Sep 2017 MORB1

FOREWORD
The Manual of Regulations for Banks (MORB) is designed to be an authoritative

codification of regulations governing banks which are all under the supervision of the Bangko
Sentral ng Pilipinas.
Prepared by the MOR Committee, the MORB methodically and logically organizes
the Bangko Sentral rules and policy issuances that implement the broader provisions of Republic
Act No. 8791, also known as the General Banking Law of 2000, as well as other pertinent
banking laws.
Principally, the MORB fosters adherence to banking standards that are ultimately
aimed at strengthening the country’s financial system stability.
While the MORB was designed to guide the operations of banks in the Philippines, it
may also serve as a useful reference material for any individual, institution or agency with
interest in the domestic banking system.
To keep pace with the developments in the financial markets, the MORB is constantly
updated to incorporate domestic financial sector reforms, as well as the latest international
standards and best practices, which are embodied in Bangko Sentral issuances as these affect
the banking business.
This edition covers rules and regulations cumulatively issued as of End-September 2017.
NESTOR A. ESPENILLA, JR.

Governor
PREFACE
Manual of Regulations for Banks
The 30 September 2017 Manual of Regulations for Banks (MORB) 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 MORB 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 - Chuchi G. Fonacier

Deputy Governor
Supervision and Examination Sector
Chairman - Jose Recon S. Tano

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

Deputy Director
Office of the General Counsel and
and Legal Services (OGCLS)
Members:
Ma. Belinda G. Caraan Betty Christine C. Bunyi

Officer-in-Charge Director
Supervision and Examination Sub-Sector Examination Department (ED) II
(SESs) II
Hazel C. Pajutagana Rhodora M. Brazil- De Vera

Manager Acting Deputy Director
Integrated Supervision Department OSPD
(ISD) II
Atty. Florabelle S. Madrid Amelia B. Damian

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

Bank Officer V Manager
AMLSG Central Point of Contact Department
(CPCD) II
Atty. Vanessa P. Tabernero-Bunag Concepcion A. Garcia

Legal Officer IV Acting Deputy Director
OGCLS CPCD IV
Ronaldo B. Ramos Pol Joseph G. Panao

Manager Manager
ED IV ISD I
The Committee Secretariat is headed by Ms. Ma. Cecilia U. Contreras, Supervision and
Examination (SE) Specialist II, and is assisted by Lara E. Loyola, Administrative Services Officer
(ASO) II, OSPD, and two (2) other personnel.
The Bangko Sentral ng Pilipinas

INSTRUCTIONS TO USERS
(30 September 2017 Edition)
The Manual of Regulations for Banks (the “Manual”) is divided into Eleven (11) Parts.
For provisions common to all types of banks, the sections and subsections of each part is
prefixed by the letter “X”. Special provisions do not contain the prefix “X” but instead, the
section/subsection applicable only to universal/commercial banks (UBs/KBs), thrift banks
(TBs) and rural banks (RBs) and cooperative banks (Coop Banks) are indicated by the first
digit showing the numbers 1, 2, and 3 applicable to said banks, respectively. The second
digit refers to the Part of the Manual. The third and fourth digits refer to the section number
of the Part while the number/s after the decimal point, if any, refer to the subsection.
Thus, to illustrate, Subsection X143.1 and Section 1381 would indicate
Main Section - “Disqualification of Directors/Trustees and Officers”
Subsection - “Persons disqualified to become officers”
X 1 4 3 . 1
Part One on “Organization, Management and Administration”
Manual of Regulations for Banks (Common provision)
Main Section - “Investment in Non-Allied Undertakings”
1 3 8 1
Part Three - “Loans, Investments and Special Credits”
Manual of Regulations for Banks (special provision for UBs/KBs)
The runners in the upper-right or left hand corners of each page show the sections/
subsections 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 BANKS
TABLE OF CONTENTS
POWER OF THE BANGKO SENTRAL
SECTION X001 Examination by the Bangko Sentral

X001.1 Refusal to permit examination
SECTIONS X002 - X008 (Reserved)
SECTION X009 Supervisory Enforcement Policy
PART ONE - ORGANIZATION, MANAGEMENT AND ADMINISTRATION
A. CLASSIFICATIONS AND POWERS OF BANKS
SECTION X101 Classifications, Powers and Scope of Authorities of Banks

1101.1 (Reserved)
2101.1 Authority of thrift banks to issue foreign letters of
credit and pay/accept/negotiate import/export drafts/
bills of exchange
2101.2 Application for authority to issue foreign letters of
credit and pay/accept/negotiate import/export drafts/
bills of exchange
B. ESTABLISHMENT AND ORGANIZATION
SECTION X102 Basic Guidelines in Establishing Banks

X102.1 Prerequisites for the grant of a universal banking
authority
X102.2 Establishment of new domestic banks
X102.3 Establishment of microfinance-oriented banks
X102.4 Conditions for the grant of authority to convert into
a lower category
X102.5 Conversion of microfinance-oriented thrift banks/
rural banks
X102.6 (Reserved)
X102.7 Application and license fees for new domestic banks
ix
SECTION X103 Certificate of Authority to Register
SECTION X104 Business Name

X104.1 Bank advertisements
SECTION X105 Liberalized Entry and Scope of Operations of Foreign Banks

X105.1 Modes of entry of foreign banks
X105.2 Qualification requirements
X105.3 Guidelines for selection
X105.4 Capital requirements of foreign banks
X105.5 Prescribed ratio of "Net Due to" account (Deleted
by Circular No. 858 dated 21 November 2014 )
X105.6 Risk-based capital for foreign bank branch
X105.7 Head office guarantee
X105.8 Scope of authority for locally incorporated
subsidiaries of foreign banks as well as branches with
full banking authority
X105.9 Control of the resources of the banking system
X105.10 Change from one mode of entry to another
X105.11 Listing of shares with the Philippine Stock Exchange
(Deleted by Circular No. 858 dated 21 November
2014)
X105.12 Equal treatment
C. MERGER AND CONSOLIDATION
SECTION X108 Merger or Consolidation to Meet Minimum Capital

X108.1 Requirement of Bangko Sentral approval
X108.2 Rules on exchange of shares
X108.3 Merger or consolidation incentives
1108.3 (Reserved)
2108.3 (Reserved)
3108.3 Regulatory relief under the strengthening program
for RBs (SPRB)
X108.4 SPRB Plus and Strengthening Program for
Cooperative Banks (SPCB) Plus
SECTIONS X109 Consolidation Program for Rural Banks (CPRB)
SECTIONS X110 (Reserved)
x
D. CAPITALIZATION
SECTION X111 Minimum Required Capital

X111.1 Minimum capitalization
X111.2 Capital build-up program (Deleted by Circular
No. 696 dated 29 October 2010)
X111.3 Memorandum of Understanding; Prompt Corrective
Action Program; Sanctions (Deleted by Circular
X111.4 Guidelines on proposed investment from third party
investors (TPIs) for purposes of complying with the
minimum capital requirements
E. RISK-BASED CAPITAL
SECTION X115 Basel III Risk-Based Capital

X115.1 Scope
X115.2 (Reserved)
1115.2 Market risk capital requirement
2115.2 (Reserved)
3115.2 (Reserved)
X115.3 Capital treatment of exposures/investments in certain
products
X115.4 Required reports
X115.5 Domestic systemically important banks (DSIBs)
X115.6 Basel III Leverage Ratio Framework
X115.7 - X115.8 (Reserved)
X115.9 Sanctions
SECTION X116 Basel I Risk-Based Capital (Deleted by Circular No. 827 dated
28 February 2014)
X116.1 Scope (Deleted by Circular No. 827 dated
28 February 2014)
X116.2 Qualifying capital (Deleted by Circular No. 827
dated 28 February 2014)
X116.3 Risk-weighted assets (Deleted by Circular No. 827
X116.4 Definitions (Deleted by Circular No. 827 dated
28 February 2014)
X116.5 Required reports (Deleted by Circular No. 827 dated
28 February 2014)
xi
X116.6 Sanctions (Deleted by Circular No. 827 dated 28
February 2014)
X116.7 Temporary relief (Deleted by Circular No. 827 dated
28 February 2014)
SECTION X117 Internal Capital Adequacy Assessment Process and Supervisory

Review Process
SECTION X118 Revised Risk-Based Capital Adequacy Framework for

Stand- Alone Thrift Banks, Rural Banks and Cooperative Banks
F. CAPITAL INSTRUMENTS
SECTION X119 Unsecured Subordinated Debt

X119.1 Minimum features of unsecured subordinated debt
X119.2 Prior Bangko Sentral approval
X119.3 Pre-qualification requirements of issuing bank
X119.4 Public issuance of unsecured subordinated debt
X119.5 Private or negotiated issuance of unsecured
subordinated debt
X119.6 Issuance abroad of unsecured subordinated debt
X119.7 Qualified investors/buyers
X119.8 Prohibitions on holdings of unsecured subordinated
debt
X119.9 Accounting treatment
X119.10 - X119.12 (Reserved)
X119.13 Sanctions
SECTION X120 Interim Tier 1 Capital for Banks Under Rehabilitation
G. STOCK, STOCKHOLDERS AND DIVIDENDS
SECTION X126 Shares of Stock of Banks

X126.1 Limits of stockholdings in a single bank
X126.2 Transactions involving voting shares of stocks
X126.3 Other foreign equity investment in domestic banks
X126.4 Convertibility of preferred stock to common stock
X126.5 Issuance of redeemable shares: conditions;
certification and report; sanctions
X126.6 Stock options/warrants
X126.7 - X126.9 (Reserved)
X126.10 Dealings with stockholders and their related interests
xii
SECTION X127 (Reserved)
SECTION 1127 Shares of Stock of Universal/Commercial Banks

1127.1 Limits on stockholdings in several banks
1127.2 - 1127.5 (Reserved)
SECTION 2127 Shares of Stock of Thrift Banks

2127.1 Moratorium on ownership ceilings (Deleted)
2127.2 Preferred shares
2127.3 - 2127.5 (Reserved)
SECTION 3127 Shares of Stock of Rural Banks and Cooperative Banks

3127.1 Moratorium on ownership ceiling
3127.2 Government-held shares
3127.3 Limits on stockholdings in several rural banks
3127.4 Convertibility of preferred stock to common stock
3127.5 Guidelines for selection
SECTION X128 Deposits for Stock Subscription
SECTION X136 Dividends

X136.1 Definitions
X136.2 Requirements on the declaration of dividends
3136.2 Limitations/Amount available for dividends declared
by rural banks and cooperative banks
X136.3 Net amount available for dividends
X136.4 Reporting and verification
X136.5 Recording of dividends
X136.6 Issuance of fractional shares
X136.7 - X136.9 (Reserved)
X136.10 Supervisory enforcement actions
SECTION 1137 (Reserved)
SECTION 3137 Limitations/Amount Available on Dividends Declared by Rural

Banks and Cooperative Banks (Deleted by Circular No. 888
dated 09 October 2015)
xiii
3137.1 Dividends on government shares (Deleted by
Circular No. 888 dated 09 October 2015)
H. DIRECTORS, OFFICERS AND EMPLOYEES
SECTION X141 Policy Statement

X141.1 Definition of terms
X141.2 Qualifications of a director
(Deleted by Circular No. 969 dated 22 August 2017)
X141.3 Powers/responsibilities and duties of directors
X141.4 Confirmation of the election/appointment of
directors/officers (Deleted by Circular No. 969 dated
22 August 2017)
X141.5 Place of board of directors' meeting
X141.6 - X141.8 (Reserved)
X141.9 Certifications required
X141.10 Sanctions
SECTION X142 Board of Directors

X142.1 Powers/Corporate powers of the board of directors
X142.2 Composition of the board of directors
X142.3 Qualifications of a director
X142.4 Chairperson of the board of directors
X142.5 Board of directors meetings
SECTION X143 Duties and Responsibilities of the Board of Directors/Directors

X143.1 Specific duties and responsibilities of the board of
directors
X143.2 Specific duties and responsibilities of a director
X143.3 Effect of non-possession of qualifications or
possession of disqualifications
(Renumbered as Subsec. X150.3 by Circular No. 969
dated 22 August 2017)
X143.4 Disqualification procedures (Renumbered as Subsec.
X150.4 by Circular No. 969 dated 22 August 2017)
X143.5 Watchlisting (Renumbered as Subsec. X150.5 by
Circular No. 969 dated 22 August 2017)
xiv
SECTION X144 Board-level committees
X144.1 Audit committee
X144.2 Risk oversight committee (ROC)
X144.3 Corporate governance committee
X144.4 Related party transactions committee
SECTION X145 Officers

X145.1 Qualifications of an officer
X145.2 Duties and responsibilities of officers
X145.3 Chief Executive Officer (CEO)
SECTION X146 Remuneration and Other Incentives

X146.1 Profit sharing progams
X146.2 Loans, advances, and other credit accommodations
to officers
X146.3 Compensation and other benefits of directors and officers
X146.4 Applicability to branches of foreign banks
(Renumbered by Circular No. 969 dated 22 August
2017)
X146.5 Supervisory enforcement actions (Renumbered by
SECTION X147 Related Party Transactions; Policy Statement

X147.1 RPT policies/roles of senior management and self-
assessment functions
X147.2 Disclosure and regulatory reporting
X147.3 Applicability to branches of foreign banks
SECTION 3147 Bonding/Training of Directors, Officers and Employee

SECTION X148 Confirmation of the Election/Appointment of Directors/Officers;

Bio-data of Directors and Officers; Interlocking Directorships and/
or Officerships; Rules of Procedures on Administrative Cases
involving Directors and Officers of BSFIs
X148.1 Confirmation of election/appointment of directors/
officers
X148.2 Bio-data of directors and officers
X148.3 Interlocking directorships and/or officerships
xv
X148.4 Rules of Procedures on administrative cases involving
directors and officers of BSFIs
X148.5 - X148.8 (Reserved)
X148.9 Sanctions
SECTION X149 Conducting Business in an Unsafe/Unsound Manner

X149.1 - X149.7 (Reserved)
X149.8 Reportorial requirement
X149.9 Sanctions
SECTION X150 Disqualification and Watchlisting of Directors and Officers

X150.1 Persons disqualified to become directors
X150.2 Persons disqualified to become officers
X150.3 Effect of non-possession of qualifications or
possession of disqualification
X150.4 Disqualification procedures
X150.5 Watchlisting
I. BANKING OFFICES
SECTION X151 Establishment/Relocation/Voluntary Closure/Sale of Branches

X151.1 Prior Monetary Board approval
X151.2 Pre-requisites for the grant of authority to establish a
branch
X151.3 Application for authority to establish branches
X151.4 Branching guidelines
X151.5 Branch processing and special licensing fee
X151.6 Establishment of other banking offices
X151.7 Opening of banking offices
X151.8 Requirements for opening a branch/other banking
office
X151.9 Relocation of branches/other banking offices
X151.10 Temporary closure, permanent closure and surrender
of branch/other banking office license, and sale/
acquisition of branches/other banking offices
X151.11 Relocation/transfer of branch licenses of closed banks
X151.12 Sanctions
X151.13 - X151.18 (Reserved)
X151.19 Tellering booths
SECTION X152 Relocation of Head Offices

X152.1 Sanctions
SECTION X153 Establishment of Sub-Branches of Foreign Bank Branches
xvi
X153.1 Application for authority to establish sub-branches
X153.2 Requirements for establishment of sub-branches
X153.3 Date of opening
X153.4 Requirements for opening a sub-branch
X153.5 Limitations on establishment of sub-branches
X153.6 Sanctions
SECTION X154 Establishment of Offices Abroad

X154.1 Application for authority to establish an office abroad
X154.2 Requirements for establishing an office abroad
X154.3 Conditions attached to the approved application
X154.4 Date of opening
X154.5 Requirements for opening an office abroad
X154.6 Sanctions
X154.7 - X154.8 (Reserved)
X154.9 Establishment of a foreign subsidiary by a bank
subsidiary
SECTION X155 Mobile Foreign Exchange Booth; Off-Site Automatic Multi-

Currency Money Changers
X155.1 Mobile foreign exchange booths
X155.2 Off-site automatic multi-currency money changers
J. BANKING DAYS AND HOURS
SECTION X156 Banking Days and Hours

X156.1 Banking hours beyond the minimum; banking
services during holidays
X156.2 Report of, and changes in, banking days and hours
X156.3 Posting of schedule of banking days and hours
K. BANKING PREMISES
SECTION X160 Bank Premises and Other Fixed Assets

X160.1 Appreciation or increase in book value
X160.2 Ceiling on total investments
X160.3 Reclassification of real and other properties acquired
to bank premises, furniture, fixture and equipment;
Sanctions
X160.4 - X160.9 (Reserved)
X160.10 Batas Pambansa Blg. 344 - An Act to Enhance the
xvii
Mobility of Disabled Persons by Requiring Certain
Buildings, Institutions, Establishments and Public
Utilities to Install Facilities and Other Devices
X160.11 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
L. MANAGEMENT CONTRACTS AND OUTSOURCING

OF BANKING FUNCTIONS
SECTION X161 Management Contracts
SECTION X162 Statement of Principle on Outsourcing

X162.1 Definition
X162.2 Prohibition against outsourcing of inherent banking
functions
X162.3 Authority to outsource
X162.4 Governance and managing of the outsourcing risks
X162.5 Documentations
X162.6 Intra-group outsourcing
X162.7 Offshore outsourcing
X162.8 Transitory provision
M. BANK OFFICES AS OUTLET OF FINANCIAL PRODUCTS OF ALLIED

UNDERTAKINGS/INVESTMENT HOUSE
SECTION X172 Statement of Principles

X172.1 Definition
X172.2 Financial products
X172.3 Governance
X172.4 Minimum documentary requirements
1172.4 Financial ratios and other related requirements
(Deleted by Circular No. 801 dated 27 June 2013)
X172.5 Fair and balanced view of the product
X172.6 Cross-selling of collective investment schemes and
its suitability to customers
X172.7 Financial product providers
1172.7 Training (Deleted by Circular No. 801 dated 27 June 2013)
X172.8 Authority to cross-sell
xviii
1172.8 Other requirements (Deleted by Circular No. 801
dated 27 June 2013)
X172.9 - Complaints handling
X172.10 Sanctions
SECTION 2172 Market ing, Sale and Servicing of Microinsurance Products by

Thrift Banks
SECTION 3172 Market ing, Sale and Servicing of Microinsurance Products by

Rural and Cooperative Banks
N. RISK MANAGEMENT
SECTION X173 Supervision by Risks
SECTION X174 Risk Governance Framework

X174.1 Risk management function
X174.2 Chief Risk Officer (CRO)
SECTION X175 Market Risk Management
SECTION X176 Liquidity Risk Management

1176.1 Liquidity Coverage Ratio (LCR)
1176.2 LCR disclosure requirements
1176.3 Sanctions
SECTION X177 Information Technology Risk Management (ITRM)

X177.1 Declaration of policy
X177.2 Purpose and scope
X177.3 Complexity of IT risk profile
X177.4 IT rating system
X177.6 Description of IT-related risks
X177.7 IT Risk Management Systems (ITRMS)
X177.8 Reports
X177.9 Sanctions and penalties
SECTION X178 Credit Risk Management; Statement of Policy

X178.1 Evaluation of credit risk management system
A. Establishing an Appropriate Credit Risk Environment
X178.2 Role of the board and senior management
X178.3 Credit risk management structure
X178.4 Credit risk strategy
xix
X178.5 Credit policies, processes and procedures
B. Operating Under a Sound Credit Granting Process
X178.6 Credit approval process
X178.7 Credit granting and loan evaluation/analysis process
and underwriting standards
X178.8 Renewal or extension of maturity date of credits
X178.9 Credit limits, large exposures, and credir risk
concentrations
X178.10 Country and transfer risks
X178.11 Credits granted to related parties
C. Maintaining an Appropriate Credit Administration,
Measurement and Monitoring Process
X178.12 Credit administration
X178.13 Credit risk measurement, validation and stress
testing
X178.14 Credit risk management information and reporting
systems
X178.15 Credit monitoring
D. Maintaining an Appropriate Credit Control Process
X178.16 Credit review process
X178.17 Credit classification and provisioning
X178.18 Credit workout and remedial management of
problem credits
X178.19 Writing off problem credits
X178.20 Enforcement actions
SECTION X179 Operational Risk Management; Policy Statement

X179.1 Definition of operational risk
X179.2 Duties and responsibilities
X179.3 Roles and functions
X179.4 Operational risk management framework
X179.5 Management of human resource-related risk
X179.6 Management of information technology-related risk
X179.7 Management of integrity of prudential reports or
reports submitted to Bangko Sentral
X179.8 Management of legal risk exposures
X179.9 Management of operational risk arising from financial
inclusion initiatives
X179.10 Notification/Reporting to Bangko Sentral
SECTION X180 Compliance Risk Management
xx
X180.1 Compliance function
X180.2 Compliance program
X180.3 Chief Compliance Officer (CCO)
X180.4 Responsibilities of the board of directors and senior
management
X180.5 Cross-border compliance issues
X180.6 Outsourcing of compliance risk assessment and testing
X180.7 Outsourcing of compliance risk assessment and testing
(Transferred to X180.6 pursuant to Circular No. 972
SECTION X181 Bank Protection

X181.1 Objectives
X181.2 Designation of a chief security officer
X181.3 Qualifications and responsibilities of the CSO
X181.4 Security program
X181.5 Minimum security measures
X181.6 Reports
X181.7 Bangko Sentral inspection
X181.8 Sanctions
SECTION X182 Business Continuity Management; Policy Statement

X182.1 Purpose, applicability and scope
X182.3 Roles and responsibilities
X182.4 Business Continuity Management Framework
X182.5 Other policies, standards and processes
SECTION X183 Social Media Risk Management; Policy Statement

X183.1 Applicability and scope
X183.3 Social media risk management system
X182.4 Compliance with relevant regulations
SECTION X184 Governance Process on the Quality of Bank Reporting;

Statement of Policy
X184.1 Reporting standards
X184.2 Governance process
X184.3 Sanctions on reports for non-compliance with the
reporting standards
X184.4 Assessment of reporting system
xxi
X184.5 Transitory provisions
SECTION X185 Internal Control Framework

X185.1 Management oversight and control culture
X185.2 Risk recognition and assessment
X185.3 Control activities
X185.4 Information and communication
X185.5 Monitoring activities and correcting deficiencies
X185.6 Dual control (Deleted by Circular No. 871 dated
05 March 2015)
X185.7 Number control (Deleted by Circular No. 871 dated
05 March 2015)
X185.8 Rotation of duties (Deleted by Circular No. 871 dated
05 March 2015)
X185.9 Independence of the internal auditor (Deleted by
Circular No. 871 dated 05 March 2015)
X185.10 Confirmation of accounts (Deleted by Circular No.
871 dated 05 March 2015)
X185.11 Other internal control standards (Deleted by Circular
No. 871 dated 05 March 2015)
X185.12 Internal control procedures for dormant/inactive
accounts (Deleted by Circular No. 871 dated 05
March 2015)
SECTION X186 Internal Audit Function

X186.1 Qualifications of the head of the internal audit
function
X186.2 Duties and responsibilities of the head of the internal
audit function or the chief audit executive
X186.3 Professional competence and ethics of the internal
audit function
X186.4 Independence and objectivity of the internal audit
function
X186.5 Internal audit charter
X186.6 Scope
SECTION X189 Selection, Appointment, Reporting Requirements and Delisting

of External Auditors and/or Auditing Firm; Sanctions; Effectivity
SECTION X190 Audited Financial Statements of Banks

X190.1 Financial audit
xxii
X190.2 Posting of audited financial statements
X190.3 Disclosure of external auditor's adverse findings to
the Bangko Sentral; sanction
X190.4 Disclosure requirement in the notes to the audited
financial statements
X190.5 Disclosure requirements in the annual report
X190.6 Posting and submission of annual report
X190.7 Sanctions for non-disclosure of certain information
and/or delayed submission of annual report
SECTION X191 Records

X191.1 Adoption of the Manual of Accounts
X191.2 Financial Reporting Package
X191.3 Philippine Financial Reporting Standards/Philippine
Accounting Standards
X191.4 Accounting treatment of financial securities
X191.5 Penalties and sanctions
X191.6 - X191.9 (Reserved)
1191.9 (Reserved)
2191.9 (Reserved)
3191.9 Retention and disposal of records of rural/cooperative
banks (Deleted by Circular No. 957 dated 17 April
2017)
SECTION X192 Reports

X192.1 Categories and signatories of bank reports
X192.2 Sanctions in case of willful delay in the submission
of reports/refusal to permit examination
X192.3 Submission of certain required information
1192.3 Submission of certain required information by UBs
X192.4 Report on crimes/losses
X192.5 Report on real estate/chattel transactions (Deleted
by Circular No. 737 dated 19 September 2011)
X192.6 Reconciliation of head office and branch
transactions
X192.7 List of stockholders and their stockholdings
X192.8 Bangko Sentral offices, where reports are submitted
X192.9 Publication/Posting of balance sheet
X192.10 Consolidated financial statements of banks and their
subsidiaries engaged in financial allied undertakings
X192.11 Reports of other banking offices
xxiii
X192.12 Reports required of foreign subsidiaries/affiliates/
banking offices or non-bank entities of domestic
banks
X192.13 Report on cross-border financial positions
1192.13 Additional reports from UBs/KBs
2192.13 (Reserved)
3192.13 (Reserved)
X192.14 Reports of strikes and lockouts
X192.15 Report on the Sworn Statement on Real Estate/Chattel
Transactions (Deleted by Circular No. 737 dated
19 September 2011)
X192.16 Notarized contracts/agreements between banks and
their related microfinance (MF) non-governmental
organizations (NGO’s)/foundations.
X192.17 Submission of Bank Quarterly Report on Residential
Real Estate Loans for the Generation of the
Residential Real Estate Price Index
X192.18 Report on repurchase agreements
O. PROMPT CORRECTIVE ACTION FRAMEWORK
SECTION X193 Prompt Corrective Action Framework
SECTION X194 - X195 (Reserved)
P. LIQUIDATION AND RECEIVERSHIP
SECTION X196 Voluntary Liquidation

X196.2 Liquidation plan
X196.3 - X196.7 (Reserved)
X196.8 Final liquidation report
SECTION X198 Insolvency or Receivership of Banks

X198.1 Definition of term
X198.2 Prohibited acts
X198.3 - X198.8 (Reserved)
X198.9 Penalties and sanctions
Q. GENERAL PROVISION ON SANCTIONS
xxiv
SECTION X199 General Provision on Sanctions
PART TWO - DEPOSIT AND BORROWING OPERATIONS
A. DEMAND DEPOSITS
SECTION X201 Authority to Accept or Create Demand Deposits

X201.1 Prerequisites to accept or create demand deposits
for thrift banks/rural banks/cooperative banks
X201.2 Requirements for accepting demand deposits
X201.3 Sanctions
SECTION X202 Temporary Overdrawings; Drawings Against Uncollected

Deposits
SECTION X203 Returned Checks
SECTION X204 Current Accounts of Bank Officers and Employees
SECTION X205 Check Clearing Rules for Banks Authorized to Accept Demand
Deposits
SECTION 2205 Check Clearing Rules for Thrift Banks Authorized to Accept
Demand Deposits ( Deleted by Circular No. 825 dated
27 February 2014 )
SECTION 3205 Check Clearing Rules for Rural Banks Who Are Members of the
Philippine Clearing House Corporation (Deleted by Circular
No. 825 dated 27 February 2014)
SECTIONS X206 Clearing Operations
SECTION X207 Check Clearing Operations During Public Sector Holidays
B. SAVINGS DEPOSITS
SECTION X213 Servicing Deposits Outside Bank Premises
SECTION X214 Withdrawals
xxv
SECTION X215 Rental Deposits of Lessees
SECTION X221 Peso Savings Deposit Accounts of Embassy Officials
C. NEGOTIABLE ORDER OF WITHDRAWAL ACCOUNTS
SECTION X223 Authority to Accept Negotiable Order of Withdrawal Accounts

X223.1 Prerequisites to accept negotiable order of withdrawal
accounts for thrift banks/rural banks/cooperative
banks
X223.2 Requirements for accepting negotiable order of
withdrawal accounts
X223.3 Sanctions
SECTION X224 Rules on Servicing Negotiable Order of Withdrawal Accounts
SECTION X225 Minimum Features
SECTION X226 Clearing of Negotiable Order of Withdrawal Accounts
D. TIME DEPOSITS
SECTION X231 Term of Time Deposits
SECTION X232 Special Time Deposits
SECTION X233 Certificates of Time Deposits

X233.1 Prerequisites to issue negotiable certificates of time
deposits for thrift banks/rural banks/cooperative
banks
X233.2 Requirements for issuing negotiable certificates of
time deposits
X233.3 Minimum features
X233.4 Insurance coverage
X233.5 Desistance from issuing new negotiable certificates
of time deposits
X233.6 Sanctions
xxvi
X233.7 - X233.8 (Reserved)
X233.9 Long-term negotiable certificates of time deposit
X233.10 (Reserved)
X233.11 Long-term non-negotiable tax-exempt certificates of
time deposit
E. DEPOSIT SUBSTITUTE OPERATIONS (QUASI-BANKING FUNCTIONS)
SECTION X234 Scope of Quasi-Banking Functions

X234.1 Elements of quasi-banking
X234.2 Definition of terms and phrases
X234.3 Transactions not considered quasi-banking
X234.4 Pre-conditions for the exercise of quasi-banking
functions
X234.5 Certificate of Authority from the Bangko Sentral
X234.6 Sale, discounting, assignment or negotiation by
banks of their credit rights arising from claims against
the Bangko Sentral to clients
SECTION X235 Deposit Substitute Instruments

X235.1 Prohibition against use of acceptances, bills of
exchange and trust certificates
X235.2 Negotiation of promissory notes
X235.4 Interbank loan transactions
X235.5 Delivery of securities
X235.6 Other rules and regulations governing the issuance
and treatment of deposit substitute instruments
X235.7 - X235.11 (Reserved)
X235.12 Repurchase agreements covering government
securities, commercial papers and other negotiable
and non-negotiable securities or instruments
SECTION X236 Minimum Trading Lot and Minimum Term of Deposit Substitute
SECTION X237 Money Market Placements of Rural Banks

X237.2 Conditions required on accepted placements not
covered by prohibition
X237.3 Sanctions
SECTION X238 Without Recourse Transactions

X238.1 Delivery of securities
xxvii
X238.2 Sanctions
X238.3 Securities custodianship operations
(Deleted by Circular No. 873 dated 25 March 2015)
SECTION X239 Issuance of Bonds

X239.2 Compliance with Securities and Exchange
Commission rules on registration of bond issues
X239.3 Notice to Bangko Sentral ng Pilipinas
X239.5 Issuance of commercial papers
F. GOVERNMENT DEPOSITS
SECTION X240 Statementof Policy

X240.2 Banks which may accept government funds
X240.3 Prerequisites for the grant of authority to accept
deposits from the Government and government
entities
X240.4 Application for authority
X240.5 Limits on funds of the Government and government
entities that may be deposited with banks
X240.6 Liquidity floor
X240.7 Exempt transactions
X240.8 Reports
X240.9 Sanctions
X240.10 - X240.14 (Reserved)
X240.15 Acceptance by banks with internet banking facility
of payment of fees for account of government entities
G. INTEREST
SECTION X242 Interest on Deposits/Deposit Substitutes

X242.1 Time of payment of interest on time deposits/deposit
substitutes
X242.2 Treatment of matured time deposits/deposit
substitutes
SECTION X243 Disclosure of Effective Rates of Interest
xxviii
H. RESERVES AGAINST DEPOSIT AND DEPOSIT SUBSTITUTE LIABILITIES
SECTION X253 Accounts Subject to Reserves; Amounts Required

X253.1 Required reserves against deposit and deposit
substitute liabilities
X253.2 Liquidity reserves (Deleted by Circular No. 753 dated
29 March 2012)
SECTION X254 Composition of Reserves

X254.1 Allowable drawings against reserves
X254.2 Exclusion of uncleared checks and other cash items
X254.3 Interest income on reserve deposits
X254.4 Book entry method for reserve securities
SECTION X255 Exemptions from Reserve Requirements
SECTION X256 Computation of Reserve Position

X256.1 Measurement of reserve requirement
X256.2 - X256.4 (Reserved)
X256.5 Guidelines in calculating and reporting to the Bangko
Sentral the required reserves on deposit substitutes
evidenced by repurchase agreements covering
government securities
SECTION X257 Reserve Deficiencies; Sanctions

X257.1 Chronic reserve deficiency; penalties
X257.2 Failure to cover overdrawings with the Bangko Sentral
X257.3 Payment of penalties on reserve deficiencies
SECTION X258 Report on Compliance
I. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS
SECTION X261 Booking of Deposits and Withdrawals

X261.1 Clearing cut-off time
X261.2 Definitions
X261.3 Booking of cash deposits
X261.4 Booking of non-cash deposits
X261.5 Booking of deposits after regular banking hours
X261.6 Other records required
X261.7 Notice required
SECTION X262 Miscellaneous Rules on Deposits
xxix
X262.1 Specimen signatures, identification photos
X262.2 Insurance on deposits
X262.3 Certification of compliance with Subsection 55.4 of
R.A. No. 8791
SECTION X263 Fees on Retail Bank Products/Services

X263.1 Fees on deposit accounts
X263.2 Fees on domestic remittance transactions
(Transferred to Sec. X906 pursuant to Circular
X263.3 Additional disclosure requirements
X263.4 Amendments to terms and conditions of retail bank
products and services
X263.5 Individual notifications
X263.6 Non-waiver by contractual provisions
SECTION X264 Unclaimed Balances
SECTION X265 Acceptance, Encashment or Negotiation of Checks Drawn in

Favor of Commissioner/Collector of Customs
SECTION X266 Cash Pick-up/Cash Delivery Services; Cash Agents

X266.1 Cash pick-up/Cash delivery services
X266.2 Use of cash agents
SECTION 3266 Qualifying Criteria Before a Rural/Cooperative Bank Engages in

Deposit Pick-up Services
(Deleted by Circular No. 940 dated 20 January 2017)
SECTION X267 Automated Teller Machines
J. BORROWINGS FROM THE BANGKO SENTRAL
SECTION X268 Rediscounting Line

X268.1 Credit Information System
X268.2 Application procedures
X268.3 Approval/Renewal of the line
X268.4 Amount of line
X268.5 Term of the line
X268.6 - X268.9 (Reserved)
X268.10 Constitutional prohibition (Deleted by Circular No.
xxx
354 dated 04 October 2002)
SECTION X269 Rediscounting Availments

X269.1 Eligibility requirements at the time of availment
X269.2 Eligible papers and collaterals
X269.3 Loan availment procedures
X269.4 Loan value
X269.5 Maturities
X269.6 Rediscount/lending rates and liquidated damages
X269.7 Release of proceeds
X269.8 Repayments/Remittance of collections/arrearages
X269.9 Prohibited transactions
X269.10 Monitoring and credit examination of borrowing
banks
X269.11 Penalties/sanctions
X269.12 Interlocking directorship/officership
SECTION X270 Repurchase Agreements with the Bangko Sentral
SECTION X271 Bangko Sentral Liquidity Window

X271.1 Nature of liquidity window
X271.2 Terms of credit
X271.3 Limit
SECTION X272 Emergency Loans or Advances to Banking Institutions

X272.1 Nature of emergency loans or advances
X272.2 When an emergency loan or advance may be
availed of
X272.3 Allowable amount of emergency loan or advance
X272.4 Application procedures
X272.5 Other documentary requirements
X272.6 Acceptable collaterals and their corresponding loan
values
X272.7 Manner and conditions of release
X272.8 Interest rates, liquidated damages, and penalties
X272.9 General terms and conditions
X272.10 Maturity/Conditions for renewals
X272.11 Remittance of collections/repayments/arrearages
X272.12 Default
SECTION X273 Facility to Committed Credit Line Issuers

X273.1 Nature of special credit accommodations
X273.2 Conditions to access
xxxi
X273.3 Terms of credit
X273.4 Ceiling
SECTION 2274 Countryside Financial Institutions Enhancement Program for

Thrift Banks
SECTION 3274 Countryside Financial Institutions Enhancement Program for

Rural and Cooperative Banks
SECTION X275 Recording and Reporting of Borrowings
SECTION X276 Rediscounting Window for Low-Cost Housing as Defined by the

Housing and Urban Development Coordinating Council
SECTION 1277 Rediscounting Window Available to All Universal and

Commercial Banks for the Purpose of Providing Liquidity
Assistance to Investment Houses
SECTION 2277 Rediscounting Window Available to TBs for the Purpose of

Providing Liquidity Assistance to Support and Promote
Microfinance Programs
SECTION 3277 Rediscounting Window Available to Rural and Cooperative

Banks for the Purpose of Providing Liquidity Assistance to Support
and Promote Microfinance Programs
3277. 1 Eligibility requirements
3277. 2 Microcredit line
3277. 3 Terms and conditions
3277. 4 Documentary requirements
3277. 5 Remittance of collections/payments/repayments
3277. 6 Reports required
3277. 7 Accounts verification
3277. 8 Sanctions
SECTION X278 Enhanced Intraday Liquidity Facility
xxxii
K. OTHER BORROWINGS
SECTION X281 Borrowings from the Government

X281.1 Exemption from reserve requirement
SECTION X282 Borrowings from Trust Departments or Investment Houses
SECTION 2283 Mortgage/CHM Certificates of Thrift Banks
SECTION 3284 Borrowings of Rural Banks/Cooperative Banks
PART THREE - LOANS, INVESTMENTS AND SPECIAL CREDITS
SECTION X301 Lending Policies (Deleted by Circular No. 855 dated

29 October 2014)
X301.1 (Reserved)
1301.1 Rules and regulations to govern the development and
implementation of banks’ internal credit risk rating
systems (Deleted by Circular No. 855 dated 29
October 2014)
2301.1 (Reserved)
3301.1 (Reserved)
X301.2 - X301.5 (Reserved)
X301.6 Large exposures and credit risk concentrations
SECTION X302 Loan Portfolio and Other Risk Assets Review System (Deleted
xxxiii
by Circular No. 855 dated 29 October 2014)
X302.1 Provisions for losses; booking (Deleted by Circular
X302.2 Sanctions (Deleted by Circular No. 855 dated
29 October 2014)
X302.3 Regulatory relief for banks under rehabilitation
program approved by the Bangko Sentral
A. LOANS IN GENERAL
SECTION X303 Credit Exposure Limits to a Single Borrower

X303.2 Rediscounted papers included in loan limit
X303.3 Credit risk transfer
X303.4 Exclusions from loan limit
X303.5 Sanctions
X303.6 - X303.7 (Reserved)
X303.8 Limit for wholesale lending activities of government
banks
SECTION X304 Grant of Loans and Other Credit Accommodations

X304.1 Additional requirements
X304.2 Purpose of loans and other credit accommodations
(Deleted by Circular No. 855 dated
29 October 2014)
X304.3 Prohibited use of loan proceeds
X304.4 Signatories
X304.5 - X304.8 (Reserved)
X304.9 Policies on loans to non-immigrants and embassy
officials
X304.10 Minimum required disclosure
X304.11 Unfair collection practices
X304.12 Confidentiality of information
X304.13 - X304.14 (Reserved)
X304.15 Sanctions
SECTION X305 Interest and Other Charges

X305.1 Rate of interest in the absence of stipulation
X305.2 Escalation clause; when allowable
X305.3 Floating rates of interest
X305.4 Accrual of interest earned on loans
X305.5 Method of computing interest
SECTION X306 Past Due Accounts and Non-Performing Loans

X306.1 Accounts considered past due
xxxiv
X306.2 Accounts considered non-performing
X306.3 Renewals/extensions (Deleted by Circular No. 855
X306.4 Restructured loans (Deleted by Circular No. 855
X306.5 Write-off of loans, other credit accommodations,
advances and other assets as bad debts (Deleted by
X306.6 Writing-off microfinance loans as bad debts
29 October 2014)
X306.7 Updating of information provided to credit
information bureaus
SECTION X307 “Truth in Lending Act” Disclosure Requirement

X307.2 Information to be disclosed
X307.3 Inspection of contracts covering credit transactions
X307.4 Posters
X307.5 Sanctions and penal provisions
SECTION X308 Amortization on Loans and Other Credit Accommodations
SECTION X309 Non-Performing Loans (Deleted by Circular No. 941 dated

20 January 2017)
X309.1 Accounts considered non-performing; definitions
(Deleted by Circular No. 941 dated 20 January 2017)
X309.2 - X309.3 (Reserved)
X309.4 Reporting requirement
X309.5 Reportorial requirement (Deleted by Circular No. 941
dated 20 January 2017)
B. SECURED LOANS
SECTION X311 Secured Loans and Other Credit Accommodations

X311.1 Loans secured by junior mortgage on real estate
29 October 2014)
X311.2 (Reserved)
1311.2 (Reserved)
2311.2 (Reserved)
3311.2 Eligible real estate collaterals on rural/cooperative bank loans
(Deleted by Circular No. 855 dated 29 October 2014)
xxxv
X311.3 Insurance on real estate improvements (Deleted by
X311.4 Participation in foreclosure proceedings
1311.4 (Reserved)
2311.4 Foreclosure by thrift banks
3311.4 Foreclosure by rural/cooperative banks
X311.5 Redemption of foreclosed real estate mortgage
SECTION X312 Loans and Other Credit Accommodations Secured By Chattels

and Intangible Properties (Deleted by Circular No. 855 dated
29 October 2014)
SECTION X313 Loans and Other Credit Accommodations Secured By Personal

Properties (Deleted by Circular No. 855 dated
29 October 2014)
SECTION X314 Increased Loan Values and Terms of Loans for Home Building
SECTION X315 Loans Secured by Certificates of Time Deposit (Deleted by

C. UNSECURED LOANS
SECTION X319 Loans Against Personal Security (Deleted by Circular No. 855
X319.1 General guidelines (Deleted by Circular No. 622 dated
16 September 2008)
X319.2 Proof of financial capacity of borrower (Deleted by
Circular No. 622 dated 16 September 2008)
X319.3 Signatories (Deleted by Circular No. 622 dated
16 September 2008)
SECTION X320 Credit Card Operations; General Policy

X320.2 Risk management system
X320.3 Minimum requirements
X320.4 Information to be disclosed
X320.5 Interest accrual on past due loans (Deleted by Circular
No. 941 dated 20 January 2017)
X320.6 Method of computing interest
X320.7 Finance charges
xxxvi
X320.8 Deferral charges
X320.9 Late payment/penalty fees
X320.10 Confidentiality of information
X320.11 Suspension, termination of effectivity and reactivation
X320.12 Inspection of records covering credit card transactions
X320.13 Offsets
X320.14 Handling of complaints
X320.15 Unfair collection practices
X320.16 Sanctions and penal provisions
X320.17 Submission of credit card business activity report
SECTION X321 Policies on Salary-Based General-Purpose Consumption Loans

X321.1 Definition; Transactions covered; Exclusions; Report
X321.2 Credit granting
X321.3 Consumer protection
X321.4 Sanctions
D. RESTRUCTURED LOANS
SECTION X322 Restructured Loans; General Policy (Deleted by Circular No.

X322.1 Definition; when to consider performing/
non-performing (Deleted by Circular No. 855
X322.2 Procedural requirements (Deleted by Circular No.
X322.3 Restructured loans considered past due ( Deleted by
Circular No. 855 dated 29 October 2014 )
X322.4 Classification ( Deleted by Circular No. 855 dated
29 October 2014 )
E. LOANS AND OTHER CREDIT ACCOMMODATIONS TO DIRECTORS,

OFFICERS, STOCKHOLDERS AND THEIR RELATED INTERESTS/SUBSIDIARIES/
AFFILIATES
SECTION X326 Policy Statement

X326.1 Definitions
SECTION X327 Transactions Covered
SECTION X328 Transactions Not Covered

X328.1 Applicability to credit card operations
xxxvii
X328.2 - X328.4 (Reserved)
X328.5 Loans, other credit accommodations and guarantees
granted to subsidiaries and/or affiliates
SECTION X329 Direct or Indirect Borrowings
SECTION X330 Individual Ceilings

X330.1 Exclusions from individual ceiling
X330.2 Exclusions from the thirty percent (30%) unsecured
individual ceiling for project finance
SECTION X331 Aggregate Ceiling; Ceiling on Unsecured Loans, Other Credit

Accommodations and Guarantees
SECTION X332 Exclusions from Aggregate Ceiling
SECTION X333 Applicability to Branches and Subsidiaries of Foreign Banks
SECTION X334 Procedural Requirements
SECTION X335 Reportorial Requirements
SECTION X336 Supervisory Enforcement Actions
SECTION X337 Waiver of Secrecy of Deposit
SECTION X338 Financial Assistance to Officers and Employees

X338.1 Mechanics (Deleted by Circular No. 969 dated
22 August 2017)
X338.2 (Reserved)
1338.2 Funding by foreign banks (Deleted by Circular
No. 969 dated 22 August 2017)
2338.2 (Reserved)
3338.2 (Reserved)
X338.3 Other conditions/limitations (Deleted by Circular
No. 969 dated 22 August 2017)
SECTION X339 Transitory Provisions

X339.1 - X339.3 (Reserved)
X339.4 Reportorial requirements
SECTION X340 Applicability of DOSRI Rules and Regulations to Government

Borrowings in Govenment-Owned or -Controlled Banks
F. MANDATORY CREDITS
xxxviii
SECTION X341 Agriculture and Agrarian Reform Credit
X341.2 Qualified borrowers
X341.3 Required allocation for agriculture and agrarian reform
credit
X341.4 Direct compliance
X341.5 Allowable alternative compliance
X341.6 Computation of loanable funds
X341.7 Computation of total equity
X341.8 Accreditation of banks as rural financial institutions
X341.9 Syndicated type of agrarian reform credit/agricultural
credit
X341.10 Interest and other charges
X341.11 Submission of reports
X341.12 Consolidated compliance
X341.13 - X341.14 (Reserved)
X341.15 Sanctions
SECTION X342 Mandatory Allocation of Credit Resources to Micro, Small and

Medium Enterprises
X342.2 Period covered; prescribed portions of loan portfolio
to be allocated
X342.3 Eligible credit exposures
X342.4 Ineligible credit instruments
X342.5 Rights/remedies available to lending institutions not
qualified to acquire or hold lands of public domain
X342.6 Submission of reports
X342.7 Sanctions
X342.8 Disposition of penalties collected
X342.9 - X342.14 (Reserved)
X342.15 Accreditation guidelines for Rural and Thrift Banks
under the SME Unified Lending Opportunities for
National Growth
G. SPECIAL TYPE OF LOANS
SECTION X343 Interbank Loans

X343.1 Systems and procedures for interbank call loan
transactions
X343.2 Accounting procedures
X343.3 Settlement procedures for interbank loan transactions
SECTION X344 Loans to Thrift/Rural/Cooperative Banks
xxxix
X344.1 Loans under Section 12 of R.A. No. 7353, Section 10
of R.A. No. 7906 and Article 102, R.A. No. 6038, as
amended by R.A. No. 9520
X344.2 Loans under Section 14 of R.A. No. 7353
SECTION X347 Standby Letters of Credit

X347.1 Domestic standby letters of credit
X347.2 Ceiling (Deleted by Circular No. 773 dated
13 November 2012)
X347.3 Reports (Deleted by Circular No. 773 dated
13 November 2012)
SECTION X348 Committed Credit Line for Commercial Paper Issues

X348.1 Who may grant line facility
X348.2 Ceilings
X348.3 Terms; conditions; restrictions
X348.4 Reports to the Bangko Sentral
X348.5 Loan limit
SECTION X349 Agriculture and Fisheries Projects with Long Gestation Periods
X349.2 Grace period
X349.3 Responsibility of lending banks
X349.4 Past due loans
X349.5 Non-performing loans
SECTION X350 Agricultural Value Chain Financing Framework; Statement of

Policy
X350.2 Features of agricultural value chain financing program
X350.3 Regulatory incentives
SECTION X361 Microfinance Loans

X361.1 Definition
X361.2 Loan limit; amortization; interest
X361.3 Credit information exemption
X361.4 Exemptions from rules on unsecured loans
X361.5 Housing microfinance loan
X361.6 (Reserved)
xl
X361.7 Micro-agri loans
X361.8 (Reserved)
1361.8 (Reserved)
2361.8 Marketing, sale and servicing of microinsurance
products by thrift banks
3361.8 Marketing, sale and servicing of microinsurance
products by rural and cooperative banks
X361.9 Required reports
X361.10 Sanctions
SECTION X365 Loans to Barangay Micro Business Enterprises

X365.1 Credit delivery
X365.2 Interest on loans to barangay micro business
enterprises
X365.3 Amortization of loans to barangay micro business
enterprises
X365.4 Waiver of documentary requirements
X365.5 Incentives to participating financial institutions
X365.6 Credit guarantee
X365.7 Record
X365.8 Reports to Congress
X365.9 Administrative sanctions
H. EQUITY INVESTMENTS
SECTION X376 Scope of Authority

X376.1 Conditions for investment in equities
X376.2 - X376.4 (Reserved)
X376.5 Guidelines for major investments
SECTION X377 Financial Allied Undertakings
SECTION X378 Limits on Investment in the Equities of Financial Allied

Undertakings
SECTION X379 Investments in Venture Capital Corporations

X379.1 Requirements for investors
X379.2 Equity investments of venture capital corporations
X379.3 Business name of venture capital corporations
X379.4 Reportorial requirements; examination by Bangko
xli
Sentral
X379.5 Interlocking directorships and/or officerships
SECTION X380 Non-Financial Allied Undertakings
SECTION 1381 Investments in Non-Allied or Non-Related Undertakings

1381.1 Non-allied undertakings eligible for investment by
universal banks
1381.2 Limits on investments in non-allied enterprises
1381.3 Report on outstanding equity investments in and
outstanding loans to non-allied enterprises
(Deleted by Circular No. 671 dated 27 November
2009)
SECTION X382 Investments in Subsidiaries and Affiliates Abroad

X382.1 Application for authority to establish or acquire
subsidiaries and affiliates abroad
X382.2 Requirements for establishing subsidiaries or affiliates
abroad
X382.3 Conditions for approval of application
X382.4 - X382.7 (Reserved)
X382.8 Investment of a bank subsidiary in a foreign subsidiary
SECTION X383 Other Limitations and Restrictions
SECTION X385 Sanctions
I. (RESERVED)
J . OTHER OPERATIONS
SECTION X388 Purchase of Receivables and Other Obligations

X388.1 Yield on purchase of receivables
X388.2 Purchase of receivables on a “without recourse” basis
X388.3 Purchase of commercial paper
X388.4 Reverse repurchase agreements with Bangko Sentral
X388.5 Investment in readily marketable bonds and other debt
xlii
securities
SECTION 1389 Guidelines on the Investment of Universal Banks and

Commercial Banks in Credit-Linked Notes, Structured Products
and Securities Overlying Securitization Structures
SECTIONS 2389 - 3389 (Reserved)
SECTION 1390 Prohibition Against Non-Residents form Investing in the Special

Deposit Account (SDA) Facility (Deleted by Circular No. 913
dated 02 June 2016)
SECTION 2390 Prohibition Against Non-Residents from Investing in the SDA

Facility (Deleted by Circular No. 913 dated 02 June 2016)
K. MISCELLANEOUS PROVISIONS
SECTION X393 Loans-to-Deposits Ratio

X393.1 Statement of policy
X393.2 Regional loans-to-deposits ratio
X393.3 Computation of the regional loans-to-deposits ratio
SECTION X394 Acquired Assets in Settlement of Loans

X394.1 Posting
X394.2 Booking
X394.3 Sales contract receivable
X394.4 - X394.9 (Reserved)
X394.10 Transfer/sale of non-performing assets to a special
purpose vehicle or to an individual
X394.11 - X394.14 (Reserved)
X394.15 Joint venture of banks with real estate development
companies
SECTION X395 Credit Policies of Government-Owned Corporations

SECTION X396 Parcellary Plans on Crop Loans
xliii
SECTION 1397 Limits on Real Estate Exposures and Other Real Estate Property
of UBs/KBs
SECTION 2397 Limits on Real Estate Exposures and Other Real Estate Property
of TBs
SECTION X398 Monetary Board Opinion on Domestic Borrowings of

Government
X398.1 Domestic borrowings by local government units
pursuant to Section 123 of R.A. No. 7653
X398.2 Debt service limit on local government borrowings
X398.3 Domestic Borrowings by Government-owned
and/or- Controlled Corporations (GOCCs), Local
Water Districts (LWDs) and State Universities and
Colleges (SUCs) pursuant to Section 123 of R.A. 7653
X398.4 (Reserved)
L. GENERAL PROVISION ON SANCTIONS
PART FOUR - TRUST, OTHER FIDUCIARY BUSINESS AND

INVESTMENT MANAGEMENT ACTIVITIES
SECTION X401 Statement of Principles
SECTION X402 Scope of Regulations
SECTION X403 Definitions
A. TRUST AND OTHER FIDUCIARY BUSINESS
SECTION X404 Authority to Perform Trust and Other Fiduciary Business

X404.1 Application for authority to perform trust and other
fiduciary business
X404.2 Required capital
xliv
X404.3 Prerequisites for engaging in trust and other fiduciary
business
X404.4 Pre-operating requirements
SECTION 2404 Grant of Authority to Engage in Limited Trust Business to Thrift

Banks
SECTION 3404 Grant of Authority to Engage in Limited Trust Business to Rural

Banks
SECTION X405 Security for the Faithful Performance of Trust and Other Fiduciary
Business
X405.1 Basic security deposit
X405.2 Eligible securities
X405.3 Valuation of securities and basis of computation of
the basic security deposit requirement
X405.4 Compliance period; sanctions
X405.5 Reserves against peso-denominated common trust
funds and trust and other fiduciary accounts - others
X405.6 Composition of reserves
X405.7 Computation of reserve position
X405.8 Reserve deficiencies; sanctions
X405.9 Report of compliance
SECTION X406 Organization and Management

X406.1 Organization
X406.2 Composition of trust committee
X406.3 Qualifications of committee members, officers and
staff
X406.4 Responsibilities of administration
X406.5 - X406.8 (Reserved)
X406.9 Outsourcing services in trust departments
X406.10 Confirmation of the appointment/designation
of trust officer and independent professional
SECTION X407 Non-Trust, Non-Fiduciary and/or Non-Investment Management

Activities
SECTION X408 Unsafe and Unsound Practices

X408.1 - X408.8 (Reserved)
xlv
X408.9 Sanctions
SECTION X409 Trust and Other Fiduciary Business

X409.2 Lending and investment disposition
X409.3 Transactions requiring prior authority
X409.4 Ceilings on loans
X409.5 Funds awaiting investment or distribution
X409.6 Other applicable regulations on loans and
investments
X409.7 Operating and accounting methodology
X409.8 Tax-exempt individual trust accounts
X409.9 Personal management trust
X409.10 - X409.15 (Reserved)
X409.16 Qualification and accreditation of private banks acting
as trustee on any mortgage or bond issuance by any
municipality, government-owned or controlled
corporation, or any body politic
X409.17 Trust fund of pre-need companies
SECTION X410 Unit Investment Trust Funds/Common Trust Funds

X410.1 Definitions
X410.2 Establishment of a Unit Investment Trust Fund
X410.3 Administration of a Unit Investment Trust Fund
X410.4 Relationship of trustee with Unit Investment
Trust Fund
X410.6 Plan rules
X410.7 Minimum disclosure requirements
X410.8 Exposure limits
X410.9 Allowable investments and valuation
X410.10 Other related guidelines on valuation of allowable
investments
X410.11 Unit investment trust fund administration support
X410.12 Counterparties
X410.13 Foreign currency-denominated unit investment trust
funds
X410.14 Exemptions from statutory and liquidity reserves,
single borrower's limit, directors, officers,
stockholders and their related interests
SECTION X411 Investment Management Activities

X411.2 Minimum size of each investment management
xlvi
account
X411.3 Commingling of funds
X411.4 Lending and investment disposition
X411.5 Transactions requiring prior authority
X411.6 Title to securities and other properties
X411.7 Ceilings on loans
X411.8 Other applicable regulations on loans and
investments
X411.10 Tax-exempt individual investment management
accounts
SECTION X412 Foreign Currency Deposit Unit/Expanded Foreign Currency

Deposit Unit Trust Accounts; Other Fiduciary or Investment
Management Accounts
X412.1 Banks with trust authority or investment management
authority
X412.2 Additional deposit for the faithful performance of trust
duties or investment management activities
X412.3 Applicability of rules and regulations
X412.4 Liquidity requirement for foreign currency deposit
unit/expanded foreign currency deposit unit common
trust funds (Deleted by Circular No. 666 dated 24
September 2009)
SECTION X413 Required Surplus
B. INVESTMENT MANAGEMENT ACTIVITIES
SECTION X414 Authority to Perform Investment Management

X414.1 Required capital
X414.2 Prerequisites for engaging in investment management
activities
X414.3 Pre-operating requirements
SECTION X415 Security for the Faithful Performance of Investment Management

Activities
X415.2 Eligible securities
X415.3 Valuation of securities and basis of computation of
the basic security deposit requirement
X415.4 Compliance period; sanctions
xlvii
SECTION X416 Organization and Management
SECTION X417 Non-Investment Management Activities
SECTION X418 Unsound Practices
SECTION X419 Conduct of Investment Management Activities
SECTION X420 Required Surplus
C. GENERAL PROVISIONS
SECTION X421 Books and Records
SECTION X422 Custody of Assets
SECTION X423 Fees and Commissions
SECTION X424 Taxes
SECTION X425 Reports Required

X425.1 To trustor, beneficiary, principal
X425.2 To the Bangko Sentral
X425.3 Audited financial statements
X425.4 Post-bond flotation report (Superseded by Circular No.
769 dated 26 September 2012)
SECTION X426 Audits

X426.1 Internal audit
X426.2 External audit
X426.3 Board action
SECTION X427 Authority Resulting from Merger or Consolidation
SECTION X428 Receivership
SECTION X429 Surrender of Trust or Investment Management License
SECTION X441 Securities Custodianship and Securities Registry Operations

X441.2 Applicability of this regulation
xlviii
X441.4 Application for authority
X441.5 Pre-qualification requirements for a securities
custodian/registry
X441.6 Functions and responsibilities of a securities custodian
X441.7 Functions and responsibilities of a securities registry
X441.8 Protection of securities of the customer
X441.9 Independence of the registry and securities custodian
X441.10 Registry of scripless securities of the Bureau of the
Treasury
X441.11 Confidentiality
X441.12 Compliance with anti-money laundering laws/
regulations
X441.15 - X441.28 (Reserved)
X441.29 Sanctions
D. GENERAL PROVISION ON SANCTIONS
SECTION X499 Sanctions
PART FIVE - MANUAL OF REGULATIONS ON FOREIGN

EXCHANGE TRANSACTIONS
Please refer to separate Manual on Foreign Exchange Transactions
PART SIX - TREASURY AND MONEY MARKET OPERATIONS

A. MONETARY OPERATIONS OF THE BANGKO SENTRAL
SECTION X601 Monetary Operations

X601.1 Repurchase agreements with Bangko Sentral
X601.2 Reverse repurchase agreements with the Bangko
Sentral
X601.3 Settlement procedures on the purchase and sale of
government securities under repurchase agreements
with the Bangko Sentral
X601.4 Borrowings from the Overnight Lending Facility (OLF)
of the Bangko Sentral
X601.5 Overnight deposits with Bangko Sentral
xlix
X601.6 The Bangko Sentral Term Deposit Facility (TDF)
X601.7 Bangko Sentral trading windows and services during
public sector holidays
X601.8 Prohibition against funds from non-residents being
accepted in the TDF and ODF
SECTION X602 Treasury Activities of BSFIs

X602.1 Treasury operations
B. FINANCIAL INSTRUMENTS
SECTIONS X611 Derivatives

X611.1 Generally authorized derivatives activities
X611.2 Activities requiring additional derivatives authority
X611.3 Intra-group transactions
X611.4 Accounting guidelines
X611.5 Reporting requirements
X611.6 Sanctions
SECTION X624 The Japanese Yen/Philippine Peso (JPY/PHP) Swap Facility under
the Cross-Border Liquidity Arrangement (CBLA) between the
Bangko Sentral and the Bank of Japan (BOJ)
X624.1 Policy statement
X624.2 Availment of the JPY/PHP Swap Facility
X624.3 Eligibility requirements
X624.4 Delivery of the JPY to the BOJ
X624.5 Allowable amounts
X624.6 Execution
SECTION X625 Forward and Swap Transactions

X625.3 Documentation
X625.4 Tenor/maturity and settlement
X625.5 (Reserved)
1625.5 Forward contracts with non-residents
2625.5 (Reserved)
l
3625.5 (Reserved)
X625.6 Cancellations, roll-overs or non-delivery of FX forward
contracts
X625.7 Non-deliverable forward contracts involving the
Philippine peso
X625.8 Compliance with anti-money laundering rules
X625.9 Reporting requirements
X625.10 - X625.13 (Reserved)
X625.14 Sanctions
SECTION 1628 Credit-linked Notes and Similar Credit Derivative Products

1628.1 Definitions
1628.2 Qualified banks
1628.3 Capital treatment of investments in CLNs
1628.4 Risk management
1628.5 Transitional arrangements
1628.6 Bangko Sentral approval not required
SECTION 1635 Bank's Exposures to Structured Products

1635.1 Statement of policy
1635.2 Definition
1635.4 Capital treatment of banks' exposures to structured
products
SECTION 1636 Expanded Foreign Currency Deposit Units Investments in Foreign

Currency Denominated Structured Products
li
1636.2 Scope
1636.3 Other conditions
1636.4 Capital treatment of structured products
1636.6 Sanctions
SECTION 1648 Investments in Securities Overlying Securitization Structures

1648.2 Definition
1648.4 Capital treatment of investments in securities
overlying securitization structures
SECTION X651 Asset-Backed Securities

X651.3 Board approval requirement
X651.4 Minimum documents required
X651.5 Minimum features of asset-backed securities
X651.6 Disclosure requirements
X651.7 Conveyance of assets
X651.8 Representations and warranties
X651.9 Third party review
X651.10 Originator and seller
X651.11 Trustee and issuer
X651.12 Servicer
X651.13 Underwriter
X651.14 Guarantor
X651.15 Credit enhancement
X651.16 Clean-up call
lii
X651.17 Prohibited activities
X651.18 Amendment of trust indenture
X651.19 Trustee or servicer in securitization
X651.20 Report to Bangko Sentral
SECTION X660 Global Peso Notes
SECTION X661 Sales and Marketing Guidelines for Financial Products

X661.1 Scope of application
X661.3 Client suitability guidelines
X661.4 Disclosures
X661.5 Sales and marketing personnel
X661.6 Role of control functions
X661.7 Record retention
PART SEVEN - ELECTRONIC BANKING SERVICES AND

OPERATIONS
SECTION X701 Electronic Banking Services

X701.1 Application
X701.2 Pre-screening of applicants
X701.3 Approval in principle
X701.4 Documentary requirements
X701.5 Conditions for Monetary Board approval
X701.6 Requirements for banks with pending applications
X701.7 Exemption
X701.8 Transitory provision
X701.9 - X701.11 (Reserved)
X701.12 Sanctions
X701.13 Outsourcing of internet and mobile banking services
(Deleted by CIrcular No. 765 dated 03 August 2012)
SECTION X705 Consumer Protection for Electronic Banking
liii
(Transferred to X177.7 pursuant to Circular No. 808 dated
22 August 2013)
X705.1 E-Banking oversight function (Transferred to X177.7
pursuant to Circular No. 808 dated 22 August 2013)
X705.2 E-Banking risk management and internal control
X705.3 Compliance with consumer awareness program
X705.4 Minimum disclosure requirements (Transferred to
X177.7 pursuant to Circular No. 808 dated 22 August
2013)
X705.5 Complaint resolution (Transferred to X177.7 pursuant
to Circular No. 808 dated 22 August 2013)
X705.6 Applicability (Transferred to X177.7 pursuant to
SECTION X780 Issuance and Operations of Electronic Money

X780.1 Declaration of policy
X780.2 Definitions
X780.4 Common provisions
X780.5 (Reserved)
X780.6 Sanctions
X780.7 Transitory provisions
X780.8 - X780.10 (Reserved)
X780.11 Outsourcing of services by Electronic Money Issuers
(EMIs) to Electronic Money Network Service
Providers (EMNSP)
PART EIGHT - ANTI-MONEY LAUNDERING REGULATIONS
SECTION X801 Declaration of Policy
SECTION X802 Scope of Regulations

SECTION X803 Definitions of Terms
liv
SECTION X804 Basic Principles and Policies to Combat Money Laundering
A. RISK MANAGEMENT
SECTION X805 Risk Management

X805.1 Board and senior management oversight
X805.2 Money laundering and terrorist financing
prevention program
X805.3 Monitoring and reporting tools
X805.5 Risk assessment
B. CUSTOMER IDENTIFICATION PROCESS
SECTION X806 Customer Due Diligence

X806.1 Customer acceptance and identification policy
X806.2 Customer identification
X806.3 On-going monitoring of customers, accounts and
transactions
X806.4 Non-discrimination against certain types of
customers
C. COVERED AND SUSPICIOUS TRANSACTION REPORTING
SECTION X807 Covered and Suspicious Transaction Reporting

X807.1 Deferred reporting of certain covered transactions
X807.2 Electronic monitoring system for AML/CFT
X807.3 Manual monitoring
X807.4 Electronic submission of reports
X807.5 Exemption from bank secrecy laws
X807.6 Confidentiality provision
X807.7 Safe harbor provision
D. RECORD KEEPING AND RETENTION
SECTION X808 Record Keeping

X808.1 Closed accounts
X808.2 Retention of records where the account or customer
is the subject of a case
X808.3 Safekeeping of records and documents
X808.4 Form of records
E. TRAINING PROGRAM
lv
SECTION X809 AML Training Program
F. BANGKO SENTRAL AUTHORITY AND ENFORCEMENT ACTIONS
SECTION X810 Bangko Sentral Authority to Check Compliance with the AMLA,
as amended
SECTION X811 Sanctions and Penalties
SECTION X813 Separability Clause
PART NINE - OTHER BANKING REGULATIONS
A. BANKING FEES/CHARGES
SECTION X901 Assessment Fees on Banks

X901.1 Annual fees on banks
SECTION X902 Collection of Fines and Other Charges from Banks

X902.1 Guidelines on the imposition of monetary penalties
X902.2 Payment of fines by banks
X902.3 Cost of checks and documentary stamps
X902.4 Check/demand draft payments to the Bangko Sentral
of thrift, cooperative and rural banks
B. BANK AS COLLECTION/REMITTANCE AGENTS
SECTION X903 Collection of Customs Duties/Taxes/Levies and Other Revenues

X903.1 Coverage
X903.2 Collection and reporting of internal revenue taxes
X903.3 Collection and reporting of customs duties and import
processing fees
X903.4 Collection and reporting of export/premium duties
X903.5 Remittances thru debit/credit advices
X903.6 Reconciliation of revenue collections
X903.7 Penalty for willful delay on the reporting of
lvi
collections/remittances
X903.8 Fines for delayed reports/remittances of collections
X903.9 Liquidity floor requirement on revenue collections
X903.10 Collection of import duties at the time of opening of
letters of credit
SECTION X904 Collection Agents of the Social Security System
SECTION X905 Collection Agents of PhilHealth
SECTION X906 Disclosure of Remittance Charges and Other Relevant

Information
C. SECURITIES BROKERING ACTIVITIES OF BANKS
SECTION X907 Segregation of Customer Funds and Securities Received by Banks

in the Performance of their Securities Brokering Functions
X907.3 Segregation of customer funds and securities
X907.4 Accounting and record keeping
X907.5 Receivership
D. CREDIT RATING AGENCIES
SECTION X931 Recognition and Derecognition of Domestic Credit Rating

Agencies for Bank Supervisory Purposes
X931.2 Minimum eligibility criteria
X931.3 Pre-qualification requirements
X931.4 Inclusion in Bangko Sentral list
X931.5 Derecognition of credit rating agencies
X931.6 Recognition of PhilRatings as domestic credit
rating agency for bank supervisory purposes
SECTION X932 Internationally Accepted Credit Rating Agencies

X932.1 Recognition of Fitch Singapore Pte., Ltd. as
international credit rating agency for bank
supervisory purposes
lvii
SECTION X934 Recognition and Derecognition of Microfinance Institution
Rating Agencies
X934.2 Pre-qualification requirements
X934.3 Minimum eligibility criteria
X934.4 Derecognition of MIRA
SECTION X947 Prohibition on the Sale of Foreign-Based Mutual Funds by

Banks
SECTION 1948 Offering in the Philippines of Products by Parent Bank and

Branches Abroad of the Parent Bank
E. PHILIPPINE & FOREIGN CURRENCY NOTES & COINS
SECTION X950 Philippine and Foreign Currency Notes and Coins

X950.2 Treatment and disposition of counterfeit Philippine
and foreign currency notes and coins
X950.3 Reproduction and/or use of facsimiles of legal tender
Philippine currency notes
X950.4 Reproduction and/or use of facsimiles of legal tender
Philippine currency coins
X950.5 Clean note and coin policy
X950.6 Replacement and redemption of legal tender
Philippine currency notes and coins considered
mutilated or unfit for circulation
X950.7 Treatment and disposition of Philippine currency
notes and coins called in for replacement
X950.8 Enforcement action
lviii
SECTION X954 Service Fee for Transactions with the Bangko Sentral
X954.1 Fee structure under the Enhanced Cash
Management (ECM) services offered by the CD,
CMSS
X954.2 Fee structure for transactions with the Bangko
Sentral regional offices and branches, RMASS
SECTION X955 Adoption of Clean Note and Coin Policy

X955.1 Compliance program
X955.3 Supervisory enforcement action
SECTION X960 Personal Equity and Retirement Account (PERA) Market

Participants and PERA Investment Products
X960.1 Applicability
X960.2 Eligibility criteria
X960.3 Qualification/Accreditation requirements
X960.4 Application for qualification/accreditation
X960.5 Security for the faithful performance of
administrators
X960.6 Grounds for suspension or revocation of qualification/
accreditation of administrator, investment manager
or custodian
X960.7 Penalty
PART TEN - BSP REGULATIONS ON FINANCIAL CONSUMER

PROTECTION
A. CONSUMER PROTECTION OVERSIGHT FUNCTION
SECTION X1001 Consumer Protection Oversight Function

X1001.1 Role and responsibility of the board and senior
lix
management
X1001.2 Consumer protection risk management system
(CPRMS)
B. CONSUMER PROTECTION STANDARDS OF CONDUCT FOR BSFIs
SECTION X1002 Consumer Protection Standards

X1002.1 Disclosure and transparency
X1002.2 Protection of client information
X1002.3 Fair treatment
X1002.4 Effective recourse
X1002.5 Financial education and awareness
C. ENFORCEMENT ACTIONS
SECTION X1003 Enforcement Actions
PART ELEVEN - BANGKO SENTRAL POLICY AND REGULATIONS

ON LICENSING
SECTION X1101 Statement of Policy and Objectives

X1101.1 Scope
X1101.2 Prudential criteria
lx
§§ X001 - X001.1
17.06.30
POWER OF THE BANGKO SENTRAL
Section X001 Examination by the Bangko the scope of examination may include, but
Sentral. The term “examination” shall refer need not be limited to, the following:
to an investigation of an institution under (1) Appraisal of the overall quality of
the supervisory authority of the Bangko corporate governance;
Sentral to determine whether the institution (2) Assessment of the risk management
is operating on a safe and sound basis, system, which shall include the evaluation
inquire into its solvency and liquidity, and of the effectiveness of management oversight
assess the effectiveness of its compliance and self-assessment functions (e.g., internal
function to ascertain that it is conducting audit, risk management and compliance);
business in accordance with laws and adequacy of policies, procedures, and limits;
regulations. effectiveness of risk measurement,
Regular or periodic examination shall be monitoring and management information
done once a year, with an interval of system; and robustness of internal controls;
twelve (12) months from the last date (3) Review of the institution’s
thereof. Special examination may be operations and overall risk profile;
conducted earlier, or at a shorter interval, (4) Evaluation of financial performance,
when authorized by the Monetary Board capital adequacy, asset quality, and
(MB) by an affirmative vote of five (5) liquidity; and
members. (5) Any other activity relevant to the
In the full exercise of the supervisory above.
powers of the Bangko Sentral, examination b. Conduct of examination. The conduct
by the Bangko Sentral of institutions shall of examination shall include, but need not
be complemented by overseeing thereof. be limited to, the interview of any bank’s
In this regard, the term “overseeing” shall directors, officers and personnel; and the
refer to a limited investigation of an verification, review and evaluation of
institution, or any investigation that is limited documents and records, including making
in scope, conducted to inquire into a copies of the records, taking possession
particular area/aspect of an institution’s thereof and keeping them under the custody
operations, for the purpose of overseeing of the Bangko Sentral after giving proper
that laws and regulations are complied with, receipts thereof.
inquiring into the solvency and liquidity of For this purpose, “records” shall refer
the institution, enforcing prompt corrective to information, whether in its original form
action, or such other matters requiring or otherwise, including documents,
immediate investigation: Provided, That signatures, seals, texts, images, sounds,
(i) specific authorizations be issued by the speeches, or data compiled, recorded or
Deputy Governor, Supervision and stored, as the case may be: (1) in written
Examination Sector (SES), and (ii) periodic form on any material; (2) on film, negative,
summary reports on overseeings conducted tape or other medium so as to be capable of
be submitted to the Monetary Board. being reproduced; or (3) by means of any
a. Scope of examination. Consistent recording device or process, computer or
with a risk-based approach to supervision, other electronic device or process; and
Manual of Regulations for Banks X001 - X009

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§§ X001 - X009
17.03.31
regardless of whether these information are prejudice to the sanctions under Section 34
stored and kept by the BSFI or another entity of R.A. No. 7653.
duly authorized by the BSFI (e.g., technology The fine shall be imposed starting on
service provider). Records shall also include the day following the receipt by the
audio, photographic, and video evidence of concerned Head of Department in the SES
events, acts, or transactions of the BSFI, of the report from the Bangko Sentral
including all records of communication, oral examiner that the bank continues to refuse
(e.g., voice recordings) or written (e.g., letters) to permit examination notwithstanding the
of officers and employees of the BSFI: written demand made by the Department
Provided, That the recording was made in Head.
connection with the performance of the Aside from the fine mentioned above,
official functions of the concerned officers the bank and/or its concerned directors and/
or employees and coursed through or officers may be subject to non-monetary
BSFI-issued computers, telephones, mobile sanctions provided under Section 37 of
phones, and similar devices. R. A. No. 7653 (The New Central Bank Act)
(Circular No. 442 dated 20 July 2004, as amended by Circular and Sec. X009.
No. 957 dated 17 April 2017, 894 dated 07 December 2015 and (Circular No. 957 dated 17 April 2017)
Circular No. 862 dated 17 December 2014)
Secs. X002 - X008 (Reserved)
§ X001.1 Refusal to permit
examination. Any act or omission that Sec. X009 Supervisory Enforcement Policy.
impedes, delays or obstructs the duly The Policy sets forth guidance on the
authorized Bangko Sentral examiner from Bangko Sentral’s supervision-by-risk
conducting an examination of a BSFI, framework. It also puts together in a
including the act of refusing to accept or holistic manner all the enforcement tools
honor the letter of authority to examine available to the Bangko Sentral as
presented by the examiner of the Bangko contained in various laws and rules and
Sentral, shall be considered as a refusal to regulations 1 and communicates the
permit examination. deployment thereof in a consistent manner
The refusal of the BSFI to permit by the Bangko Sentral in the course of
examination shall be reported by the Bangko performing its supervisory function. It
Sentral examiner to the Head of the further sets out the guiding principles and
appropriate department of the SES, who shall objectives behind the deployment of such
forthwith make a written demand upon the enforcement actions.
BSFI concerned for such examination. If the Nothing in this Section shall be
BSFI continues to refuse the said construed as superseding enforcement
examination without any satisfactory actions previously imposed against Bangko
explanation thereof, a report on such refusal Sentral-supervised FIs pursuant to existing
shall be submitted by the Bangko Sentral laws, Bangko Sentral rules and
examiner concerned to the said Department regulations.
Head.
Sanctions. A bank that wilfully refuses a. Statement of policy and rationale
to permit examination shall pay a fine of The Bangko Sentral is issuing this
P30,000 per day from the day of the refusal Supervisory Enforcement Policy to provide
and for as long as such refusal lasts, without guidance on its supervision-by-risk
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)
X001 - X009 Manual of Regulations for Banks

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§ X009
16.03.31
framework. The Bangko Sentral (1) Achieving the desired change.

recognizes that risk-taking is integral to a Effect a change in the overall condition and
financial institution’s business. The governance of Bangko Sentral-supervised
existence of risk is not necessarily a FIs consistent with the expectations set
reason for concern so long as Management under relevant laws and regulations; and
exhibits the ability to effectively manage (2) Mitigating risk. Mitigate risks to the
that level of risk and operates the financial FIs and other stakeholders in order to
institution (FI) in a safe and sound manner. maintain the stability of the financial system.
Thus, when risk is not properly managed,
the Bangko Sentral may deploy a wide range c. General principles
of enforcement actions provided under The Bangko Sentral, in the deployment
existing laws, Bangko Sentral rules and of enforcement actions, is guided by the
regulations, taking into consideration the following general principles:
nature and extent of the supervisory issues and (1) Root cause diagnosis. The
concerns and the level of cooperation enforcement action addresses the underlying
provided by Management. cause of the supervisory issues and concerns.
The Bangko Sentral adopts a holistic (2) Consistently matching the severity of
approach to supervision with the objective enforcement action to the supervisory issue.
of guiding FIs under its supervision to The deployment of appropriate enforcement
mitigate risk and achieve the desired changes. action is commensurate to the severity of
Bangko Sentral’s risk-based the supervisory issues and concerns. The
supervision, of which enforcement action severity of the supervisory issues and
is a key part, focuses on the safety and concerns is assessed in terms of prevalence1
soundness of operations of the FIs. This and persistence.
policy sets forth the expectations of the (3) Successive or simultaneous
Bangko Sentral when it deploys deployment of enforcement actions.
enforcement action and the consequences Enforcement actions may be deployed
when expected actions are not performed successively or simultaneously taking into
within prescribed timelines. account the nature and seriousness of the
Thus, this over-arching policy is difficulties encountered by the FIs and the
needed - (a) as a collation of various ability and willingness of the FI’s
enforcement actions already present in Management to address the supervisory
various laws, rules and regulations; (b) for issues and concerns.
better guidance of the FIs and the bank (4) Monitorability and follow-through.
supervisors; and (c) as a means to The Bangko Sentral monitors the FI’s
broadcast to the banking/financial progress/compliance with the expected
industry the consequences of failure to actions to address the supervisory issues,
address the Bangko Sentral requirements concerns and problems.
and supervisory expectations. (5) Escalation of enforcement actions.
Enforcement actions may be escalated if the
b. Objectives of the enforcement policy desired change is not achieved and the root
The Bangko Sentral’s Supervisory causes of the FI’s issues, concerns and
Enforcement Policy aims to achieve the problems are not addressed by the FI within
following two (2) key objectives: prescribed timelines.
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.
Manual of Regulations for Banks X001 - X009

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§ X009
16.03.31
d. Categories of enforcement actions • Suspension of authorities,

The three (3) main categories of privileges and other activities
enforcement action are: (1) corrective • Divestment and/or unwinding
actions, (2) sanctions and (3) other • Monetary sanction - penalties/
supervisory actions. These enforcement fines against the FI
actions may be imposed singly or in (ii) Directors and officers
combination with others. • Reprimand
(a) Corrective actions
• Restriction on compensation and
Corrective actions are enforcement
benefits
actions intended to require the FI to address
• Divestment
the underlying cause of supervisory issues,
concerns and problems. These include the • Suspension
following: • Disqualification
(i) Bangko Sentral directives • Removal
Directives are basically orders and • Monetary penalties/fines
instructions communicated by the The foregoing sanctions to individuals
appropriate supervising department in are without prejudice to the filing of
Bangko Sentral requiring the FI to undertake separate civil or criminal actions against
a specific positive action or refrain from them, when appropriate.
performing a particular activity within a (c) Other supervisory actions
prescribed timeline. Subject to prior MB approval, the
(ii) Letter of Commitment (LOC) Bangko Sentral, when warranted, may
The LOC is an enforcement action deploy other supervisory actions such as
where the FI’s Board of Directors (Board) is (i) Initiation into the PCA Framework;
required, upon approval and/or confirmation (ii) Issuance of a cease and desist order
by the MB, to make a written commitment (CDO) against the FI as well as its directors
to undertake a specific positive action or and officers;
refrain from performing a particular activity (iii) Conservatorship; and
with a given time period. (iv) Placement under receivership.
The LOC is generally used to arrest
emerging supervisory concerns before these e. Due Process
develop into serious weaknesses or An integral part of the deployment of
problems, or to address remaining enforcement actions is the observance of
supervisory issues and concerns. due process in all cases.
(b) Sanctions The FI and/or its directors and officers
Sanctions that may be imposed on an FI are afforded fair and reasonable
and/or its directors and officers, as provided opportunity to explain their side and to
under existing laws, Bangko Sentral rules submit evidences in support thereof,
and regulations, are subject to the prior which are given due consideration in
approval and/or confirmation by the MB. determining the appropriate enforcement
Such sanctions include the following: action(s) to be imposed.
(i) FIs (Circular No. 875 dated 15 April 2015, as amended by Circular
Nos. 903 dated 29 February 2016 and 894 dated 07 December
• Restrictions on activities and 2015)
privileges
X001 - X009 Manual of Regulations for Banks

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§ X101
17.06.30
PART ONE
ORGANIZATION, MANAGEMENT AND ADMINISTRATION
A. CLASSIFICATIONS AND POWERS TB, an RB, a financial allied enterprise, or a

OF BANKS non-financial allied enterprise; and
(d) in case of publicly-listed UBs, the
Section X101 Classifications, Powers and power to own up to 100% of the voting
Scope of Authorities of Banks. The stock of only one (1) other UB or KB.
following are the classifications, powers and A UB may perform the functions of an
scope of authorities of banks, as well as the IH either directly or indirectly through a
prerequisites for the grant of banking subsidiary IH; in either case, the
authorities. underwriting of equity securities and
a. Classifications of banks. Banks are securities dealing shall be subject to
classified into the following subject to the pertinent laws and regulations of the
power of the Monetary Board to create other Securities and Exchange Commission (SEC):
classes or kinds of banks: Provided, That if the IH functions are
(1) Universal banks (UBs); performed directly by the UB, such functions
(2) Commercial banks (KBs); shall be undertaken by a separate and
(3) Thrift banks (TBs), as defined in distinct department or other similar unit in
Republic Act (R.A.) No. 7906, which shall the UB: Provided, further, That a UB cannot
be composed of: (a) savings and mortgage perform such functions both directly and
banks, (b) stock savings and loan indirectly through a subsidiary.
associations, and (c) private development (2) KBs. In addition to the general
banks; powers incident to corporations and those
(4) Rural banks (RBs), as defined in provided in other laws, a KB shall have
R. A. No. 7353; the authority to exercise all such powers
(5) Cooperative banks (Coop Banks); as may be necessary to carry on the
and business of commercial banking, such as
(6) Islamic banks (IBs), as defined in accepting drafts and issuing letters of
R.A. No. 6848. credit; discounting and negotiating
b. Powers and scope of authorities. promissory notes, drafts, bills of
The following are the powers and scope of exchange, and other evidences of debt;
authorities of banks. accepting or creating demand deposits;
(1) UBs. A UB shall have the authority receiving other types of deposits and
to exercise, in addition to the powers and deposit substitutes; buying and selling
services authorized for a KB as enumerated foreign exchange and gold or silver
in Item “b(2)” and those provided by other bullion; acquiring marketable bonds and
laws, the following: other debt securities; and extending credit,
(a) the powers of an investment house subject to such rules as the Monetary
(IH) as provided under existing laws; Board may promulgate. These rules may
(b) the power to invest in non-allied include the determination of bonds and
enterprises; other debt securities eligible for
(c) the power to own up to one investment, the maturities and aggregate
hundred percent (100%) of the equity in a amount of such investment.
Manual of Regulations for Banks Part I - Page 1

§ X101
17.06.30
It may also exercise or perform any or government-owned or -controlled

all of the following: corporations;
(a) invest in the equities of allied (h) accept foreign currency deposits as
enterprises as provided in Sections 31 and provided under R.A. No. 6426, as
32 of R.A. No. 8791; amended;
(b) purchase, hold and convey real (i) act as correspondent for other
estate as specified under Sections 51 and financial institutions (FIs);
52 of R.A. No. 8791; (j) purchase, hold and convey real
(c) receive in custody funds, documents estate as specified under Sections 51 and
and valuable objects; 52 of R.A. No. 8791;
(d) act as financial agent and buy and (k) offer other banking services as
sell, by order of and for the account of their provided in Section 53 of R.A. No. 8791; and
customers, shares, evidences of (l) buy and sell foreign exchange.
indebtedness and all types of securities; With prior approval of the Monetary
(e) make collections and payments for Board, and subject to such guidelines as
the account of others and perform such other may be established by it, TBs may also
services for their customers as are not perform the following services:
incompatible with banking business; (m) open current or checking accounts;
(f) upon prior approval of the Monetary (n) engage in trust, quasi-banking
Board, act as managing agent, adviser, functions and money market operations;
consultant or administrator of investment (o) act as collection agent for
management/advisory/consultancy government entities, including but not
accounts; limited to, the Bureau of Internal Revenue
(g) rent out safety deposit boxes; and (BIR), Social Security System (SSS) and the
(h) engage in quasi-banking functions. Bureau of Customs (BOC);
(3) TBs. In addition to the powers (p) act as official depository of national
provided in other laws, a TB may perform agencies and of municipal, city or provincial
any or all of the following services: funds in the municipality, city or province
(a) grant loans, whether secured or where the TB is located;
unsecured; (q) issue mortgage and chattel mortgage
(b) invest in readily marketable bonds certificates, buy and sell them for its own
and other debt securities, commercial account or for the account of others, or
papers and accounts receivable, drafts, bills accept and receive them in payment or as
of exchange, acceptances or notes arising amortization of its loan;
out of commercial transactions; (r) invest in the equity of allied
(c) issue domestic letters of credit; undertakings;
(d) extend credit facilities to private and (s) issue foreign letters of credit; and
government employees; (t) pay/accept/negotiate import/export
(e) extend credit against the security of draft/bills of exchange.
jewelry, precious stones and articles of (4) RBs. In addition to the powers
similar nature, subject to such rules and provided in other laws, an RB may perform
regulations as the Monetary Board may any or all of the following services:
prescribe; (a) extend loans and advances
(f) accept savings and time deposits; primarily for the purpose of meeting the
(g) rediscount paper with the Land normal credit needs of farmers, fishermen
Bank of the Philippines (LBP), Development or farm families as well as cooperatives,
Bank of the Philippines (DBP), and other merchants, private and public employees;
Part I - Page 2 Manual of Regulations for Banks

§ X101
17.06.30
(b) accept savings and time deposits; Bangko Sentral.

(c) act as correspondent of other FIs; (6) IBs. In addition to the general
(d) rediscount paper with the LBP, DBP powers incident to corporations and those
or any other bank, including its branches provided in other laws, as well as in
and agencies. Said banks shall specify the Circular No. 105 (Appendix 44), insofar as
nature of paper deemed acceptable for they are not inconsistent or incompatible
rediscount, as well as the rediscount rate to with the provisions of R.A. No. 6848, an IB
be charged by any of these banks; may perform any or all of the following
(e) act as collection agent; services:
(f) acquire readily marketable bonds and (a) open savings accounts for
other debt securities; safekeeping or custody with no participation
(g) offer other banking services as in profit and losses except unless otherwise
provided in Section 53 of R.A. No. 8791; and authorized by the account holders to be
(h) buy and sell foreign exchange. invested;
With prior approval of the Monetary (b) accept investment account
Board, an RB may perform any or all of the placements and invest the same for a term
following services: with the IB’s funds in Islamically permissible
(i) accept current or checking transactions on participation basis;
accounts: Provided, That such RB has net (c) accept foreign currency deposits
assets of at least P5.0 million; from banks, companies, organizations and
(j) accept negotiable order of individuals, including foreign governments;
withdrawal (NOW) accounts; (d) buy and sell foreign exchange;
(k) act as trustee over estates or (e) act as correspondent of banks and
properties of farmers and merchants; institutions to handle remittances or any
(l) act as official depository of fund transfers;
municipal, city or provincial funds in the (f) accept drafts and issue letters of
municipality, city or province where it is credit or letters of guarantee, negotiate
located; notes and bills of exchange and other
(m) sell domestic drafts; and evidence of indebtedness under the
(n) invest in allied undertakings. universally accepted Islamic financial
(5) Coop Banks. A Coop Bank shall instruments;
primarily provide financial, banking and (g) act as collection agent insofar as the
credit services to cooperatives and their payment orders, bills of exchange or other
members, although it may provide the same commercial documents are exclusive of riba
services to non-members or the general or interest prohibitions;
public. (h) provide financing with or without
In addition to the powers granted to collateral by way of leasing, sale and
Coop Banks under existing laws, any Coop leaseback, or cost plus profit sales
Bank may perform any or all of the banking arrangement;
services offered by rural banks under Items (i) handle storage operations for goods
“4.a” to “4.h” above. A Coop Bank may or commodity financing secured by
likewise perform any or all of the banking warehouse receipts presented to the bank;
services offered by rural banks under Items (j) issue shares for the account of
“4.(i)” to “4.(n)” as well as any or all of the institutions and companies assisted by the
banking services offered by other types of bank in meeting subscription calls or
banks, subject to prior approval of the augmenting their capital and/or fund

§§ X101 - 2101.1
17.06.30
requirements as may be allowed by law; § 2101.1 Authority of thrift banks to

(k) undertake various investments in all issue foreign letters of credit and pay/
transactions allowed by the Islamic Shari’a in accept/negotiate import/export drafts/bills
such a way that shall not permit the haram of exchange. With prior Monetary Board
(forbidden), nor forbid the halal (permissible); approval, TBs may be authorized to issue
(l) act as an official government foreign letters of credit (LCs) and pay/
depository, or its branches, subdivisions accept/negotiate import/export drafts/bills
and instrumentalities and of government- of exchange, subject to compliance with
owned or-controlled corporations, the following conditions (at the time of
particularly those doing business in the application unless otherwise indicated):
Autonomous Region; a. Minimum capital requirement of
(m) issue investment participation P1.0 billion;
certificates, muquaradah (non-interest- b. Ten percent (10%) risk-based capital
bearing bonds), debentures, collaterals and/ adequacy ratio (CAR);
or the renewal and refinancing of the c. CAMELS composite rating not lower
same, with the approval of the Monetary than “3”, with Management component
Board to be used by the IB in its financing score not lower than “3” in the latest
operations for projects that will promote the examination of the bank;
economic development primarily of the d. Risk management system appropriate
Autonomous Region; to its operations, characterized by clear
(n) carry out financing and joint delineation of responsibility for risk
investment operations by way of mudarabah management, adequate risk measurement
purchasing for others on a cost-plus system, appropriately structured risk limits,
financing arrangement, and invest funds effective internal control system and complete,
directly in various projects or through the timely and efficient risk reporting system;
use of funds whose owners desire to invest e. Articles of incorporation which
jointly with other resources available to the shall include among its powers or
IB on a joint mudarabah basis; and purposes, the issuance of foreign LCs and
(o) invest in equities of the following payment/acceptance/negotiation of
allied undertakings: import/export drafts/bills of exchange
(1) Warehousing companies; (which may be submitted any time prior
(2) Leasing companies; to engaging in said activities);
(3) Storage companies; f. Correspondent banking relationship
(4) Companies engaged in the or arrangement with reputable foreign
management of mutual funds but not in the banks (which should be in place prior to
mutual funds themselves; and engaging in said activities);
(5) Such other similar activities as the g. Appointment of the officer with
Monetary Board has declared or may actual experience of at least two (2) years
declare as appropriate from time to time, as in-charge or at least as assistant in-charge
subject to existing limitations imposed by of import and export financing operations
law. in a UB/KB who will be in-charge of the
(As amended by Circular Nos. 960 dated 04 May 2017, 865
said operations (prior to engaging in said
dated 22 December 2014, 682 dated 15 February 2010 and 650
dated 09 March 2009) activities);
h. Appointment of bank personnel
§ 1101.1 (Reserved) with actual experience and/or specific

§§ 2101.1 - X102.1
16.12.31
training in import and export financing § 2101.2 Application for authority to

operations who will handle the said issue foreign letters of credit and pay/
operations (prior to engaging in said accept/negotiate import/export drafts/bills
activities); of exchange. An application for authority
i. No net weekly regular and liquidity to issue foreign LCs and pay/accept/
reserve deficiencies during the twelve (12) negotiate import/export drafts/bills of
week period immediately preceding the date exchange shall be signed by the president
of application; of the bank or officer of equivalent rank
j. No deficiency in asset and liquid and shall be accompanied by a certified
asset cover for FCDU liabilities for true copy of the resolution of the bank’s
three (3) months immediately preceding the board of directors authorizing the
date of application; application.
k. No deficiency in liquidity floor (Circular No. 650 dated 09 March 2009)
requirement for government funds held
during the twelve (12)- week period B. ESTABLISHMENT AND
immediately preceding the date of ORGANIZATION
application;
l. No float items outstanding for more Sec. X102 Basic Guidelines in Establishing
than sixty (60) calendar days in the “Due Banks. A new banking organization must
From/To Head Office/Branches/Offices” have suitable/fit shareholders, adequate
and “Due from Bangko Sentral” accounts financial strength, a legal structure in line
exceeding one percent (1%) of the total with its operational structure, a management
resources as of end of month preceding the with sufficient expertise and integrity to operate
date of application; the bank in a sound and prudent manner.
m. No unbooked valuation reserves; In establishing a new banking
n. Compliant with ceilings on loans, organization, the documentary requirements
other credit accommodations and to be submitted to the Bangko Sentral are
guarantees to directors, officers, listed in Appendix 37.
stockholders, and their related interests The revised rules and regulations
(DOSRI) for the quarter immediately governing the organization, membership,
preceding the date of application; establishment, administration, activities,
o. Compliant with the single supervision and regulation of cooperative
borrower’s loan limit (SBL); banks are found in Appendix 38.
p. Compliant with the limit on real (As amended by Circular Nos. 902 dated 15 February 2016, 774
estate and improvements, including bank dated 16 November 2012 and 682 dated 15 February 2010)
equipment;
q. No uncorrected findings of unsafe § X102.1 (2008 - X101.2) Prerequisites
and unsound banking practices; for the grant of a universal banking authority
r. Generally compliant with banking a. Compliance with guidelines. A
laws, rules and regulations, orders or domestic bank seeking authority to operate
instructions of the Monetary Board and/or as a UB shall submit an application to the
Bangko Sentral Management; and appropriate department of the SES. The
s. No past due obligations with the applicant shall comply with the guidelines
Bangko Sentral or with any FI. for the issuance of a UB authority and shall
(Circular No. 650 dated 09 March 2009 as amended by Circular submit all the documentary requirements
No. 686 dated 20 April 2010) enumerated in Appendix 1.

§§ X102.1 - X102.3
16.12.31
b. Public offering of bank shares. A on 27 December 1998.

domestic bank applying for a UB authority The guidelines on public offering
shall, as a condition to the approval of its and listing of bank shares are enumerated
application, make a public offering of at in Appendix 1.
least ten percent (10%) of the required
minimum capital and this condition must § X102.2 (2015 - Suspension of the
be complied with before it can be granted grant of new banking licenses or the
the license for authority to operate establishment of banks; 2008 - X102.1)
as a UB. Establishment of new domestic banks.
The term public offering shall mean the There shall be a moratorium 1 on the
offer to sell equity shares to the public. establishment of new domestic banks,
Public shall refer to all prospective except as follows: (i) grant of new universal/
stockholders, excluding the bank’s directors, commercial banking license in connection
shareholders owning twenty percent (20%) with the upgrading of an existing thrift bank
or more of the bank’s subscribed capital under Phase 1, and (ii) establishment of new
stock, together with those of their relatives banks in cities or municipalities where there
within the fourth degree of consanguinity are no existing banking offices, both of which
or affinity, and corporations controlled or shall comply with the required minimum
affiliated with them. capitalization under Subsec. X111.1 and other
A bank whose shares of stock are qualification requirements prescribed under
already listed in the Philippine Stock existing regulations.
Exchange (PSE) at the time of filing of its The moratorium on the establishment of
application for UB authority shall be new domestic banks shall be fully lifted and
deemed to have complied with the public locational restrictions shall be fully liberalized
offering requirement. Likewise, an under Phase 2 starting 01 January 2018.
applicant bank may opt to have its shares (As amended by Circular No. 902 dated 15 February 2016)
listed in the PSE directly instead of passing
through the process of public offering. In § X102.3 (2015 – Partial lifting of
either case, at least ten percent (10%) of general moratorium on the licensing of new
the applicant bank’s capital stock should thrift banks and rural banks; 2008 - X102.2)
be held by public stockholders before it Establishment of microfinance-oriented
can be granted the license for authority to banks. A microfinance-oriented bank is a
operate as a UB. bank that provides financial services and
c. Listing of bank shares in the stock caters primarily to the credit needs of the
exchange. Domestic banks granted a UB basic or disadvantaged sectors such as
license, existing or new, must list their farmers, peasants, artisanal fisherfolk,
shares in the PSE within three (3) years: workers in the formal sector and migrant
Provided, That in the case of new UBs, workers, workers in the informal sectors,
the three (3) year period shall be reckoned indigenous peoples and cultural
from the date the license to operate as a communities, women, differently-abled
UB was granted. In the case of existing UBs persons, senior citizens, victims of
which have not listed their shares in the calamities and disasters, youth and students,
exchange, the three (3) year period lapsed children, urban poor and low income
1
The moratorium applied to all applications for establishment of new banks as of 16 August 1999. The
moratorium for establishing new KBs lapsed on 12 June 2003, pursuant to Section 8 of R.A. No. 8791.

§ X102.3
16.12.31
households for their microenterprises and accompanied by the following documents:

small businesses so as to enable them to (a) A vision and mission statement with
raise their income levels and improve their clear expression of the commitment to reach
living standards. Microfinance loans are low-income clients.
granted on the basis of the borrower’s cash (b) A written manual of operations,
flow and are typically unsecured. which shall include the administrative and
The guidelines on the establishment of credit program systems and procedures.
a microfinance-oriented bank are as follows: The Manual must be consistent with the
a. Microfinance-oriented banks may be core principles, characteristics and features
established on a very selective basis, of microfinance indicated in Sec. X361.
preferably in places not fully served by (6) At least fifty percent (50%) of the
existing RBs or in areas not fully serviced bank’s gross loan portfolio shall at all times
by microfinance-oriented banks, subject to consist of microfinance loans as defined in
the following additional criteria (in addition Sec. X361.
to standard licensing requirements): b. The requirement that the president,
(1) That the microfinance-oriented bank chief operating officer or general manager
to be established shall either be a TB or an of a TB or RB must have at least two (2)
RB; years experience in banking and/or finance
(2) That the capital of the microfinance- may be substituted with microfinance
oriented banks to be established should be experience in cases of officers of a
owned by private persons, multilateral microfinance organization applying for
entities or a combination thereof; authority to establish, or convert into a TB
(3) That the minimum paid-in capital of or RB: Provided, That the concerned officer
microfinance-oriented banks shall be the is a college graduate.
applicable capitalization requirement under c. Subject to the standard branching
Subsec. X111.1; requirements under Sec. X151 and
(4) That the organizers must have the minimum capital requirements under
capacity to engage in microfinancing, which Subsec. X111.1, microfinance-oriented
may be indicated by the following: banks may apply for establishment of a
(a) At least twenty percent (20%) of the branch after one (1) year of profitable
paid-in capital of the proposed bank must operations.
be owned by persons or entities with track d. Existing non-bank microfinance
record in microfinancing. organizations applying for authority to
(b) Majority of the members of the board establish, or convert into a microfinance-
of directors have experience in oriented TB or RB may also be allowed to
microfinancing with at least one (1) member convert their existing branches/offices into
having actual banking experience. branches of the bank proposed to be
(c) The proposed bank must have as a established by simultaneously applying for
minimum, an adequate loan tracking system authority for the purpose.
that allows daily monitoring of loan However, the standard requirements for
releases, collection and arrearages, and any the establishment of branches and the
restructuring and refinancing. minimum capitalization requirement, have
(5) In addition to the requirements for to be complied with. Moreover, there must
the establishment of banks in Appendix 37, be a proof that the area is not fully served
the application for authority to establish a by any existing RB.
(As amended by Circular Nos. 932 dated 16 December 2016,
microfinance-oriented bank must be 902 dated 15 February 2016 and 624 dated 13 October 2008)

§ X102.4
16.03.31
§ X102.4 (2008 - X101.6) Conditions (c) Restriction on lending to affiliates;

for the grant of authority to convert into a (d) Denial of access to Bangko Sentral
lower category. rediscounting facilities;
a. That the bank must have complied (e) Suspension of authority to accept or
with the end-2000 minimum capital handle government deposits;
requirement and other laws/regulations (f) Suspension of authority to engage in
applicable to the lower bank category into derivatives activities (for a UB converting
which it is converting. For this purpose, the into a KB); and
term “capital” shall be as defined under (g) Suspension of authority to invest in
Sec. X111; allied undertakings.
b. That the bank immediately upon c. That a bank which has not corrected
receipt of notice of approval of conversion as of date of application the major findings/
shall not engage in nor renew transactions violations noted in its latest examination
under authorities not associated with those shall submit upon application a
allowed for the lower bank category into Memorandum of Understanding that it shall
which it is converting and within six (6) correct the same within a period of six (6)
months from date of receipt of notice of months from date of receipt of notice of
approval of its application for conversion, approval of its application, otherwise, the
the bank shall phaseout all inherent powers same monetary and non-monetary penalties
and activities under special authorities not mentioned in Item “b” above shall be
normally associated to the lower bank imposed;
category into which it is converting: d. That the bank shall submit the
Provided, That a TB (previously authorized pertinent amended Articles of Incorporation
by the Monetary Board to accept demand and By-Laws duly registered with the SEC
deposits) may be allowed to retain such within six (6) months from date of receipt
authority when converting into an RB but of notice of approval of its application;
may clear checks only through a e. That the bank shall fully disclose its
correspondent bank and shall not be new status in its signage, financial
allowed to participate directly in the statements and stationeries; and
Philippine Clearing House Corporation f. That the bank shall start operation in
(PCHC) and the Bangko Sentral check the lower category into which it is
clearing operations: Provided, further, That converting after approval by the SEC of the
for failure to comply with these bank’s amended Articles of Incorporation
requirements, the following monetary and and By-Laws, its compliance with all the
non-monetary penalties shall be imposed conditions of approval of the conversion and
reckoned from the set deadline until the bank the issuance by the Bangko Sentral of a
has fully complied with the said certificate of authority to operate.
requirements The same conditions and sanctions
(1) Monetary penalties mentioned in Items “a” to “f” above shall
From UB to KB P30,000/day apply to all banks which have downgraded
From KB to TB 15,000/day
or with approved downgrading prior to 13
From TB to RB
Within Metro Manila P5,000/day March 2000: Provided, That the penalties
Outside Metro Manila 500/day mentioned in Items “b” and “c” above shall
(2) Non-monetary penalties be reckoned from their respective
(a) Suspension of branching privileges; prescribed deadlines or within six (6)
(b) Suspension of declaration of cash months from 13 March 2000, if no such
dividends; deadline is prescribed.

§§ X102.5 - X102.7
16.12.31
§ X102.5 (2008 - X102.3) Conversion market study citing, among others, changes
of microfinance-oriented thrift banks/rural in demographic, social, and economic
banks. factors; and
a. Microfinance-oriented TBs and RBs (2) Certified true copy of the resolution
are allowed to convert to regular TBs and of the bank’s board of directors authorizing
RBs: Provided, That they have complied the conversion of the microfinance-oriented
with all the requirements for a regular TB/ branch into a regular branch.
RB license and subject to the submission of (CL-2008-075 dated 28 November 2008, as amended by Circular
the following: No. 929 dated 28 October 2016)
(1) Certification signed by the president
or officer of equivalent rank stating that the § X102.6 (Reserved)
allocation of at least fifty percent (50%) of
the gross loan portfolio to microfinance is § X102.7 Application and license fees
no longer feasible due to changes in market for new domestic banks. Applications for
condition. The certification shall be new domestic banking licenses, except for
supported by: applications to establish a bank with head
(a) a market study citing, among others, office located in cities or municipalities
changes in demographic, social, and where there are no existing banking offices
economic factors; and as well as to merge and acquire a distressed
(b) strategic plan and business strategy bank, shall be subject to both application
contemplating the conversion to a regular and license fees below:
bank; and Bank Application License
(2) Certified true copy of the resolution Category Fee Fee
of the bank’s board of directors authorizing (in Million Pesos)
Universal Banks 0.500 25.000
the conversion of the microfinance-oriented
Commercial Banks 0.400 20.000
bank into a regular bank. The bank must Thrift Banks
also change its business name to reflect its -Head Office in
reclassification to a regular bank. National Capital
b. Microfinance-oriented branches Region (NCR) 0.100 5.000
-Head Office in All
may convert into regular branches , five Other Areas Outside
(5) years after the start of the branch’s NCR 0.040 2.000
operations, subject to the submission of Rural and
the following: Cooperative Banks
-Head Office in NCR 0.010 0.500
(1) Certification signed by the president -Head Office in All
or officer of equivalent rank that: Other Areas Outside
(a) At least seventy percent (70%) of NCR (All Cities up to
deposits generated by the branch to be 3rd class
municipalities) 0.004 0.200
established shall be actually lent out to -Head Office in All
microfinance borrowers; and Other Areas Outside
(b) The microfinance loans of said branch NCR (4th class to 6th
shall at all times be fifty percent (50%) of its class municipalities) 0.002 0.100
gross loan portfolio
are no longer feasible due to changes in market The application fee shall be non-
condition in the locality where it is located. refundable and shall be paid upon filing of
The certification shall be supported by a the written application to establish a bank.
Manual of Regulations for Banks Part I - Page 8a

§§ X102.7 - X104
16.03.31
The license fee, net of the application fee, of authority from the Bangko Sentral.
shall be paid after the Monetary Board has (As amended by CL-2008-078 dated 15 December 2008)
approved said application.
The aforementioned fees shall also apply Sec. X104 (2008 - X167) Business Name3.
to existing domestic and foreign banks1 that a. UBs/KBs. Only a bank that is granted
are upgrading to the next higher bank category. universal/commercial banking authority may
(Circular No. 902 dated 15 February 2016) represent itself to the public as such in
connection with its business name.
Sec. X103 Certificate of Authority to b. TBs. TBs may be allowed to adopt
Register2. The SEC shall not register the and use any name: Provided, That the words
articles of incorporation of any bank, or any A Thrift Bank, A Savings Bank, A Private
amendment thereto, unless accompanied by Development Bank or A Stock Savings and
a certificate of authority issued by the Loan Association, as the case may be, are
Monetary Board, under its seal. The affixed after its business name.
certificate shall not be issued unless the c. RBs/Coop Banks. RBs/Coop Banks
Monetary Board is satisfied from the may adopt a corporate name or use a
evidence submitted that: business name/style with the word Rural
a. All requirements of existing laws and or Coop, as the case may be. Said banks
regulations to engage in the business for may also adopt a name without such words:
which the applicant is proposed to be Provided, That the identifying phrase, A
incorporated have been complied with; Cooperative Bank or A Rural Bank, as the
b. The public interest and economic case may be, is affixed after its business
conditions, both general and local, justify name: Provided, further, That where the
the authorization; and name of the bank is shown on letterheads,
c. The amount of capital, the financing, billboards and other advertising materials,
organization, direction and administration, the size of the letters of such phrase shall
as well as the integrity and responsibility of be at least one-half (½) the size of the
the organizers and administrators reasonably business name.
assure the safety of deposits and the public Subject to prior approval of the Bangko
interest. Sentral, a TB, RB or Coop Bank may apply
Likewise, the SEC shall not register the to be exempted from the general
by-laws of any bank, or any amendment requirements under Items “b” and “c” above:
thereto, unless accompanied by a certificate Provided, That the applicant TB, RB or Coop
(Next page is Part I - Page 9)
1
This excludes foreign banks established after the effectivity of R.A. No. 10641 (An Act Allowing the Full Entry
of Foreign Banks in the Philippines, Amending the Purpose of R.A. No. 7721).
2
See SEC Circular No. 3 dated 16 February 2006.
3
See SEC Circular Nos. 5 dated 17 July 2008 and 14 October 2000, and DTI Administrative Order No. 1008 effective
10 October 2010.
Part I - Page 8b Manual of Regulations for Banks

§ X104 - X104.1
15.10.31
Bank shows compliance with the following has complied with all the conditions for the
conditions: said application; and
(1) The new business name of the bank (4) Such other documents as may be
must reasonably describe the business required by the Bangko Sentral.
activities that the bank is engaged in. (As amended by Circular No. 872 dated 13 March 2015,
(2) The business name should not CL-2011-062 dated 19 August 2011, CL-2008-053 dated 21 August
2008 and 2008-007 dated 21 January 2008)
mislead, misrepresent or give a false
impression to the public with respect to the § X104.1 (2008-X607) Bank
banking category of a bank, the location/s Advertisements. The following rules and
and clientele it serves, as well as the regulations shall govern bank
products and services that the applicant advertisements.
bank is authorized to offer to the public. a. No bank shall publish, issue or
(3) The applicant bank shall not use a distribute in any form, any advertisement
business name that is identical, deceptive that shall degrade, deprecate or otherwise
or confusingly similar with existing prejudice other banking and financial
corporate names, in accordance with institutions.
existing applicable laws, rules and b. No bank shall publish, issue or
regulations governing the use of corporate distribute in any form of advertisement (in
names pursuant to the provisions of the newspapers, magazines, television, radio,
Corporation Code of the Philippines. billboards, brochures, prospectuses, or any
(4) The applicant bank must meet the other medium) or allow itself to be used/
minimum capitalization requirements mentioned in any form of advertisement
applicable at the time of filing of its unless such advertisement is in pursuance
application to change its business name. of its business or investment.
(5) The applicant bank must not have c. No bank shall place or cause to be
any major supervisory concern/s that placed any advertisement tending to mislead
threaten its solvency or liquidity, as a depositor into believing that he will get
determined by the appropriate more in benefits than what the bank is
department/s of the SES. legally authorized to give. No bank
(6) Other conditions which the Bangko advertisement shall contain any false claim
Sentral may deem necessary or as may be or exaggerated representation as to its
warranted by the attendant circumstances liquidity, solvency, resources, deposits and
in order to protect the public interest. banking services.
The application of a TB, RB or Coop d. No bank advertisement shall give the
Bank for exemption from the general impression that the bank is engaged in a
requirements on the use of name under business other than banking.
Items “(b)” and “(c)” above shall be e. Banks shall inform their depositors
supported by the following: and other clients by advertisement or
(1) Application letter signed by the publication of the termination of benefits
president or officer of equivalent rank previously advertised or publicized.
indicating the justification for the request; f. Banks shall discontinue any
(2) Notarized secretary’s certificate on advertisement whenever the same is
the resolution of the bank’s board of deemed unethical/unwarranted or violative
directors authorizing the request for of the provisions of these regulations. The
exemption; client banks and/or their advertising
(3) Certification signed by the president agencies shall incorporate in their contract/
or the officer of equivalent rank that the bank agreement for time and space with media

§§ X104.1 - X105.3
14.12.31
the condition that such contract/agreement operate in the Philippines through any of
for time and space can be cancelled/ the modes of entry provided under Items
terminated immediately whenever the client “a” to “c” of Subsec. X105.1 must, in
bank is directed by the Bangko Sentral to addition to satisfying the criteria prescribed
desist or discontinue the particular under Subsec. X105.3, be -
advertisement in question. (1) Widely-owned and publicly-listed in
g. Responsibility for compliance with the country of origin, unless the foreign bank
the above rules and regulations rests with applicant is owned and controlled by the
the bank officers or directors who caused government of its country of origin.
the approval or placement of such (2) Established, reputable and financially
advertisement. sound.
The determination of whether a foreign
Sec. X105 (2008 - X121) Liberalized Entry bank applicant is widely-owned and
and Scope of Operations of Foreign Banks. publicly listed, established, reputable, and
The following rules shall govern the financially sound shall be based on the
liberalized entry and scope of operation of information derived from submitted
foreign banks. documents as required under Appendix 2.
(As amended by Circular No. 858 dated 21 November 2014)
Further, if the foreign bank is owned/
controlled by a holding company, this
requirement may apply to the holding
§ X105.1 (2008 - X121.1) Modes of
company.
entry of foreign banks. With prior approval
of the Monetary Board, foreign banks may
operate in the Philippines through any
§ X105.3 (2008 - X121.3) Guidelines
one (1) of the following modes:
for selection. The following factors shall be
a. By acquiring, purchasing or owning
considered in selecting the foreign banks
up to 100% of the voting stock of an existing which will be allowed to enter the
domestic bank (including banks under Philippine banking system through R.A. No.
receivership or liquidation, provided no 7721, as amended by R.A. No. 10641:
final court liquidation order has been issued); a. Geographic representation and
b. By investing in up to 100% of the complementation. Representation from the
voting stock of a new banking subsidiary different parts of the world and/or the
incorporated under the laws of the international financial centers shall be
Philippines; or ensured.
c. By establishing a branch and b. Strategic trade and investment
sub-branches with full banking authority. relationships between the Philippines and
Interested foreign banks shall file with the home country of the foreign bank.
the Office of the Governor, Bangko Sentral, Consideration shall be given to the
their application for authority to operate in countries of origin of applicant foreign
the Philippines through any of the modes of banks –
entry mentioned above. The application (1) With substantial financial assistance
requirements are listed in Appendix 2. to, and loans and investments, past and
(As amended by Circular Nos. 858 dated 21 November 2014 present, in the Philippines; and
and 774 dated 16 November 2012) (2) With which the Philippines has
significant volume of trade especially to
§ X105.2 (2008 - X121.2) Qualification those with which the country has substantial
requirements. A foreign bank seeking to net exports.

§ X105.3 - X105.4
14.12.31
c. Relationship between the applicant § X105.4 (2008 - X121.4) Capital

bank and the Philippines. Consideration requirements of foreign banks.
shall be given to the capability of the foreign a. For locally incorporated subsidiaries.
bank to promote trade with, and to bring A foreign bank subsidiary shall comply with
foreign investments into, the Philippines. the minimum capital and prudential capital
Long standing financial and commercial ratios applicable to domestic banks of the
relationship with, and assistance extended same category as prescribed under
to, the Philippines, shall likewise be taken prevailing regulations.
into account. b. For foreign bank branches
d. Demonstrated capacity, global (1) A foreign bank branch shall comply
reputation for financial innovations and with the minimum capital and prudential
stability in a competitive environment of the capital ratios applicable to domestic banks
applicant bank. of the same category as prescribed under
e. Reciprocity rights enjoyed by Philippine prevailing regulations.
banks in the applicant’s country. Subject to (2) For purposes of compliance with
the host country’s rules and regulations of minimum capital regulations, the term
general application, Philippine banks should “capital of a foreign bank branch” shall refer
have the opportunity to establish operations to the sum of: (i) permanently assigned
in the foreign bank applicant’s home country.
capital, (ii) undivided profits, and
f. Willingness to fully share banking
(iii) accumulated net earnings, which is
technology.
(As amended by Circular Nos. 858 dated 21 November 2014 and
composed of unremitted profits not yet
809 dated 23 August 2013) cleared by the Bangko Sentral for outward

§§ X105.4 - X105.8
14.12.31
remittance and losses in operations, less § X105.5 Prescribed ratio of “Net Due
capital adjustments as may be required by to” account.
the Bangko Sentral in accordance with (Deleted by Circular No. 858 dated 21 November 2014)
prevailing rules and regulations of general
application. § X105.6 (2008 - X121.6) Risk-based
(3) Permanently assigned capital shall capital for foreign bank branch
be inwardly remitted and converted into a. Foreign bank branches shall comply
Philippine currency at the exchange rate with the same risk-based capital adequacy
prevailing at the time of remittance. ratios applicable to domestic banks of the
(4) Any Net due from head office, same category.
branches, subsidiaries and other offices b. In computing the risk-based capital
outside the Philippines, excluding adequacy ratios, Common Equity Tier 1
accumulated net earnings, shall be a (CET1) capital shall include permanently
deductible adjustment to capital. assigned capital, undivided profits,
(5) For purposes of compliance with the accumulated net earnings and other capital
Single Borrower’s Limit (SBL), the capital of components.
a foreign bank branch, subject to prescribed c. Any Net due from head office,
adjustments, shall be synonymous to its “net branches, subsidiaries and other offices
worth”. outside the Philippines, excluding
Transitory provision. accumulated net earnings shall be deducted
a. Minimum capital of foreign banks. from CET1 capital.
Minimum capital of foreign banks d. The guidelines for computing the risk-
established in the Philippines prior to R.A. based capital adequacy ratios are provided
No. 10641 shall comply with the applicable in Appendix 63b.
(As amended by Circular Nos. 858 dated 21 November 2014
minimum capital level requirement as
and 822 dated 13 December 2013)
prescribed under Subsec. X111.1. Existing
foreign banks that do not meet the minimum § X105.7 (2008 - X121.7) Head Office
capital requirements shall submit an guarantee. The head office of foreign bank
acceptable capital build-up program as branches shall guarantee prompt payment
required under Subsec. X111.1. of all liabilities of its Philippine branches,
b. SBL as well as the observance of the
1. Loans and credit commitments of constitutional rights of the employees of such
foreign bank branches as of 07 August 2014 branches.
may be maintained, but once repaid or
expired, shall no longer be increased in § X105.8 (2008 - X121.8) Scope of
excess of the ceiling allowed under the authority for locally incorporated
suceeding paragraph. subsidiaries of foreign banks as well as
2. Existing foreign bank branches shall branches with full banking authority
be given until 31 December 2019 to use Subsidiaries and branches of foreign banks
twice the level of capital as defined in this established under Subsec. X105.1 shall be
Subsection as net worth, as reference point allowed to perform the same functions and
for purposes of determining the appropriate enjoy the same privileges of, and be subject
SBL. to the same limitations imposed upon, a
(As amended by Circular Nos. 858 dated 21 November 2014, Philippine bank of the same category.
822 dated 13 December 2013 and 696 dated 29 October 2010)

§§ X105.8 - X108
14.12.31
Privileges shall include the eligibility to § X105.12 (2008-X121.12) Equal

operate under a universal banking authority treatment. Any right, privilege or incentive
subject to compliance with existing rules granted to foreign banks or their subsidiaries
and regulations and the guidelines or affiliates under R.A. No. 7721, as
enumerated in Appendix 3. amended by R.A. No. 10641 shall be
(As amended by Circular No. 858 dated 21 November 2014) equally enjoyed by, and extended under the
same conditions, to domestic banks.
§ X105.9 (2008 - X121.9) Control of the (As amended by Circular No. 858 dated 21 November 2014)
resources of the banking system. The
Monetary Board shall adopt such measures Secs. X106 - X107 (Reserved)
as may be necessary to ensure that at all
times the control of sixty percent (60%) of C. MERGER AND CONSOLIDATION
the resources or assets of the entire banking
system is held by domestic banks, which Sec. X108 (2008 - X111) Merger or
are majority-owned by Filipinos. Said Consolidation to Meet Minimum Capital
measures may include – The merger or consolidation of banks and
a. Suspension of entry of additional other financial intermediary(ies) to meet
foreign bank subsidiaries and branches; and minimum capital requirements shall be
b. Suspension of license upgrade or allowed subject to the following
conversion to subsidiary of existing foreign regulations.
bank branches. For purposes of merger and
Other measures may also be considered, consolidation, the following definitions shall
provided that such measures so adopted apply:
shall be consistent with R.A. No. 7721, as a. Merger - is the absorption of one (1)
amended by R.A. No. 10641, and shall or more corporations by another existing
consider vested rights and the non- corporation, which retains its identity and
impairment of contracts. takes over the rights, privileges, franchises,
(As amended by Circular No. 858 dated 21 November 2014) and properties, and assumes all the
liabilities and obligations of the absorbed
§ X105.10 (2008 - X121.10) Change
corporation(s) in the same manner as if it
from one mode of entry to another. Foreign
had itself incurred such liabilities or
banks which are operating in the Philippines
obligations. The absorbing corporation
may apply for conversion of their mode of
continues its existence while the life or lives
entry.
of the other corporation(s) is/are terminated.
The bank shall comply with all
b. Consolidation - is the union of two
applicable requirements and submit an
(2) or more corporations into a single new
acceptable transition plan which shall
corporation, called the consolidated
address how the foreign bank shall
corporation, all the constituent corporations
implement the change in mode of entry.
thereby ceasing to exist as separate entities.
The consolidated corporation shall
§ X105.11 (2008 - X121.11) Listing of thereupon and thereafter possess all the
shares with the Philippine Stock Exchange rights, privileges, immunities, franchises
(Deleted by Circular No. 858 dated 21 November 2014) and properties, and assume all the liabilities

§§ X108 - 3108.3
12.12.31
and obligations of each of the constituent § X108.3 (2008 - X112) Merger or

corporations in the same manner as if it had consolidation incentives. In pursuance of
itself incurred such liabilities or obligations. the policy to promote mergers and
consolidations among banks and other
§ X108.1 (2008 - X111.1) Requirement financial intermediaries, as well as
of Bangko Sentral approval. Mergers and purchases or acquisitions of majority or all
consolidations including the terms and of the outstanding shares of stock of a bank/
conditions thereof shall comply with the QB, as a means to develop larger and
provisions of applicable law and are subject stronger FIs, constituent/participating entities
to approval by the Bangko Sentral. may avail themselves of incentives or reliefs,
The guidelines and procedures in the subject to prior approval of the Monetary
application for merger/consolidation as Board.
shown in Appendix 87 shall be observed (As amended by Circular Nos. 771 dated 11 October 2012 and
by banks. 494 dated 20 September 2005)
(As amended by M-2009-028 dated 12 August 2009)
1108.3 (Reserved)
§ X108.2 (2008 - X111.2) Rules on
exchange of shares. As a general rule, the 2108.3 (Reserved)
ratio of exchange of shares between or
among the participants in a bank merger or 3108.3 Regulatory relief under the
consolidation shall be based on mutual strengthening program for RBs (SPRB)1.In
agreement of the parties concerned. pursuance of the policy to promote mergers
However, any appraisal increment reserve and consolidations as a means to develop
(revaluation reserve) arising from the bigger and stronger RBs and to further
revaluation of the fixed assets, as may be strengthen the rural banking system,
agreed upon by the parties, shall be constituent RBs may, subject to prior Bangko
limited to premises, improvement, and Sentral approval, avail themselves of any or
equipment which are necessary for its all of the merger or consolidation incentives
immediate accommodation in the under the SPRB.
transaction of the bank’s business. Such The guidelines on the grant of regulatory
revaluation should be based on fair relief under the SPRB including the
valuation of the property which shall be documentary requirements in applying for
subject to review and approval by the the regulatory relief are provided in
Bangko Sentral. Appendix 94.
(Circular No. 693 dated 09 August 2010)
(No pages 14 to 16)

(Next page is Part I page 17)
1
The SPRB is a joint undertaking of the Bangko Sentral and the Philippine Deposit Insurance Corporation (PDIC) aimed at
promoting mergers and consolidations as a means to further strengthen the rural banking system through the grant of
financial assistance (FA) by the PDIC and regulatory relief by the Bangko Sentral to eligible strategic third party investors
(STPIs) which shall be RBs, desiring to enter into mergers and consolidations with eligible distressed RBs that may be
considered under the SPRB.

§ X108.4
16.09.30
§ X108.4 SPRB Plus1 and Strengthening c. Dividend rate on the PS shall be equal
Program for Cooperative Banks (SPCB) to the rate per annum of the prevailing ten (10)-
Plus. As a supplement to the SPRB, the year FXTN available at the time of the release
SPRB Plus, which became effective on of FA instead of the eight percent (8%) per
02 August 2012 and shall be available up annum fixed in the SPCB;
to 31 December 2014, contains the d. Principal of the DL under the
following enhanced features: combination of preferred shares and DL
a. inclusion of TBs, which serve the will be equivalent to such amount that will
same niche market as the RBs, as among provide a net interest spread (NIS) over
the eligible banks in addition to RBs; the tenor of the DL to such amount equal
b. inclusion of TBs, UBs and KBs, non- to the PS;
bank corporations and banking groups as e. Interest rate per annum on DL under
among the eligible STPIs; the combination of PS and DL will be
c. additional branching and other equivalent to such rate that will provide the
incentives to be provided on top of the bank with an annual NIS that will
regulatory relief already available under the accumulate over the tenor of the DL to such
SPRB Module 1; and amount equal to the PS instead of the three
d. acquisition via purchase of assets and percent (3%) less premium rate of
assumption of liabilities, and acquisition of government securities fixed in the SPCB;
control in an eligible bank as additional f. Principal of the DL intended to provide
modes of entry of an eligible STPI. income support to the surviving bank will be
The SPRB Plus Framework is shown in equivalent to such amount that will provide a
Appendices 94a. NIS equal to the capital deficiency to bring
The SPCB Plus, which replaced the Risk-Based Capital Adequacy Ratio (RBCAR)
SPCB (Strengthening Program for Rural to zero percent (0%);
Banks [SPRB] Module II) became effective g. Interest rate per annum on DL intended
on 16 September 2013 and shall be to provide income support to the surviving
available up to 17 September 20142. It has bank will be equivalent to such rate that will
generally the same framework as the SPRB provide the bank with an annual NIS that will
Module II, with the following accumulate over the tenor of the DL to such
enhancements/amendments: amount equal to the capital deficiency to bring
a. Inclusion of KBs, among the eligible RBCAR to zero percent (0%); and
Strategic Third Party Investors (STPIs) in h. Conduct of due diligence review by
addition to Coop Banks, RBs and TBs; PDIC or an external auditor.
b. Financial assistance (FA) to be Guidelines on the grant of regulatory
extended by the PDIC and LBP can be in relief incentive under the SPCB Plus are
the form of direct loan (DL) only [without provided for under Appendix 94b - Annex A.
the preferred shares(PS)] intended to Based on the arrangement agreed upon
provide income support to the surviving by the Bangko Sentral, PDIC and LBP, the
bank; eligible STPIs and eligible Coop Banks shall
1
The Bangko Sentral and the PDIC signed the Supplemental Agreement to implement the SPRB Plus aimed at
strengthening the thrift and rural banking industry to effectively serve the countryside and improve the delivery
of financial services to rural communities.
2
The availability period for SPCB Plus was extended until 17 September 2015 (CL-2015-029 dated 06 May
2015). This shall again be available for one (1) year from 30 September 2015 until 30 September 2016, subject
to the same terms and conditions of the existing program, unless otherwise jointly amended by the Bangko
Sentral, PDIC and LBP (CL-2015-067 dated 05 November 2015).

§§ X108.4 - X111
16.09.30
submit to the SPCB lane a joint letter, separately D. CAPITALIZATION

addressed to PDIC, Bangko Sentral and LBP,
indicating their intention to merge or Sec. X111 (2008 - X106) Minimum
consolidate, or enter into a purchase of Required Capital. The following provisions
assets and assumption of liabilities or shall govern the capital requirements for
acquisition of control under the SPCB Plus, banks.
and all the other required documents shown The term capital shall be synonymous
in Appendix 94b- Annex A. to unimpaired capital and surplus,
(M-2012-040 dated 08 August 2012, as amended by Circular No. combined capital accounts and net worth
917 dated 08 July 2016, CL-2015-067 dated 05 November 2015, and shall refer to the total of the unimpaired
Circular No. 890 dated 02 November 2015, CL-2015-029 dated
paid-in capital, surplus and undivided
06 May 2015, M-2015-008 dated 28 January 2015, M-2014-
003 dated 27 January 2014 and M-2013-061 dated 23 Decem- profits, less:
ber 2013) a. Unbooked valuation reserves and
other capital adjustments as may be required
Sec. X109 Consolidation Program for Rural by the Bangko Sentral;
Banks (CPRB). The CPRB aims to strengthen b. Total outstanding unsecured credit
the rural banking industry, in recognition of accommodations, both direct and indirect,
the major role that RBs play in financial to directors, officers, stockholders, and their
inclusion. It intends to promote mergers and related interests (DOSRI) granted by the
consolidations among RBs to bring about a bank proper;
less fragmented banking system by enabling c. Total outstanding unsecured loans,
them to improve financial strength, enhance other credit accommodations and
viability, strengthen management and guarantees granted to subsidiaries;
governance and expand market reach, d. Total outstanding loans, other credit
among others. accommodations and guarantees granted to
The CPRB shall be available for a period related parties that are not at arm’s length
of two (2) years from the signing of the terms as determined by the appropriate
Memorandum of Agreement among the supervising department of the Bangko
Bangko Sentral, the PDIC and the LBP. The Sentral;
eligibility of the merging or consolidating RBs e. Deferred income tax;
to qualify under the CPRB as well as the f. Appraisal increment reserve
incentives thereunder shall be governed by the (revaluation reserve) as a result of
CPRB Framework and its implementing appreciation or an increase in the book
guidelines as provided under Appendix 113
value of bank assets;
and Appendix 113a, respectively.
g. Equity investment of a bank in another
For proponent banks that wish to avail
bank or enterprise, whether foreign or
of the equity investment facility from the LBP
domestic, if the other bank or enterprise has
under the program, their eligibility shall be
a reciprocal equity investment in the
subject to the guidelines on the LBP equity
investing bank, in which case, the
investment facility in Annex A of
investment of the bank or the reciprocal
Appendix 113a.
(CL-2015-050 dated 18 August 2015, as amended by Circular No.
investment of the other bank or enterprises,
903 dated 29 February 2016 and M-2015-043 dated 11 December whichever is lower; and
2015) h. In the case of RBs/Coop Banks, the
government counterpart equity, except those
Sec. X110 (Reserved) arising from conversion of arrearages under

§ X111
16.06.30
the Bangko Sentral rehabilitation program. with his related interest in the lending bank,
With respect to Item “b” hereof, the should at least amount to two percent (2%)
provision in Subsec. X326.1 shall apply or more of the total subscribed capital stock
except that in the definition of stockholders of the bank, shall not apply for the purpose
in said Subsection, the qualification that his of this Item.
stockholdings, individually and/or together (As amended by Circular Nos. 914 dated 23 June 2016 and 560
( Next Page is Part I - Page 19 )

§ X111.1
16.12.31
§ X111.1 Minimum capitalization. The For the grant of the following special
minimum capitalization of banks shall be banking authorities:
as follows: a. Quasi-banking functions for TBs;
Required b. Trust and other fiduciary business
Minimum for U/KBs and TBs;
Bank Category Capitalization
c. Limited trust for TBs and RBs/Coop
UBs
Head Office Only P3.00 billion Banks;
Up to 10 branches1/ 6.00 billion d. Foreign currency deposit unit/
11 to 100 branches 1/ 15.00 billion expanded foreign currency deposit unit
1/
More than 100 branches 20.00 billion (FCDU/EFCDU);
KBs
e. Issuance of foreign letters of credit
Head Office Only P2.00 billion
Up to 10 branches1/ 4 .00 billion (LCs) for TBs;
11 to 100 branches 1/ 10.00 billion f. Acceptance of demand deposit and
More than 100 branches 1/
15.00 billion NOW accounts for TBs and RBs/Coop
TBs Banks; and
Head Office in National Capital Region (NCR)
Head Office Only P500 million
g. Acting as third party custodian/
Up to 10 branches1/ 750 million registry;
11 to 50 branches 1/ 1.00 billion the higher of (a) the required minimum
More than 50 branches 1/ 2.00 billion capital under this Subsection at the time of
Head Office in all Other Areas Outside NCR the application for the grant of special
Up to 10 branches1/ 300 million
banking authority or (b) the amount
11 to 50 branches 1/ 400 million specified in the applicable Sections/
More than 50 branches 1/ P800 million Subsections for the grant of special banking
RBs and Coop Banks authorities shall be the required minimum
Head Office in NCR capital which shall be complied with on a
continuing basis.
11 to 50 branches 1/ 100 million Transitory provisions. Banks which are
More than 50 branches 1/ 200 million existing, or which are already authorized by
Head Office in All Other Areas Outside NCR the Monetary Board but not yet operating,
(All Cities up to 3rd class municipalities) or persons from whom completed
applications have been received but
11 to 50 branches 1/ 40 million pending action by the Bangko Sentral, shall
More than 50 branches 1/ 80 million be allowed five (5) years from 19 November
Head Office in All Other Areas Outside NCR 2014 within which to meet the above
(4th class to 6th class municipalities) minimum capital requirements. Banks
granted with special banking authorities/
11 to 50 branches 1/ 20 million licenses which require compliance with
More than 50 branches 1/ 40 million minimum capital requirements shall be
given five (5) years from 19 November 2014
The above shall also be the within which to comply.
required minimum capitalization upon Banks which comply with the
(a) establishment of a new bank, new capital levels shall submit to the
(b) conversion of an existing bank from a Bangko Sentral a certification to this effect
lower to a higher category bank and vice within thirty (30) calendar days from
versa, and (c) relocation of the head office 19 November 2014. Banks not meeting the
of a TB/RB in an area of higher classification. required minimum capital must submit to
1/
Branches- inclusive of Head Office

§§ X111.1 - X111.4
16.12.31
the Bangko Sentral an acceptable capital cover the full amount of the capital
build-up program for this purpose within deficiency, shall immediately submit the
one (1) year from 19 November 2014. If subscription contract/written agreement
the prescribed minimum capital necessitates with the TPI to the Bangko Sentral. It is
an increase in the authorized capital stock, understood that with the submission of such
affected banks shall cause the corresponding contract, the TPI has already agreed to infuse
amendments to their articles of the needed funds to cover the capital
incorporation/cooperation. deficiency.
The appropriate department of the SES b. In case the transaction requires
will evaluate the continuing compliance of prior Bangko Sentral approval under
banks to the aforementioned capital build- Subsec. X126.2b, the bank shall submit
up program. The Bangko Sentral may the following documentary requirements
require appropriate actions and/or impose within fifteen (15) banking days from the
sanctions for non-compliance with the submission of the aforementioned
capital build-up program as provided under subscription contract/written agreement
existing banking laws and/or Bangko Sentral or within the timeline prescribed by
rules and regulations. Subsec. X126.2b1, whichever is earlier:
(As amended by Circular Nos. 932 dated 16 December 2016, (1) Bank’s request (signed by the
854 dated 29 October 2014, 715 dated 04 March 2011, 696 president or officer of equivalent rank) for
dated 29 October 2010 and 682 dated 15 February 2010)
Bangko Sentral aproval of the subject
§ X111.2 (2008 - X106.2) Capital build- transactions (accompanied by a Board
up program. Resolution of the TPI to that effect, if the
(Deleted by Circular No. 696 dated 29 October 2010) TPI is a corporation);
(2) A certified copy of the Escrow
§ X111.3 (2008 - X106.3) Memorandum Agreement between the bank, TPI and
of Understanding; Prompt Corrective escrow agent, and a certificate of escrow
Action Program; Sanctions. deposit issued by the escrow agent
(Deleted by Circular No. 696 dated 29 October 2010) equivalent to at least the amount of the
proposed investment;
§ X111.4 Guidelines on proposed (3) Documentary requirements under
investment from third party investors Subsec. X126.2b; and
(TPIs) for purposes of complying with the (4) Other documentary requirements
minimum capital requirements. The as may be required by the Bangko Sentral.
following are the guidelines for capital c. The bank shall also comply with the
deficient banks with proposed investments requirements under Sec. X128 on the
from third party investor/s (TPIs) for treatment of deposit for stock subscription
purposes of addressing the capital as part of the equity, if applicable.
deficiency: d. In case a bank has a pending
a. A bank that has already entered into a application with the PDIC under the
final agreement with a TPI to invest in the SPRB Plus/SPCB Plus, the bank and the
bank, which amount of investment shall TPI shall submit a joint certification
1
Sixty (60) calendar days from date of transaction or thirty (30) calendar days from receipt of corporate
secretary of the transaction, whichever comes first.

§§ X111.4 - 1115.2
15.12.31
signed by the president or officer of half percent (2.5%), comprised of CET1

equivalent rank of the bank and the TPI capital, shall likewise be imposed.
concerned that there is a pending Existing capital instruments as of
application with the PDIC, together 31 December 2010 which do not meet the
with the acknowledgement receipt by eligibility criteria for capital instruments
PDIC of said application. under the revised capital framework
The investment of the TPI would not shall no longer be recognized as capital
be considered for purposes of addressing starting 01 January 2014. Capital
the capital deficiency if the aforementioned instruments issued from 01 February 2011
documentary requirements are not to 12 October 2012 shall be recognized as
complied with. In this regard, it is qualifying capital until 31 December 2015.
(The BSP’s implementation plans for the
understood that mere submission to
New International Capital Standards or
Bangko Sentral of a TPI’s Letter of Intent
Basel 2 contained in the Basel Committee
(LOI) to invest in the bank shall not be
on Banking Supervision (BCBS) document
considered sufficient action to address the “International Convergence of Capital
bank’s capital deficiency. Measurement and Capital Standards: A
If the above requirements are not Revised Framework”, are shown in
submitted within the given period, the Appendix 63)
appropriate department of the Bangko (Circular No. 538 dated 04 August 2006, as amended by
Sentral may proceeed in recommending M-2014-019 dated 10 April 2014, Circular Nos. 822 dated
appropriate supervisory action/s on the 13 December 2013, and 781 dated 15 January 2013,
M-2013-056 dated 10 December 2013, Circular Nos. 762 dated
bank, if applicable. 25 July 2012, 750 dated 01 March 2012, 717 and 716 both dated
(M-2014-002 dated 27 January 2014, as amended by Circular 25 March 2011, 713 dated 14 February 2011, 709 dated
No. 890 dated 02 November 2015) 10 January 2011, M-2008-015 dated 19 March 2008, Circular
Nos.605 dated 05 March 2008 and 588 dated 11 December
2007,M-2007-019 dated 21 June 2007, Circular No. 560 dated
31 January 2007 and M-2006-022 dated 24 November 2006)
E. RISK-BASED CAPITAL
§ X115.1 Scope. The Basel III guidelines
apply to all UBs and KBs, as well as their
Sec. X115 Basel III Risk-Based Capital. The subsidiary banks and QBs.
guidelines implementing the revised risk- (As amended by Circular No. 781 dated 15 January 2013)
based capital adequacy framework for the
Philippine banking system to conform to § X115.2 (Reserved)
Basel III recommendations is provided in
Appendix 63b. § 1115.2 (2008 - 1116.5) Market risk
The risk-based capital ratio of a bank, capital requirement. UBs/KBs shall also
expressed as a percentage of qualifying capital measure and apply capital charges for
to risk-weighted assets, shall not be less than market risk, in addition to the credit risk
ten percent (10%) for both solo basis (head capital requirement in this Section, in
office plus branches) and consolidated basis accordance with the Guidelines to
(parent bank plus subsidiary financial allied Incorporate Market Risk in the Risk-Basel
undertakings, but excluding insurance Capital Adequacy Framework in
companies). Other minimum capital ratios Appendix 46.
include Common Equity Tier (CET) 1 ratio and The capital treatment of market risk
Tier 1 capital ratios of six percent (6.0%) and exposures arising from the holdings of
seven and a half percent (7.5%), respectively. Dollar-Linked Peso Notes (DLPNs) is
A capital conservation buffer of two and a indicated in Appendix 46a.

§§ 1115.2 - X115.5
17.06.30
The instructions for accomplishing the line-by-line basis shall be required to submit
report on computation of the Adjusted report on a consolidated basis. The
Risk- Based Capital Adequacy Ratio covering abovementioned reports shall be classified
combined credit risk and market risk are as Category A-1 reports.
shown in Appendices 46b (for UBs and KBs All UBs and KBs as well as their
with expanded derivatives authority), subsidiary banks shall be subject to all other
46c (for UBs and KBs with expanded reporting requirements (i.e., Basel III Capital
derivatives authority but without options Adequacy Summary Report) under the
transactions) and 46d (for UBs and KBs Basel III risk-based capital as may be
without expanded derivatives authority). prescribed by the Bangko Sentral.
(As amended by M-2011-062 dated 13 December 2011 and Erroneous/Delayed/Erroneous and
Circular No. 740 dated 16 November 2011) Delayed/Unsubmitted reports relative to the
Basel III requirements shall be subject to
§ 2115.2 (Reserved) penalties provided under Subsec. X184.3
(Circular No. 842 dated 25 July 2014, as amended by Circular
§ 3115.2 (Reserved) No. 963 dated 27 June 2017)
§ X115.3 (2008 - X116.8) Capital § X115.5 Domestic systemically

treatment of exposures/investments in important banks (DSIBs).
certain products. The guidelines on the It is the thrust of the Bangko Sentral to
capital treatment of bank’s exposures/ ensure that its capital adequacy framework
investments in the following products are is consistent with the Basel principles.
in Part VI: Hence, the Bangko Sentral is adopting
a. Credit-linked notes in Sec. 1628 and policy measures for DSIBs, which are
its Subsections. essentially aligned with the documents
b. Structured products in Subsec. 1635.4. issued by BCBS on global systemically
c. EFCDU investments in Subsec. 1636.4. important banks (GSIBs) and DSIBs.
d. Investment in securities overlying The broad aim of the policies is to reduce
securitization structures in Subsec. 1648.4. the probability of failure of DSIBs by
increasing their going-concern loss
§ X115.4 Required reports. Banks shall absorbency and to reduce the extent or
submit a report of their risk-based capital impact of failure of DSIBs on the domestic/
adequacy ratio on a solo basis (head office real economy.
plus branches) and on a consolidated basis The guidelines shall apply on a
(parent bank plus subsidiary financial allied consolidated basis to all UBs and KBs,
undertakings, but excluding insurance including branches of foreign banks
companies) quarterly to the appropriate established under R.A. No. 7721 (An Act
department of the SES in the prescribed Liberalizing the Entry and Scope of
forms within the deadlines, i.e., fifteen (15) Operations of Foreign Banks in the
banking days and thirty (30) banking days Philippines and for Other Purposes).
after the end of reference quarter, The framework for dealing with
respectively. Only banks with subsidiary domestic systemically important banks
financial allied undertakings (excluding consists of 3 parts, as follows:
insurance companies) which under existing a. Assessment methodology
regulations are required to prepare The impact of a DSIB’s failure to the
consolidated statements of condition on a domestic economy shall be assessed based

§§ X115.5 - X115.6
17.06.30
on bank-specific factors, to wit: (a) size; § X115.6 Basel III Leverage Ratio
(b) interconnectedness; (c) substitutability/ Framework.
financial institution infrastructure; and a. The Basel III Leverage Ratio is
(d) complexity. Ten (10) indicators related designed to act as a supplementary measure
to these categories shall be used to identify to the risk-based capital requirements. The
DSIBs. These indicators reflect the factors leverage ratio intends to restrict the build-up
or criteria which makes a bank significant of leverage in the banking sector to avoid
for the stability of the financial system and destabilizing deleveraging processes which
the economy. can damage the broader financial system
b. Higher Loss Absorbency (HLA) and and the economy. Likewise, it reinforces
interaction with other elements of Basel III the risk-based requirements with a simple,
framework non-risk based “backstop” measure.
Banks that will be identified as DSIBs The Basel III leverage ratio is defined as
shall be required to have HLA. The HLA the capital measure (the numerator) divided
requirement is aimed at ensuring that DSIBs by the exposure measure (the denominator),
have a higher share of their balance sheets with this ratio expressed as percentage:
funded by instruments which increase their
resilience as a going concern, considering Capital Measure
that the failure of a DSIB is expected to have (Tier 1 Capital)
Basel III Leverage Ratio =
a greater impact on the domestic financial
Exposure Measure
system and economy.
To determine banks’ compliance with The leverage ratio shall not be less than
the additional CET1 requirement for DSIBs, five percent (5%) computed on both solo
the minimum ratio should be complied with (head office plus branches) and
by the parent bank and its subsidiary banks consolidated bases (parent bank plus
and quasi-banks on both solo and subsidiary financial allied undertakings but
consolidated bases. excluding insurance companies).
c. Intensive supervisory approach The guidelines implementing the Basel III
Banks identified as DSIBs shall include Leverage Ratio framework are provided in
in their Internal Capital Adequacy Appendix 111. The guidelines shall apply to
Assessment Process (ICAAP) document UBs and KBs and their subsidiary banks/QBs.
concrete and reasonable recovery plans Starting 31 December 2014 and every
which shall be implemented in case the quarter thereafter until 31 December
bank breaches the HLA capital requirement.
2017, concerned banks shall submit the
The recovery plans shall include guidelines
Basel lll Leverage Ratio reporting template,
and action plans to be taken to restore the
including required disclosure templates,
DSIB’s financial condition to viable level in
on both solo and consolidated bases for
cases of significant deterioration in certain
monitoring purposes. For the periods
scenarios. This shall include specific initiatives
ended 31 December 2014, 31 March 2015
appropriate to the bank’s risk profile such as
and 30 June 2015, the reports shall be
capital rising activities, streamlining of
submitted within thirty (30) banking days
businesses, restructuring and disposal of
from 30 June 2015 on both solo and
assets, to improve capital position.
consolidated bases. For the succeeding
The guidelines on the framework for
dealing with DSIBs and recovery plan of a quarters, the report shall be submitted
DSIB are shown in Appendices 107 and 107a, semi-annually, each submission covering
respectively. two (2) quarters on both solo and
(Circular No. 856 dated 29 October 2014, as amended by Circular consolidated bases. Report submission shall
No. 904 dated 10 March 2016) be fifteen (15) banking days and thirty (30)

§§ X115.6 - X115.9
17.06.30
banking days on solo and consolidated § X115.9 Sanctions.

bases, respectively, from the end of the most a. For non-reporting of CAR breaches.
recent reference quarter. The report It is the responsibility of the bank CEO to
submission is summarized below: cause the immediate reporting of CAR
breaches both to its Board and to the Bangko
Report Date Reference Date Deadline of
Submission Sentral. It is likewise the CEO’s responsibility
31 December 2014 30 June 2015 Thirty (30) banking to ensure the accuracy of CAR calculations
31 March 2015 days on both solo
30 June 2015 and consolidated and the integrity of the associated
bases from end of monitoring and reporting system. Any
reference date
willful violation of the above will be
30 September 2015 31 December Fifteen (15) banking considered as a serious offense for purposes
31 December 2015 2015 days on solo basis of determining the appropriate monetary
from end of reference
31 March 2016 30 June 2016 date and thirty (30) penalty that will be imposed on the CEO.
30 June 2016 banking days on In addition, the CEO shall be subject to the
consolidated basis
30 September 2016 31 December from end of following non-monetary sanctions:
31 December 2016 2016 reference date 1) First offense – warning;
31 March 2017 30 June 2017
2) Second offense – reprimand;
30 June 2017 3) Third offense – one (1) month
suspension without pay; and
30 September 2017 31 December
31 December 2017 2017 4) Further offense – disqualification.
b. For non-compliance with required
During the monitoring period, the disclosures. Willful non-disclosure or
Bangko Sentral shall continue to assess the erroneous disclosure of any item required
calibration as well as the treatment of the to be disclosed under this framework
components of the leverage ratio. Final in the Published Statement of Condition shall
guidelines shall be issued in view of the be considered as a serious offense for
changes to the framework as well as purposes of determining the appropriate
migration from monitoring of the leverage penalty that will be imposed on the bank.
ratio to a Pillar 1 requirement starting In addition, the CEO and the board shall be
01 January 2018. Public disclosure of subject to the following non-monetary
information relative to leverage ratio shall
sanctions:
not be required during the monitoring period,
1) First offense – warning on CEO and
i.e., 31 December 2014 to 31 December 2017.
the Board;
b. Sanctions. Banks shall not be penalized
2) Second offense – reprimand on CEO
on any breach on the five percent (5%)
and the Board;
minimum leverage ratio during the
3) Third offense – one (1) month
monitoring period, i.e., 31 December 2014
suspension of CEO without pay; and
to 31 December 2017. However, Erroneous/
Delayed/Erroneous and Delayed/ 4) Further offense – possible
Unsubmitted reports shall be subject to disqualification of the CEO and/or the
penalties provided under Subsec. X184.3. For Board.
(Circular No. 538 dated 04 August 2006, as amended by Circular
purposes of monetary penalties, the reports Nos. 956 dated 17 April 2017, 762 dated 25 July 2012, 750
shall be classified as Category A-1 report. dated 01 March 2012, 717 and 716 both dated 25 March 2011,
(Circular No. 881 dated 09 June 2015 and M-2015-026 dated 713 dated 14 February 2011, 709 dated 10 January 2011, M-
16 July 2015, as amended by Circular Nos. 963 dated 27 June 2017 2008-015 dated 25 March 2008, Circular Nos. 605 dated 05
and 943 dated 26 January 2017) March 2008, 588 dated 11 December 2007, M-2007-019 dated
21 June 2007, Circular No. 560 dated 31 January 2007 and M-
§ X115.7 – X115.8 (Reserved) 2006-022 dated 24 November 2006)

§§ X116 - X118
17.06.30
Sec. X116 Basel I Risk-Based Capital. Coop Banks2 are in Appendix 63c.
(Deleted by Circular No. 827 dated 28 February 2014) Capital instruments issued by banks
starting 01 January 2014 shall be subject
§ X116.1 Scope. to the criteria for inclusion as qualifying
(Deleted by Circular No. 827 dated 28 February 2014)
capital provided in Appendix 63b
Annexes A to C and Annexes E to F.
§ X116.2 (2008 - X116.1) Qualifying
a. The risk-based capital adequacy
capital.
(Deleted by Circular No. 827 dated 28 February 2014) ratio (CAR) of stand-alone TBs, RBs and
Coop Banks, expressed as a percentage of
§ X116.3 (2008 - X116.2) Risk-weighted qualifying capital to risk-weighted assets,
assets. shall not be less than ten percent (10%)
(Deleted by Circular No. 827 dated 28 February 2014) for both solo basis (head office and
branches) and consolidated basis (parent
§ X116.4 (2008 - X116.3) Definitions. bank and subsidiary financial allied
(Deleted by Circular No. 827 dated 28 February 2014) undertakings).
Stand-alone TBs, RBs and Coop Banks
§ X116.5 (2008 - X116.4) Required shall comply with the provisions of this
reports.
Section starting 01 January 2012.
(Deleted by Circular No. 827 dated 28 February 2014)
b. Required reports. Banks shall submit
§ X116.6 Sanctions. a report of their risk-based capital ratio on a
(Deleted by Circular No. 827 dated 28 February 2014) solo basis (head office plus branches) and
on a consolidated basis (parent bank plus
§ X116.7 Temporary relief. subsidiary financial allied undertakings
(Deleted by Circular No. 827 dated 28 February 2014) [i.e., RBs and Venture Capital Corporations
(VCC) for TBs, and RBs for Coop Banks]
Sec. X117 Internal Capital Adequacy quarterly in the prescribed forms within the
Assessment Process and Supervisory deadlines, i.e., fifteen (15) banking days and
Review Process1. The guidelines on banks’ thirty (30) banking days after the end of the
internal capital adequacy assessment reference quarter, respectively. Only banks
process (ICAAP) and Bangko Sentral’s
with subsidiary financial allied undertakings
supervisory review process (SRP) are shown
in Appendices 90, 90a and 90b, (i.e., RBs and VCCs for TBs, and RBs for
respectively. Coop Banks) which under the existing
The ICAAP guidelines shall apply to all regulations are required to prepare
UBs and KBs on a group-wide basis. consolidated financial statements on a
The guidelines took effect on 01 January line-by-line basis shall be required to submit
2011. report on consolidated basis. The
(Circular No. 639 dated 15 January 2009, as amended by abovementioned reports shall be classified
Circular Nos. 869 dated 30 January 2015, 731 dated 28 July
2011, 677 dated 29 December 2009)
as Category A-2 reports.
c. Sanctions
Sec. X118 Revised Risk-Based Capital (1) For non-reporting of CAR breaches
Adequacy Framework for Stand-Alone (a) It is the responsibility of the President
Thrift Banks, Rural Banks and Cooperative or any officer of the bank holding equivalent
Banks. The guidelines implementing the position to cause the immediate reporting
revised risk-based capital adequacy of CAR breaches both to its Board of
framework for Stand-alone TBs, RBs, and Directors (BOD) and to the Bangko Sentral.
1
All covered UBs and KBs were required to submit the interim ICAAP document until 30 April 2010 and the
final ICAAP document until 31 January 2011.
2
These refer to TBs, RBs and Coop Banks that are not subsidiaries of UBs and KBs.

§ X118
17.06.30
It is likewise the responsibility of the the prescribed minimum CAR, the

President/or any officer holding equivalent Monetary Board may limit or prohibit the
position to ensure the accuracy of CAR distribution of net profits by such bank and
calculations and the integrity of the may require that part or all of net profits be
associated monitoring and reporting system. used to increase the capital accounts of the
Any willful violation of the above will be bank until the minimum requirements has
considered as a serious offense for purposes been met. The Monetary Board may,
of determining the appropriate monetary furthermore, restrict or prohibit the
penalty that will be imposed on the acquisition of major assets and the making
President/or any officer holding equivalent of new investments by the bank, with the
position. In addition, the President/or any exception of purchases of readily
officer holding equivalent position shall be marketable evidences of indebtedness of the
subject to the non-monetary sanctions: Republic of the Philippines and of the
(1) First offense – warning Bangko Sentral included in paragraph 2,
(2) Second offense – reprimand Item “a.ii” of Part III, Appendix 63c and
(3) Third offense – 1 month suspension any other evidences of indebtedness or
without pay obligations the servicing and repayment of
(4) Further offense – disqualification which are fully guaranteed by the Republic
(2) For non-compliance with required of the Philippines, until the minimum
disclosures requirement capital ratio has been restored.
(a) Willful non-disclosure or erroneous (b) In case of a bank merger, or
disclosure of any item required to be consolidation, or when a bank is under
disclosed under this framework in the rehabilitation program approved by the
Published Statement of Condition shall be Bangko Sentral, the Monetary Board may
considered as a serious offense for purposes temporarily relieve the surviving bank,
of determining the appropriate penalty that consolidated bank, or constituent bank or
will be imposed on the bank. In addition, corporations under rehabilitation from full
the President/or any officer holding compliance with the required capital ratio
equivalent position and the BOD shall be under such conditions as it may prescribe.
subject to the following non-monetary (c) A bank may also be subject to Prompt
sanctions: Corrective Action (PCA) framework when
(1) First offense – warning on President/ either the total CAR, Tier 1 ratio or leverage
or any officer holding equivalent position ratio falls below ten percent (10%),
and the BOD six percent (6%), and five percent (5%),
(2) Second offense – reprimand on respectively, or such other minimum levels
President/or any officer holding equivalent that may be prescribed for the said ratios
position and the BOD under relevant regulations, and/or the
(3) Third offense – one (1) month combined capital accounts fall below the
suspension of President/or any officer minimum capital requirement prescribed
holding equivalent position without pay under Subsec. X111.1, pursuant to the
(4) Further offense – possible provisions of Sec. X193.
disqualification of the President/or any officer (Circular No. 688 dated 26 May 2010, as amended by Circular
Nos. 956 dated 17 April 2017, 827 dated 28 February 2014, 781
holding equivalent position and/or the BOD dated 15 January 2013, 770 dated 28 September 2012, 762
(3) For non-compliance with the dated 25 July 2012, 750 dated 01 March 2012, 717 and 716 both
minimum CAR dated 25 March 2011, 713 dated 14 February 2011 and 709
(a) In case a bank does not comply with dated 10 January 2011)

§§ X119 - X119.1
06.12.31
F. CAPITAL INSTRUMENTS the face of every note, debenture or other

certificate evidencing the same:
Sec. X119 Unsecured Subordinated Debt. (1) This obligation is not a deposit and
The following are the guidelines for the is not insured by the PDIC;
issuance of unsecured subordinated debt (2) This obligation is neither secured nor
(UnSD) eligible as Hybrid Tier 1 (HT1) and covered by the guarantee of (name of bank)
Tier 2 capital: or its subsidiaries and affiliates, or other
(As amended by Memorandum to All Banks dated 23 March arrangement that legally or economically
2006) enhances the priority of the claim of any
holder of the UnSD as against depositors
§ X119.1 Minimum features of and other creditors (for LT2); depositors,
unsecured subordinated debt. other creditors and holders of LT2 capital
a. Form. A UnSD that will be publicly instruments (for UT2); and depositors, other
distributed may either be scripless in form creditors and holders of LT2 and UT2 capital
or evidenced by certificates such as: instruments (for HT1);
promissory note, debenture or other (3) This obligation does not have a
appropriate certificate of indebtedness. A priority claim, in respect of principal and
UnSD in scripless form shall comply with coupon payments in the event of winding
the provisions of R.A. No. 8792, up of the (name of bank), which is higher
otherwise known as the “Electronic than or equal with that of depositors and
Commerce Act”, particularly on the other creditors (for LT2); depositors, other
existence of an assurance on the integrity, creditors and holders of LT2 capital
reliability and authenticity of the UnSD instruments (for UT2); and depositors, other
in electronic form. An independent third creditors, holders of LT2 and UT2 capital
party UnSD Registry shall maintain instruments (for HT1); and
unissued UnSD certificates and the UnSD (4) The obligation is ineligible as
Registry Book, which must be electronic if collateral for a loan granted by (name of
the UnSD is scripless in form. A UnSD that Bank), its subsidiaries and affiliates.
will be issued privately or on a negotiated If the UnSD is scripless in form, the
basis shall be evidenced by certificates. foregoing provisions/information shall be
All UnSD shall be registered in the name furnished every buyer/investor in a separate
of individuals or entities and pre-numbered written instrument receipt of which must be
serially. duly acknowledged by him.
b. Denomination. The UnSD must be d. Term. The UnSD qualifying under
issued in minimum denominations of HT1 capital shall be perpetual. The
P500,000 or its equivalent if denominated minimum maturity of a UnSD qualifying
in a foreign currency. under UT2 and LT2 capital shall be ten (10)
c. Mandatory provisions. If the UnSD years and five (5) years, respectively.
is not scripless in form, the following (As amended by Memorandum to All Banks dated 23 March
provisions must appear in bolder prints on 2006)

§§ X119.2 - X119.4
15.12.31
§ X119.2 Prior Bangko Sentral of the Issuing Bank’s board of directors

approval. No UnSD shall be issued without authorizing the issuance of the UnSD
the prior approval of the Bangko Sentral. indicating, among others, the issue size,
terms and conditions, offering period,
§ X119.3 Pre-qualification purpose or intended use of proceeds thereof,
requirements of issuing bank. A bank the names of the Underwriter/Arranger,
applying for authority to issue a UnSD UnSD Registry, Selling Agent(s) and Market
shall comply with the following Maker(s), and Public Trustee;
requirements: (b) A certification by the corporate
a. It has complied with the minimum secretary that the issuance of the UnSD
amount of capital required under Subsec. has been approved by the stockholders
X111.1 or its paid-in capital is at least owning or representing at least two-thirds
equal to the amount required therein. (2/3) of the outstanding capital stock of
b. It has established a risk management the Issuing Bank if the UnSD has
system appropriate to its operations convertibility feature;
characterized by clear delineation of (c) A written confirmation from the
responsibility for risk management, president or officer of equivalent rank of the
adequate risk measurement systems, Issuing Bank stating that all the conditions/
appropriately structured risk limits, eligibility criteria for UnSD to qualify for
effective internal controls and complete, capital instruments under applicable and
timely and efficient risk reporting system. existing capital adequacy framework are
c. It is a locally incorporated bank. complied with and that such conditions/
eligibility criteria shall be contained in the
§ X119.4 Public issuance of unsecured UnSD Certificates if the UnSD is not in
subordinated debt. Public issuance of UnSD scripless form, in the Information Disclosure
is an issuance offered to the general public, and Purchase Advice.
which may or may not be qualified investors/ (d) A written undertaking from the
buyers as hereinafter defined. The Issuing president or officer of equivalent rank of the
Bank must be rated by an independent credit Issuing Bank not to support, directly or
rating agency recognized by the Bangko indirectly, by extending loans, issuing
Sentral and a Public Trustee shall be payment guarantees or otherwise, the buyer/
holder of the UnSD of the Issuing Bank;
appointed for investor protection.
(e) A written confirmation from the
a. Application for authority
president or officer of equivalent rank of the
(1) The application shall be signed by
Issuing Bank stating that the designated
the president or officer of equivalent rank
Underwriter/Arranger, UnSD Registry,
of the applicant bank; Selling Agent(s) and Market Maker(s) were
(2) The application for authority on each provided with a complete list of subsidiaries
UnSD issue/issue program shall be filed and affiliates of the Issuing Bank including
with the appropriate department of the SES: their subsidiaries and affiliates;
Provided, That the period of an issue (f) A written undertaking from the
program of two (2) or more tranches shall not president or officer of equivalent rank of the
exceed one (1) year from date of approval; and Issuing Bank to update the above-
(3) The application shall be mentioned list within three (3) banking days
accompanied by: from the date of change in composition
(a) A certified true copy of the resolution thereof;

§ X119.4
15.12.31
(g) Specimen of the UnSD; and (2) Within ten (10) banking days after
(h) A written external legal opinion that issuance of the initial and subsequent tranches:
all the conditions/eligibility criteria for (a) A written notice of the actual date of
UnSD to qualify for capital instruments issuance/offering of each initial and
under applicable and existing capital subsequent tranches.
adequacy framework and loss absorption c. Requirements for other parties
(for HT1 and UT2) features, have been involved
met; and The issuing bank shall be held
(i) A certification signed by the accountable for ensuring the continuous
president (or officer of equivalent rank) compliance by its chosen participant-FIs
and chief compliance officer of the with the qualification requirements
issuing bank stating the compliance of prescribed by the Bangko Sentral.
all parties to the UnSD transaction As such, the issuing bank shall make a
with the respective prequalification careful and diligent evaluation of the parties
requirements prescribed under Item “c” of whom it shall engage to act as underwriter/
Subsec. X119.4 arranger, UnSD registry, selling agent,
b. Additional requirements for the market maker and public trustee of its
issuance of UnSD UnSDs.
After a bank’s application to issue a The following qualification
UnSD has been approved, the applicant requirements shall be strictly complied
shall submit the following additional with prior to and on a continuing basis by
requirements to the appropriate department the issuing bank and FIs engaged to act as
of the SES: underwriter/arranger, UnSD registry,
(1) At least fifteen (15) banking days selling agent, market maker and public
before the date of offering: trustee while the UnSDs of the issuing
(a) A written confirmation from the bank remains outstanding:
president or officer of equivalent rank of (1) Underwriter/Arranger
the Issuing Bank stating that the bank has (a) It is either a UB or an IH: Provided,
been rated by an independent credit rating That if an offering is on a best effort basis,
agency duly recognized by the Bangko the Arranger may also be a KB: Provided,
Sentral; further, That if an offering is denominated
(b) Information disclosure of the UnSD in foreign currency, the Underwriter/
issuance prepared by the Underwriter Arranger may also be any reputable
Arranger; international investment bank.
(c) Promotional materials; (b) It must be an independent third
(d) Specimen of the proposed Purchase party that has no subsidiary/affiliate or any
Advice and Registry Confirmation; and other relationship with the Issuing Bank
(e) Copy of the agreements between that would undermine the objective
the Issuing Bank and the Underwriter/ conduct of due diligence.
Arranger/UnSD Registry/Selling Agent(s)/ (c) If Underwriter, it must have
Market Maker(s), and Public Trustee. adequate risk management and must be
The Bangko Sentral reserves the right to well capitalized, which for a local
suspend the date of offering, within the Underwriter, shall be evidenced by
fifteen (15) banking day period from compliance with the risk-based CAR
submission of the above-mentioned prescribed under applicable and existing
requirements. capital adequacy framework for the past

§ X119.4
15.12.31
sixty (60) days immediately preceding the (e) It must have a CAMELS composite
date of application where applicable. rating of at least “3” in the last regular
(2) UnSD Registry examination, where applicable.
(a) It may be a UB, a KB, or such other (3) Selling Agent
specialized entity that may be qualified by (a) It must be an FI with dealership or
the Monetary Board. brokering license.
(b) It must be a third party that has no (b) It must be a third party that has no
subsidiary/affiliate or any other subsidiary/affiliate or any other
relationship with the Issuing Bank that
relationship with the Issuing Bank that
would undermine its independence.
would undermine its independence.
(c) It must not be an Underwriter or a
Market Maker of the UnSD. (4) Market Maker
(d) It must have adequate facilities and (a) It must be an FI with a dealership
the organization to do the following: or brokering license.
(i) Maintain certificates of unissued UnSD (b) It must be a third party that has no
and the Registry Book which must be subsidiary/affiliate or any other
electronic if the UnSD is in scripless form; relationship with the Issuing Bank that
(ii) Deliver transactions within the would undermine its independence.
agreed trading period; and (c) It must have adequate risk
(iii) Issue Registry Confirmations and management and must be well capitalized
UnSD Certificates if they are not in as evidenced by compliance with the risk
scripless form to buyers/holders of UnSD. based CAR prescribed under applicable and
(Next Page is Part I - Page 29)

§ X119.4
15.12.31
existing capital adequacy framework for the (b) Prepares the prospectus/information
past sixty (60) days immediately preceding disclosure, including updates for multi-
the date of application where applicable. tranche UnSD issues;
There is no need for a Market Maker if (c) Formulates the distribution/
the UnSD is to be held on to maturity: allocation plan for the initial offering and
Provided, That this condition is properly ensures proper and orderly distribution of
disclosed in the Purchase Advice, Registry the primary offering of the UnSD;
Confirmation and Prospectus/Information (d) Disseminates information to
Disclosure. prospective investors of UnSD on the terms
(5) Public Trustee and conditions of the issue (including
(a) It must be an FI authorized by the information of non pre-termination at the
Bangko Sentral to engage in trust and other initiative of the holder and the liquidity
fiduciary business. mechanism in secondary trading) and the
(b) It must be a third party that has no rights and obligations of the holder, issuer,
subsidiary/affiliate or any other relationship Underwriter/Arranger, UnSD Registry,
with the Issuing Bank that would undermine Selling Agent, Market Maker and Public
its independence. Trustee; and
(c) It must have adequate risk (e) When selling to its clients, it must
management system and must be well perform the functions/responsibilities of
capitalized as evidenced by compliance the Selling Agent under Item “d(3)” hereof.
with the risk-based CAR prescribed under (2) UnSD Registry
applicable and existing capital adequacy (a) Keeps unissued UnSD certificates
framework for the past sixty (60) days and maintains UnSD Registry book, which
immediately preceding the date of must be electronic if UnSD is scripless in
application where applicable. The 60-day form;
(b) Records initial issuance of the
compliance period with the risk-based CAR
UnSD and subsequent transfer of
shall be waived in evaluating a bank’s
ownership;
eligibility to act as Public Trustee for another
(c) Issues UnSD Certificates for primary
bank’s UnSD’s Tier 2 offering, if the former
offerings if UnSD is not scripless in form;
bank has instituted remedial measure to its
(d) Issues Registry Confirmation to
CAR deficiency by issuing Tier 2 capital.
buyers/holders;
(d) It may also be the UnSD Registry.
(e) Functions as paying agent for periodic
(e) A Public Trustee is mandatory if
interest and principal payments;
UnSD shall be offered to the general public
(f) Monitors compliance with the
and optional if offering will be limited to
prohibitions on holdings of UnSD, as
qualified investors/buyers.
prescribed under Subsec. X119.8 hereof;
d. Functions/Responsibilities of other and
parties involved (g) Submits within ten (10) banking days
The respective parties shall have, among from end of reference month, an exception
others, the following functions/ report on Subsec. X119.8 to the appropriate
responsibilities: department of the SES. This report shall be
(1) Underwriter/Arranger classified as a “Category B” report.
(a) Conducts due diligence on the (3) Selling Agent
Issuing Bank and determines the valuation/ (a) Verifies identity of each investor to
pricing of the primary issue; ascertain that Subsec. X119.8 is not violated

§ X119.4
15.12.31
and applies appropriate standards to combat and sends a copy thereof to the UnSD
money laundering as required under existing Registry; and
Bangko Sentral regulations; (f) Ensures secondary market transfers
(b) Determines the suitability of the and registration in coordination with the
investor and ensures that he fully UnSD Registry.
understands the features of the UnSD and (5) Public Trustee
the risk involved therein; and (a) Monitors compliance of the Issuing
(c) Issues the Purchase Advice for the Bank with the terms and conditions of the
primary offering of the UnSD to the buyer UnSD;
and sends a copy thereof to the UnSD (b) Monitors compliance of the other
Registry. parties with their functions and
The sale or distribution of UnSD may responsibilities prescribed under this
also be performed by the issuer through its Memorandum;
head office and branches subject to the (c) Reports regularly to UnSD holders
following conditions: non-compliance of the Issuing Bank with
(i) The in-house distribution shall not the terms and conditions of the UnSD and
exceed fifty percent (50%) of the total issue; such other developments that adversely
(ii) The sale/distribution must be done affect their interest and advise them of the
under the supervision of an officer of the course of action they should take to protect
Issuing Bank who is capable of determining their interest; and
the suitability of the investor and ensuring (d) Act on behalf of the UnSD holders
that he fully understands the risk in UnSD; in case of bankruptcy of the Issuing Bank.
(iii) All personnel assigned to distribute e. Change of underwriter/arranger,
sell UnSD must be capable of determining UnSD registry, selling agent(s), market
the suitability of the investor and ensuring maker(s). After an application for authority
that he fully understands the risk in UnSD; to issue a UnSD has been approved by the
and Bangko Sentral, the Issuing Bank cannot
(iv) It must also perform the functions/ change its Underwriter/Arranger, UnSD
responsibilities of the Selling Agent. Registry, Selling Agent(s), Market Maker(s)
(4) Market Maker and Public Trustee without prior Bangko
(a) Sets an independent pricing for the Sentral approval.
secondary trading of UnSD; f. Agreements between issuing bank
(b) Posts daily the bid and offer prices and other parties involved. The
for the UnSD on the screen of at least one agreements between the Issuing Bank and
(1) of the information providers until the the UnSD Registry/Selling Agent(s)/Market
operation of a fixed income exchange for Maker(s)/ Public Trustee shall comply
UnSD; with the provisions of Subsec. X162.1 on
(c) Verifies identity of each investor to bank service contracts. The Issuing Bank
ascertain that Subsec. X119.8 is not violated shall be liable to investors for any damages
and applies appropriate standards to combat caused by actions of the UnSD Registry,
money laundering as required under existing Selling Agent(s) and Market Maker(s),
Bangko Sentral regulations; which are contrary to the agreements
(d) Determines the suitability of the entered into.
buyer and ensures that he fully understands g. Purchase advice and registry
the risk involved in a UnSD; confirmation. The Purchase Advice and
(e) Issues the Purchase Advice for the Registry Confirmation shall contain all the
secondary trading of the UnSD to the buyer terms and conditions on the issuance of

§ X119.4
15.12.31
UnSD and shall conspicuously state the This UnSD cannot be terminated by the
following caveat: holder (for HT1). This UnSD cannot be
(1) This UnSD is not a deposit and is terminated by the holder before (maturity
not insured by the PDIC. date) (for UT2 and LT2).
(2) This UnSD is neither secured nor However, it may be pre-terminated at
covered by a guarantee of the Issuer/ the instance of the Issuing Bank upon:
Underwriter/Arranger or related party of the (a) Prior approval of the Bangko Sentral
Issuer/Underwriter/Arranger or other subject to the following conditions:
arrangement that legally or economically (i) The repayment is in connection with
enhances the priority of the claim of any call option after a minimum of five (5) years
holder of the UnSD as against depositors from issue date, or even within the first five
and other creditors (for LT2); depositors, (5) years from issue date when:
other creditors and holders of LT2 capital (aa)The UnSD was issued for the
instruments (for UT2); and depositors, other purpose of a merger with or acquisition by
creditors and holders of LT2 and UT2 capital the Issuing Bank and the merger or
instruments (for HT1); acquisition is aborted;
(3) This UnSD does not have a priority (bb) There is a change in tax status of
claim, in respect of principal and coupon the UnSD due to changes in the tax laws
payments in the event of winding-up of the and/or regulations; or
Issuing Bank, which is higher than or equal (cc) The UnSD does not qualify as HT1,
with that of depositors and other creditors
UT2 or LT2 capital, as the case may be, as
(for LT2); depositors, other creditors and
determined by the Bangko Sentral; and
holders of LT2 capital instruments (for UT2);
(ii) The debt is simultaneously replaced
and depositors, other creditors, holders of
with the issues of new capital which is
LT2 and UT2 capital instruments (for HT1);
neither smaller in size nor of lower quality
(4) This UnSD is ineligible as collateral
than the original issue, unless the Issuing
for a loan granted by the Issuing Bank, its
subsidiaries or affiliates; Bank’s capital adequacy ratio remains more
(5) This UnSD cannot be terminated by than adequate after redemption; and
the holder nor by the Issuing Bank (for HT1). (b) Prior notice to holders on record.
This UnSD cannot be terminated by the Negotiations/transfers from one (1)
holder nor by the Issuing Bank before holder to another do not constitute pre-
(maturity date) (for UT2 and LT2). termination.
However, negotiations/ transfers from However, for tax purposes, negotiations/
one (1) holder to another do not constitute transfers from one (1) holder to another shall
pre-termination. be subject to the pertinent provisions of the
For tax purposes, negotiations/transfers National Internal Revenue Code of 1997,
from one (1) holder to another shall be as amended, and BIR regulations.
subject to the pertinent provisions of the In case there is a feature allowing one-time
National Internal Revenue Code of 1997, step-up in the coupon rate in conjunction with
as amended, and BIR regulations. a call option, the step-up shall be after a
However, negotiations/transfers from minimum of ten (10) years for HT1 and UT2
one (1) holder to another do not constitute and five (5) years for LT2 after the issue date,
pre-termination. and shall not result in an increase over the
(Item “g(5)” above shall apply if the initial rate that is more than:
Issuing Bank commits no pre-termination (i) 100 basis points less the swap spread
of the UnSD. Otherwise, it shall read as between the initial index basis and the
follows): stepped-up index basis; or

§ X119.4
15.12.31
(ii) Fifty percent (50%) of the initial credit (c) Upon appointment of receiver for
spread less the swap spread between the the Issuing Bank.
initial index basis and the stepped-up index The rate of conversion shall be fixed
basis. at the time of the subscription of this
The swap spread shall be fixed at the UnSD.
pricing date and reflect the differential in (12) The amount and timing of
pricing on that date between the initial coupons on this UnSD shall be
reference security or rate and the stepped- discretionary on the Issuing Bank where
up reference security or rate; the Issuing Bank has not paid or declared
(6) The holders/owners of this UnSD a dividend on its common shares in the
cannot set off any amount they owe to the preceding financial year, or determines
Issuing Bank against this UnSD. that no dividend is to be paid on such
(7) All negotiations/transfers of this shares in the current financial year; and
UnSD prior to maturity must be coursed the Issuing Bank shall have full control
through a Market Maker until the operation and access to waived payments (for HT1).
of a fixed income exchange. The coupon payment on this UnSD shall
(8) The payment of principal may be be deferred where the Issuing Bank has
accelerated on this UnSD only in the event not paid or declared a dividend on its
of insolvency of the Issuing Bank. common shares in the preceding financial
(9) The coupon rate, or the formulation year, or determines that no dividend is to
for calculating coupon payments shall be
be paid on such shares in the current
fixed at the time of the issuance of the UnSD
financial year (for UT2);
and may not be linked to the credit standing
(13)The coupon on this UnSD shall be
of the Issuing Bank;
non-cumulative. In case there is a feature
(10) The payment of principal and
allowing withheld cash coupon to be
coupon due on this UnSD shall not be made
payable in scrip or shares of stock, the
to the extent that such payment will cause
the Issuing Bank to become insolvent (for shares of stock to be issued shall not be of
HT1 and UT2); lower quality capital than the UnSD (for
(11) The holders of the UnSD shall be HT1); and
treated as if they were holders of a specified (14)The coupon to be paid on this UnSD
class of share capital in any proceedings shall be paid only to the extent that the
commenced for the winding-up of the Issuing Bank has profit distributable
Issuing Bank (for HT1 and UT2); determined in accordance with existing
(Item “g(11)” above shall apply if such Bangko Sentral regulations (for HT1).
is the manner by which the UnSD is to be N.B.: The last five (5) items (i.e., 10, 11,
treated in loss situation. Otherwise, it shall 12, 13 and 14) are applicable only to UnSD
read as follows): qualifying under HT1 and UT2 capital, as
This UnSD shall be automatically the case may be. The foregoing information
converted into common shares or perpetual shall also be shown in the Prospectus/
and non-cumulative preferred shares (for Information Disclosure.
HT1) or into common shares or perpetual h. Pre-termination by the Issuer
and non-cumulative preferred shares or (1) The Issuing Bank may pre-terminate
perpetual and cumulative preferred shares the UnSD subject to the following
(for UT2) upon occurrence of certain trigger conditions:
events as follows: (a) The Information Disclosure, Purchase
(a) Breach of minimum capital ratio; Advice and Registry Confirmation shall
(b) Commencement of proceedings for include the information that the Issuing Bank
winding-up of the Issuing Bank; or has the option to pre-terminate the UnSD;

§§ X119.4 - X119.5
15.12.31
(b) Compliance with Items “a(2)(a)vii”, Confirmation to the buyer, in the case
“b(1)(h)v” or “b(2)(c)iv” as may be of secondary trading.
applicable; (As amended by Circular Nos. 890 dated 02 November 2015, 834
dated 26 May 2014, 827 dated 28 February 2014, 778 dated
(c) Prior notification of thirty (30)
14 December 2012, 716 dated 25 March 2011, 709 dated 10 January
banking days or more to holders of record; 2011, Memorandum to All Banks dated 23 March 2006)
and
(d) Notwithstanding any agreement to § X119.5 Private or negotiated issuance
the contrary, the Issuer shall shoulder the of unsecured subordinated debt.
tax due, if any, on the interest income a. Private or negotiated issuance of
already earned by the holders. UnSD is the issuance of UnSD to qualified
(2) Within ten (10) banking days after investors/buyers, whether individuals or
the completion of the pre-termination institutions as defined under Subsec.
transaction, the Issuing Bank must submit a X119.7. There is no limit on the number of
written notice to the appropriate department qualified investors/buyers and on the sale
of the SES of the following: or negotiation of the UnSD: Provided, That
(a) Actual pre-termination date; and such sale or negotiation shall only be made
(b) New capital composition. to another qualified investor/buyer.
i. Primary offering/secondary trading b. Application for authority of the Issuing
(1) The primary offering of a UnSD shall Bank
be executed through an Underwriter under (1) The application shall be signed by
a firm commitment or through an Arranger the president or officer of equivalent ran of
on a best effort basis. Initial sale/distribution the Issuing Bank.
of UnSD shall be made by a Selling Agent, (2) The application for authority on each
the Underwriter/Arranger or, to a limited negotiated UnSD issue shall be filed with
extent, the Issuing Bank itself. Subsequent the appropriate department of the SES.
negotiations in secondary trading must be (3) The application shall be accompanied
executed through authorized Market by:
Maker(s) until the operation of a fixed income (a) A certified true copy of the resolution
exchange. of the Issuing Bank’s board of directors
The primary offering as well as the authorizing the private/negotiated issuance
secondary trading of a UnSD must be of UnSD indicating, among others, the
supported by Purchase Advice to be issued amount, duration/maturity, interest rate,
by the Selling Agent or the Market Maker, purpose or intended use of proceeds of the
as the case may be, with the original given UnSD;
to the buyer and a second copy to the UnSD (b) A Certification by the corporate
Registry. Upon presentation by the buyer secretary that the issuance of the UnSD has
of the original copy of Purchase Advice, the been approved by the stockholders owning
UnSD Registry shall: or representing at least two-thirds (2/3) of
(a) record the primary issuance in the the outstanding capital stock of the Issuing
Registry Book and issue a Registry Bank if the UnSD has convertibility feature;
Confirmation and the corresponding UnSD (c) A written confirmation from the
certificate to the buyer if it is not scripless president or officer of equivalent rank of the
in form; and Issuing Bank stating that all the conditions/
(b) register the transfer of ownership in eligibility criteria for UnSD to qualify for
the UnSD Registry Book and issue a Registry capital instruments under applicable and

§ X119.5
15.12.31
existing capital adequacy framework are (2) A copy of each of the duly signed
complied with and that such conditions/ Debt Agreements/Contracts between the
eligibility criteria shall be contained in the Issuing Bank and the investor/buyer as
UnSD Certificates, Prospectus/Information specified in the application for authority to
Disclosure and Debt Agreement/Contract. issue negotiated UnSD; and
(d) An undertaking from the president (3) A copy of the income tax return of
or officer of equivalent rank of the Issuing the investor/buyer in case of a natural
Bank that the UnSD shall be issued only to person.
qualified investors/buyers; d. Debt agreement/contract
(e) A certification from the president or The Debt Agreement/Contract shall
officer of equivalent rank of the Issuing Bank contain all the terms and conditions on the
that the investor/buyer shall not be among issuance of UnSD and shall conspicuously
those prohibited to hold UnSD under state the following caveat:
Subsec. X119.8 and that the Issuing Bank (1) This UnSD is not a deposit and is
has applied appropriate standards to combat not insured by the PDIC.
money laundering as required under existing (2) This UnSD is neither secured nor
Bangko Sentral regulations; covered by a guarantee of the Issuer or
(f) A written undertaking from the related party of the Issuer or other
president or officer of equivalent rank of the arrangement that legally or economically
Issuing Bank not to support, directly nor enhances the priority of the claim of any
indirectly, by extending loans, issuing holder of the UnSD as against depositors
payment guarantees or otherwise, the buyer/ and other creditors (for LT2); depositors,
holder of the UnSD of the Issuing Bank; and other creditors and holders of LT2 capital
(g) Specimen of the proposed Debt instruments (for UT2); and depositors, other
Agreement/Contract containing the terms creditors and holders of LT2 and UT2 capital
and conditions of the UnSD issuance instruments (for HT1).
(h) A written external legal opinion that (3) This UnSD does not have a priority
all the conditions for UnSD under claim, in respect of principal and coupon
applicable and existing capital adequacy payments in the event of winding-up of
framework including the subordination the Issuing Bank, which is higher than or
(for HT1, UT2 and LT2) and loss equal with that of depositors and other
absorption (for HT1 and UT2) features, creditors (for LT2); depositors, other
have been met. creditors and holders of LT2 capital
c. Additional requirements for the instruments (for UT2); and depositors,
private issuance of UnSD. Within ten (10) other creditors, holders of LT2 and UT2
banking days after issuance of the UnSD, capital instruments (for HT1);
the Issuing Bank shall submit the following (4) This UnSD is ineligible as collateral
additional requirements to the appropriate for a loan made by the Issuing Bank, its
department of the SES: subsidiaries or affiliates.
(1) A written notice of the actual date of (5) This UnSD cannot be terminated
full receipt of proceeds, accompanied by a by the holder nor by the Issuing Bank (for
certification from the president or officer of HT1). This UnSD cannot be terminated
equivalent rank of the Issuing Bank stating by the holder nor by the Issuing Bank
that the pre-qualification requirements under before (maturity date) (for UT2 and LT2).
Subsec. X119.3 have been complied with Item “d(5)” above shall apply if the
up to the time of full receipt of proceeds; Issuing Bank commits no pre-termination

§ X119.5
15.12.31
of the UnSD. Otherwise, it shall read as pricing date and reflect the differential in
follows: pricing on that date between the initial
This UnSD cannot be terminated by the reference security or rate and the stepped-
holder (for HT1). This UnSD cannot be up reference security or rate;
terminated by the holder before (maturity (6) This UnSD may only be sold,
date) (for UT2 and LT2). transferred or negotiated to another qualified
However, it may be pre-terminated at investor/buyer;
the instance of the Issuing Bank upon: (7) The holders/owners of this UnSD
(a) Prior approval of the Bangko Sentral cannot set off any amount they owe to the
subject to the following conditions: Issuing Bank against this UnSD.
(i) The repayment is in connection with (8) The payment of principal may be
call option after a minimum of five (5) years accelerated on this UnSD only in the event
from issue date, or even within the first five of insolvency of the Issuing Bank.
(5) years from issue date when: (9) The coupon rate, or the formulation
(aa)The UnSD was issued for the for calculating coupon payments shall be
purpose of a merger with or acquisition by fixed at the time of the issuance of the UnSD
the Issuing Bank and the merger or and may not be linked to the credit standing
acquisition is aborted; of the Issuing Bank;
(bb) There is a change in tax status of (10) The payment of principal and
the UnSD due to changes in the tax laws coupon due on this UnSD shall not be made
and/or regulations; or to the extent that such payment will cause
(cc) The UnSD does not qualify as HT1, the Issuing Bank to become insolvent (for
UT2 or LT2 capital, as the case may be, as HT1 and UT2);
determined by the Bangko Sentral; and (11) The holders of the UnSD shall be
(ii) The debt is simultaneously replaced treated as if they were holders of a specified
with the issues of new capital which is class of share capital in any proceedings
neither smaller in size nor of lower quality commenced for the winding up of the
than the original issue, unless the Issuing Issuing Bank (for HT1 and UT2);
Bank’s capital adequacy ratio remains more (Item “d(11)” above shall apply if such
than adequate after redemption; and is the manner by which the UnSD is to be
(b) Prior notice to investors/buyers. treated in loss situation. Otherwise it shall
In case there is a feature allowing one- read as follows):
time step-up in the coupon rate in This UnSD shall be automatically
conjunction with a call option, the step-up converted into common shares or perpetual
shall be after a minimum of ten (10) years and non-cumulative preferred shares (for
(for HT1 and UT2) and five (5) years (for HT1), or into common shares or perpetual
LT2) after the issue date, and shall not result and non-cumulative preferred shares or
in an increase over the initial rate that is perpetual and cumulative preferred shares
more than: (for UT2) upon occurrence of certain trigger
(i) 100 basis points less the swap spread events as follows:
between the initial index basis and the (a) Breach of minimum capital ratio;
stepped-up index basis; or (b) Commencement of proceedings for
(ii) Fifty percent (50%) of the initial credit winding up of the Issuing Bank; or
spread less the swap spread between the (c) Upon appointment of receiver for the
initial index basis and the stepped-up index Issuing Bank.
basis. The rate of conversion shall be fixed at
The swap spread shall be fixed at the the time of the subscription of this UnSD.

§§ X119.5 - X119.6
15.12.31
(12) The amount and timing of coupons (2) Within ten (10) banking days after
on this UnSD shall be discretionary on the the completion of the pre-termination
Issuing Bank where the Issuing Bank has not transaction, the Issuing Bank must submit a
paid or declared a dividend on its common written notice to the appropriate department
shares in the preceding financial year, or of the SES of the following:
determines that no dividend is to be paid on (a) Actual pre-termination date; and
such shares in the current financial year; and (b) New capital composition.
the Issuing Bank shall have full control and f. Functions/Responsibilities of the
access to waived payments (for HT1). The Issuing Bank
coupon payment on this UnSD shall be (1) Prepares the Prospectus/Information
deferred where the Issuing Bank has not paid Disclosure on the UnSD issues;
or declared a dividend on its common shares (2) Disseminates to prospective
in the preceding financial year, or investors/buyers information on the terms
and conditions of the UnSD (including
determines that no dividend is to be paid on
information on no pre-termination at the
such shares in the current financial year (for
initiative of the holder, and where
UT2);
applicable, the liquidity mechanism in
(13) The coupon on this UnSD shall be
secondary trading) and the rights and
non-cumulative. In case there is a feature
obligations of the holder and the issuer;
allowing withheld cash coupon to be
(3) Keeps unissued UnSD certificates
payable in scrip or shares of stock, the shares and maintains UnSD Register;
of stock to be issued shall not be of lower (4) Records initial issuance of UnSD and
quality capital than the UnSD (for HT1); and subsequent transfer of ownership;
(14) The coupon to be paid on this UnSD (5) Issues UnSD Certificates and Registry
shall be paid only to the extent tha the Issuing Confirmation to original investors/buyers;
Bank has profit distributable determined in (6) Issues Registry Confirmation to
accordance with existing Bangko Sentral subsequent buyers/holders where applicable;
regulations (for HT1). (7) Ensures compliance with Subsec.
N.B.: The last five (5) items (i.e., 10, 11, X119.8 and applies appropriate standards to
12, 13 and 14) are applicable only to UnSD combat money laundering as required under
qualifying under HT1 and UT2 capital, as existing Bangko Sentral regulations; and
the case may be. (8) Determines suitability of the
e. Pre-termination by the Issuer investors/buyers (original or subsequent)
(1) The Issuing Bank may preterminate and assures that he fully understands the
the negotiated UnSD subject to the following risk involved in a UnSD.
conditions: (As amended by Circular Nos. 890 dated 02 November 2015
and 827 dated 28 February 2014 and Memorandum to All Banks
(a) The Debt Agreement/Contract shall
dated 23 March 2006)
include the information that the Issuing Bank
has the option to pre-terminate the UnSD;
§ X119.6 Issuance abroad of unsecured
(b) Compliance with call options as
subordinated debt. The overseas issuance
provided in applicable and existing capital
of UnSD shall also be subject to the
adequacy framework; provisions of Sec. X119 except for the
(c) Prior notification of thirty (30) following:
banking days or more to lender/investor; and a. Overseas issuance of UnSD may be
(d) Notwithstanding any agreement to allowed to be governed by the laws and
the contrary, the Issuer shall shoulder the applicable rules and regulations of the
tax due, if any, on the interest income already country where the UnSD is to be issued
earned by the holders. with respect to form, qualified investors/

§§ X119.6 - X119.9
15.12.31
buyers and subsequent sale or negotiation; § X119.8 Prohibitions on holdings of

b. The requirements under Subsecs. unsecured subordinated debt. The
X119.1 c(1), X119.4 g(1), and X119.5 d(1) and following persons and entities are
d(6) may be allowed to be dispensed with prohibited from purchasing/holding UnSD
in cases of overseas issuance of UnSD; and of the Issuing Bank:
c. The subsequent sale/negotiation in a. Subsidiaries and affiliates of the
the Philippines of the UnSDs originally Issuing Bank including their subsidiaries
issued overseas shall not be allowed unless and affiliates; and
all the requirements for domestic issuance b. Common trust funds (CTFs) managed
are complied with. by the Trust Department of the Issuing Bank,
It is however understood that the its subsidiaries and affiliates or other related
applicant/issuer shall also secure the entities: Provided, That other funds being
approval of the International Department managed by the Trust Department of the
(ID) of the Bangko Sentral for the overseas Issuing Bank, its subsidiaries and affiliates
issuance of foreign currency denominated or other related entities are allowed to
UnSD. purchase or invest in UnSD of the Issuing
(As amended by Memorandum to All Banks dated 23 March Bank subject to the following conditions:
2006) (1) That the fund owners give prior
authority/instruction to the Trust Department
§ X119.7 Qualified investors/buyers. to purchase or invest in the UnSD of the
Qualified buyers of, or suitable investors in, Issuing Bank; and
a UnSD can be any of the following: (2) That the authority/instruction of the
a. Banks; fund owner and his understanding of the
b. Investment house (IH); risk involved in purchasing or investing in
c. Insurance company; UnSD are fully documented.
d. Pension or retirement fund of other For purposes of this Section, an affiliate
entities which have no subsidiary/affiliate refers to a related entity linked by means of
or any other relationship with the Issuing ownership of at least twenty percent (20%)
Bank; to not more than fifty percent (50%) of its
e. Investment company; outstanding voting stock.
f. Funds managed by another bank or
other entities duly authorized to engage in § X119.9 Accounting treatment.
trust or other fiduciary business; Obligations arising from the issuance of
g. Domestic corporate or institutional UnSD (including the portion exceeding the
investors with total assets of at least P100.0 allowable ceiling for purposes of
million; determining the qualifying capital as
h. Foreign multilateral organizations provided in applicable and existing capital
such as, the ADB and IFC; adequacy framework shall be booked under
i. High net-worth individual investor/ the following General Ledger account titles:
buyer who is sophisticated enough to a. “Other Equity Instruments - Others”
understand and appreciate the significance for HT1 capital which shall be presented in
of and the risk involved in UnSD as may be the equity accounts section of the Balance
indicated by his/her educational Sheet which shall be accounted for in
background and/or employment/business accordance with the provisions of PAS 32; and
experience; and b. “Unsecured Subordinated Debt” for
j. Stockholder, director or officer with UT2 and LT2 capital, which shall be
the rank of at least a vice-president of the presented in the liability accounts section
Issuing Bank. of the balance sheet.

§§ X119.9 - X119.13
15.12.31
However, only the proceeds actually with the provisions of this Section and for
received from the UnSD issues, (i.e., net of non-disclosure or misrepresentation of
discounts, if any, and transaction costs) shall information, as follows:
be considered as HT1, UT2 or LT2 capital. a. On the issuing bank
The proceeds actually received from the (1) Suspension of its authority to issue
UnSD issues, (i.e., net of discounts, if any, remaining tranches, if any;
and transaction costs) eligible as UT2 or LT2 (2) Disqualification from future issuance
capital shall be considered in the of UnSD;
computation of loanable funds for purposes (3) Disqualification of all outstanding
of determining compliance with the
issues as eligible Tier 2 capital; and
mandatory allocation of funds for agri-agra
(4) Monetary penalty of P30,000 for
credit required under P.D. No. 717, as
each violation.
amended.
A UnSD eligible as HT1, UT2 or LT2 b. On the underwriter/arranger
capital shall be accounted for in accordance (1) Disqualification from being
with PAS 32 and PAS 39. underwriter/arranger for three (3) years; and
A UnSD denominated in foreign (2) Monetary penalty of P30,000 for
currency eligible as HT1, UT2 or LT2 may each violation.
be recorded in the regular banking unit c. On the UnSD registry
(RBU) or foreign currency deposit unit (1) Disqualification from being
(FCDU/EFCDU) of the issuing bank: appointed as UnSD Registry for three (3)
Provided, That if booked in the FCDU/ years; and
EFCDU, the following conditions shall be (2) Monetary penalty of P30,000 for
strictly observed: each violation.
a. The issuing bank shall indicate in its d. On the selling agent/market maker
application that the UnSD shall be booked (1) Disqualification from being
in its FCDU/EFCDU; appointed as selling agent or market maker
b. The UnSD shall remain in the FCDU/ for three (3) years; and
EFCDU books until full settlement; and (2) Monetary penalty of P30,000 for
c. The UnSD shall be issued only to each violation.
non-residents and offshore banking units e. On the public trustee
(OBUs) in accordance with Section 72.2.e
(1) Disqualification from being
of CB Circular No. 1389, as amended.
A UnSD eligible as HT1, UT2 or LT2 appointed as public trustee for three (3)
capital shall be accounted for in accordance years; and
with PAS 32 and PAS 39. (2) Monetary penalty of P30,000 for
(As amended by Circular Nos. 890 dated 02 November 2015, each violation.
827 dated 28 February 2014 and Memorandum to All Banks f. On the certifying officer - A fine of
dated 23 March 2006) P5,000 per day from the time of required
disclosure up to the time disclosure was
§§ X119.10 - X119.12 (Reserved) made, or from the time misrepresentation
was made up to the time the information
§ X119.13 Sanctions. Without prejudice
to the other sanctions prescribed under was corrected, and a possible
Sections 36 and 37 of R.A. No. 7653 and disqualification if warranted by the gravity
the provisions of Section 16 of R.A. No. of the offense committed.
8791, sanctions shall be imposed g. On the responsible officer - A fine of
on BSP-supervised FIs for failure to comply P30,000 for participating in or tolerating the

§ X120
12.12.31
non-disclosure or misrepresentation of depositors, other creditors of the bank and

information, and a possible disqualification holders of LT2 and UT2 capital
if warranted by the gravity of the offense instruments;
committed. (4) The PDIC, as holder of the interim
FIs not supervised by the Bangko Sentral capital notes must not have a priority claim,
acting as selling agent and/or market maker in respect of its principal and coupon
of UnSDs and/or its concerned directors/ payments of the interim Tier 1 capital notes
officers that are found to violate rules and in the event of winding up of the bank,
regulations in the performance of their which is higher than or equal with that of
functions/responsibilities shall be subject to depositors, other creditors of the bank and
the provisions of Section 36 of R.A. No. holders of LT2 (e.g., limited life redeemable
7653 and shall, likewise, be referred to the preferred stock) and UT2 (e.g., perpetual and
SEC for appropriate action. cumulative preferred stock) capital
(As amended by Circular Nos. 778 dated 14 December 2012 instruments. The PDIC must waive its right
and 585 dated 15 October 2007) to set-off any amount it owes the bank
against any subordinated amount owed to
Sec. X120 Interim Tier 1 Capital for Banks it due to the interim Tier 1 capital notes;
Under Rehabilitation. The following are the (5) It must not be repayable without the
guidelines on the issuance of capital notes prior approval of the Bangko Sentral:
that will qualify as interim Tier 1 capital for Provided, That repayment may be allowed
banks under rehabilitation: only in connection with a call option after a
a. Banks under rehabilitation shall be minimum of five (5) years from issue date:
allowed, upon prior Bangko Sentral Provided, however, That a call option may
approval, to issue capital notes that shall be exercised within the first five (5) years
qualify as interim Tier 1 capital: Provided, from issue date upon entry of new investors:
That the PDIC shall be the holder of the Provided, further, That such repayment prior
said capital notes: Provided, further, That to maturity shall be approved by the Bangko
any transter from PDIC of said capital Sentral only if it is simultaneously replaced
notes shall require prior Bangko Sentral with issues of new capital which is neither
approval. smaller in size nor of lower quality than the
b. The interim Tier 1 capital notes original issue, unless the bank’s capital ratio
shall have the following minimum remains more than adequate after
features: redemption.
(1) It must be perpetual, unsecured and It must not contain any clause, which
subordinated; requires acceleration of payment of
(2) It must be issued and fully paid-up. principal, except in the event of insolvency.
Only the net proceeds received from the The agreement governing its issuance must
issuance shall be included as Tier 1 capital. not contain any provision that mandates or
The proceeds of the issuance must be creates an incentive for the bank to repay
immediately available without limitation to the outstanding principal of the interim
the bank; Tier 1 capital notes, e.g., a cross-default or
(3) It must neither be secured nor negative pledge or a restrictive covenant,
covered by a guarantee of the issuer or other than a call option, which may be
related party or other arrangement that exercised by the bank;
legally or economically enhances the (6) The PDIC, as holder of the interim
priority of the claim of the PDIC as against Tier 1 capital notes, shall have the right to

§ X120
08.12.31
convert, upon prior notice to the Bangko distributable determined in accordance with
Sentral, the interim Tier 1 capital notes into existing Bangko Sentral regulations. The
perpetual and non-cumulative preferred coupon rate, or the formulation for
shares convertible into common shares calculating coupon payments must be fixed
which may be sold to new investors: at the time of issuance of the interim Tier 1
Provided, That the rate of conversion shall capital notes and must not be linked to the
be fixed at the time of subscription of the credit standing of the bank;
interim Tier 1 capital notes; (10) It must not have step-up provisions
(7) The coupons must be non- in the coupon rate in conjunction with the
cumulative; call option;
(8) The bank must have full discretion (11) All other transactions involving the
over the amount and timing of coupon capital notes shall require prior Bangko
payments and it must have full control and Sentral approval.
access to waived payments; c. The bank must submit a written
(9) Any coupon to be paid must be paid opinion from its external auditor that the
only to the extent that the bank has profits features of the interim Tier 1 capital notes

(No pages 41 to 48)

§§ X120 - X126.1
14.12.31
shall be accounted for as equity instruments Particulars Ceiling

in accordance with PAS 32. (e) Voting shares of stock of a
(Circular No. 595 dated 11 January 2008) Filipino individual or a
Philippine non-bank
Secs. X121- X125 (Reserved) corporation in:
i.UB/KB and TB 40%
G. STOCK, STOCKHOLDERS ii.RB 60%
AND DIVIDENDS
Voting shares of stock of a
Sec. X126 Shares of Stock of Banks. The qualified Philippine
corporation in UB, KB, TB
following shall govern transactions affecting
and RB prior to the 60%
shares of stock of banks and the limits on
effectivity of R.A. No.
stockholdings in a single bank or in several 10641 (7 August 2014)
banks. (f) Combined ownership of
For purposes of this Section, the term an individual and
“corporations” shall include partnerships, corporation/s which is/are
cooperatives, associations and other wholly-owned or a majority
juridical persons/entities. of the voting shares of stock
(As amended by Circular No. 718 dated 26 April 2011) of which is owned by such
individual in:
§ X126.1 Limits of stockholdings in a i.UB/KB/TB 40%
single bank. The stockholdings of an ii.RB 60%
individual, corporation, family group, or
same group of persons in any bank shall be a. Any foreign individual or non-bank
subject to the limits prescribed in Sections corporation may each own or control up to
11, 12, and 13 of R.A. No. 8791, R.A. No. forty percent (40%) only of the voting stock
7906, R.A. No. 7353, as amended by R.A. of a UB, KB or TB: Provided, That the
No. 10574, R.A. No. 7721 as amended by aggregate foreign-owned voting stock
R.A. No. 10641, and other relevant laws as owned by foreign individuals and non-bank
summarized in the table below: corporations shall not exceed forty percent
(40%) of the voting stock of the UB/KB, and
Particulars Ceiling sixty percent (60%) in the case of TBs.
(a) Voting shares of stock of a For RBs, non-Filipino citizens, excluding
foreign individual or a foreign foreign banks, may each or in the aggregate,
non-bank corporation in: own, acquire or purchase, up to sixty
i.UB/KB and TB 40% percent (60%) of the voting stock in an RB.
ii.RB 60% The percentage of foreign-owned voting
(b) Aggregate ownership of the stock in a bank shall be determined by the
voting shares of stock of foreign citizenship of the individual or corporate
individuals and/or foreign non-
stockholders in that bank.
bank corporations in:
i.UB/KB 40% b. Qualified foreign banks may own or
ii.TB/RB 60% control up to 100% of the voting stock of a
(c) Voting shares of stock of a domestic bank.
qualified foreign bank in UB, 100% c. Any Filipino individual or a
KB, TB and RB domestic non-bank corporation may each
(d) Combined ownership of the own up to forty percent (40%) only of the
voting shares of stock of 100% voting stock of a UB, KB or TB, and up to
qualified foreign banks in UB, sixty percent (60%) only of the voting stock
KB,TB and RB of a rural bank.

§§ X126.1 - X126.2
17.06.30
d. An individual and a corporation or stockholders of the corporation, irrespective

corporations which are wholly-owned, or of the place of incorporation. For purposes
a majority of the voting stock of which is hereof, the term “controlling stockholders”
owned, by him, may own only up to a shall refer to stockholders holding more than
combined forty percent (40%) of the voting fifty percent (50%) of the voting stock of the
stock of a UB, KB or TB, and up to a corporate stockholders of the bank.
combined sixty percent (60%) of the voting In the case of RBs, a corporate
stock of a RB. stockholder thereof shall be deemed
e. Stockholdings of family groups or Filipino-owned if it is organized under the
related interests. Individuals related to each laws of the Philippines and at least sixty
other within the fourth degree of percent (60%) of its capital is owned by
consanguinity or affinity, whether legitimate, Filipino citizens.
illegitimate or common-law, shall be (3) The relationship of individuals who
considered family groups or related interests are stockholders of a bank shall be
and may each own up to forty percent (40%) determined in accordance with the
of the voting stock of a UB, KB or TB and provisions of Articles 963 to 966 of the Civil
up to sixty percent (60%) of the voting stock Code of the Philippines.
of an RB: Provided, That said relationship (As amended by Circular Nos. 858 dated 21 November 2014,
must be fully disclosed in all transactions 809 dated 23 August 2013, 718 dated 26 April 2011 and Circular
No. 682 dated 15 February 2010)
by such individuals or family groups or
related interests. § X126.2 Transactions involving voting
f. Two (2) or more corporations owned shares of stocks. The following regulations
or controlled by the same family group or shall govern all transactions involving voting
same group of persons shall be considered shares of stocks in banks.
related interests but may each own up to For purposes of this Subsection,
forty percent (40%) of the voting stock of a “transaction” shall refer to subscription/
UB, KB or TB and up to sixty percent (60%) issuance, purchase/sale, transfer, conversion
of the voting stock of an RB: Provided, That of preferred shares or debt instruments into
said relationship must be fully disclosed in voting shares of stock, and such act, contract,
all transactions by such individuals or family agreement or arrangement whereby a
groups or related interests. person, whether natural or juridical,
g. Ceiling on stockholdings in a Coop acquires voting shares of stock from one
Bank. The equity investment of any person, whether natural or juridical, or is
cooperative in any Coop Bank shall not vested the right to vote or the control of the
exceed forty percent (40%) of the subscribed voting shares of stock of a bank.
capital stock of such Coop Bank. a. Unlawful and void transactions
h. Determination of foreign-owned involving voting shares of stock of banks.
voting stock and citizenship of corporate The following transactions, to the extent of
stockholders in a bank as well as the the excess over any of the prescribed
relationship of stockholders of a bank. ceilings under R.A. No. 8791, R.A. No.
(1) The percentage of foreign-owned 7906, R.A. No. 7353, as amended by R.A.
voting stocks in a bank shall be determined No. 10574, R.A. No. 7721 as amended by
by the citizenship of all the stockholders in R.A. No. 10641 and other relevant laws are
that bank. hereby declared unlawful and void:
(2) The citizenship of the corporation, (1) Any transaction involving voting
which is a stockholder of a bank shall follow shares of stock of a bank, if such transaction,
the citizenship of the controlling in itself, or in relation with other/previous

§ X126.2
17.06.30
transaction/s shall result in the ownership accompanied by, in the case of transferee-
and control by an individual or corporation stockholder, the same papers/documents
of voting shares of stock in excess of any of required of incorporators/stockholders of
the prescribed limits of stockholdings in a newly established banks as provided in
bank. Appendix 37. The corporate secretary shall
(2) Any act, contract, agreement or hold in abeyance the registration of the
arrangement, such as voting trust agreement transaction until the required prior Bangko
or proxy, which vests in any person, whether Sentral approval is submitted as provided
natural or juridical, the right to vote or the in Subsec. X126.2.c.
control of the voting shares of stock of a bank, (3) In the case of additional subscription,
if such arrangement in itself, or in relation the bank shall not recognize the fund infused
with other/previous transaction/s, shall by the subscriber in its book as asset and
result in the acquisition of the right to vote liability or equity unless prior Monetary
or the control of voting shares of stock of Board approval is obtained. Pending
the bank, in excess of the prescribed approval by the Monetary Board, the fund
ceilings. infused by the subscriber shall be placed in
b. Transactions requiring prior Monetary an escrow in another bank.
Board approval (4) Sanctions. Any willful delay in the
(1) Prior approval of the Monetary Board submission by the transferor and transferee
shall be required on transaction involving of the request for prior Monetary Board
voting shares of stock of a bank, if such approval, together with the required
transaction, in itself or in relation with other/ supporting papers/documents, within sixty
previous transactions will: (60) calendar days from date of transaction
(a) result in ownership or control of more or thirty (30) calendar days from receipt by
than twenty percent (20%) of voting shares corporate secretary of request for
of stock of a bank by any person whether registration of the transaction, whichever is
natural or juridical or which will enable earlier, shall subject the transferor, the
such person to elect, or be elected as, a transferee, or both to the sanctions
director of such bank; or prescribed under Section 35 of R.A. No.
(b) effect a change in the majority 7653, without prejudice to the appropriate
ownership or control of the voting shares legal actions for the rescission and
of stock of the bank from one (1) group of invalidation of the transaction.
persons to another group: Provided, That in Moreover, any director and/or officer of
no case shall such transaction be approved a bank found to be acting in the interest of
unless the bank concerned shall an unregistered stockholder shall be subject
immediately comply with the prescribed to the applicable administrative sanctions
minimum capital requirement for new under Section 37 of R.A. No. 7653, without
banks, notwithstanding any approved prejudice to the filing of appropriate criminal
capital build-up program. charges as provided under Section 36 of R.A.
(2) The request for prior Monetary Board No. 7653.
approval shall be submitted jointly by the Furthermore, any violation of the
transferor-stockholder (or the bank in the provisions of Subsec. X126.2.b(3) hereof
case of additional subscription or shall subject the bank and/or its directors
conversion of preferred shares or debt and/or officers to the applicable
instruments) and the transferee-stockholder administrative sanctions under Section 37
thru the bank to the appropriate department of R.A. No. 7653, without prejudice to the
of the SES. The request shall be filing of appropriate criminal charges as

§ X126.2
17.06.30
provided under Section 36 of R.A. No. 7653. with the right to vote has controlling interest,
c. Duties of a corporate secretary. In all and the extent thereof;
transactions, which may lawfully come to (3) require the subscriber, purchaser,
the knowledge of the corporate secretary transferee or recipient of voting shares of
involving voting shares of stock of a bank stock to execute an affidavit (sample format
such as but not limited to subscription/ shown in Appendix 4) stating, among other
issuance, purchase/sale, transfer, conversion things, that the subscriber, transferee or
of preferred shares or debt instruments into recipient of voting shares of stock is a
voting shares of stock, or registration of bonafide owner of the said shares of stock,
voting trust agreements, or any form of that he/she is not an agent, assignee, proxy,
agreement vesting the right to vote or the nominee or a dummy of any person,
control of the voting shares of stock of the whether natural or juridical, and that he/
bank, the corporate secretary shall, before she acknowledges full awareness of:
registering the transaction or agreement in (a) the prohibitions against ownership
the stock and transfer book of the bank: of voting shares of stock in excess of the
(1) ascertain the identity and citizenship ceilings prescribed by laws/Bangko Sentral
of the subscriber, purchaser, transferee or regulations as provided in Subsec. X126.2.a;
recipient of voting shares of stock, voting and/or
trustee, proxy or person vested with the right (b) the requirement for prior Monetary
to vote, and for this purpose, he should Board approval for transactions resulting to
require the subscriber, transferee or significant ownership of voting shares of
recipient of voting shares of stock, voting stock of a bank by any person, whether
trustee, proxy or the person vested with the natural or juridical, or by one (1) group of
right to vote to submit proof of citizenship, persons, as provided in Subsec. X126.2.b.
which may consist, in case of a corporation, If the request for registration of
of a certified true copy of the articles of transaction will patently cause the voting
incorporation, accompanied by the affidavit shares of stocks of an individual or a
of the corporate secretary of the corporation, corporation to exceed the ceilings
certifying to the correctness and accuracy prescribed by laws/Bangko Sentral
of the list of stockholders, their citizenship regulations, the corporate secretary shall
and the percentage of shares owned by deny the registration of the transaction and
them; forthwith inform the parties to the
(2) require the subscriber, purchaser, transaction in writing.
transferee or recipient of voting shares of If the request for registration of
stock, voting trustee, proxy or person vested transaction would result to the significant
with the right to vote, at the time of the ownership of the voting shares of stock of a
receipt of the request for registration of bank by any person, whether natural or
transaction, to disclose all information with juridical, or by one (1) group of persons,
respect to persons related to the subscriber, requiring prior Monetary Board approval as
transferee or recipient of voting shares of provided in Subsec. X126.2.b, and no such
stock, voting trustee, proxy or person vested prior Monetary Board approval is submitted,
with the right to vote, within the fourth the corporate secretary shall hold in
degree of consanguinity or affinity, whether abeyance the registration of the transaction
legitimate, illegitimate or common-law, as and forthwith inform the parties to the
well as corporations, where the subscriber, transaction in writing.
transferee or recipient of voting shares of In the event the corporate secretary has
stock, voting trustee, proxy or person vested reason to doubt the legality of the transaction

§§ X126.2 - X126.3
17.06.30
sought to be registered, he/she may each other within the fourth degree of
commence an action before the appropriate consanguinity or affinity, whether legitimate,
body; illegitimate or common-law (in the case of
(4) promptly inform stockholders individuals) as well as corporations which
(a) who have reached any of the ceilings are wholly-owned or a majority of the stock
prescribed by laws/Bangko Sentral of which is owned by any of such
regulations of their ineligibility to own or stockholders, including their subsidiaries;
control more than the applicable ceiling or and
(b) who would own voting shares of stock (3) An affidavit under oath (sample
requiring prior Monetary Board approval; format shown in Appendix 4) from each
and of the stockholders attesting, among
(5) disclose the ultimate beneficial other things, that he/she/it is the bonafide
owners of bank shares held in the name of owner of the voting shares of stock of the
Philippine Central Depository (PCD) bank in his/her/its own right, and not as an
Nominee Corporation in the annual agent, assignee, proxy, nominee or a
(or quarterly whenever changes occur) dummy of any other person, natural or
report on Consolidated List of Stockholders juridical.
and Their Stockholdings (BSP 7-16-11), (As amended by Circular Nos. 963 dated 27 June 2017, 858
which report shall be made under oath dated 21 November 2014, 809 dated 23 August 2013 and 718
by the corporate secretary. Any Delayed/ dated 26 April 2011)
Unsubmitted report, a Category A-2
report, shall subject the bank to the § X126.3 Other foreign equity
corresponding penalties in accordance with investment in domestic banks. Except as
Subsec. X184.3. otherwise covered under Sec. X105 and
Sanctions. The corporate secretary found Subsec. X126.1, the following guidelines
to have willfully falsely certified/submitted shall be observed on equity investments of
misleading statements and/or violated any foreigners in domestic banks:
of the provisions of Subsec. X126.2.c a. The prior authority of the Monetary
shall be subject to the applicable Board shall be obtained by foreign banks,
administrative sanctions under Section 37 including their subsidiaries and their holding
of R.A. No. 7653. The imposition of the companies having majority holdings in such
said administrative actions is without foreign banks, whenever acquiring more
prejudice to the filing of appropriate criminal than forty percent (40%) of the voting stock
charges as provided under Section 35 of of a domestic bank, including foreign-owned
R.A. No. 7653 for the willful making of false shares outstanding and foreign-held as of 27
or misleading statement. April 1973 and which continued to be held
d. Requirement for newly established by the foreign stockholder up to the date of
banks. Entities which may hereinafter apply the acquisition by the foreign banks.
for a license to engage in banking business b. (Deleted by Cir. No. 256 dated 15
shall, before being allowed to operate, August 2000)
submit - c. The prior authority of the Monetary
(1) An alphabetical list of stockholders Board is not required if the foreign investor
with the number and percentage of voting is (1) an individual, (2) a non-financial entity,
shares of stock owned by them; or (3) a non-bank financial entity which is
(2) A separate list containing the names not owned or controlled by a bank, its
of stockholders who own voting shares of subsidiary or holding company, and the
stock in the bank and who are related to investor is acquiring foreign-owned shares

§§ X126.3 - X126.5
15.12.31
in existing domestic banks: Provided, That acquired by the holders by virtue of such
said shares were outstanding and foreign cumulative feature are not satisfied by the
held as of 27 April 1973 and which bank within a period of three (3) years
continued to be foreign-held up to the date from date of issue.
of acquisition by the foreign investor. d. Conversion of preferred shares of
d. The maximum stockholdings stock into voting/common shares of
foreigners may own in domestic banks stock, regardless of convertibility features
shall continue to be governed by existing and notwithstanding any provision of
provisions of law. existing Bangko Sentral regulations to the
e. Only foreign-owned shares directly contrary, shall be:
funded by inward remittance of foreign (1) effected only to the extent of the
exchange sold to the local banking system prescribed ceilings under existing laws;
are qualified for registration with the and
Bangko Sentral through its appropriate (2) subject to prior Monetary Board
department for capital repatriation and approval whenever said conversion will
remittance of profits/dividends privileges, result to significant ownership of the
in accordance with existing Bangko Sentral voting/common shares of stock of a bank
rules and regulations. by any person, whether natural or
juridical, or by one group of persons, as
§ X126.4 Convertibility of preferred provided in Subsec. X126.2.b.
stock to common stock. Out of the The foregoing provision must be
convertible preferred shares of stock specifically stated in the certificates of
which KBs/TBs may henceforth be preferred shares of stock.
authorized to issue, at least fifty percent (As amended by Circular No. 718 dated 26 April 2011)
(50%) of each such issue, shall be
convertible into common stock at the § X126.5 Issuance of redeemable
option of the holders thereof after five (5) shares: conditions; certification and
years from date of issue: Provided, report; sanctions.
however, That : a. Conditions. Banks may issue
a. The bank concerned may allow the redeemable shares subject to the
conversion of such preferred stock into following conditions:
common stock even before the lapse of (1) The applicant bank prior to the
five (5) years from date of issue; approval of the amendment of articles of
b. At the time of the sale of the incorporation to issue redeemable
preferred stock, both classes thereof (one preferred shares, has complied with the
with convertibility feature and the other requirements under Items “B1” to “B6”,
without convertibility feature) shall be Appendix 5.
offered to the purchasers, with the The articles of incorporation of an
purchasers having the option to acquire applicant bank shall incorporate the
either or both classes of preferred stock; conditions in Items “a (3)(a)”, “a(3)(b)”,
and “a(3)(c)” and “a(3)(d)” of this Subsection.
c. Preferred shares of stock with a (2) The applicant bank prior to the
cumulative feature issued by banks shall issuance of redeemable shares shall comply
automatically be convertible into common with, in addition to the conditions in Item “(1)”
shares of stock at the option of the holders above, the requirements under Items “B7”,
thereof whenever the right as may be “B8”, and “B12” to “B16”, Appendix 5.

§ X126.5
15.12.31
(3) The applicant bank after the requisites and conditions set forth in Items
issuance of redeemable shares shall “(a)” to “(d)” above;
comply with the following: (f) The conditions in Items “(3)(a)”,
(a) Redemption of shares shall be “(3)(b)”, “(3)(c)” and “(3)(d)” above shall
allowed at the specific dates or periods be incorporated in the certificates of
fixed for redemption only upon prior stock; and
approval of the Bangko Sentral and, where (g) Shares issued with the replacement
the conditions of the issuance specifically requirement upon redemption shall be
state, only if the shares redeemed are eligible as Upper Tier 2 capital for
replaced with at least an equivalent purposes of computing qualifying capital
amount of newly paid-in shares so that as provided in applicable and existing
the total paid-in capital stock is capital adequacy framework. Shares
maintained at the same level immediately issued without such condition shall be
prior to redemption: Provided, That the eligible as Lower Tier 2 capital.
redemption shall not be earlier than five b. Certification and report. The bank
(5) years after the date of issuance: shall submit within fifteen (15) days after
Provided, further, That such redemption every issuance of at least twenty percent
may not be made where the bank is (20%) of the redeemable shares whether
insolvent or if such redemption will cause issued in series or at one (1) time, a
insolvency, impairment of capital or certification signed by its President/
inability of the bank to meet its debts as Chairman under oath, stating that the
they mature; requirements under Items “a(1)” and “a(2)”
(b) A sinking fund for the redemption above, including all other conditions that
of preferred shares is to be created upon the Bangko Sentral may impose, have been
their issuance. This is to be effected by complied with. The applicant bank shall,
the transfer of free surplus to a restricted not later than ten (10) days from the end
surplus account. The fund shall not be of reference year, submit a yearly report
available for dividends. The guidelines for of issuances of preferred shares to the
the establishment and administration/ appropriate department of the SES
management of sinking fund for the indicating therein the name/s of the
redemption of redeemable private subscriber/s, the date the shares were
preferred shares are shown in Appendix issued and the number/amount of shares
47. issued.
(c) The issuing bank shall not treat in c. Sanctions. Any violation of the
any way redeemable preferred shares as foregoing provisions shall be subject to
time deposit, deposit substitute or other the following sanctions:
form of borrowings; (1) On the bank:
(d) No dividend shall be declared or (a) For failure to comply with Items
paid on redeemable shares in the absence “a(3)(a)” to “a(3)(d)” above:
of sufficient undivided profits, free i. Suspension of branching privilege;
surplus; ii. Prohibition against granting of new
(e) The issuing bank shall execute unsecured loans to DOSRI;
within ten (10) days after the first issuance iii. Prohibition against declaration of
a Deed of Undertaking (see Appendix 42), dividends;
to be signed by its directors and principal iv. Denial of access to Bangko Sentral
officers, binding them to comply with the rediscounting facilities;

§§ X126.5 - X126.10
15.12.31
v. Revocation of authority to accept found to be false, a fine of P5,000 per day

government deposits and to handle from the time the certification was made
government funds as a result of agency up to the time the certification was found
agreements with the BIR, SSS, etc. to be false, shall be imposed against the
(b) For failure to infuse capital in an certifying officer.
amount at least equivalent to amount of (As amended by Circular Nos. 890 dated 02 November 2015,
888 dated 09 October 2015, 827 dated 28 February 2014
redeemed shares as required in
and 585 dated 15 October 2007)
Item “a(3)(a)”:
i. Sanctions in Item “(a)” above; § X126.6 Stock options/warrants. A
ii. No new loans and investments, bank may grant options/warrants to
except in government securities; subscribe at par to its capital stock:
iii. P1,000 fine per day until the Provided, That:
required infusion is made. a. Provisions authorizing such options
(c) If the certification submitted by the warrants shall be embodied in its articles
bank required in these guidelines is found of incorporation and in its by-laws; and
to be false, suspension of authority to b. Such options/warrants may be
issue preferred shares for one (1) year. granted for a maximum period of three (3)
(d) For failure to submit report of years from the date such options/warrants
issuance of redeemable preferred shares, become effective.
a fine of P1,200 for UBs/KBs; P600 for
TBs; and P180 for RBs/Coop Banks per §§ X126.7 - X126.9 (Reserved)
day of default until the report is submitted.
(2) On the directors and officers: § X126.10 Dealings with stockholders
(a) For violation of any of the terms of and their related interests. Dealings of a
the Deed of Undertaking, the following bank with any of its stockholders and their
shall be imposed against the officers and related interests shall be upon terms not
directors of the bank who signed the deed: less favorable to the bank than those
i. First offense - A fine of P500 per day offered to others. Towards this end, every
for each violation from the time the natural person acquiring shares
violation was committed or up to the time cumulatively amounting to at least two
the violation is corrected; percent (2%) of the total subscribed
ii. Second and subsequent offenses - capital of a domestic bank must disclose
A fine of P5,000 per day from the time all relevant information on all persons
the violation was committed up to the time related to him within the fourth degree of
the violation is corrected. consanguinity or affinity, whether
(b) If the certification submitted by the legitimate, illegitimate or common law as
bank as required in these guidelines is well as corporations, partnership or

§§ X126.10 - 2127.2
08.12.31
associations where he has controlling majority or all of the equity of which is

interests. A corporation acquiring shares owned by such person or family group,
amounting to at least two percent (2%) of owns more than forty percent (40%) of the
the total subscribed capital of a domestic voting stock of any UB or KB may not
bank must disclose its controlling acquire more than forty percent (40%) of
stockholders or group of stockholders as the voting stock in any other UB or KB,
well as the corporations, partnerships or even if the shares of stock are being
association where such controlling acquired from a natural person in a single
stockholders or group of stockholders have transaction and the stockholding is in
controlling interest. excess of forty percent (40%) of the bank’s
The foregoing information shall also be voting stock.
disclosed in cases of the following For purposes of determining
transactions: availment of credit facility applicability of the limitations provided in
from the bank; purchase or sale of asset this Section, stockholders shall be deemed
from/to the bank; leasing property from or as affiliated to each other through common
to the bank; providing janitorial, business interest or a business group in cases
messengerial, security and other services where the holdings of such stockholders
to the bank; and such other transactions as altogether constitute a majority or control
may be required to be disclosed by the in one (1) or more enterprises.
Monetary Board. Where the stockholdings
of such individual/organization together §§ 1127.2 - 1127.5 (Reserved)
with his/its related interests amount to at
least two percent (2%) of the total Sec. 2127 Shares of Stock of Thrift Banks
subscribed capital stock of the bank, the The following regulations shall also govern
foregoing transactions shall be subject to shares of stock in TBs.
the procedural requirements and the
reportorial requirements prescribed under § 2127.1 Moratorium on ownership
Secs. X334 and X335, respectively. ceilings1
(Deleted)
Sec. X127 (Reserved)
§ 2127.2 Preferred shares. Private
Sec. 1127 Shares of Stock of Universal/ development banks may also issue ordinary
Commercial Banks. The following preferred shares of stock to private persons,
guidelines shall also govern shares of stock other than the preferred stock representing
in UBs and KBs. government counterpart capital
contribution: Provided, That said preferred
§ 1127.1 Limits on stockholdings in stock sold to private persons shall be
several banks. Stockholders affiliated to governed by the pertinent BSP regulations
each other through a common interest for preferred stock issued to private
herein termed a business group or any investors.
corporation or association majority or all Preferred shares of stock of private
of the equity of which is owned by a development banks held by DBP/LBP and
business group may not control more sold thereafter to private persons may, at
than one (1) KB nor more than one (1) the option of the purchasers, be retained
UB or both. with the same rights as when such shares
Any natural person or a family group, of stock were held by DBP/LBP, or
who, together, with any corporation converted at not less than par to common
1
Stockholdings in a TB were exempted from the ownership ceilings prescribed under Subsec. X126.1 until
16 March 2005.
§§ 2127.2 - 3127.3
13.12.31
shares or to ordinary preferred shares of liquidation; and (c) preferred stock with
the class issued to private shareholders. such rights, voting powers, preferences and
restrictions, as may be approved by the
§§ 2127.3 - 2127.5 (Reserved) Monetary Board. Preferred and common
stocks shall have a minimum par value of
Sec. 3127 Shares of Stock of Rural Banks one peso (P1.00) per share: Provided, That
and Cooperative Banks. The following starting 2 July 2009, RBs which have a par
rules shall govern stockholdings in RBs and value per share higher than P1.00 and
Coop Banks: choose to lower the par value of their shares
of stock will be required to undertake the
§ 3127.1 Moratorium on ownership necessary steps and secure attendant
ceiling. Individual stockholdings in RBs in approvals from the BOD and stockholders
excess of the forty percent (40%) ceiling of the banks involved as well as from
as of 02 April 2002 and as provided in relevant regulatory agencies to ensure that
Section 11 of R.A. No. 8791 may be the reduction in par value shall not result
retained: Provided, That such excess to a dilution in the percentage holdings of
stockholdings were approved by the stockholders and that its effect shall not
Monetary Board: Provided, further, That prejudice the rights of creditor. An RB may
such stockholdings shall not be further not issue no-par value stock.
increased, but may be reduced and once In the case of an acquisition plan of an
reduced, shall not thereafter be increased RB already approved-in-principle by the
beyond the forty percent (40%) ceiling Monetary Board where the shares of stock
prescribed under said Section 11. of the target RB are at a par value per share
Any request for exemption from the higher than P1.00, the acquiring bank may
prescribed ownership ceilings of individual/ request from the Bangko Sentral the
non-bank/corporate stockholdings shall be incentive to value the shares of stock of the
submitted to the Monetary Board for to-be-acquired RB at the minimum par value
approval through the appropriate of P1.00: Provided, That the acquiring bank
department of the SES and the exemption will be responsible for securing the
shall be reflected in the required report on necessary approvals from its BOD and
stock transactions. In cases where stockholders as well as from the Bangko
unsubscribed shares of stock are sold to any Sentral and the SEC pursuant to Section 14
person other than the existing stockholders, of R.A. No. 8791 and Section 38 of the
the bank’s corporate secretary shall execute Corporation Code of the Philippines.
a certificate under oath that all the pertinent The LBP, the DBP, or any government-
requirements of the Corporation Code on a owned or-controlled bank or financial
valid stock transfer/subscriptions have been institution, on representation of the said
complied with. private shareholders but subject to the
investment guidelines, policies and
§ 3127.2 Government-held shares procedures of the bank or financial
The articles of incorporation of RBs or the institution and upon approval by the
articles of cooperation of Coop Banks Monetary Board of the Bangko Sentral, shall
shall provide for: (a) common stock with the subscribe to the capital stock of any RB,
power to vote; (b) preferred stock to which shall be paid in full at the time of
represent the counterpart capital of the LBP, subscription, in an amount equal to the fully
DBP or any government-owned or paid subscribed and unimpaired capital of
controlled bank or FI, which shall be the private stockholders or such amount as
non-voting and preferred as to assets upon the Monetary Board may prescribe as may

§§ 3127.2 - X128
14.12.31
be necessary to promote and expand rural incorporation shall be amended to reflect

economic development. the conversion, if any, of the preferred shares
(As amended by Circular Nos. 809 dated 23 August 2013 and of stock into common stock.
663 dated 10 September 2009) For this purpose, a certificate that all
preferred shares have been sold and
§ 3127.3 Limits on stockholdings in transferred to private shareholders shall be
several rural banks. Individuals, banks and issued, duly signed by the president, the
non-bank corporations may, subject to corporate secretary, and a majority of the
applicable ownership ceilings, own voting board of directors. The bank shall submit
shares in such number of RBs as may be copies of such certificate and the amended
authorized by the Monetary Board. articles of incorporation to the Bangko
(As amended by Circular No. 809 dated 23 August 2013) Sentral for the issuance of a certificate of
authority for the purpose of registering the
§ 3127.4 Convertibility of preferred
amended articles with the SEC.
stock to common stock. RBs may convert
(As amended by Circular No. 809 dated 23 August 2013)
their unissued preferred shares into common
stock.
§ 3127.5 Guidelines for selection. In
In the case of sale by the DBP, LBP or
determining the fitness and propriety of the
any government-owned or controlled bank
non-Filipino citizen, excluding foreign banks
or financial institution of preferred stock to
that will be allowed to invest in the voting
private persons, such stock may be stock of an RB, criteria, such as, but not
converted into common stock: Provided, limited to the following, shall be considered:
That such shares may be sold at any time at a. strategic objectives in investing in
adjusted book value: Provided further, That an RB;
pending amendment of the bank’s articles b. demonstrated capacity;
of incorporation, if necessary for the purpose c. good reputation and integrity; and
of reflecting the conversion, the transfer shall d. business model that is credible,
be recorded by the bank in its stock and innovative and consistent with the policy
transfer book and such shareholders shall objectives of R.A. No. 10574.
thereafter enjoy all the rights and privileges A foreign bank seeking to own, acquire
appurtenant to the converted stock. The or purchase up to 100% of the voting stock
certificates for the government preferred in an RB shall meet the qualification
stocks so transferred shall be surrendered requirements and selection criteria under
and cancelled and the corresponding Subsecs. X105.2 and X105.3, respectively.
common stock certificates shall be issued. (Circular No. 809 dated 23 August 2013, as amended by Circular
The corporate secretary of the bank shall No. 858 dated 21 November 2014)
submit to the appropriate department of the
SES and the SEC a report of every transfer of Sec. X128 Deposits for Stock Subscription.
preferred stock from the LBP, DBP or any Deposits for stock subscription refer to
government-owned or controlled bank or payments made by existing stockholders or
financial institution to private shareholders new subscribers of the bank on subscription
within five (5) banking days from the date to the increase in the authorized capital,
of such transfer. which may be recognized either as a liability
When all the preferred shares of stocks or equity.
held by the LBP, DBP or any government- Deposits for stock subscription shall be
owned or controlled bank or financial recognized as part of equity for prudential
institution have been sold to private reporting purposes when all of the following
shareholders, the bank’s articles of conditions are met:

§§ X128 - X136.1
15.10.31
a. The deposit for stock subscription Sec. X136 Dividends. The following rules
meets the definition of an equity instrument and regulations shall govern the declaration
under Philippine Accounting Standards of dividends on shares of stock, regardless
(PAS) 32 Financial Instruments: Presentation of feature, as well as interest payments on
such that the deposit for stock subscription unsecured subordinated debt which meet
shall not be interest-bearing nor the qualification requirements of Additional
withdrawable by the subscriber; Tier 1 or Hybrid Tier 1 capital as defined
b. The bank’s existing authorized capital under existing risk-based capital adequacy
is already fully subscribed; framework.
c. The bank’s stockholders and board Pursuant to Section 57 of R.A. No.
of directors have approved the proposed 8791, no bank shall declare dividends
increase in authorized capital; greater than its accumulated net profits then
d. The bank has filed an application for on hand, deducting therefrom its losses and
the amendment of its articles of bad debts. Neither shall the bank declare
incorporation for the increase in authorized dividends if, at the time of declaration, it
capital with the appropriate department of has not complied with the provisions of
the SES, duly supported by complete Subsec. X136.2.
documents as listed in Annex B of Circular (As amended by Circular No. 888 dated 09 October 2015)
Letter No. 2009-042 dated 14 May 2009.
Applications for the amendment of § X136.1 Definitions. For purposes of
articles of incorporation for the increase in
this Section, the following definitions shall
authorized capital, which have been
apply:
returned due to insufficiency of supporting
a. Bad debts - shall include any debt on
documents, shall not qualify for recognition
which interest is past due for a period of six
as an equity instrument; and
(6) months, unless it is well secured and in
e. The bank must have obtained
process of collection.
approval of the Monetary Board on
transactions involving significant ownership A loan payable in installments with an
of voting shares of stock by any person, automatic acceleration clause shall be
natural or juridical, or by one group of considered a bad debt within the
persons as provided in Item “b” of Subsec. contemplation of this Subsection where
X126.2, if applicable. installments or amortizations have become
Deposits for stock subscription, which past due for a period of six (6) months,
do not meet the abovementioned conditions unless the loan is well secured and in
shall be classified as a liability. process of collection. For a loan payable in
Deposits for stock subscription, which installment without an acceleration clause,
meet the conditions to be recognized as only the installments or amortizations that
equity shall form part of a bank’s qualifying have become past due for a period of six (6)
capital for purposes of computing the risk- months and which are not well secured and
based capital adequacy ratio under in the process of collection shall be
Sec. X115 for UBs/KBs as well as their considered bad debts within the
subsidiary banks and QBs, and Sec. X118 contemplation of this Section.
for standalone TBs, RBs and Coop Banks. b. Well secured - A debt shall be
(Circular 762 dated 25 July 2012) considered well secured (or fully secured),
if it is covered by collateral in the form of a
Secs. X129 - X135 (Reserved) duly constituted mortgage, pledge, or lien

§§ X136.1 - 3136.2
15.10.31
on real or personal properties, including b. Liquidity floor requirement for

securities, having a loan value sufficient to government funds;
discharge the debt in full, including accrued c. Minimum capitalization requirement
interest and other pertinent fees and expenses. and risk-based capital ratios as provided
c. In process of collection - A debt due under applicable and existing capital
to a bank shall be considered in process of adequacy framework;
collection when it is the subject of d. Capital conservation buffer
continuing extrajudicial or judicial requirement as defined in Appendix 63b,
proceedings aimed towards its full Part III, for universal and commercial banks
settlement or liquidation or otherwise to (UBs/KBs) and their subsidiary banks and
place it in current status. quasi-banks(QBs);
The extrajudicial proceedings, such as e. Higher loss absorbency requirement,
the writing of collection or demand letters, phased-in starting 1 January 2017 with full
must have been initiated by the bank and/ implementation by 1 January 2019, in
or its lawyers before the interest or accordance with Domestic Systemically
installments or amortizations on the debt Important Banks (DSIBs) Framework as
have become past due and unpaid for a provided under Subsec. X115.5, for UB/KBs
period of six (6) months. and their subsidiary banks and QBs that are
The debt shall continue to be considered identified as DSIBs; and
in process of collection for a period of f. Has not committed any unsafe or
six (6) months counted from date of the first unsound banking practice as defined under
collection or demand letter and if, within existing regulations and/or major acts or
this period, the debtor fails to make a omissions1 as may be determined by the
payment of at least twenty percent (20%) of Bangko Sentral to be ground for suspension
the outstanding balance of the principal on of dividend distribution, unless this has
his account, plus all interest which may have been addressed by the bank as confirmed
accrued thereon, the same shall by the Monetary Board or the Deputy
automatically be classified as bad debts Governor, SES, as may be applicable, upon
unless judicial proceedings are instituted. recommendation of the appropriate
The debt shall continue to be considered department of SES.
in process of collection during the pendency Banks shall ensure compliance with the
of the judicial proceedings. When judgment minimum capital requirements and risk-
against the debtor has been obtained, the based capital ratios even after the dividend
bank must be active in enforcing the distribution.
(As amended by Circular Nos. 888 dated 09 October 2015 and
judgment for the debt to continue to be 571 dated 21 June 2007)
considered in process of collection.
§ 3136.2 Limitations/Amount available
§ X136.2 Requirements on the for dividends declared by rural banks and
declaration of dividends. At the time of cooperative banks. The following rules shall
declaration, banks shall have complied with also govern the declaration of dividends by
the following: RBs and Coop Banks.
a. Clearing account with the Bangko a. Reserve for retirement of government
Sentral is not overdrawn; preferred stock. In addition to the requirements
1
Major acts or omissions is defined as bank individual failure to comply with the requirements of banking
laws, rules and regulations as well as Monetary Board directives having material impact on bank capital,
solvency, liquidity or profitability, and/or those violations classified as major offenses under the Report of
Examination, except those classified under unsafe or unsound practice.

§§ 3136.2 - X136.4
15.10.31
prescribed in Subsec. X136.2, an RB/Coop bank are not precluded from entering into
Bank may declare cash dividends only if the an agreement providing for rates of
amount of its reserve for retirement of gov- dividends other than those prescribed by
ernment preferred stock is at least equal to law.
the amount which should have been accu- (3) Held on or after 13 September 2013.
mulated had the bank transferred annually Shares held by the LBP, DBP, or by any
to the reserve account from its undivided government-owned or-controlled bank or FI
profits an amount equal to at least an aver- shall share in dividend distributions from
age of one-tenth (1/10) of the total amount the date of issuance in an amount based on
of preferred stock; and the lending benchmark approved by the
b. Applicability of other laws, rules and Bangko Sentral plus the prevailing non-
regulations for Coop Banks. Coop Banks prime spread of the government FI:
shall, likewise, comply with the provisions Provided, That the RB and the government-
governing the distribution of net surplus as owned or-controlled bank are not precluded
provided under Article 86 of R.A. 9520, the from entering into an agreement providing
Coop Bank’s By-laws as other laws, rules for rates of dividends other than those
and regulations. prescribed by law.
c. Dividends on government shares (Circular No. 888 dated 09 October 2015)
for RBs
(1) Held prior to 09 June 1992. X136.3 Net amount available for
Whenever dividends of not less than dividends. The net amount available for
fourteen percent (14%) are declared on dividends shall be the amount of
common stock, government preferred stock unrestricted or free retained earnings and
shall be entitled to a cash dividend not to undivided profits reported in the Financial
exceed two percent (2%) of total outstanding Reporting Package (FRP) as of the calendar/
preferred stock. Should the dividends fiscal year-end immediately preceding the
declared on common stock be less than date of divided declaration.
fourteen percent (14%), the dividend on The derivation of the amount of
preferred stock shall be proportionately dividends from the unrestricted/free retained
reduced. earnings shall be based on a sound
(2) Held on or after 09 June 1992. Shares accounting system and loss provisioning
held by the LBP, DBP, or by any processes under existing regulations which
government-owned or-controlled bank or FI takes into account relevant capital
shall share in dividend distributions from adjustments including losses, bad debts and
the date of issuance in the amount of four unearned profits or income1.
percent (4%) on the first and second years; (As amended by Circular No. 888 dated 09 October 2015)
six percent (6%) on the third and fourth
years; eight percent (8%) on the fifth and § X136.4 Reporting and verification.
sixth years; ten percent (10%) on the seventh Declaration of dividends shall be reported
and eighth years; and twelve percent (12%) by the bank concerned to the appropriate
on the ninth to the fifteenth years, which department of the SES within ten (10)
shall be cumulative: Provided, That the RB business days after date of declaration in
and the government-owned or controlled the following manner:
1
Unearned profits or income refers to unrealized items which are considered not available for dividend
declaration such as accumulated share/equity in net income of its subsidiaries, associates or joint venture
accounted for under the equity method, recognized deferred tax asset, foreign exchange profit arising from
revaluation of foreign exchange denominated accounts and others.

§§ X136.4 - X136.10
15.10.31
a. Submission of a duly notarized prior Bangko Sentral verification, disclosure

certification (Appendix 114) signed by the by means of a footnote should include a
President, or an officer of equivalent rank, statement to the effect that the dividend
and the Chief Compliance Officer stating declaration is subject to review by the
that the bank has complied with the Bangko Sentral.
requirements on the declaration of (As amended by Circular No. 888 dated 09 October 2015)
dividends provided under Subsec. X136.2,
and, in the case of rural banks and § X136.6 Issuance of fractional shares.
cooperative banks, Subsec. 3136.2, as Whenever the declaration of stock dividend
well as other existing applicable laws; and results in the issuance of fractional shares,
b. Submission of the Report on banks may observe the following guidelines:
Dividends Declared listed under a. The amount corresponding to the
Appendix 6, which shall be considered a fraction should be given in the form of cash
Category A-1 report. dividend; and
However, banks with major b. The certificate of stock issued
supervisory concerns such as those should be in whole numbers, and the
initiated under prompt corrective action fractional shares shall be issued in the
(PCA) or with specific MB directive to form of scrip certificates. In no case shall
suspend/refrain/restrict dividend the certificate of stock be issued including
declaration, shall be subject to prior Bangko such fractional share. The scrip certificate
Sentral verification by the appropriate is temporary in nature and should be
department of the SES. Pending verification redeemed in cash when the bank is in a
of abovementioned reports, no position to do so, or stockholders holding
announcement or communication on the such scrip certificates may negotiate with
declaration of dividends nor shall any other stockholders for the purchase or sale
payment be made thereon until receipt of of such shares to convert them into full
Bangko Sentral advice thereof. shares, subject to the limitations on
(As amended by Circular No. 888 dated 09 October 2015) stockholdings as provided by law.
§ X136.5 Recording of dividends. The §§ X136.7 – X136.9 (Reserved)

liability for dividends declared shall be taken
up in the bank’s books upon its declaration. § X136.10 Supervisory enforcement
However, for dividend declarations that actions. Consistent with Sec. X009, the
are subject to prior Bangko Sentral Bangko Sentral may deploy enforcement
verification, the liability for dividends actions to promote adherence with the rules
declared shall be taken up in the bank’s and regulations governing dividend
books upon receipt of Bangko Sentral advice declaration and bring about timely
thereof. A memorandum entry may be corrective actions. The Bangko Sentral may
made to record the dividend declaration on issue directives to suspend/refrain/
the date of approval by the board of restrict from performing a particular
directors. activity or impose sanctions to limit the
For full disclosure purposes, the level of or suspend any business activity
dividends declared shall be disclosed in the that has adverse effects on the safety or
financial statements either as a footnote in soundness of the bank, among others.
the statement of changes in equity or in the Sanctions may likewise be imposed on a
notes to the financial statements. For bank and/or its directors, officers and/or
dividends declared that is still subject to employees.

§§ X136.10 - X141.1
17.09.30
The imposition of sanctions shall be of the Election/Appointments of Directors

without prejudice to the imposition of and Officers; Place of Board of Directors’
administrative sanctions under Section 37 Meeting; Reports Required; Sanctions)
of R.A. No. 7653 including declaring as Policy Statement. It is the thrust of the
unsafe or unsound (as defined under Section Bangko Sentral to continuously strengthen
56 of R.A. No. 8791) the inappropriate corporate governance in its supervised
dividend declarations, and/or to the filing financial institutions cognizant that this is
of appropriate criminal charges against central in sustaining the resiliency and
culpable persons as provided under Section stability of the financial system. In this light,
35 of R.A. No. 7653 for the willful making the Bangko Sentral is aligning its existing
of a false/misleading statement. regulations with the Code of Corporate
Further, banks subsequently found to Governance for Publicly-Listed Companies
have violated the provisions on dividend issued by the SEC as well as with best
declaration or have falsely certified/ practices and standards issued by globally
submitted misleading statements shall be recognized standard setting bodies.
reverted to the prior Bangko Sentral
verification wherein the bank can only make
§ X141.1 Definition of terms. For
an announcement or communication on the
purposes of these regulations, the following
declaration of dividends or payment of
definitions shall apply:
dividends thereon1 upon receipt of Bangko
a. Affiliate shall refer to an entity linked
Sentral advice thereof.
(Circular No. 888 dated 09 October 2015)
directly or indirectly to a BSFI by means of:
(1) Ownership, control as defined
Sec. X137 (Reserved) under Item “d” of this Subsection, or power
to vote of at least twenty percent (20%) of
Sec. 1137 (Reserved) the outstanding voting stock of the entity,
or vice-versa;
Sec. 2137 (Reserved) (2) Interlocking directorship or
officership, where the director or officer
Sec. 3137 Limitations/Amount Available on concerned owns, controls, as defined under
Dividends Declared by Rural Banks and Item “d” of this Subsection, or has the power
Cooperative Banks. to vote, at least twenty percent (20%) of the
(Deleted by Circular No. 888 dated 09 October 2015) outstanding voting stock of the entity;
(3) Common ownership, whereby the
§ 3137.1 Dividends on government common stockholders own at least ten
shares. percent (10%) of the outstanding voting
(Deleted by Circular No. 888 dated 09 October 2015) stock of the BSFI and at least twenty percent
(20%) of the outstanding voting stock of the
entity;
H. CORPORATE GOVERNANCE (4) Management contract or any
GUIDELINES arrangement granting power to the BSFI to
direct or cause the direction of management
Sec. X141 (2017 - Definition; and policies of the entity; or
Qualifications; Powers/Responsibilities and (5) Permanent proxy or voting trusts in
Duties of Board of Directors; Confirmation favor of the BSFI constituting at least twenty
1
Subject banks whose shares are listed with any domestic stock exchange may declare dividends and give
immediate notice of such declaration to the SEC and the stock exchanges, in compliance with pertinent rules
of the SEC: Provided, That no record date is fixed for such dividend pending verification of the report on such
declaration by the appropriate department of the SES.

§ X141.1
17.09.30
percent (20%) of the outstanding voting (2) Power to govern the financial and
stock of the entity, or vice versa. operating policies of the enterprise under a
b. Close family members shall refer to statute or an agreement; or
persons related to the BSFI’s directors, (3) Power to appoint or remove the
officers and stockholders (DOS) within the majority of the members of the board of
second degree of consanguinity or affinity, directors or equivalent governing body; or
legitimate or common-law. These shall (4) Power to cast the majority votes at
include the spouse, parent, child, brother, meetings of the board of directors or
sister, grandparent, grandchild, parent-in-law, equivalent governing body; or
son-/daughter-in-law, brother/sister-in-law, (5) Any other arrangement similar to
grandparent-in-law, and grandchild-in-law any of the above.
of the BSFI’s DOS. Control is presumed to exist if there is
c. Complex banks shall refer to ownership or holding, whether direct or
UBs/KBs. Nonetheless, a UB/KB may apply indirect, of twenty percent (20%) or more
with the Bangko Sentral for a reclassification of a class of voting shares of a company.
as simple or non-complex bank in order to Should the BSFI choose to disclaim or
avail of the reduced minimum requirement rebut the presumption, it should provide
on the constitution of board committees. facts sufficient to show that there is indeed
The Bangko Sentral may likewise declare no control. Further, the BSFI shall submit a
TBs, RBs or Coop Banks as complex. Any written commitment that: (a) shares owned
TB, RB or Coop Bank having at least three or held are exclusively for investment
(3) of the following characteristics shall be purposes; (b) the BSFI-stockholder will not
deemed a complex bank: serve on the board of directors and will not
(1) Total assets of at least P6 billion; nominate any candidate to serve on the
(2) Extensive branch network; board of directors or otherwise seek board
(3) N o n - t r a d i t i o n a l financial representation; (c) the BSFI-stockholder
products and services by virtue of
will have only limited contacts with
special authorities (e.g., trust, quasi-
BSFI management that are customary
banking derivatives licenses), as well as
for interested shareholders; (d) the
distinctive products like credit cards,
BSFI-stockholder will engage only in
remittance, trade-related services,
normal and customary transactions with
contract-to-sell (CTS) financing, among
the enterprise; and (e) the BSFI will not
other financial services;
pledge the shares acquired to secure a loan
(4) Use of non-conventional
with any institution.
business model, such as those using
e. Corresponding persons in affiliated
non-traditional delivery platform such
companies shall refer to the DOS of the
as electronic platforms; and
(5) Business strategy characterized affiliated companies and their close family
by risk appetite that is aggressive, and members.
risk exposures which are increasing, f. Directors. Directors shall include:
such as those with robust branch expansion (1) directors who are named as such in
programs or acquisition plans as determined by the articles of incorporation;
the Bangko Sentral. (2) directors duly elected in subsequent
d. Control of an enterprise exists when meetings of the stockholders or those
there is: appointed by virtue of the charter of
(1) Power over more than one-half of the government-owned BSFIs; and
voting rights by virtue of an agreement with other (3) those elected to fill vacancies in the
stockholders; or board of directors.

§ X141.1
17.09.30
g. Independent directors. An he is a director or substantial shareholder,

independent director shall refer to a person other than transactions which are conducted
who – at arm’s length and could not materially
(1) is not or was not a director, officer interfere with or influence the exercise of
or employee of the BSFI, its subsidiaries, his judgment;
affiliates or related interests during the past (8) was not appointed in the BSFI, its
three (3) years counted from the date of his subsidiaries, affiliates or related interests as
election/appointment; Chairman “Emeritus”, “Ex-Officio”,
(2) is not or was not a director, officer, Directors/Officers or Members of any
or employee of the BSFI’s substantial Advisory Board, or otherwise appointed in
stockholders and their related companies a capacity to assist the board of directors in
during the past three (3) years counted from the performance of its duties and
the date of his election/appointment; responsibilities during the past three (3)
(3) is not an owner of more than two years counted from the date of his
percent (2%) of the outstanding shares or a appointment;
stockholder with shares of stock sufficient (9) is not affiliated with any non-profit
to elect one (1) seat in the board of directors organization that receives significant
of the institution, or in any of its related funding from the BSFI or any of its related
companies or of its majority corporate companies or substantial shareholders; and
shareholders; (10) is not employed as an executive
(4) is not a close family member of any officer of another company where any of
director, officer or stockholder holding the BSFI’s executives serve as directors.
shares of stock sufficient to elect one (1) seat h. Majority stockholder or majority
in the board of directors of the BSFI or any shareholder shall refer to a person, whether
of its related companies or of any of its natural or juridical, owning more than fifty
substantial stockholders; percent (50%) of the voting stock of a BSFI.
(5) is not acting as a nominee or i. Non-executive directors shall
representative of any director or substantial refer to those who are not part of the
shareholder of the BSFI, any of its related day to day management of operations
companies or any of its substantial and shall include the independent
shareholders; d i r e c t o r s . H o w e v e r , n o t a l l non-
(6) is not or was not retained as executive directors are considered
professional adviser, consultant, agent or independent directors.
counsel of the BSFI, any of its related j. Officers shall include the chief
companies or any of its substantial executive officer (CEO)1, executive vice
shareholders, either in his personal capacity president, senior vice-president, vice
or through his firm during the past three (3) president, general manager, treasurer,
years counted from the date of his election; secretary, trust officer and others mentioned
(7) is independent of management and as officers of the BSFI, or those whose duties
free from any business or other relationship, as such are defined in the by-laws, or are
has not engaged and does not engage in any generally known to be the officers of the
transaction with the BSFI or with any of its BSFI (or any of its branches and offices other
related companies or with any of its than the head office) either through
substantial shareholders, whether by himself announcement, representation, publication
or with other persons or through a firm of or any kind of communication made by the
which he is a partner or a company of which BSFI: Provided, That a person holding the
1
Shall also refer to the President or any other title referring to the top management post in the BSFI

§ X141.1
17.09.30
position of chairman or vice-chairman of the mortgage, pledge or assignment covers only

board of directors or another position in the said co-owner’s undivided interest;
board of directors shall not be considered (4) Corporation, association or firm of
as an officer unless the duties of his position which any or a group of directors, officers,
in the board of directors include functions stockholders of the BSFI and/or their
of management such as those ordinarily spouses or relatives within the first degree
performed by regular officers: Provided, of consanguinity or affinity, or relative by
further, That members of a group or legal adoption, hold or own at least twenty
committee, including sub-groups or percent (20%) of the subscribed capital of
sub-committees, whose duties include such corporation, or of the equity of such
functions of management such as those association or firm;
ordinarily performed by regular officers, and (5) Corporation, association or firm
are not purely recommendatory or advisory, wholly or majority-owned or controlled by
shall likewise be considered as officers. any related entity or a group of related
k. Parent shall refer to a corporation entities mentioned in Items “m(2)” and
which has control over another corporation “m(4)” of this Subsection;
directly or indirectly through one (1) or more (6) Corporation, association or firm
intermediaries; which owns or controls directly or indirectly
l. Related company shall refer to whether singly or as part of a group of
another company which is: related interest at least twenty percent (20%)
(1) Its parent or holding company; of the subscribed capital of a substantial
(2) Its subsidiary or affiliate; or stockholder of the BSFI or which controls
(3) A corporation where a BSFI or its majority interest of the BSFI pursuant to
majority stockholder own such number of Item “g” of Subsec. X303.1;
shares that will allow/enable such person (7) Corporation, association or firm
or group to elect at least one (1) member of which has an existing management contract
the board of directors or a partnership or any similar arrangement with the parent
where such majority stockholder is a of the BSFI; and
partner. (8) Non-governmental organizations
m. Related interest shall refer to any (NGOs)/foundations that are engaged in
of the following: retail microfinance operations which are
(1) Spouse or relative within the first incorporated by any of the stockholders
degree of consanguinity or affinity, or and/or directors and/or officers or related
relative by legal adoption, of a director, BSFIs.
officer or stockholder of the BSFI; The general principles and standards
(2) Partnership of which a director, that will govern the business relationships
officer, or stockholder of a BSFI or his between BSFIs and their related NGOs/
spouse or relative within the first degree foundations engaged in retail microfinance
of consanguinity or affinity, or relative by are found in Appendix 27.
legal adoption, is a general partner; n. Related parties shall cover the
(3) Co-owner with the director, officer, BSFI’s subsidiaries as well as affiliates and
stockholder or his spouse or relative within any party (including their subsidiaries,
the first degree of consanguinity or affinity, affiliates and special purpose entities) that
or relative by legal adoption, of the property the BSFI exerts direct/ indirect control over
or interest or right mortgaged, pledged or or that exerts direct/indirect control over the
assigned to secure the loans or other credit BSFI; the BSFI’s DOSRl, and their close
accommodations, except when the family members, as well as corresponding

§ X141.1
17.09.30
persons in affiliated companies. These shall (5) Construction arrangements/

also include such other person/juridical contracts;
entity whose interests may pose potential (6) Lease arrangements/contracts;
conflict with the interest of the BSFI, hence, (7) Trading and derivative transactions;
is identified as a related party. (8) Borrowings, commitments, fund
The above definition shall also include transfers and guarantees;
direct or indirect linkages to a BSFI identified (9) Sale, purchase or supply of any
as follows: goods or materials; and
(1) Ownership, control or power to (10) Establishment of joint venture
vote, of ten percent (10%) to less than twenty entities.
percent (20%) of the outstanding voting RPTs shall be interpreted broadly to
stock of the borrowing entity, or vice versa; include not only transactions that are
(2) Interlocking directorship or entered into with related parties but also
officership, except in cases involving outstanding transactions that were entered
independent directors as defined under into with an unrelated party that
existing regulations or directors holding subsequently becomes a related party.
nominal share in the borrowing corporation; p. Risk appetite statement shall refer
(3) Common stockholders owning at to the articulation in written form of the
least ten percent (10%) of the outstanding aggregate level and types of risk that a BSFI
voting stock of the BSFI and ten percent is willing to accept, or to avoid, in order to
(10%) to less than twenty percent (20%) of achieve its business objectives. It includes
the outstanding voting stock of the qualitative statements as well as quantitative
borrowing entity; or measures expressed relative to earnings,
(4) Permanent proxy or voting trusts capital, risk measures, liquidity and other
in favor of the BSFI constituting ten percent relevant measures as appropriate.
(10%) to less than twenty percent (20%) q. Risk governance framework shall
of the outstanding voting stock of the refer to the framework through which the
borrowing entity, or vice versa. board of directors and management establish
o. Related party transactions (RPTs) the BSFI’s strategy; articulate and monitor
shall refer to transactions or dealings adherence to risk appetite and risk limits;
with related parties of the BSFI, and identify, measure, and manage risks.
including its trust department regardless r. Risk limits shall refer to the
of whether or not a price is charged. allocation of the BSFI’s risk appetite
These shall include, but not limited to statement to: specific risk categories
the following: (e.g., credit, market, liquidity, operational);
(1) On- and off-balance sheet credit the business unit or platform level
exposures and claims and write-offs; (e.g., retail, capital markets); lines of
(2) Investments and/or subscriptions for business or product level [e.g., concentration,
debt/equity issuances; value-at-risk (VaR), or other limits]; and other
(3) Consulting, professional, agency levels, as appropriate.
and other service arrangements/contracts; s. Stockholder shall refer to any
(4) Purchases and sales of assets, stockholder of record in the books of the
including transfer of technology and BSFI, acting personally, or through an
intangible items (e.g., research and attorney-in-fact; or any other person duly
development, trademarks and license authorized by him or through a trustee
agreements); designated pursuant to a proxy or voting

§§ X141.1 - X142.2
17.09.30
trust or other similar contracts, whose §§ X141.6 - X141.8 (Reserved)

stockholdings in the BSFI, individual and/
or collectively with the stockholdings of: § X141.9 Certifications required.
(1) his spouse and/or relative within the (Deleted by Circular No. 969 dated 22 August 2017)
first degree by consanguinity or affinity
or legal adoption; (2) a partnership in § X141.10 Sanctions.
which the stockholder and/or the spouse (Deleted by Circular No. 969 dated 22 August 2017)
and/or any of the aforementioned relatives
Sec. X142 (2017 - Definition; Qualifications;
is a general partner; and (3) corporation,
and Duties and Responsibilities of Officers)
association or firm of which the stockholder
Board of Directors.
and/or his spouse and/or the aforementioned
relatives own more than fifty percent (50%)
of the total subscribed capital stock of such § X142.1 (2017 - Definition of officers)
corporation, association or firm, amount to Powers/Corporate powers of the board of
one percent (1%) or more of the total directors. The corporate powers of an
subscribed capital stock of the BSFI. institution shall be exercised, its business
t. Substantial stockholder shall refer to conducted, and all its resources controlled
a person, or group of persons whether natural through its board of directors. The powers
or juridical, owning such number of shares of the board of directors as conferred by
that will allow such person or group to elect law are original and cannot be revoked by
at least one (1) member of the board of the stockholders. The directors shall hold
directors of a BSFI or who is directly or
their office charged with the duty to exercise
indirectly the registered or beneficial owner
sound and objective judgment for the best
of more than ten percent (10%) of any class
interest of the institution.
of its equity security. (As amended by Circular No. 969 dated 22 August 2017)
u. Subsidiary shall refer to a corporation
or firm more than fifty percent (50%) of the § X142.2 (2017 - Qualifications of an
outstanding voting stock of which is directly officer) Composition of the board of
or indirectly owned, controlled or held with directors.
power to vote by its parent corporation. a. Pursuant to Sections 15 and 17 of
(As amended by Circular No. 969 dated 22 August 2017) R.A. No. 8791, there shall be at least
five (5), and a maximum of fifteen (15)
§ X141.2 Qualifications of a members of the board of directors of a BSFI:
director. Provided, That in case of a bank merger or
consolidation, the number of directors may
§ X141.3 Powers/responsibilities and be increased up to the total number of the
duties of directors. members of board of directors of the
(Deleted by Circular No. 969 dated 22 August 2017) merging or consolidating bank/as provided
for in their respective articles of
§ X141.4 Confirmation of the election/ incorporation, but in no case to exceed
appointment of directors/officers. twenty-one (21). The board of directors shall
(Deleted by Circular No. 969 dated 22 August 2017) determine the appropriate number of its
members to ensure that the number thereof
§ X141.5 Place of board of directors’
is commensurate to the size and complexity
meeting.
(Deleted by Circular No. 969 dated 22 August 2017) of the BSFI’s operations.

§§ X142.2 - X142.3
17.09.30
b. To the extent practicable, the whether a person is fit and proper for the
members of the board of directors shall be position of a director, the following matters
selected from a broad pool of qualified must be considered: integrity/probity,
candidates. Non-executive directors, who physical/mental fitness; relevant education/
shall include independent directors, shall financial literacy/training; possession of
comprise at least majority of the board of competencies relevant to the job, such as
directors to promote the independent knowledge and experience, skills, diligence
oversight of management by the board of and independence of mind; and sufficiency
directors. of time to fully carry out responsibilities.
c. At least one-third (1/3) but not less In assessing a director’s integrity/
than two (2) members of the board of probity, consideration shall be given to the
directors shall be independent directors: director’s market reputation, observed
Provided, That any fractional result from conduct and behavior, as well as his ability
applying the required minimum proportion, to continuously comply with company
i.e., one-third (1/3), shall be rounded up to policies and applicable laws and
the nearest whole number: Provided, further, regulations, including market conduct rules,
That in the case of RBs, at least one (1) and the relevant requirements and standards
independent director shall be elected to the of any regulatory body, professional body,
board of directors: Provided, furthermore, clearing house or exchange, or government
That RBs whose business model is deemed and any of its instrumentalities/agencies.
complex by the Bangko Sentral, or as An elected director has the burden to
directed by the appropriate supervising prove that he possesses all the foregoing
department, shall have at least one-third minimum qualifications and none of the
(1/3) but not less than two (2) members of cases mentioned under Subsec. X150.1.
the board of directors as independent A director shall submit to the Bangko
directors: Provided, finally, That any Sentral the required certifications and other
fractional result from applying t h e documentary proof of such qualifications
required minimum proportion, i.e., using Appendix 98 as guide within twenty (20)
one-third (1/3) shall be rounded-up to the banking days from the date of election.
nearest whole number. Non-submission of complete documentary
d. Non-Filipino citizens may become requirements or their equivalent within the
members of the board of directors of a BSFI prescribed period shall be construed as his
to the extent of the foreign participation in failure to establish his qualifications for the
the equity of said BSFI: Provided, That position and results in his removal from the
pursuant to Section 23 of the Corporation board of directors.
Code of the Philippines (BP Blg. 68), a The Bangko Sentral shall also consider
majority of the directors must be residents its own records in determining the
of the Philippines. qualifications of a director.
(As amended by Circular No. 969 dated 22 August 2017) The members of the board of directors
shall possess the foregoing qualifications in
§ X142.3 (2017 - Duties and addition to those required or prescribed
responsibilities of officers) Qualifications under R.A. No. 8791 and other applicable
of a director. laws and regulations.
a. A director shall have the following (2) He must have attended a seminar
minimum qualifications: on corporate governance for board of
(1) He must be fit and proper for the directors. A director shall submit to the
position of a director. In determining Bangko Sentral a certification of compliance

§§ X142.3 - X142.4
17.09.30
with the Bangko Sentral-prescribed syllabus independent director in the same BSFI, but
on corporate governance for first-time may continue to serve as regular director.
directors and documentary proof of such The nine (9) year maximum cumulative term
compliance: Provided, That the following for independent directors shall be reckoned
persons are exempted from complying with from 2012.
the aforementioned requirement: c. Members of the board of directors
(a) Filipino citizens with recognized shall not be appointed as Corporate
stature, influence and reputation in the Secretary or Chief Compliance Officer.
banking community and whose business (As amended by Circular No. 969 dated 22 August 2017)
practices stand as testimonies to good
corporate governance; § X142.4 (2017 - Appointment of
(b) Distinguished Filipino and foreign officers; 2011 - X142.3) Chairperson of the
nationals who served as senior officials in board of directors.
central banks and/or financial regulatory a. Roles of the Chairperson of the board
agencies, including former Monetary Board of directors. The Chairperson of the board
members; or of directors shall provide leadership in the
(c) Former Chief Justices and Associate board of directors. He shall ensure effective
Justices of the Philippine Supreme Court: functioning of the board of directors,
Provided, further, That this exemption including maintaining a relationship of trust
shall not apply to the annual training with members of the board of directors. He
requirements for the members of the board shall: (1) ensure that the meeting agenda
of directors. focuses on strategic matters including
b. Independent and non-executive discussion on risk appetites, and key
directors governance concerns; (2) ensure a sound
In selecting independent and decision-making process; (3) encourage and
non-executive directors, the number and promote critical discussion; (4) ensure that
types of entities where the candidate is dissenting views can be expressed and
likewise elected as such, shall be considered discussed within the decision-making
to ensure that he will be able to devote process; (5) ensure that members of the
sufficient time to effectively carry out his board of directors receive accurate, timely,
duties and responsibilities. In this regard, and relevant information; (6) ensure the
the following shall apply: conduct of proper orientation for first-time
(1) A non-executive director may directors and provide training opportunities
concurrently serve as director in a maximum for all directors; and (7) ensure conduct of
of five (5) publicly listed companies. In performance evaluation of the board of
applying this provision to concurrent directors at least once a year.
directorship in entities within a b. Qualifications of the chairperson of
conglomerate, each entity where the the board of directors. To promote checks
non-executive director is concurrently and balances, the chairperson of the board
serving as director shall be considered of directors shall be a non-executive director
separately considered in assessing or an independent director, and must not
compliance with this requirement; and have served as CEO of the BSFI within the
(2) An independent director of a BSFI past three (3) years. The positions of
may only serve as such for a maximum chairperson and CEO shall not be held by
cumulative term of nine (9) years. After one (1) person. In exceptional cases where
which, the independent director shall be the position of chairperson of the board of
perpetually barred from serving as directors and CEO is allowed to be held by

§§ X142.4 - X143.1
17.09.30
one (1) person as approved by the Monetary election.

Board, a lead independent director shall be b. Board-level committee meetings
appointed. Board-level committees shall meet as
For this purpose, the board of directors prescribed in their respective charters.
shall define the responsibilities of the lead Participation of committee members may
independent director, which shall be likewise be in person or through modern
documented in the corporate governance technologies: Provided, That the attendance
manual. The board of directors shall ensure and participation of members in committee
that the lead independent director functions meetings shall be considered in the
in an environment that allows him to assessment of continuing fitness and
effectively challenge the CEO as propriety of each director as member of
circumstances may warrant. The lead board-level committees and the board of
independent director shall perform a more directors.
enhanced function over the other (As amended by Circular No. 969 dated 22 August 2017)
independent directors and shall: (1) lead the
independent directors at board of directors Sec. X143 (2017 - Disqualification and
meetings in raising queries and pursuing Watchlisting of Directors and Officers)
matters; and (2) lead meetings of Duties and Responsibilities of the Board
independent directors, without the presence of Directors/Directors.
of the executive directors. (As amended by Circular No. 969 dated 22 August 2017)
§ X143.1 (2017 - Persons disqualified
§ X142.5 Board of directors meetings. to become directors) Specific duties and
BSFIs shall include in their by-laws a responsibilities of the board of directors.
provision that meetings of their board of The board of directors is primarily
directors shall be held only within the responsible for defining the BSFI’s vision
Philippines, except in the case of BSFIs with and mission. The board of directors has the
head office located outside the Philippines, fiduciary responsibility to the BSFI and all
where meetings may be held in their its shareholders including minority
respective places of business. shareholders. It shall approve and oversee
a. Full board of directors meetings the implementation of strategies to achieve
The meetings of the board of directors corporate objectives. It shall also approve
may be conducted through modern and oversee the implementation of the risk
technologies such as, but not limited to governance framework and the systems of
teleconferencing and video conferencing as checks and balances. It shall establish a
long as the director who is taking part in sound corporate governance framework.
said meetings can actively participate in the The board of directors shall approve the
deliberations on matters taken up therein: selection of the CEO and key members of
Provided, That every member of the board senior management and control functions
of directors shall participate in at least fifty and oversee their performance.
percent (50%) and shall physically attend a. The board of directors shall define
at least twenty-five percent (25%) of all the BSFI’s corporate culture and values. It
meetings of the board of directors every year: shall establish a code of conduct and ethical
Provided, further, That the absence of a standards in the BSFI and shall
director in more than fifty percent (50%) of institutionalize a system that will allow
all regular and special meetings of the board reporting of concerns or violations to an
of directors during his/her incumbency is a appropriate body. In this regard, the board
ground for disqualification in the succeeding of directors shall:

§ X143.1
17.09.30
(1) Approve a code of conduct or code and strategies and in overseeing management’s
of ethics, which shall articulate acceptable implementation thereof. In this regard, the
and unacceptable activities, transactions and board of directors shall:
behaviors that could result or potentially (1) Ensure that the BSFI has beneficial
result in conflict of interest, personal gain influence on the economy by continuously
at the expense of the BSFI as well as the providing services and facilities which will
corresponding disciplinary actions and be supportive of the national economy.
sanctions. The code of conduct shall (2) Approve the BSFI’s strategic
explicitly provide that directors, officers, and objectives and business plans. These shall
all personnel are expected to conduct take into account the BSFI’s long-term
themselves ethically and perform their job financial interests, its level of risk tolerance,
with skill, due care, and diligence in and ability to manage risks effectively. In this
addition to complying with laws, respect, the board of directors shall establish
regulations, and company policies. a system for measuring performance against
(2) Consistently conduct the affairs of plans.
the BSFI with a high degree of integrity and (3) Actively engage in the affairs of the
play a lead role in establishing the BSFI’s BSFI and keep-up with material changes in
corporate culture and values. The board of the BSFI’s business and regulatory
directors shall establish, actively promote, environment as well as act in a timely
and communicate a culture of strong manner to protect the long-term interests of
governance in the BSFI, through adopted the BSFI.
policies and displayed practices. The board (4) Approve and oversee the
of directors shall ensure that the CEO and implementation of policies governing major
executive team champion the desired values areas of the BSFI’s operations. The board of
and conduct, and that they face material directors shall regularly review these
consequences if there are persistent or high policies, as well as evaluate control
profile conduct and value breaches. functions (e.g., internal audit, risk
(3) Oversee the integrity, independence, management and compliance) with senior
and effectiveness of BSFI’s policies and management to determine areas for
procedures for whistleblowing. It shall improvement as well as to promptly identify
allow employees to communicate, with and address significant risks and issues.
protection from reprisal, legitimate concerns c. The board of directors shall be
about illegal, unethical or questionable responsible for the appointment/selection of
practices directly to the board of directors key members of senior management and
or to any independent unit. Policies shall heads of control functions and for the
likewise be set on how such concerns shall approval of a sound remuneration and other
be investigated and addressed, for example, incentives policy for personnel. In this
by an internal control function, an objective regard, the board of directors shall:
external party, senior management and/or (1) Oversee selection of the CEO and
the board of directors itself. It shall prevent other key personnel, including members of
the use of the facilities of the BSFI in the senior management and heads of control
furtherance of criminal and other improper functions based on the application of fit and
or illegal activit ies, such as but not limited proper standards. Integrity, technical
to financial misreporting, money expertise, and experience in the BSFI’s
laundering, fraud, bribery or corruption. business, either current or planned, shall be
b. The board of directors shall be the key considerations in the selection
responsible for approving BSFI’s objectives process. Moreover, since mutual trust and

§ X143.1
17.09.30
a close working relationship are important, should include a system for identifying and
the members of senior management shall developing potential successors for the CEO
uphold the general operating philosophy, and other critical positions.
vision and core values of the BSFI. (5) Ensure that personnel’s expertise and
(2) Approve and oversee the knowledge remain relevant. The board of
implementation of performance standards directors shall provide its personnel with
as well as remuneration and other incentives regular training opportunities as part of a
policy. The policy should be consistent with professional development program to
the long-term strategic objectives and enhance their competencies and stay abreast
financial soundness of the BSFI and should of developments relevant to their areas of
promote good performance, convey responsibility.
acceptable risk-taking behavior, and (6) Ensure that employee pension funds
reinforce the BSFI’s operating and risk are fully funded or the corresponding
culture. liability appropriately recognized in the
(3) Oversee the performance of senior books of the BSFI at all times, and that all
management and heads of control functions: transactions involving the pension fund are
(a) The board of directors shall regularly conducted at arm’s length terms.
monitor and assess the performance of the d. The board of directors shall be
management team and heads of control responsible for approving and overseeing
functions based on approved performance implementation of the BSFI’s corporate
standards. governance framework. In this regard, the
(b) The board of directors shall hold board of directors shall:
members of senior management (1) Define appropriate governance
accountable for their actions and enumerate structure and practices for its own work,
the possible consequences if those actions and ensure that such practices are followed
are not aligned with the board of directors’ and periodically reviewed:
performance expectations. These (a) The board of directors shall structure
expectations shall include adherence to the itself in a way, including in terms of size
BSFI’s values, risk appetite and risk culture, and frequency of meetings, so as to promote
under all circumstances. efficiency, critical discussion of issues, and
(c) The board of directors shall regularly thorough review of matters. The board of
meet with senior management to engage in directors shall meet regularly to properly
discussions, question, and critically review discharge its functions, and likewise have
the reports and information provided by the discussions on values, conduct, and
latter. behaviors.
(d) Non-executive board members shall (b) The board of directors shall create
meet regularly, other than in meetings of the committees to increase efficiency and allow
audit, risk oversight, corporate governance, deeper focus in specific areas. The number
and related party transactions committees, and nature of board-level committees would
in the absence of senior management, with depend on the size of the BSFI and the board
the external auditor and heads of the internal of directors, the BSFI’s complexity of
audit, compliance and risk management operations, as well as the board of directors’
functions. long-term strategies and risk tolerance.
(4) Engage in succession planning for the (c) The board of directors shall regularly
CEO and other critical positions, as review the structure, size and composition
appropriate. In this respect, the board of of the board of directors and board-level
directors shall establish an effective committees with the end in view of having
succession planning program. The program a balanced membership. Towards this end,

§ X143.1
17.09.30
a system and procedure for evaluation of or summaries of matters reviewed,

the structure, size and composition of the recommendations made, decisions taken
board of directors and board-level and dissenting opinions) of its deliberations
committees shall be adopted which shall and decisions. The board of directors shall
include, but not limited to, benchmark and also ensure that independent views in
peer group analysis. The results of meetings of the board of directors shall be
assessment shall form part of the ongoing given full consideration and all such
improvement efforts of the board of meetings shall be duly minuted.
directors. (2) Develop a remuneration and other
(d) The board of directors shall adopt incentives policy for directors that shall be
policies aimed at ensuring that the members submitted for approval of the stockholders.
of the board of directors are able to commit The board of directors shall ensure that the
to effectively discharge their responsibilities, policy is consistent with the long-term
which shall include policy on the number interest of the BSFI, does not encourage
of directorship positions and/or other excessive risk-taking, and is not in conflict
internal/external professional commitments with the director’s fiduciary responsibilities.
that a director may have, commensurate (3) Adopt a policy on retirement for
with the responsibilities placed on the directors and officers, as part of the
director, as well as the nature, scale and succession plan, to promote dynamism and
complexity of the BSFI’s operations. avoid perpetuation in power.
(e) The board of directors shall ensure (4) Conduct and maintain the affairs of
that individual members of the board of the BSFI within the scope of its authority as
directors and the shareholders are prescribed in its charter and in existing laws,
accurately and timely informed of a rules and regulations. It shall ensure effective
comprehensive and understandable compliance with the latter, which include
assessment of the BSFI’s performance, prudential reporting obligations. Serious
financial condition, and risk exposures. All weaknesses in adhering to these duties and
members of the board of directors shall have responsibilities may be considered as unsafe
reasonable access to any information about and unsound practice.
the BSFI at all times. The board of directors (5) Maintain, and periodically update,
shall also ensure that adequate and organizational rules, by-laws, or other
appropriate information flows internally and similar documents setting out its
to the public. organization, rights, responsibilities and key
(f) The board of directors shall assess at activities. The board of directors shall ensure
least annually its performance and that the BSFI’s organizational structure
effectiveness as a body, as well as its various facilitates effective decision-making and
committees, the CEO, the individual good governance. This includes clear
directors, and the BSFI itself, which may be definition and delineation of the lines of
facilitated by the corporate governance responsibility and accountability.
committee or external facilitators. This (6) Oversee the development, approve,
exercise shall cover the assessment of the and monitor implementation of corporate
ongoing suitability of each board member governance policies. The board of directors
taking into account his or her performance shall ensure that corporate governance
in the board of directors and board-level policies are followed and periodically
committees. reviewed for ongoing improvement.
(g) The board of directors shall maintain (7) Approve an overarching policy on
appropriate records (e.g., meeting minutes the handling of RPTs to ensure that there is

§ X143.1
17.09.30
effective compliance with existing laws, extent of relationship with the BSFI; assess
rules and regulations at all times, that these situations in which a non-related party (with
are conducted on an arm’s length basis, and whom a BSFI has entered into a transaction)
that no stakeholder is unduly disadvantaged. subsequently becomes a related party and
In this regard: vice versa; and generate information on the
(a) The board of directors shall approve type and amount of exposures to a particular
all material RPTs, those that cross the related party. The said system will facilitate
materiality threshold, and write-off of submission of accurate reports to the
material exposures to related parties, and regulators/supervisors. The system as well
submit the same for confirmation by as the overarching policies shall be subject
majority vote of the stockholders in the to periodic assessment by the internal audit
annual stockholders’ meeting. Any renewal and compliance functions and shall be
or material changes in the terms and updated regularly for their sound
conditions of RPTs shall also be approved implementation. The overarching policy and
by the board of directors. All final decisions the system shall be made available to the
of the board of directors on material RPTs, Bangko Sentral and audit functions for
including important facts about the nature, review. Any changes in the policies and
terms, conditions, original and outstanding procedures shall be approved by the board
individual and aggregate balances, of directors.
justification and other details that would (d) The board of directors shall maintain
allow stockholders to make informed adequate capital against risks associated
judgment as to the reasonableness of the with exposures to related parties. In this
transaction, must be clearly disclosed during regard, material risks arising from RPTs shall
stockholders meetings and duly reflected in be considered in the capital planning
the minutes of board of directors and process. The prescribed scenario/stress tests
stockholders’ meetings. under the capital planning process shall also
(b) The board of directors shall delegate capture RPTs in order to determine whether
to appropriate management committee the the BSFI is well-insulated from any going
approval of RPTs that are below the concern issue of related parties.
materiality threshold, subject to (e) The board of directors shall oversee
confirmation by the board of directors. This the integrity, independence, and
shall, however, exclude DOSRI transactions, effectiveness of the policies and procedures
which are required to be approved by the for whistleblowing. The board of directors
board of directors. All decisions under the should ensure that senior management
delegated authority must be properly addresses legitimate issues on RPT that are
recorded in the minutes of the committee raised. The board of directors should take
meetings. responsibility for ensuring that staff who
(c) The board of directors shall establish raise concerns are protected from
an effective system to: detrimental treatment or reprisals.
(i) Determine, identify and monitor (8) Define an appropriate corporate
related parties and RPTs; governance framework for group structures,
(ii) Continuously review and evaluate which shall facilitate effective oversight
existing relationships between and among over entities in the group. The board of
businesses and counterparties; and directors of the parent company shall ensure
(iii) Identify, measure, monitor and consistent adoption of corporate
control risks arising from RPTs. The system governance policies and systems across the
should be able to define related parties’ group. In this regard:

§ X143.1
17.09.30
(a) The board of directors shall define and sharing of information within the group,
and approve appropriate governance management of risks and effective
policies, practices and structure that will supervision of the group.
enable effective oversight of the entire group, (g) The board of directors shall require
taking into account the nature and the risk management, compliance function
complexity of operations, size and the types and internal audit group to conduct a
of risks to which the BSFI and its periodic formal review of the group
subsidiaries are exposed. The board of structure, their controls and activities to
directors shall also establish means to assess consistency with the board of
ensure that such policies, practices and directors approved policies, practices and
systems remain appropriate in light of the strategies and to require said groups to
growth, increased complexity and report the results of their assessment directly
geographical expansion of the group. to the board of directors.
Further, it shall ensure that the policies In cases where the BSFI is a subsidiary/
include the commitment from the entities affiliate of a non-Bangko Sentral regulated
in the group to meet all governance parent company:
requirements. (a) The board of directors shall define
(b) The board of directors shall define and approve policies and clear
the risk appetite for the group, which shall strategies for the establishment of new
be linked to the process of determining the structures (e.g., subsidiaries/affiliate of the
adequacy of capital of the group. BSFI). The board of directors shall also report
(c) The board of directors shall ensure to the Bangko Sentral any plan to create
that adequate resources are available for all additional group structures.
the entitles in the group to effectively (b) The board of directors shall
implement and meet the governance understand the roles, relationships or
policies, practices and systems. interactions of each entity in the group with
(d) The board of directors shall define one another and with the parent company.
and approve policies and clear strategies for The board of directors shall understand the
the establishment of new structures. legal and operational implications of the
(e) The board of directors shall group structure and how the various types
understand the roles, the relationships or of risk exposures affect the BSFI’s capital,
interactions of each entity in the group with risk profile and funding under normal and
one another and with the parent company. contingent circumstances.
The board of directors shall understand the e. The board of directors shall be
legal and operational implications of the responsible for approving BSFI’s risk
group structure and how the various types governance framework and overseeing
of risk exposures affect the group’s capital, management’s implementation thereof. In
risk profile and funding under normal and this regard, the board of directors shall:
contingent circumstances. The board of (1) Define the BSFI’s risk appetite. In
directors shall ensure that the group’s setting the risk appetite, the board of
corporate governance framework includes directors shall take into account the business
appropriate processes and controls to environment, regulatory landscape, and the
identify and address potential intragroup BSFI’s long term interests and ability to
conflicts of interest, such as those arising manage risk.
from intragroup transactions. (2) Approve and oversee adherence to
(f) The board of directors shall develop the risk appetite statement (RAS), risk policy,
sound and effective systems for generation and risk limits.

§§ X143.1 - X143.2
17.09.30
(3) Oversee the development of, for the position for the duration of his term.
approve, and oversee the implementation He should possess unquestionable
of policies and procedures relating to the credibility to make decisions objectively and
management of risks throughout the BSFI. resist undue influence. He shall treat board
(4) Define organizational responsibilities directorship as a profession and shall have
following the three lines of defense a clear understanding of his duties and
framework. The business line functions will responsibilities as well as his role in
represent the first line of defense, the risk promoting good governance. Hence, he
management and compliance functions for shall maintain his professional integrity and
the second line of defense, and the internal continuously seek to enhance his skills,
audit function for the third line of defense. knowledge and understanding of the
In this regard: activities that the bank is engaged in or
(a) The board of directors shall ensure intends to pursue as well as the
that the risk management, compliance and developments in the banking industry
internal audit functions have proper stature including regulatory changes through
in the organization, have adequate staff and continuing education or training.
resources, and carry out their b. To conduct fair business transactions
responsibilities independently, objectively with the BSFI and to ensure that personal
and effectively. interest does not bias board decisions.
(b) The board of directors shall ensure Directors should, whenever possible, avoid
that non-executive board members meet situations that would give rise to a conflict
regularly, with the external auditor and of interest. If transactions with the institution
heads of the internal audit, compliance and cannot be avoided, it should be done in the
risk management functions other than in regular course of business and upon terms
meetings of the audit and risk oversight not less favorable to the institution than
committees, in the absence of senior those offered to others. The basic principle
management. to be observed is that a director should not
(As amended by Circular No. 969 dated 22 August 2017) use his position to make profit or to acquire
benefit or advantage for himself and/or his
§ X143.2 (2017 - Persons disqualified related interests. He should avoid situations
to become officers) Specific duties and that would compromise his impartiality.
responsibilities of a director. The position c. To act honestly and in good faith,
of a director is a position of trust. A director with loyalty and in the best interest of the
assumes certain responsibilities to different institution, its stockholders, regardless of the
constituencies or stakeholders, i.e., the BSFI amount of their stockholdings, and other
itself, its stockholders, its depositors and stakeholders such as its depositors,
other creditors, its management and investors, borrowers, other clients and the
employees, the regulators, deposit insurer general public. A director must always act
and the public at large. These constituencies in good faith, with the care which an
or stakeholders have the right to expect that ordinarily prudent man would exercise
the institution is being run in a prudent and under similar circumstances. While a
sound manner. The members of the board director should always strive to promote the
of directors should exercise their “duty of interest of all stockholders, he should also
care” and “duty of loyalty” to the institution. give due regard to the rights and interests of
a. To remain fit and proper for the other stakeholders.
position for the duration of his term. A d. To devote time and attention
director is expected to remain fit and proper necessary to properly discharge their duties

§§ X143.2 - X144
17.09.30
and responsibilities. Directors should devote i. To observe confidentiality. Directors

sufficient time to familiarize themselves with must observe the confidentiality of
the institution’s business. They must be non-public information acquired by reason
constantly aware of the institution’s of their position as directors. They may not
condition and be knowledgeable enough to disclose said information to any other person
contribute meaningfully to the board’s work. without the authority of the board.
They must attend and actively participate BSFIs shall furnish aII of their first-time
in board and committee meetings, request directors within a BSFI with a copy of the
and review meeting materials, ask questions, specific duties and responsibilities of the
and request explanations. If a person cannot board of directors and as an individual
give sufficient time and attention to the director prescribed under Subsecs. X143.1
affairs of the institution, he should neither and X143.2, upon election. The BSFI must
accept his nomination nor run for election keep on file certification under oath of the
as member of the board. directors concerned that they have received
e. To act judiciously. Before deciding copies of such specific duties and
on any matter brought before the board of responsibilities and that they fully
directors, every director should thoroughly understand and accept the same.
evaluate the issues, ask questions and seek (As amended by Circular No. 969 dated 22 August 2017)
clarifications when necessary.
f. To contribute significantly to the § X143.3 Effect of non-possession of
decision-making process of the board. qualifications or possession of
Directors should actively participate and disqualifications.
(Renumbered as Subsec. X150.3 by Circular No. 969 dated 22
exercise objective independent judgment on August 2017)
corporate affairs requiring the decision or
approval of such board. § X143.4 Disqualification procedures.
g. To exercise independent judgment. (Renumbered as Subsec. X150.4 by Circular No. 969 dated 22
A director should view each problem/ August 2017)
situation objectively. When a disagreement
§ X143.5 Watchlisting.
with others occurs, he should carefully (Renumbered as Subsec. X150.5 by Circular No. 969 dated 22
evaluate the situation and state his position. August 2017)
He should not be afraid to take a position
even though it might be unpopular. Sec. X144 (2017 - Bio-data of Directors and
Corollarily, he should support plans and Officers) Board-Level Committees. The
ideas that he thinks will be beneficial to the board of directors may delegate some of its
institution. functions, but not its responsibilities, to
h. To have a working knowledge of the board-level committees. In this regard, the
statutory and regulatory requirements board of directors shall:
affecting the institution, including the a. Approve, review, and update, at least
content of its articles of incorporation and annually or whenever there are significant
by-laws, the requirements of the Bangko changes therein, the respective charters of
Sentral and where applicable, the each committee or other documents that set
requirements of other regulatory agencies. out its mandate, scope and working
A director should also keep himself procedures. Said documents shall articulate
informed of the industry developments and how the committee will report to the full
business trends in order to safeguard the board of directors, what is expected of the
institution’s competitiveness. committee members, and tenure limits for

§§ X144 - X144.1
17.09.30
serving in the committee. The board of directors, with the views of the independent
directors shall also consider occasional directors duly considered and minuted.
rotation of committee members and chairs UBs/KBs that are part of a conglomerate
to avoid undue concentration of power and shall also constitute an RPT Committee. The
promote fresh perspective. Bangko Sentral may likewise direct the
b. Appoint members of the committees board of directors of other BSFIs to constitute
taking into account the optimal mix of skills an RPT committee as part of their corporate
and experience to allow the board of governance reforms.
directors, through the committees, to fully (As amended by Circular No. 969 dated 22 August 2017)
understand and objectively evaluate the
§ X144.1 Audit committee.
relevant issues. In order to promote
a. Composition and chairperson. The
objectivity, the board of directors shall
audit committee shall be composed of at
appoint independent directors and
least three (3) members of the board of
non-executive members of the board of
directors, who shall all be non-executive
directors to the greatest extent possible.
directors, majority of whom shall be
Towards this end, an independent director
independent directors, including the
who is a member of any committee that
chairperson: Provided, That in the case of
exercises executive or management
simple or non-complex RBs, the audit
functions that can potentially impair such
committee shall be composed of at least
director’s independence cannot accept
three (3) members of the board of directors
membership in committees that perform
who shall all be non-executive directors,
independent oversight/control functions
including the chairperson who shall be an
such as the Audit, Risk Oversight and
independent director: Provided, further, That
Corporate Governance, Related Party
the chairperson of the audit committee shall
Transactions committees, without prior
not be the chairperson of the board of
approval of the Monetary Board.
directors or of any other board-level
c. Ensure that each committee shall
committees.
maintain appropriate records (e.g., minutes
The audit committee shall have
of meetings or summary of matters reviewed
accounting, auditing, or related financial
and decisions taken) of their deliberations
management expertise or experience
and decisions. Such records shall document
commensurate with the size, complexity of
the committee’s fulfillment of its
operations and risk profile of the BSFI. It
responsibilities and facilitate the assessment
shall have access to independent experts to
of the effective performance of its functions.
assist them in carrying out its
d. Constitute, at a minimum, the
responsibilities.
following committees: (1) Audit Committee;
b. Duties and responsibilities of the
(2) Risk Oversight Committee, and
(3) Corporate Governance Committee:
audit committee. The audit committee shall:
(1) Oversee the financial reporting
Provided, That the board of directors of
simple or non-complex banks may, at a
framework. The committee shall oversee the
minimum, constitute only the Audit financial reporting process, practices, and
Committee unless directed by the Bangko controls. It shall ensure that the reporting
Sentral to create other board-level framework enables the generation and
committees: Provided, further, That the preparation of accurate and comprehensive
board of directors shall discuss risk information and reports.
management and corporate governance (2) Monitor and evaluate the adequacy
matters in the meetings of the board of and effectiveness of the internal control

§§ X144.1 - X144.2
17.09.30
system. The committee shall oversee the have full discretion to invite any director or
implementation of internal control policies executive officer to attend its meetings.
and activities. It shall also ensure that (7) Establish whistleblowing
periodic assessment of the internal control mechanism. The committee shall establish
system is conducted to identify the and maintain mechanisms by which officers
weaknesses and evaluate its robustness and staff shall, in confidence, raise concerns
considering the BSFI’s risk profile and about possible improprieties or malpractices
strategic direction. in matters of financial reporting, internal
(3) Oversee the internal audit function. control, auditing or other issues to persons
The committee shall be responsible for the or entities that have the power to take
appointment/selection, remuneration, and corrective action. It shall ensure that
dismissal of internal auditor. It shall review arrangements are in place for the
and approve the audit scope and frequency. independent investigation, appropriate
The committee shall ensure that the scope follow-up action, and subsequent
covers the review of the effectiveness of the resolution of complaints.
BSFI’s internal controls, including financial, (Circular No. 969 dated 22 August 2017)
operational and compliance controls, and
risk management system. The committee § X144.2 Risk oversight committee
shall functionally meet with the head of (ROC).
internal audit and such meetings shall be a. Composition and chairperson. The
duly minuted and adequately documented. committee shall be composed of at least
In this regard, the audit committee shall three (3) members of the board of directors,
review and approve the performance and majority of whom shall be independent
compensation of the head of internal audit, directors, including the chairperson. The
and budget of the internal audit function. ROC’s chairperson shall not be the
(4) Oversee the external audit function. chairperson of the board of directors, or any
The committee shall be responsible for the other board-level committee. The risk
appointment, fees, and replacement of oversight committee shall possess a range
external auditor. It shall review and approve of expertise and adequate knowledge on
the engagement contract and ensure that the risk management issues and practices. It
scope of audit likewise cover areas shall have access to independent experts to
specifically prescribed by the Bangko assist it in discharging its responsibilities.
Sentral and other regulators. b. Duties and responsibilities of the
(5) Oversee implementation of ROC. The ROC shall advise the board of
corrective actions. The committee shall directors on the BSFI’s overall current and
receive key audit reports, and ensure that future risk appetite, oversee senior
senior management is taking necessary management’s adherence to the risk
corrective actions in a timely manner to appetite statement, and report on the state
address the weaknesses, non-compliance of risk culture of the BSFI. The ROC shall:
with policies, laws, and regulations and (1) Oversee the risk management
other issues identified by auditors and other framework. The committee shall oversee the
control functions. enterprise risk management framework and
(6) Investigate significant issues/ ensure that there is periodic review of the
concerns raised. The committee shall have effectiveness of the risk management
explicit authority to investigate any matter systems and recovery plans. It shall ensure
within its terms of reference, have full access that corrective actions are promptly
to and cooperation by management, and implemented to address risk management

§§ X144.2 - X144.3
17.09.30
concerns. the board of directors and senior

(2) Oversee adherence to risk appetite. management.
The committee shall ensure that the current (2) Oversee the continuing education
and emerging risk exposures are consistent program for the board of directors. The
with the BSFI’s strategic direction and overall committee shall ensure allocation of
risk appetite. It shall assess the overall status sufficient time, budget and other resources
of adherence to the risk appetite based on for the continuing education of directors,
the quality of compliance with the limit and draw on external expertise as needed.
structure, policies, and procedures relating The committee shall establish and ensure
to risk management and control, and effective implementation of policy for
performance of management, among others. on-boarding/orientation program for first
(3) Oversee the risk management time directors and annual continuing
function. The committee shall be responsible education for all directors.
for the appointment/selection, remuneration, For this purpose, the orientation
and dismissal of the chief risk officer (CRO). program for first time directors shall be for
It shall also ensure that the risk management at least eight (8) hours, while the annual
function has adequate resources and continuing training shall be at least for four (4)
effectively oversees the risk-taking activities hours. The training programs should cover
of the BSFI. topics relevant in carrying out their duties
and responsibilities as directors.
(3) Oversee the performance evaluation
process. The committee shall oversee the
§ X144.3 Corporate governance
periodic evaluation of contribution and
committee.
performance (e.g., competence, candor,
a. Composition. The committee shall be
attendance, preparedness and participation)
composed of at least three (3) members of
of the board of directors, board-level
the board of directors who shall all be
committees, and senior management.
non-executive directors, majority of whom Internal guidelines shall be adopted that
shall be independent directors, including the address the competing time commitments
chairperson. of directors serving on multiple boards.
b. Duties and responsibilities of the (4) Oversee the design and operation of
corporate governance committee. The the remuneration and other incentives
corporate governance committee shall assist policy. The committee shall ensure that the
the board of directors in fulfllling its
remuneration and other incentives policy
corporate governance responsibilities. In this
is aligned with operating and risk culture
regard, the corporate governance committee
as well as with the strategic and financial
shall:
interest of BSFI, promotes good performance
(1) Oversee the nomination process for
and conveys acceptable risk-taking behavior
members of the board of directors and for
defined under its Code of Ethics, and
positions appointed by the board of
directors. The committee shall review and complies with legal and regulatory
evaluate the qualifications of all persons requirements. It shall work closely with the
nominated to the board of directors as well BSFI’s risk oversight committee in evaluating
as those nominated to other positions the incentives created by the remuneration
requiring appointment by the board of system. In particular, the risk oversight
directors. The committee shall recommend committee shall examine whether incentives
to the board of directors matters pertaining provided by the remuneration system take
to the assignment to board committees, as into consideration risk, capital, and the
well as succession plan for the members of likelihood and timing of earnings. Moreover,

§§ X144.3 - X144.4
17.09.30
it shall monitor and review the determine any potential reputational risk
remuneration and other incentives policy issues that may arise as a result of or in
including plans, processes and outcomes connection with the transactions. In
to ensure that it operates and achieves the evaluating RPTs, the Committee shall take
objectives as intended. into account, among others, the following:
(Circular No. 969 dated 22 August 2017) (a) The related party’s relationship to the
BSFI and interest in the transaction;
§ X144.4 Related party transactions (b) The material facts of the proposed
committee. RPT, including the proposed aggregate value
a. Composition and chairperson. The of such transaction;
committee shall be composed of at least (c) The benefits to the BSFI of the
three (3) members of the board of directors, proposed RPT;
two (2) of whom shall be independent (d) The availability of other sources of
directors, including the chairperson. The comparable products or services; and
committee shall at all times be entirely (e) An assessment of whether the
composed of independent directors and proposed RPT is on terms and conditions
non-executive directors, with independent that are comparable to the terms generally
directors comprising majority of the available to an unrelated party under similar
members. In case a member has conflict of circumstances. The BSFI shall have in place
interest in a particular RPT, he should refrain an effective price discovery system and have
from evaluating that particular transaction. exercised due diligence in determining a fair
The compliance officer or internal auditor price for RPTs.
may sit as resource persons in said All RPTs that are considered material
committee. based on BSFI’s internal policies shall be
b. Duties and responsibilities of the endorsed by the RPT committee to the board
related party transactions committee. of directors for approval.
(1) Evaluate on an ongoing basis existing (3) Ensure that appropriate disclosure is
relations between and among businesses made, and/or information is provided to
and counterparties to ensure that all related regulating and supervising authorities
parties are continuously identified, RPTs are relating to the BSFI’s RPT exposures, and
monitored, and subsequent changes in policies on conflicts of interest or potential
relationships with counterparties (from conflicts of interest. The disclosure shall
non-related to related and vice versa) are include information on the approach to
captured. Related parties, RPTs, and managing material conflicts of interest that
changes in relationships shall be reflected are inconsistent with such policies; and
in the relevant reports to the board of conflicts that could arise as a result of the
directors and regulators/supervisors. BSFI’s affiliation or transactions with other
(2) Evaluate all material RPTs to ensure related parties.
that these are not undertaken on more (4) Report to the board of directors on a
favorable economic terms (e.g., price, regular basis, the status and aggregate
commissions, interest rates, fees, tenor, exposures to each related party as well as
collateral requirement) to such related the total amount of exposures to all related
parties than similar transactions with parties.
non-related parties under similar (5) Ensure that transactions with related
circumstances and that no corporate or parties, including write-off of exposures, are
business resources of the BSFI are subject to periodic independent review or
misappropriated or misapplied, and to audit process.

§§ X144.4 - X145.2
17.09.30
(6) Oversee the implementation of the shall be construed as his/her failure to

system for identifying, monitoring, establish his/her qualifications for the
measuring, controlling, and reporting RPTs, position and results to his/her removal
including the periodic review of RPT therefrom.
policies and procedures. The Bangko Sentral shall also consider
(Circular No. 969 dated 22 August 2017) its own records in determining the
qualifications of an officer.
Sec. X145 (2017 - Interlocking The foregoing qualifications for officers
Directorships and/or Officerships) shall be in addition to those required or
Officers. prescribed under R.A. No. 8791 and other
applicable laws and regulations.
§ X145.1 (2017 - Representatives of (As amended by Circular No. 969 dated 22 August 2017)
government) Qualifications of an officer.
An officer must be fit and proper for the § X145.2 Duties and responsibilities of
position he is being appointed to. In officers.
determining whether a person is fit and a. To set the tone of good governance
proper for a particular position, the following from the top. Bank officers shall promote
matters must be considered: integrity/ the good governance practices within the
probity, education/training, and possession bank by ensuring that policies on
of competencies relevant to the function governance as approved by the board of
such as knowledge and experience, skills directors are consistently adopted across the
and diligence. bank.
In assessing an officer’s integrity/probity, b. To oversee the day-to-day
consideration shall be given to the officer’s management of the BSFI. Bank officers shall
market reputation, observed conduct and ensure that bank’s activities and operations
behavior, as well as his ability to are consistent with the bank’s strategic
continuously comply with company objectives, risk strategy, corporate values
policies and applicable laws and and policies as approved by the board of
regulations, including market conduct directors. They shall establish a bank-wide
rules, and the relevant requirements and management system characterized by
standards of any regulatory body, strategically aligned and mutually
professional body, clearing house or reinforcing performance standards across
exchange, or government and any of its the organization.
instrumentalities/agencies. c. To ensure that duties are effectively
An appointed officer has the burden to delegated to the staff and to establish a
prove that he possesses all the foregoing management structure that promotes
minimum qualifications and none of the accountability and transparency. Bank
cases mentioned under Subsec. X150.2. An officers shall establish measurable
officer shall submit to the Bangko Sentral standards, initiatives and specific
the required certifications and other responsibilities and accountabilities for
documentary proof of such qualifications each bank personnel. Bank officers shall
using Appendix 98 as guide within oversee the performance of these delegated
twenty (20) banking days from the date of duties and responsibilities and shall
meeting of the board of directors in which ultimately be responsible to the board of
the officer is appointed/promoted. Non- directors for the performance of the bank.
submission of complete documentary d. To promote and strengthen checks
requirements within the prescribed period and balances systems in the BSFI. Bank

§§ X145.2 - X146.1
17.09.30
officers shall promote sound internal package shall take into account the
controls and avoid activities that shall employee’s position, role, responsibilities
compromise the effective dispense of their and activities in the BSFI. It shall also
functions. Further, they shall ensure that consider the risks that the employee takes
they give due recognition to the importance on behalf of the BSFI. In this regard, it should
of the internal audit, compliance and be sensitive to prospective risks and risk
external audit functions. outcomes that have been realized and
(As amended by Circular Nos. 969 dated 22 August 2017, considers the overall performance of the
749 dated 27 February 2012) BSFI.
b. Remuneration and incentive pay-out
§ X145.3 Chief Executive Officer (CEO).
schedule should be sensitive to the time
The CEO shall be the overall-in-charge for
horizon of risk. The policy may include
the management of the business and affairs
provisions that defer payment until risk
of the BSFI governed by the strategic
outcomes are better known or provisions
direction and risk appetite approved by the
under which remuneration and incentives
board of directors. He shall be primarily
may be reduced or reversed if new facts
accountable to the board of directors in
emerge showing that the remuneration and
championing the desired conduct and
incentives paid was based on erroneous
behavior, implementing strategies, and in
assumptions, such as misreporting or if it is
promoting the long-term interest of the BSFI.
(As amended by Circular No. 969 dated 22 August 2017) discovered that the employee has failed to
comply with internal policies or legal
Sec. X146 (2017 - Related Party requirements.
Transactions; Policy Statement; 2014 - c. Remuneration of employees in risk
Profit Sharing Program) Remuneration and control functions (i.e., internal audit,
Other Incentives. The board of directors compliance, and risk management
shall approve a remuneration and other functions) shall be based on the achievement
incentives policy that is appropriate and of their objectives and shall be independent
consistent with the BSFI’s operating and risk of the business lines which they oversee.
culture, long-term business and risk appetite,
performance, and control environment. Said § X146.1 (2017 - Definition of terms)
policy shall cover all employees and should Profit sharing programs. Profit sharing
be designed to encourage good performance programs adopted in favor of directors,
that supports the interest of the BSFI and its officers, and employees shall be reflected
stakeholders. It shall be aligned with prudent in the by-laws of the BSFI, subject to the
risk-taking and explicitly discourage following guidelines:
excessive risk-taking as defined by internal a. The base in any profit sharing program
policies. The board of directors or a shall be the net income for the year of the
board-level committee (e.g., corporate bank as shown in its Consolidated Statement
governance committee) shall monitor and of Income and Expenses for the year, net of
review the remuneration and other the following:
incentives policy including plans, processes (1) All cumulative dividends accruing to
and outcomes, at least annually, to ensure preferred stock to the extent not covered by
that it operates and achieves the objectives earned surplus;
as intended. (2) Accrued interest receivable credited
BSFIs shall consider the following in the to income but not yet collected, net of
design of the remuneration and other reserves already set up for uncollected
incentives policy: interest on loans;
a. The remuneration and incentives (3) Unbooked valuation reserves on

§§ X146.1 - X146.2
17.09.30
loans or the amount required to update financing the housing. transportation, and
valuation reserves in accordance with the personal needs of the officers. In this
schedule approved by the Monetary Board, regard, the board of directors shall identify
as well as all amortizations due on deferred specific purposes eligible for said credit
charges; accommodations to officers to promote
(4) Provisions for current year’s taxes; good performance and acceptable
(5) Income tax deferred for the year: risk-taking behavior consistent with the
Provided, however, That in case of reversal BSFI’s operating and risk culture, long-term
of deferred income taxes which were business and risk appetite, performance,
deducted from net income in computing for and control environment. BSFIs shall submit
profit sharing of previous years, the deferred the board-approved purposes for the
income tax reversed to expense shall be grant of loans, advances, or any other
added back to net income to arrive at the forms of credit accommodations to officers
base for profit sharing for the year during for approval of the Bangko Sentral. The
which the reversal is made; and guidelines and contractual provisions
(6) Accumulated profits not yet received implementing said defined purposes, and
but already recorded by a bank representing any subsequent changes thereto, shall
its share in profits of its subsidiaries under on the other hand, be approved by the
the equity method of accounting; board of directors or a board-level
b. The bank may provide in its by-laws committee.
for other priorities in the computation of net Transitory provision. Existing financing
profits for purposes of profit sharing: programs for officers that have been
Provided, That in no case shall profit sharing approved by the Bangko Sentral prior to 14
take precedence over any of the items in the September 2017, need not be resubmitted:
preceding paragraph; and Provided, That BSFIs that shall change any
c. Prior approval of the Monetary Board of the provisions of the earlier approved
shall be necessary before a bank which has program shall submit for approval of the
received financial assistance from the Bangko Sentral the board-approved purposes
Bangko Sentral may implement its profit for the grant of loans, advances, or any other
sharing program. Financial assistance shall forms of credit accommodations to officers.
refer to emergency loans and advances and a. Funding by foreign banks. In the case
such other forms of credit accommodations of local branches of foreign banks, financial
which are intended to provide banks with assistance for their officers and employees
liquidity in times of need. may be funded, through any of the following
(As amended by Circular Nos. 969 dated 22 August 2017, means:
895 dated 14 December 2015)
(1) Through a local affiliate by special
§ X146.2 (2017 - Duties and arrangement with the head office abroad in
responsibilities/roles and functions) any of the following forms:
Loans, advances, and other credit (a) Inward remittance from the head
accommodations to officers. BSFIs may office of the affiliate; or
grant loans, ad vances, or any (b) Assignment to the affiliate of
other forms of credit accommodations to equivalent amounts of profits otherwise
their officers as part of a board-approved remittable abroad under existing
remuneration and incentive program. The regulations; or
board of directors shall ensure that these (c) Direct loans by the foreign bank to
credit accommodations are granted for the affiliate; or
legitimate purposes, such as among others, (2) Through the local branch itself by:
.

§§ X146.2 - X146.3
17.09.30
(a) Segregation or transfer of undivided regular report on “availments of financial

profits normally remitted to the head office assistance to officers and employees” to the
abroad equivalent to the loans to officers BSP within fifteen (15) banking days after
and employees which shall be lodged under end of reference semester.
“Other Liabilities-Head Office Accounts”. The appropriate department of the SES
This account shall at all times have a balance may further require banks to submit such
equivalent to the outstanding loans to data or information as may be necessary to
officers/employees financed under this facilitate verification of such transactions by
scheme; or Bangko Sentral examiners.
(b) Inward remittance; or (As amended by Circular No. 969 dated 22 August 2017)
(3) Through the local branch from local
sources without earmarking an equivalent § X146.3 (2017 - Disclosure and
amount of undivided profits: Provided, That regulatory reporting) Compensation and
the aggregate ceilings on such loans as other benefits of directors and officers. To
provided under existing regulations shall protect the funds of depositors and creditors,
apply. the Monetary Board may regulate/restrict the
Loans under Items “(2)(a)” and “(2)(b)” payment by the BSFI of compensation,
of this Subsection shall be treated in the allowances, fees, bonuses, stock options,
branch books as loans granted by its head profit sharing and fringe benefits to its
office. The documentation and collection directors and officers in exceptional cases
of such loans shall be handled by the branch and when the circumstances warrant, such
for the account of the head office. as, but not limited to the following:
Loans financed under Items “(1)” and a. When the bank is under
“(2)” shall be excluded from the controllership, conservatorship or when it
computation of the capital to risk assets ratio. has outstanding emergency loans and
b. Other conditions/limitations. advances and such other forms of credit
(1) The investment by a bank in accommodation from the Bangko Sentral
equipment and other chattels under its fringe which are intended to provide it with
benefits program for officers and employees liquidity in times of need;
shall be included in determining the extent b. When the institution is found by the
of the investment of the bank in real estate Monetary Board to be conducting business
and equipment for purposes of Section 51 in an unsafe or unsound manner;
of R.A. No. 8791. c. When it is found by the Monetary
(2) The investment by a bank in Board to be in an unsatisfactory financial
equipment and other chattels contemplated condition such as, but not limited to, the
under these guidelines shall not be for the following cases:
purpose of profits in the course of business (1) Its capital is impaired;
for the bank. (2) It has suffered continuous losses from
(3) The aggregate outstanding loans and operations for the past three (3) years;
other credit accommodations granted under (3) Its composite CAMEL(S) rating in the
the bank’s fringe benefits program, inclusive latest examination is below “3”; and
of those granted to officers in the nature of (4) It is under rehabilitation by the
lease with option to purchase, shall not Bangko Sentral/PDIC which rehabilitation
exceed five percent (5%) of the bank’s total may include debt-to-equity conversion, etc.
loan portfolio. In the presence of any one (1) or more
Banks providing financial assistance to of the circumstances mentioned above, the
their officers/employees shall submit a Monetary Board may impose the following
Manual of Regulations for Banks Part I - Page 82c

§§ X146.3 - X147.1
17.09.30
restrictions in the compensation and other and to the entire group where said
benefits of directors and officers: institutions belong. ln this regard, related
a. In the case of profit sharing, the party transactions are generally allowed:
provision of Subsec. X146.1 shall be Provided, That these are done on an arm’s
observed except that for purposes of this length basis. The Bangko Sentral expects
Section, the total amount of unbooked banks, including their non-bank financial
valuation reserves and deferred charges shall subsidiaries and affiliates, to exercise
be deducted from the net income. appropriate oversight and implement
b. Except for the financial assistance to effective control systems for managing said
meet expenses for the medical, maternity, exposures as these may potentially lead to
education and other emergency needs of the abuses that are disadvantageous to the bank
directors or officers or their immediate and its depositors, creditors, fiduciary
family, the other forms of financial clients, and other stakeholders.
assistance may be suspended. (As amended by Circular Nos. 969 dated 22 August 2017, 917
c. When the total compensation dated 08 July 2016 and 895 dated 14 December 2015)
package including salaries, allowances, fees
and bonuses of directors and officers are § X147.1 (2017 - Profit sharing
significantly excessive as compared with programs) RPT policies/roles of senior
peer group averages, the Monetary Board management and self-assessment
may order their reduction to reasonable functions.
levels: Provided, That even if a bank is in a. The RPT policies shall include, but
financial trouble, it may nevertheless be not be limited to the following:
allowed to grant relatively higher salary (1) Definition of related parties. The
packages in order to attract competent policy shall clearly define “related parties”.
officers and quality staff as part of its It shall identify persons and companies that
rehabilitation program. are considered the BSFI’s related parties. The
The foregoing provisions founded on policy shall require management to
Section 18 of R.A. No. 8791 shall be periodically review and update the
deemed part of the benefits and inventory of related parties to capture
compensation programs of banks. organizational and structural changes in the
(As amended by Circular Nos. 969 dated 22 August 2017 and BSFI and its related parties.
895 dated 14 December 2015) (2) Coverage of RPT policy. The coverage
of the RPT policy shall capture a broader
§ X146.4 Applicability to branches of spectrum of transactions, covering not only
foreign banks. those that give rise to credit and/or
(Renumbered by Circular No. 969 dated 22 August 2017)
counterparty risks but also those that could
§ X146.5 Supervisory enforcement pose material/special risk or potential abuse
actions. to the BSFI and its stakeholders.
(Renumbered by Circular No. 969 dated 22 August 2017) Transactions that were entered into
with an unrelated party that subsequently
Sec. X147 (2017 - Profit Sharing/ becomes a related party may be excluded
Compensation and Other Benefits) Related from the limits and approval process
Party Transactions; Policy Statement. required in the policy. However, any
The Bangko Sentral recognizes that alteration to the terms and conditions, or
transactions between and among related increase in exposure level, related to these
parties create financial, commercial and transactions after the non-related party
economic benefits to individual institutions becomes a related party shall subject the
Part I - Page 82d Manual of Regulations for Banks

§ X147.1
17.09.30
RPT to the requirements of the policy. The Materiality threshold may be set for each
prospective treatment should, however, be type of transaction and for each related party
without prejudice to supervisory actions group, depending on the nature of the
that may be enforced for transactions noted transaction and risks involved. The RPT
to have not been conducted on an arm’s policy may also identify transactions
length basis. excluded from the materiality threshold
(3) Guidelines in ensuring arm’s length requirement, such as transactions
terms. The policy shall have clear guidelines concerning deposit operations, regular trade
in ensuring that RPTs are conducted in the transactions involving purchases and sales
regular course of business and not of debt securities traded in an active market,
undertaken on more favorable economic and those granted under Bangko Sentral
terms (e.g., price, commissions, interest approved fringe benefit programs. Materiality
rates, fees, tenor, collateral requirement) to threshold levels will vary from one BSFI to
such related parties than similar transactions another depending on the nature, scope,
with non-related parties under similar frequency, value of, and risks associated
circumstances. This shall include guidance with the RPT. The BSFI shall document the
for an effective price discovery mechanism justifications for the materiality thresholds
to ensure that transactions are engaged into and exclusions set.
at terms that promote the best interest of The Bangko Sentral may direct a BSFI to
the BSFI and its stakeholders. The price reduce its materiality threshold or amend
discovery mechanism may include, but not excluded transactions if the Bangko Sentral
limited to, acquiring the services of an deems that the threshold or exclusion is
external expert, opening the transaction to inappropriate considering the BSFI’s size,
a bidding process, or publication of available risk profile, and risk management systems.
property for sale. (6) Internal limits for individual and
(4) Conflicts of interest. The policy shall aggregate exposures. To ensure that RPTs
cover the identification and prevention or are within prudent levels, the policy shall,
management of potential or actual conflicts in addition to existing prudential limits
of interest which may arise. The members which shall be complied with at all times,
of the board of directors, stockholders, and include internal limits or sub-limits for
management shall disclose to the board of individual and aggregate exposures to a
directors whether they directly, indirectly related party and for aggregate exposures to
or on behalf of third parties, have a financial all related parties that are consistent with
interest in any transaction or matter affecting the BSFI’s risk appetite, risk profile, and
the BSFI. Directors and officers with capital strength.
personal interest in the transaction shall The internally-set limits shall be tied in
abstain from the discussion, approval and with the BSFI’s internal definition of capital.
management of such transaction or matter Breaches in limits shall be reported to the
affecting the BSFI. board of directors with the decision of the
(5) Materiality thresholds and excluded board of directors to accept the exposure or
transactions. The policy shall include to take steps to address the breaches, as may
materiality thresholds for RPTs, which shall be necessary, duly documented in the
be set at a level where omission or minutes of meetings.
misstatement of the transaction could pose (7) Whistleblowing mechanisms. The
significant risk to the BSFI and could policy shall include effective
influence the economic decisions of its whistleblowing mechanisms consistent
board of directors. with the corporate values and codes of
Manual of Regulations for Banks Part I - Page 82e

§§ X147.1 - X147.2
17.09.30
conduct set by the board of directors. The parties. It shall aid in the review of the BSFI’s
policy shall encourage employees to transactions and identify any potential RPT
communicate, confidentially and without that would require review by the Board or
the risk of reprisal, legitimate concerns about RPT Committee. It shall ensure that the RPT
illegal, unethical or questionable RPTs. It policy is kept updated and is properly
shall include guidance on how and by implemented throughout the BSFI.
whom legitimate material concerns should (As amended by Circular Nos. 969 dated 22 August 2017,
be reported, investigated and addressed by 895 dated 14 December 2015, )
an objective independent internal or
external body, senior management and/or § X147.2 (2017 - Compensation and
the board of directors itself. other benefits of directors and officers)
(8) Restitution of losses and other Disclosure and regulatory reporting. Banks
remedies for abusive RPTs. The policy shall shall adequately disclose in their Annual
include measures that would cut losses and Report, if applicable, the overarching
allow recovery of losses or opportunity policies and procedures for managing RPTs,
costs incurred by the BSFI arising from RPTs including managing of conflicts of interest
that are not engaged on arm’s length terms. or potential conflicts of interest;
The policy shall also include the manner of responsibility of RPT Committee; nature,
handling personnel, officers or directors, terms and conditions, as well as original and
who have been remiss in their duties in outstanding individual and aggregate
handling RPTs. balances, including off-balance sheet
The overarching policy will consolidate commitments, of material RPTs.
all existing policies that address the above In addition to the required reports on
requirements or may make reference to DOSRI and transactions with subsidiaries
already existing policies. and affiliates under existing regulations:
b. Roles of senior management and a. UBs/KBs that are part of
self-assessment functions. Senior conglomerates shall report all entities in the
management shall implement appropriate conglomerate structure where it belongs.
controls to effectively manage and monitor The conglomerate structure shall likewise
RPTs on a per transaction and aggregate disclose beneficial owners of shareholdings
basis. Exposures to related parties shall also that are in the name of PCD Nominee
be monitored on an ongoing basis to ensure Corporation. The report on conglomerate
compliance with the BSFI’s policy and structure shall be submitted to the Bangko
Bangko Sentral’s regulations. Sentral within thirty (30) calendar days after
The internal audit function shall conduct the end of every calendar year.
a periodic formal review of the effectiveness b. Banks shall submit a report on
of the BSFI’s system and internal controls material exposures to related parties, which
governing RPTs to assess consistency with shall include the material RPTs of their
the board-approved policies and procedures. non-bank financial subsidiaries and
The resulting audit reports, including affiliates, based on the bank’s internal
exceptions or breaches in limits, shall be definition within twenty (20) calendar days
communicated directly to the audit after the end of the reference quarter starting
committee. with the quarter ending 31 March 2016.
The compliance function shall ensure Supervised non-bank financial subsidiaries
that the BSFI complies with relevant rules and affiliates are therefore expected to report
and regulations and is informed of regulatory their material RPTs to the parent bank,
developments in areas affecting related which in turn shall report same to the
Part I - Page 82f Manual of Regulations for Banks

§§ X147.2 - X148.1
17.09.30
Bangko Sentral. the requirements set forth in the guidelines

Transactions concerning deposit under this Section and bring about timely
operations, credit card availments, regular corrective actions and compliance with
trade transactions involving purchases and Bangko Sentral directives. The Bangko
sales of debt securities traded in an active Sentral considers abuses in credit to related
market, are excluded from the reporting parties as serious offenses and shall be dealt
requirement to Bangko Sentral: Provided, with severely. In this regard, abuse shall be
That credit card lines with amounts falling interpreted to include extending credit to
within the definition of “material related parties without adopting appropriate
transactions” shall be reported to the Bangko internal policies. For this purpose, the
Sentral upon approval of the line. Bangko Sentral may, among others, issue
Lease contracts and other similar directives or sanctions on the bank and
contracts with recurring payment responsible persons, which may include
transactions shall only be reported once, restrictions or prohibitions of lending to
upon approval of said transaction by the related parties or from certain authorities/
board of directors. In case the parties activities, restrictions or prohibitions on
involved in the transactions are both dividend declarations; and warning,
supervised by the Bangko Sentral, only the reprimand, suspension, removal and
lessor, in case of a lease contract, or the disqualification of bank directors, officers and/
party engaging/requesting for the services or employees concerned.
of the other bank, in case of other contracts, (Circular No. 895 dated 14 December 2015, as amended by Circular
shall submit the report. Nos. 969 dated 22 August 2017 and 914 dated 23 June 2016)
This section amends the reporting
Sec. 1147 (Reserved)
requirement on group structure and the
report on significant transactions required
Sec. 2147 (Reserved)
under Item “d(8)” Subsec. X143.1.
Sec. 3147 Bonding/Training of Directors,
§ X147.3 ( 2017 - X146.4) Applicability Officers and Employees.
to branches of foreign banks. The (Deleted by Circular No. 969 dated 22 August 2017)
governance principles and requirements
embodied in this Section shall be complied Sec. X148 (2017 - Real Estate and Chattel
with by branches of foreign banks, to the Transactions with DOSRI and Employees)
extent possible, given their distinct Confirmation of the Election/Appointment
organizational set-up. The General Manager of Directors/Officers; Bio-data of
or Country Manager is the principal officer Directors and Officers; Interlocking
that will oversee the implementation of the Directorships and/or Officerships; Rules of
governance principles embodied in this Procedures on Administrative Cases
Section. Branches of foreign banks are not Involving Directors and Officers of
covered by the reportorial requirement on BSFIs.
conglomerate structure.
(Circular No. 895 dated 14 December 2015, as amended by
§ X148.1 [2017 - Certification on real
estate/ chattel transactions with DOSRI and
§ X147.4 (2017 - X146.5) Supervisory employee(s)] Confirmation of election/
enforcement actions. The Bangko Sentral appointment of directors/officers.
reserves the right to deploy its range of a. Confirming authority. The election/
supervisory tools to promote adherence to appointment of directors/officers shall be
Manual of Regulations for Banks Part I - Page 82g

§ X148.1
17.09.30
subject to confirmation by the following: reports, the appropriate supervising
Confirming Authority Position Level department of the SES does not advise the
a. Monetary Board Directors and CEO of UBs BSFI concerned against said election/
and KBs, including their appointment.
subsidiary banks, QBs, trust
corporations1 and NBFIs However, the confirmation by the
with trust authority; of Monetary Board/SES Committee of the
stand-alone Islamic Banks, election/appointment to above-mentioned
TBs, RBs, Coop Banks, QBs position levels shall not be required in the
and NBFIs with trust
following cases:
authority with total assets of
at least P10.0 billion; and (1) Re-election of a director (as a
of trust corporations with director) in the same BSFI or election of
assets under management of the same director in another bank, QB, trust
at least P10.0 billion. corporation, and NBFI with trust authority
b. SES Committee Directors and CEO of
stand-alone Islamic Banks, within a banking group;
TBs, RBs, Coop Banks, QBs, (2) Re-election of an independent
and NBFIs with trust authority director (as an independent director or not)
with total assets of less than in the same BSFI or election of the same
P10.0 billion; and of trust
director (as an independent director or not)
corporations1 with assets
under management of less in another bank, QB, trust corporation, and
than P10.0 billion. NBFI with t rust authority within a banking
Treasurer and heads of group; and
internal audit, risk management (3) Promotion of an officer, other than to
and compliance functions, and
and other officers with rank of that which requires (a) prior Monetary Board
senior vice president and approval, or (b) a different set of minimum
above president and above ( or qualifications, or (c) a different level of confirming
equivalent ranks) of UBs and authority as provided in the first paragraph
KBs and their subsidiary banks,
hereof, in the same bank or appointment/transfer
QBs, trust corporations, and
NBFIs with trust authority; of to another bank, QB, trust corporation, and NBFI
stand-alone Islamic Banks, TBs with trust authority within a banking group:
RBs, Coop Banks, QBs and Provided, That the director/officer
NBFIs with trust authority; and of concerned has been previously confirmed
trust corporations.
Trust Officer regardless of rank by the Monetary Board, or if previously
of banks/QBs/NBFIs as confirmed by the SES Committee, his/her
provided in Subsec. X406.10. re-election/promotion/transfer requires the
same level of confirming authority as
Provided, That BSFIs shall report to the provided in the first paragraph hereof:
appropriate department of the SES, any Provided, further, That said director/officer
succeeding resignation, retirement, or has had continuous service within the
replacement of directors/officers as same BSFI or banking group. This
mentioned within twenty (20) banking days exemption shall apply to directors/officers
after such resignation/retirement/ confirmed by the Monetary Board/SES
replacement. Committee starting 01 January 2011.
The election/appointment of The appointment of officers below the
abovementioned directors/officers shall be rank of Senior Vice President (SVP) other
deemed to have been confirmed by the than the Treasurer, trust officer, and heads
Bangko Sentral, if after sixty (60) banking days of internal audit, risk management, and
from receipt of the complete required compliance functions regardless of rank
1
As defined under Subsec. 4102T.1 of MORNBFI-T
Part I - Page 82h Manual of Regulations for Banks

§§ X148.1 - X148.2
17.09.30
shall be subject neither to Monetary Board time directors/officers within a particular
approval nor Bangko Sentral confirmation. bank/banking group whose election/
For purposes of this Subsection, the term appointment requires Monetary Board/SES
banking group shall refer to the parent bank Committee confirmation, the duly notarized
and its subsidiary banks, QBs, trust entities, authorization form per Appendix 76, within
and other NBFIs other than stand-alone and twenty (20) banking days from the date of
trust corporations as well as other banks, election/re-election of the directors/meeting
QBs, trust entities, and other NBFIs other of the board of directors in which the
than stand-alone and trust corporations officers are appointed/promoted, in
over which the parent bank has the accordance with Appendix 6.
power to exercise “control as defined in The bio-data shall be updated and
Subsec. X141.1. submitted in cases of change of name due
The required certifications and other to change in civil status and change of
documentary proof of qualifications for the residential address, within twenty (20)
confirmation of the election/appointment of banking days from the date the change
directors/officers, and approval of the occurred, and in cases of requests for prior
appointment of compliance officers of Monetary Board approval of interlocks.
banks/QBs/NBFI with trust authority/trust For other officers below the rank of SVP
corporations are shown in Appendix 98. other than the treasurer, trust officer, and
Non-submission of complete documentary heads of internal audit, risk management,
requirements within the prescribed period and compliance functions regardless of rank,
shall be construed as his/her failure to establish the BSFI shall not be required to submit their
his/her qualifications for the position. bio-data to the Bangko Sentral.
A director/officer whose election/ b. The bank shall, however, keep a
appointment was not confirmed for failure to complete record of the bio-data of all its
submit the complete documentary directors and officers and shall maintain a
requirements shall be deemed removed system of updating said records which shall
from office after due notice to the board of be made available during on-site
directors of the BSFI, even if he has assumed
examination or when required by the
the position to which he was elected/
Bangko Sentral for submission for off-site
appointed, pursuant to Section 16 of R.A.
verification.
No. 8791.
(CL-2011-045 dated 01 July 2011, as amended by Cir. Nos. 969
c. Banks shall also submit to the
dated 22 August 2017,887dated 07 October 2015, 758 dated 11 appropriate department of the SES, a duly
May 2012 and Cir. No. 766 dated 17 August 2012) notarized list of the incumbent members
of the board of directors and officers
§ X148.2 (2017 - X144) Bio-data of (president or equivalent rank, down the line,
directors and officers. format attached as Appendix 98b), within
a. BSFI shall submit to the appropriate twenty (20) banking days from the annual
department of the SES a bio-data with election of the board of directors as provided
ID picture of their (1) directors and officers in the bank’s by-laws, in accordance with
who are subject to confirmation under Appendix 6.
Subsec. X148.1, or (2) officers below the d. If after evaluation, the appropriate
rank of SVP requiring a different set of department of the SES shall find grounds for
minimum qualifications, upon every disqualification, the director/officer so
e l e c t i o n / re- elect ion/appointment/ elected/re-elected/appointed/promoted may
promotion in a prescribed form and for first be recommended for removal from office
Manual of Regulations for Banks Part I - Page 82i

§§ X148.2 - X148.3
17.09.30
even if he/she has assumed the position to a. Interlocking directorships

which he/she was elected/re-elected/ While concurrent directorship may be
appointed/promoted pursuant to Section 16 the least prejudicial of the various
of R.A. No. 8791. relationship cited in this Section to the
In the case of the independent directors, interests of the FIs involved, certain
the bio-data shall be accompanied by a measures are still necessary to safeguard
certification under oath from the director against the disadvantages that could result
concerned that he is an independent director from indiscriminate concurrent directorship.
as defined under Item “g” Subsec. X141.1. (1) Except as may be authorized by the
(Circular No. 969 dated 22 August 2017) Monetary Board or as otherwise provided
hereunder, there shall be no concurrent
§ X148.3 Interlocking directorships directorships between banks or between a
and/or officerships. In order to safeguard bank and a QB or an NBFI.
against the excessive concentration of (2) Without the need for prior approval
economic power, unfair competitive of the Monetary Board, concurrent
advantage or conflict of interest situations directorships between entities not involving
to the detriment of others through the an investment house shall be allowed in the
exercise by the same person or group following cases:
of persons of undue influence over the (a) Banks not belonging to the same
policy-making and/or management functions category: Provided, That not more than
of similar FIs while at the same time one (1) bank shall have quasi-banking functions;
allowing banks, QBs and non-bank financial (b) A bank and an NBFI;
institutions (NBFIs) without quasi-banking (c) A bank without quasi-banking
functions to benefit from organizational functions and a QB; and
synergy or economies of scale and effective (d) A bank and one (1) or more of its
sharing of managerial and technical subsidiary bank/s, QB/s and NBFI/s.
expertise, the following regulations shall For purposes of the foregoing, a
govern interlocking directorships and/or husband and his wife shall be considered
officerships within the financial system as one (1) person.
consisting of banks, QBs and NBFIs. b. Interlocking directorships and
For purposes of this Section, QBs shall officerships
refer to investment houses, finance In order to prevent any conflict of
companies, trust entities and all other NBFIs interest resulting from the exercise of
with quasi-banking functions while NBFIs directorship coupled with the reinforcing
shall refer to investment houses, finance influence of an officer’s decision-making
companies, trust entities, insurance and implementing powers, the following
companies, securities dealers/brokers, credit rules shall be observed:
card companies, non-stock savings and loan (1) Except as may be authorized by the
associations (NSSLAs), holding companies, Monetary Board or as otherwise provided
investment companies, government NBFIs, hereunder, there shall be no concurrent
asset management companies, insurance directorship and officership between banks
agencies/brokers, venture capital or between a bank and a QB or an NBFI;
corporations, FX dealers, money changers, and
lending investors, pawnshops, fund (2) Without the need for prior approval
managers, mutual building and loan of the Monetary Board, concurrent
associations, remittance agents and all other directorship and officership between a bank
NBFIs without quasi-banking functions. and one (1) or more of its subsidiary bank/s,
Part I - Page 82j Manual of Regulations for Banks

§ X148.3
17.09.30
QB/s and NBFI/s, other than investment Aforementioned concurrent officerships

house/s, shall be allowed. may be allowed, subject to the following
c. Interlocking officerships conditions:
A concurrent officership in different FIs (a) that the positions do not involve any
may present more serious problems of functional conflict of interests;
self-dealing and conflict of interest. Multiple (b) that any officer holding the positions
positions may result in poor governance or of president, chief executive officer, chief
unfair competitive advantage. Considering operating officer or chief financial officer or
the full-time nature of officer positions, the their equivalent may not be concurrently
difficulties of serving two (2) offices at the appointed to any of said positions or their
same time, and the need for effective and equivalent;
efficient management, the following rules (c) that the officer involved, or his spouse
shall be observed: or any of his relatives within the first degree
As a general rule, there shall be no of consanguinity or affinity or by legal
concurrent officerships between banks or, adoption, or a corporation, association or
between a bank and a QB or a NBFI1. firm wholly- or majority-owned or
In the case of non-governmental controlled by such officer or his relatives
organizations (NGOs)/foundations that are enumerated above, does not own in his/its
engaged in retail microfinance operations, own capacity more than twenty percent
as defined under Item “e(8)” of Subsec. X326.1, (20%) of the subscribed capital stock of the
BSFI officers are prohibited from holding entities in which the bank has equity
officership position or other positions that
investments; and
may cause them to be involved in the daily
(d) that where any of the positions involved
microfinance operations of related NGOs/
is held on full-time basis, adequate justification
foundations.
shall be submitted to the Monetary Board; or
However, subject to prior approval of the
(4) Concurrent officership positions in the
Monetary Board, concurrent officerships, may
same capacity which do not involve
be allowed in the following cases:
management functions, i.e., internal auditor,
(1) Between a bank and not more than
two (2) of its subsidiary bank/s, QB/s, and corporate secretary, assistant corporate
NBFI/s, other than investment house/s; or secretary and security officer, between a bank
(2) Between a bank and not more than and one or more of its subsidiary QB/s and
two (2) of its subsidiary QB/s and NBFI/s; NBFI/s, or between bank/s, QB/s and NBFI/s,
or other than investment house/s: Provided,
(3) Between two (2) banks, or between That at least twenty percent (20%) of the
a bank and a QB or an NBFI, other than an equity of each of the banks, QBs and NBFI/s
investment house: Provided, That at least is owned by a holding company or by any
twenty percent (20%) of the equity of each of the banks/QBs within the group.
of the banks, QBs or NBFIs is owned by a (5) Concurrent officership positions as
holding company or a bank/QB and the corporate secretary or assistant corporate
interlocking arrangement is necessary for secretary between bank/s, QB/s and NBFI/s,
the holding company or the bank/QB to other than investment house/s, outside of
provide technical expertise or managerial those covered under Item “c(4)” of this
assistance to its subsidiaries/affiliates. Subsection: Provided, That proof of
1
BSFI officers, who concurrently held officership position or other positions that caused them to be involved
in the daily microfinance operations of related NGOs/ foundations, were given up to 30 September 2011 to
relinquish such officer position.
Manual of Regulations for Banks Part I - Page 82k

§§ X148.3 - X149
17.09.30
disclosure to and consent from all of the holding voting shares of stock of banks
involved FIs, on the concurrent officership unless otherwise provided under existing
positions, shall be submitted to the Bangko laws.
Sentral. (As amended by Circular Nos. 969 dated 22 August 2017,
953 dated 27 March 2017, 851 dated 30 September 2014and
For purposes of this Subsection,
725 dated 26 June 2011, M-2011-033 dated 15 June 2011,Circular
members of a group or committee, Nos. 646 dated 23 February 2009 and 592 dated 28 December
including sub-groups or sub-committees, 2007)
whose duties include functions of
management such as those ordinarily § X148.4 Rules of procedures on
performed by regular officers, shall likewise administrative cases involving directors
be considered as officers. and officers of BSFIs. The rules of
It shall be the responsibility of the procedure on administrative cases involving
corporate governance committee to conduct directors and officers of BSFIs are shown in
an annual performance evaluation of the Appendix 64.
board of directors and senior management. (Circular No. 969 dated 22 August 2017)
When a director or officer has multiple
positions, the committee should determine §§ X148.5 – X148.8 (Reserved)
whether or not said director or officer is able
to and has been adequately carrying out his/ § X148.9 Sanctions.
her duties and, if necessary, recommend
changes to the board based upon said
Sec. X149 Conducting Business in an
performance/review.
Unsafe/Unsound Manner. Whether a
The general principles and standards
particular activity may be considered as
that will govern the business relationships
conducting business in an unsafe or
between banks and their related NGOs/
foundations engaged in retail microfinance unsound manner, all relevant facts must be
are found in Appendix 27. considered. An analysis of the impact
d. Secondment thereof on the bank’s operations and
A BSFI may second or transfer its financial conditions must be undertaken,
employee to another entity for temporary including evaluation of capital position,
assignment: Provided, That it has a board- asset condition, management, earnings
approved policy on secondment and that the posture and liquidity position.
transfer of the employee is approved by the In determining whether a particular act
appropriate authority of the BSFI: Provided, or omission, which is not otherwise
further, That the secondee or the transferred prohibited by any law, rule or regulation
employee shall relinquish all his duties, affecting banks, may be deemed as
responsibilities, and authorities in the BSFI, conducting business in an unsafe or
and shall receive remuneration and other unsound manner, the Monetary Board,
incentives from the host entity. BSFIs shall upon report of the head of the supervising
submit a notice within ten (10) banking days or examining department based on findings
from the approval of secondments of in an examination or a complaint, shall
employees to the appropriate supervising consider any of the following
department of the SES. circumstances:
e. Representatives of government a. The act or omission has resulted or
The provisions of this Section shall may result in material loss or damage, or
apply to persons appointed to such positions abnormal risk or danger to the safety,
as representatives of the government or stability, liquidity or solvency of the
government-owned or controlled entities institution;

§ X149 - X150.1
17.09.30
b. The act or omission has resulted or § X150.1 (2017 - X143.1) Persons

may result in material loss or damage or disqualified to become directors. Without
abnormal risk to the institution’s depositors, prejudice to specific provisions of law
creditors, investors, stockholders, or to the prescribing disqualifications for directors,
Bangko Sentral, or to the public in general; the following are disqualified from
c. The act or omission has caused any undue becoming directors:
injury, or has given unwarranted benefits, a. Permanently disqualified
advantage or preference to the bank or any party Directors/officers/employees permanently
in the discharge by the director or officer of his disqualified by the Monetary Board from
duties and responsibilities through manifest holding a director position:
partiality, evident bad faith or gross (1) Persons who have been convicted
inexcusable negligence; or by final judgment of a court for offenses
d. The act or omission involves entering involving dishonesty or breach of trust such
into any contract or transaction manifestly as, but not limited to, estafa, embezzlement,
and grossly disadvantageous to the bank, extortion, forgery, malversation, swindling,
whether or not the director or officer theft, robbery, falsification, bribery, violation
profited or will profit thereby. The list of of B.P. Blg. 22, violation of Anti-Graft and
activities which may be considered unsafe Corrupt Practices Act and prohibited acts
and unsound is shown in Appendix 48. and transactions under Section 7 of R.A. No.
(As amended by Circular No. 640 dated 16 January 2009) 6713 (Code of Conduct and Ethical
Standards for Public Officials and
§§ X149.1 – X149.7 (Reserved) Employees);
(2) Persons who have been convicted
§ X149.8 Reportorial requirement. For
by final judgment of a court sentencing them
purposes of determining market median rates
to serve a maximum term of imprisonment
on deposits and monitoring banks that rely
of more than six (6) years;
excessively on large, high-cost or volatile
(3) Persons who have been convicted
deposits/borrowings specified in Item “g” of
by final judgment of the court for violation
Appendix 48, all banks shall submit a
of banking laws, rules and regulations;
quarterly report on bank deposit interest rates
(4) Persons who have been judicially
which shall be included in the report of
declared insolvent, spendthrift or
selected branch accounts.
incapacitated to contract;
Guidelines on reportorial requirement for
(5) Directors, officers or employees of
bank interest rates is provided in Appendix
105. closed banks who were found to be
(Circular No. 848 dated 08 September 2014) culpable for such institution’s closure as
determined by the Monetary Board;
§ X149.9 Sanctions. (6) Directors and officers of banks found
(Deleted by Circular No. 969 dated 22 August 2017) by the Monetary Board as administratively
liable for violation of banking laws, rules
Sec. X150 (2017 - Rules of Procedure on and regulations where a penalty of removal
Administrative Case Involving Directors from office is imposed, and which finding
and Officers and Banks) Disqualification of the Monetary Board has become final and
and Watchlisting of Directors and Officers. executory; or
This Section shall also apply to Coop Banks. (7) Directors and officers of banks or any
(As amended by Circular Nos. 969 dated 22 August 2017 and
682 dated 15 February 2010)
person found by the Monetary Board to be

§ X150.1
17.09.30
unfit for the position of directors or officers Directors/officers/employees

because they were found administratively disqualified by the Monetary Board from
liable by another government agency for holding a director position for a specific/
violation of banking laws, rules and indefinite period of time. Included are:
regulations or any offense/violation (1) Persons who refuse to fully disclose
involving dishonesty or breach of trust, and the extent of their business interest or any
which finding of said government agency material information to the appropriate
has become final and executory. department of the SES when required
b. Temporarily disqualified pursuant to a provision of law or of a circular,

§ X150.1
17.09.30
memorandum, rule or regulation of the (iv) A partnership of which a director

Bangko Sentral. This disqualification shall or officer, or his/her spouse is the managing
be in effect as long as the refusal persists; partner or a general partner owning a
(2) Directors who have been absent or controlling interest in the partnership; and
who have not participated for whatever (v) A corporation, association or firm
reasons in more than fifty percent (50%) of wholly-owned or majority of the capital of
all meetings, both regular and special, of the which is owned by any or a group of
board of directors during their incumbency, persons mentioned in the foregoing
and directors who failed to physically attend Items “(i)”, “(ii)” and “(iv)”;
for whatever reasons in at least twenty-five This disqualification shall be in effect
percent (25%) of all board meetings in any as long as the delinquency persists.
year, except that when a notarized (4) Persons who have been convicted
certification executed by the corporate by a court for offenses involving dishonesty
secretary has been submitted attesting that or breach of trust such as, but not limited
said directors were given the agenda to, estafa, embezzlement, extortion, forgery,
materials prior to the meeting and that their malversation, swindling, theft, robbery,
comments/decisions thereon were falsification, bribery, violation of B.P. Blg. 22,
submitted for deliberation/discussion and violation of Anti-Graft and Corrupt Practices
were taken up in the actual board meeting, Act and prohibited acts and transactions
said directors shall be considered present under Section 7 of R.A. No. 6713,
in the board meeting. This disqualification violation of banking laws, rules and
applies only for purposes of the immediately regulations or those sentenced to serve a
succeeding election; maximum term of imprisonment of more
(3) Persons who are delinquent in the than six (6) years but whose conviction has
payment of their obligations as defined not yet become final and executory;
hereunder: (5) Directors and officers of closed banks
(a) Delinquency in the payment of pending their clearance by the Monetary
obligations means that an obligation of a Board;
person with a bank where he/she is a director (6) Directors disqualified for failure to
or officer, or at least two (2) obligations with observe/discharge their duties and
other banks/FIs, under different credit lines responsibilities prescribed under existing
or loan contracts, are past due pursuant to regulations. This disqualification applies
Sec. X306; until the lapse of the specific period of
(b) Obligations shall include all disqualification or upon approval by the
borrowings from a bank obtained by: Monetary Board on recommendation by the
(i) A director or officer for his own appropriate department of the SES of such
account or as the representative or agent of directors’ election/reelection;
others or where he/she acts as a guarantor, (7) Directors who failed to attend the
endorser or surety for loans from such FIs; special seminar for board of directors required
(ii) The spouse or child under the under Item “c” of Subsec. X141.2. This
parental authority of the director or officer; disqualification applies until the director
(iii) Any person whose borrowings or concerned had attended such seminar;
loan proceeds were credited to the account (8) Persons dismissed/terminated from
of, or used for the benefit of a director or employment for cause. This disqualification
officer; shall be in effect until they have cleared
Part I - Page 85a Manual of Regulations for Banks

§§ X150.1 - X150.2
17.09.30
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) Directors and officers of banks
showing good and justifiable reasons, or found by the Monetary Board as
after the lapse of five (5) years from the time administratively liable for violation of
they were officially advised by the banking laws, rules and regulations where
appropriate department of the SES of their a penalty of suspension from office or fine
disqualification; is imposed, regardless whether the finding
(9) Those under preventive suspension; of the Monetary Board is final and executory
(10) Persons with derogatory records as or pending appeal before the appellate court,
certified by, or on the official files of, the unless execution or enforcement thereof is
judiciary, NBI, Philippine National Police restrained by the court. The disqualification
(PNP), quasi-judicial bodies, other shall be in effect during the period of
government agencies, international police, suspension or so long as the fine is not fully
monetary authorities and similar agencies paid.
or authorities of foreign countries for (As amended by Circular Nos. 969 dated 22 August 2017, 584
irregularities or violations of any law, rules dated 28 September 2007, and 513 dated 10 February 2006)
and regulations that would adversely affect
the integrity of the director/officer or the § X150.2 (2017 - X143.2) Persons
ability to effectively discharge his duties. disqualified to become officers.
This disqualification applies until they have a. The disqualifications for directors
cleared themselves of the alleged mentioned in Subsec. X150.1 shall likewise
irregularities/violations or after a lapse of apply to officers, except those stated in
five (5) years from the time the complaint, Items “b(2)” and “b(7)”.
which was the basis of the derogatory b. The spouses or relatives within the
record, was initiated; second degree of consanguinity or affinity
(11) Directors and officers of banks are prohibited from holding officership
found by the Monetary Board as positions across the following functional
administratively liable for violation of categories within a bank:
banking laws, rules and regulations where 1. Decision making and senior
a penalty of removal from office is imposed, management function, e.g., chairman,
and which finding of the Monetary Board president, chief executive officer (CEO),
is pending appeal before the appellate court, chief operating officer (COO), general
unless execution or enforcement thereof is manager, and chief financial officer (CFO)
restrained by the court; other than the treasurer or controller;
(12) Directors and officers of banks or 2. Treasury function, e.g., Treasurer and
any person found by the Monetary Board Vice President – Treasury;
to be unfit for the position of director or 3. Recordkeeping and financial
officer because they were found reporting functions, e.g., controller and chief
administratively liable by another accountant;
government agency for violation of banking 4. Safekeeping of assets, e.g., chief
laws, rules and regulations or an offense/ cashier;
violation involving dishonesty or breach of 5. Risk management function, e.g., chief
trust, and which finding of said government risk officer;
agency is pending appeal before the 6. Compliance function, e.g., compliance
appellate court, unless execution or officer; and
Manual of Regulations for Banks Part I - Page 85b

§ X150.2 - X150.4
17.09.30
7. Internal audit function, e.g., internal abovementioned Subsections shall be

auditor. subject to the disqualification procedures
The spouse or a relative within the provided under Subsec. X150.4.
second degree of consanguinity or affinity (As amended by Circular Nos. 969 dated 22 August 2017, 758
of any person holding the position of dated 11 May 2012 and 513 dated 10 February 2006)
manager, cashier, or accountant of a branch
§ X150.4 (2017 - X143.4)
or extension office of a bank or their
Disqualification procedures.
respective equivalent positions is
a. The board of directors and
disqualified from holding or being
management of every institution shall be
appointed to any of said positions in the
responsible for determining the existence
same branch or extension office.
of the ground for disqualification of the
c. Any appointive or elective official1,
institution’s director/officer or employee and
whether full time or part time, except in
for reporting the same to the Bangko Sentral.
cases where such service is incident to
While the concerned institution may
financial assistance provided by the
conduct it own investigation and impose
government or government owned or
appropriate sanction/s as are allowable, this
-controlled corporations (GOCCs) or in
shall be without prejudice to the authority
cases allowed under existing law.
of the Monetary Board to disqualify a
d. In the case of Coop Banks, any officer
director/officer/employee from being
or employee of CDA or any elective public
elected/ appointed as director/officer in any
official, except a barangay official.
FI under the supervision of the Bangko
e. Except as may otherwise be allowed
Sentral. Grounds for disqualification made
under Commonwealth Act No. 108,
known to the institution, shall be reported
otherwise known as “The Anti-Dummy
to the appropriate department of the SES
Law”, as amended, foreigners cannot be
within seventy-two (72) hours from
officers or employees of banks.
knowledge thereof.
(As amended by Circular Nos. 969 dated 22 August 2017, 809
dated 23 August 2013 and 699 dated 17 November 2010) b. On the basis of knowledge and
evidence on the existence of any of the
§ X150.3 (2017 - X143.3) Effect of non- grounds for disqualification mentioned in
possession of qualifications or possession Subsecs. X150.1 and X150.2, the director
of disqualifications. A director/officer or officer concerned shall be notified in
elected/appointed who does not possess all writing either by personal service or
the qualifications mentioned under Subsecs. through registered mail with registry return
X142.3 and X145.1 and/or has any of the receipt card at his/her last known address
disqualifications mentioned under Subsecs. by the appropriate department of the SES of
X150.1 and X150.2 shall not be confirmed the existence of the ground for his/her
by the confirming authority under Subsec. disqualification and shall be allowed to
X148.1 and shall be removed from office submit within fifteen (15) calendar days from
even if he/she has assumed the position to receipt of such notice an explanation on
which he/she was elected or appointed why he/she should not be disqualified and
pursuant to Section 16 of R.A. No. 8791. A included in the watchlisted file, together
confirmed director/officer or officer not with the evidence in support of his/her
requiring confirmation found to possess any position. The head of said department may
of the disqualifications, enumerated in the allow an extension on meritorious ground.
1
In the case of RB, appointive and elective public officials currently holding officership positions shall continue
holding such position until the end of their current terms effective 13 September 2013.
Part I - Page 85c Manual of Regulations for Banks

§ X150.4
17.09.30
c. Upon receipt of the reply explanation recommend to the Monetary Board his/her
of the director/officer concerned, the delisting. On the other hand, if the director/
appropriate department of the SES shall officer concerned is found to be responsible
proceed to evaluate the case. for the closure of the institution, the
The director/officer concerned shall be concerned department of the SES shall
afforded the opportunity to defend/clear recommend to the Monetary Board his/her
himself/herself. delisting from the masterlist of temporarily
d. If no reply has been received from the disqualified persons and his/her inclusion
director/officer concerned upon the expiration in the masterlist of permanently disqualified
of the period prescribed under Item “b” above, persons.
said failure to reply shall be deemed a waiver g. If the disqualification is based on
and the appropriate department of the SES shall dismissal from employment for cause, the
proceed to evaluate the case based on appropriate department of the SES shall, as
available records/evidence. much as practicable, endeavor to establish
e. If the ground for disqualification is the specific acts or omissions constituting
delinquency in the payment of obligation, the the offense or the ultimate facts which
concerned director or officer shall be given a resulted in the dismissal to be able to
period of thirty (30) calendar days within determine if the disqualification of the
which to settle said obligation or, restore it to director/officer concerned is warranted or
its current status or, to explain why he/she not. The evaluation of the case shall be made
should not be disqualified and included in for the purpose of determining if
the watchlisted file, before the evaluation disqualification would be appropriate and
on his disqualification and watchlisting is not for the purpose of passing judgment on
elevated to the Monetary Board. the findings and decision of the entity
f. For directors/officers of closed banks, concerned. The appropriate department of the
the concerned department of the SES shall SES may decide to recommend to the
make appropriate recommendation to the Monetary Board a penalty lower than
Monetary Board clearing said directors/ disqualification (e.g., reprimand, suspension,
officers when there is no pending case/ etc.) if, in its judgment the act committed or
complaint or evidence against them. When omitted by the director/officer concerned does
there is evidence that a director/officer has not warrant disqualification.
committed irregularity, the appropriate h. All other cases of disqualification,
department of the SES shall make whether permanent or temporary shall be
recommendation to the Monetary Board elevated to the Monetary Board for approval
that his/her case be referred to the Office of and shall be subject to the procedures
Special Investigation (OSI) for further provided in Items “a”,”b”,”c” and “d” above.
investigation and that he/she be included i. Upon approval by the Monetary
in the masterlist of temporarily disqualified Board, the concerned director/officer shall
persons until the final resolution of his/her be informed by the appropriate department
case. Directors/officers with pending cases/ of the SES in writing either by personal
complaints shall also be included in said service or through registered mail with
masterlist of temporarily disqualified registry return receipt card, at his/her last
persons upon approval by the Monetary known address of his/her disqualification
Board until the final resolution of their cases. from being elected/appointed as director/
If the director/officer is cleared from officer in any FI under the supervision of
involvement in any irregularity, the Bangko Sentral and/or of his/her inclusion
appropriate department of the SES shall in the masterlist of watchlisted persons so
Manual of Regulations for Banks Part I - Page 85d

§§ X150.4 - X150.5
17.09.30
disqualified. following procedures:

j. The board of directors of the concerned a. Watchlist categories. Watchlisting
institution shall be immediately informed of shall be categorized as follows:
cases of disqualification approved by the (1) Disqualification File “A”
Monetary Board and shall be directed to act (Permanent) - Directors/officers/employees
thereon not later than the following board permanently disqualified by the Monetary
meeting. Within seventy-two (72) hours Board from holding a director/officer
thereafter, the corporate secretary shall report position.
to the Governor of the Bangko Sentral through (2) Disqualification File “B”
the appropriate department of the SES the (Temporary) - Directors/officers/employees
action taken by the board on the director/ temporarily disqualified by the Monetary
officer involved. Board from holding a director/officer
k. Persons who are elected or b. Inclusion of directors/officers/
appointed as director or officer in any of employees in the watchlist. Directors/
the BSP-supervised institutions for the first officers/employees disqualified under
time but are subject to any of the grounds Subsec. X150.4 shall be included in the
for disqualification provided for under watchlist disqualification files “A” or “B”.
Subsecs. X150.1 and X150.2, shall be c. Confidentiality. Watchlist files shall
afforded the procedural due process be for internal use only of the Bangko
prescribed above. Sentral and may not be accessed or queried
l. Whenever a director/officer is upon by outside parties including banks,
cleared in the process mentioned under QBs NBFIs with trust authority and trust
Item “c” above or, when the ground for corporations except with the authority of
disqualification ceases to exist, he/she the person concerned (without prejudice to
would be eligible to become director or the authority of the Governor and the
officer of any bank, QB, trust entity or any Monetary Board to authorize release of the
institution under the supervision of the information) and with the approval of the
Bangko Sentral only upon prior approval concerned SES Department Head or SES
by the Monetary Board. It shall be the Subsector Head or the Deputy Governor,
responsibility of the appropriate SES or the Governor or the Monetary Board.
department of the SES to elevate to the The Bangko Sentral will disclose
Monetary Board the lifting of the information on the persons included in its
disqualification of the concerned director/ watchlist files only upon submission of a
officer and his/her delisting from the duly notarized authorization from the
masterlist of watchlisted persons. concerned person and approval of such
request by the concerned SES Department
584 dated 28 September 2007)
Head or SES Subsector Head or the Deputy
§ X150.5 (2017 - X143.5) Watchlisting. Governor, SES or the Governor or the
To provide the Bangko Sentral with a central Monetary Board. The prescribed
information file to be used as reference in authorization form to be submitted to the
passing upon and reviewing the qualifications appropriate department of the SES is in
of persons elected or appointed as director or Appendix 76.
officer of a bank, QB or trust entity, the SES Banks can gain access to said
shall maintain a watchlist of persons information in the said watchlist for the sole
disqualified to be a director or officer of such purpose of screening their nominees/
entities under its supervision under the applicants for directors/officers and/or
Part I - Page 85e Manual of Regulations for Banks

§§ X150.5 - X151
17.09.30
confirming their elected directors and policies. Toward this end, the following are
appointed officers. Banks must obtain the the rules and regulations that shall govern
said authorization on an individual basis. the establishment, relocation, voluntary
d. Delisting. All delistings shall be closure and sale of local branches of
approved by the Monetary Board upon domestic banks, including locally
recommendation of the operating incorporated subsidiaries of foreign banks
departments of SES except in cases of and the establishment of branches of foreign
persons known to be dead where delisting banks in the Philippines shall continue to
shall be automatic upon proof of death and be governed by the provisions of Sec. X105
need not be elevated to the Monetary Board. on liberalized entry and scope of operations
Delisting may be approved by the Monetary of foreign banks and Sec. X153 on
Board in the following cases: establishment of sub-branches of foreign
(1) Watchlist - Disqualification File “B” banks branches1.
(Temporary) - For purposes of this Section and its
(a) After the lapse of the specific period Subsections, the following definitions shall
of disqualification; apply:
(b) When the conviction by the court Branch shall refer to any permanent
for crimes involving dishonesty, breach of office or place of business in the Philippines
trust and/or violation of banking law other than the head office where deposits
becomes final and executory, in which case are accepted and/or withdrawals are
the director/officer/employee is relisted to serviced by tellers or other authorized
Watchlist - Disqualification File “A” personnel. It maintains a complete set of
(Permanent); and books of accounts.
(c) Upon favorable decision or clearance Extension office shall refer to any
by the appropriate body, i.e., court, NBI, permanent office or place of business in the
Bangko Sentral, bank, QB, trust entity or Philippines other than the head office or a
such other agency/body where the
branch, where deposits are accepted and/
concerned individual had derogatory
or withdrawals are serviced by tellers
record.
or other authorized personnel. It does not
Directors/officers/employees delisted
maintain a complete set of books of
from the Watchlist - Disqualification File
accounts as its transactions are taken-up
“B” other than those upgraded to Watchlist
directly in the books of the head office or a
- Disqualification File “A” shall be eligible
branch to which it is attached. It shall be
for re-employment with any bank, QB or
treated as a branch for purposes of this
trust entity.
(As amended by Circular Nos. 969 dated 22 August 2017, 758
Section and its Subsections as well as in
dated 11 May 2012, CL-2007-001 dated 04 January 2007 and determining compliance with the applicable
CL-2006-046 dated 21 December 2006) minimum capital requirement under
Subsec. X111.1.
I. BANKING OFFICES Other banking office (OBO) shall refer
to any permanent office or place of business
Sec. X151 Establishment/Relocation/ in the Philippines other than the head office,
Voluntary Closure/Sale of Branches. The branch or extension office, which engages
Bangko Sentral shall promote and maximize in any or all of the following non-
the delivery of efficient and competitive transactional banking-related activities:
banking services especially to underserved a. Market loans, deposits and other bank
markets and customers through innovative products and services;
1
With additional special regulatory relief in areas affected by Tropical Depression “Yolanda” as provided
under Appendix 89a (Circular No. 820 dated 06 December 2013).
Manual of Regulations for Banks Part I - Page 85f
§ X151
16.12.31
b. Accept loan applications and conduct c. Host on-site automated teller

preliminary credit evaluation as well as machines (ATMs);
perform credit administration support d. Perform customer care services;
services; e. Perform customer identification
(Next page is Part 1 - Page 86)
Part I - Page 85g Manual of Regulations for Banks

§§ X151 - X151.1
16.12.31
process, receive account opening documents money out for electronic money (e-money)
and facilitate account activation: Provided, transactions;
That account opening approval and actual (7) Collect premiums/pay out benefits
opening of deposit accounts shall be done from/to members of social security
only at the head office/branches/ extension institutions such as the Government Service
offices; and Insurance System (GSIS), Social Security
f. Such other non-transactional banking System (SSS), Philippine Health Insurance
related activities as may be authorized by Corporation (Philhealth), Employees’
the Bangko Sentral.
Compensation Commission (ECC), and
An OBO may also be recognized as
“microfinance-oriented”. A microfinance- other government authorized pension and
oriented OBO (MF-OBO)/micro-banking benefit systems;
office (MBO) shall refer to an OBO that (8) Pay out benefits under government
primarily caters to the banking needs and sponsored conditional cash transfer schemes;
services of microfinance clients and overseas (9) Accept utilities payment; and
Filipinos (OFs) and their beneficiaries. As (10) Purchase foreign currencies up to the
contemplated under Appendix 45, maximum equivalent of USD300 per client
“microfinance clients” are micro-credit per day for credit to micro-deposit accounts;
borrowers and/or micro-depositors. subject to the following conditions:
In addition to the non-transactional (a) An MF-OBO/MBO shall only perform
banking-related activities and services the transactional activities it has specifically
allowable for regular OBOs, MF-OBO/ applied for and had been authorized by the
MBOs may also engage in any or all of the Bangko Sentral to perform. Subsequent
following limited transactional banking enhancements are likewise subject to prior
activities and services: Bangko Sentral approval;
(1) Approve, open and accept micro- (b) The bank shall ensure the timely
deposits including initial deposit and service
accounting and proper recording of all
withdrawals thereof: Provided, That
appropriate internal controls are in place. financial transactions of its MF-OBO/
As contemplated under Appendix 45, the MBOs, and observe adequate internal
average daily savings account balance for a control procedures to ensure the safety of
micro-deposit account shall not exceed Forty funds and reliability of financial records and
Thousand Pesos (P40,000.00) unless a reports emanating from all transactions; and
higher amount has been approved by the (c) The bank’s compliance program shall
Bangko Sentral; take into account MF-OBO/MBOs and their
(2) Accept check deposits of activities.
microfinance clients for collection and credit Cities previously considered as restricted
to own deposit accounts; areas refer to the cities of Makati,
(3) Disburse/release proceeds of micro- Mandaluyong, Manila, Parañaque, Pasay,
loans and collect loan amortization Pasig, Quezon and San Juan.1
payments and related charges. Micro-loans (As amended by Circular Nos. 932 dated 16 December 2016,
include all types of microfinance loans as 901 dated 29 January 2016 and 868 dated 26 January 2015, M-
defined under Appendix 45 as well as other 2011-032 dated 06 June 2011, Circular Nos.694 dated 14 October 2010,
loans to microfinance clients; 669 dated 22 October 2009 and 624 dated 13 October 2008)
(4) Present, market, sell and service
micro-insurance products in accordance § X151.1 Prior Monetary Board
with existing regulations; approval. No bank operating in the
(5) Receive/pay-out funds in connection Philippines shall establish branches,
with authorized remittance transactions; extension offices or other banking offices
(6) Act as a cash/money in and cash/ or transact business outside the premises
1
The branching restriction in the cities of Makati, Mandaluyong, Manila, Parañaque, Pasay, Pasig, Quezon
and San Juan, which were previously considered as restricted areas, was fully lifted effective on 01 July 2014.

§§ X151.1 - X151.2
16.12.31
of its duly authorized principal office or (5) No deficiency in 3 months

head office without the prior approval of liquidity floor on
government deposits
the Monetary Board. (6) Compliant with as of date of
(As amended by Circular No. 624 dated 13 October 2008) the single borrower’s application
loan limit and limit on
§ X151.2 Pre-requisites for the grant total investment in real
of authority to establish a branch. With estate and improvements
including bank equipment
prior approval of the Monetary Board, banks
(7) No past due obligation as of date of
may establish branches subject to the with the Bangko Sentral application
following pre-qualification requirements: or with any FI
a. The bank has complied with the (8) No float items outstanding 3 months
in the “Due From/To Head
minimum capital requirement under
Office/Branches/Offices”
Subsec. X111.1. and “Due from Bangko Sentral”
b. The bank’s risk-based CAR at the time accounts exceeding
of filing the application is not lower than one percent (1%) of the
total resources as of end
twelve percent (12%); of the month
c. The bank’s CAMELS composite rating (9) No uncorrected findings as of date of
in the latest examination is at least “3”, with of unsafe and unsound application
management component score not lower banking practices
(10) Has adequate accounting as of date of
than “3”; records, systems, application
d. The bank has established a risk procedures and internal
management system appropriate to its control
operations, characterized by clear (11) Has generally complied as of date of
with banking laws, rules application
delineation of responsibility for risk and regulations, orders
management, adequate risk measurement or instructions of the
system, appropriately structured risk limits, Monetary Board and/or
effective internal control system and Bangko Sentral Management
(12) It has neither unpaid as of date of
complete, timely and efficient risk reporting assessment due nor past application
system; due obligation with the
e. The bank has no major supervisory PDIC.
concerns outstanding on safety and In the case of branches to be established
soundness as indicated by the following in cities previously considered as restricted
during the period immediately preceding the areas, neither the bank nor any of its
date of application or as of the date of subsidiary banks is under Prompt Corrective
application: Action (PCA) or if under PCA, it shall be
(1) No unbooked as of date of compliant with PCA resolution guidelines.
valuation reserves application f. The bank has been operating profitably
(2) No deficiency in 12 weeks
for the year immediately preceding the date
regular and liquidity
reserve requirements of application, or in the case of newly-
on deposits and deposit established banks, the submitted projection
substitutes showed that profitability will be attained on
(3) No deficiency in 3 months the third year of operations, at the latest; and
asset and liquid asset
cover for EFCDU/
g. Additional requirements for the
FCDU liabilities establishment of microfinance/BMBE-
(4) Compliant with 12 weeks oriented branches of banks which are not
ceilings on loans microfinance/BMBE-oriented are as follows:
to DOSRI
(1) The branch shall have a manual of

§§ X151.2 - X151.4
16.12.31
operations on microfinancing duly approved offered; competition analysis to show that its
by the bank’s board of directors; application will not lead to over banking in
(2) The branch shall have an adequate the target market; and financial projections for
loan tracking system that allows daily the first three (3) years of operations showing
monitoring of loan releases, collections and sustained viability, as may be required by the
arrearages, and any restructuring and appropriate department of the SES: Provided,
refinancing arrangements;
That normally operating UBs, KBs, and TBs
(3) The proposed branch shall be
with total resources of P1 billion or more shall
managed by a person with adequate
be exempt from the foregoing requirements.
experience or training in microfinancing
activities; and A bank is not considered normally operating
(4) At least seventy percent (70%) of if it is under PCA or is non-compliant with
the deposits generated by the branch to supervisory directives duly confirmed by the
be established shall be actually lent out Monetary Board. In the evaluation of the
to qualified microfinance/BMBE business plan, due consideration shall be given
borrowers and the microfinance/BMBE to banks that are able or are committed to
loans of said branch shall at all times be invest or deploy branch resources in their area
at least fifty percent (50%) of its gross loan of operations;
portfolio. b. Certified true copy of the resolution
A microfinance-oriented branch is a of the bank’s board of directors
branch that provides financial services and authorizing the establishment of the
caters primarily to the credit needs of basic branch and indicating its proposed site;
or disadvantaged sectors such as those c. Organizational set up of the
specified under the second paragraph of proposed branch showing the proposed
Subsec. X102.3, so as to enable them to staffing pattern; and
raise their income levels and improve their d. Certification/Undertaking signed by
living standards. Microfinance loans are the president of the bank or officer of
granted on the basis of the borrower’s cash
equivalent rank that the bank has
flow and are typically unsecured.
complied or will comply, as the case
A BMBE-oriented branch of a bank
maybe, with the prerequisites for the grant
is a branch that caters primarily to the
credit needs of BMBEs duly registered under of authority to establish a branch under
R.A. No. 9178. Subsec. X151.2.
(As amended by Circular Nos. 932 dated 16 December 2016, (As amended by Circular No. 624 dated 13 October 2008)
890 dated 02 November 2015, 827 dated 28 February 2014, 728
dated 23 June 2011, 715 dated 04 March 2011, 682 dated 15 § X151.4 Branching guidelines.
February 2010, 674 dated 10 December 2009 and 624 dated 13
October 2008) Branches may be established, subject to the
following guidelines:
§ X151.3 Application for authority to a. A bank may apply to establish as
establish branches. An application for many branches as its capital as defined
authority to establish a branch shall be under Sec. X111 and Subsec. X111.1 can
signed by the president of the bank or support, taking into account any approved
officer of equivalent rank and shall be but unopened branch/es outstanding at the
time of application.
accompanied by the following
b. Only applications submitted with
information/documents:
complete documentary requirements
a. Business plan detailing the primary
enumerated in Subsec. X151.3 shall be
banking activities/products and services to be accepted.

§§ X151.4 - X151.5
16.12.31
c. As a general rule, banks shall be branch application will lead to an

allowed to establish branches anywhere in overbanking situation in the specific market.
the Philippines, including in cities (As amended by Circular Nos. 932 dated 16 December 2016,
previously considered as restricted areas: 759 dated 30 May 2012, CL-2011- 052 dated 27 July 2011,
Circular Nos. 727 and 728 both dated 23 June 2011, 696 dated
Provided, That, if TBs/RBs/Coop Banks will 29 October 2010, 692 dated 23 July 2010, 682 dated 15 February
establish branches in cities/municipalities 2010 and 624 dated 13 October 2008)
of a higher classification than their head
office, the applicable minimum required § X151.5 Branch processing and special
capital under Subsec. X111.1 will be that licensing fee.
of the city/municipality of the higher a. Branch processing fee
classification, regardless of where the head The bank shall be immediately charged
office is located. with the total processing fee computed for
Branches of microfinance-oriented all branches approved, in accordance with
banks or microfinance-oriented branches of the following:
banks which are not microfinance-oriented,
Bank Branch Processing Fees
may be established anywhere, subject to
Category Metro Manila, 3rd to 6th
compliance with, among other Cities of Cebu Class Muni -
requirements, the minimum capital and Davao, nicipalities
requirement under Subsec. X111.1. All Other
In addition, the following guidelines Cities, 1st to
2nd Class
shall apply to Coop Banks: Municipalities
(1) The Coop Bank of the province may a. UBs/KBs/ P200,000 P100,000
set up branches/extension offices/OBOs Affiliated TBs
anywhere within the province subject to b. Non-affiliated P100,000 P50,000
TBs
compliance with the applicable branching
c. RBs/Coop P25,000 P25,000
rules and regulations as provided in Banks
Sec. X151. d. Microfinance P5,000 5,000
(2) Coop Banks from other provinces -oriented banks
may set up branches/extension offices/ or microfinance
-oriented branches
OBOs in cities or municipalities where
of banks
there are no other Coop Bank head office/ Provided, That branches to be established
branch/extension office. in unbanked cities and municipalities
d. The Monetary Board may decide to shall be exempted from the processing
disapprove an otherwise qualified branch fee: Provided, further, That branches of
application if in its determination such TBs, RBs and Coop Banks to be

(No Pages 90 to 92)

§§ X151.5 - X151.6
16.12.31
established within the region where the f. Additional requirement for the
head office is located shall be exempted establishment of MF-OBOs/MBOs:
from the processing fee. 1) At least fifty percent (50%) of total
In no case shall staggered payment for transactions generated are with
the total branch processing fee be allowed. microfinance clients;
b. Special licensing fee 2) It shall have a maximum on-site cash
For branch applications in the cities limit not exceeding P500,000 per day,
previously considered as restricted areas as commensurate to its level of banking
defined under Sec. X151, the applicant bank activities;
shall upon acceptance of branch application 3) It shall have adequate physical
pay a special licensing fee per branch facilities and security arrangements as well
depending on the bank’s category, as follows: as information and transaction support
systems appropriate to the level of banking
Bank Category Licensing Fee Per Branch activities undertaken and services offered;
UB/KB P20 million 4) It shall be managed by a responsible
TB 15 million officer with adequate experience or training
RB/Coop Bank 1.5 million
in microfinancing activities; and
Relocation of approved but unopened 5) It shall have a manual of operations
branches under Subsec. X151.7, relocation appropriate to its authorized activities that
is periodically reviewed and updated and
of existing branches under Subsec. X151.9,
duly approved by the bank’s board of
and relocation of head offices under
directors.
Sec. X152, shall be subject, in the manner
The application to establish other
therein provided, to the special licensing fees.
banking offices shall be signed by the
868 dated 26 January 2015, 847 dated 28 August 2014, 759 president of the bank or officer of equivalent
dated 30 May 2012, 728 dated 23 June 2011 and 624 dated 13 rank and submitted to the appropriate
October 2008) department of the SES together with the
following documents:
§ X151.6 Establishment of other 1. Certified true copy of the resolution
banking offices. OBOs may be established of the bank’s board of directors authorizing
with prior Monetary Board approval, and the establishment of the other banking office
subject to compliance with the following: and indicating its proposed site;
a. Minimum capital requirement under 2. Purpose statement indicating the
Subsec. X111.1; bank’s objective or reason for establishing
b. Ten percent (10%) risk-based CAR; the other banking office; and
c. CAMELS composite rating not lower 3. Undertaking signed by the president
than “3”, with Management component of the bank or officer of equivalent rank
score not lower than “3” in the latest that said other banking office shall
examination of the bank; not accept deposits and/or service
d. Not under Prompt Corrective Action withdrawals thru tellers or other authorized
(PCA) or under conditions subject to PCA; personnel.
e. No major supervisory concerns on OBOs may be established only in areas
safety and soundness such as those where the bank is allowed to establish
enumerated under Item “e” of Subsec. X151.2 branches as provided under Subsec. X151.4
as of the date of application; and on branching guidelines.

§§ X151.6 - X151.8
16.12.31
The processing guidelines on the Approved but not yet opened

establishment of MF-OBOs/MBOs are in branches/OBO may be relocated upon prior
Appendix 93. approval by the Deputy Governor, SES,
(As amended by Circular No. 932 dated 16 December 2016, subject to the presentation of justification
825 dated 07 February 2014, M-2011-019 dated 29 March 2011,
and valid reason for the relocation, and
M-2010-040 dated 04 November 2010, Circular Nos. 694 dated
14 October 2010, 682 dated 15 February 2010 and 624 dated 13 resubmission of the information/
October 2008) documents enumerated in Subsec. X151.3
on application for authority to establish
§ X151.7 Opening of banking offices. branches: Provided, That branches located
Approved branches/OBOs shall be opened, outside the cities previously considered as
as follows: restricted areas areas as defined under
a. Approved branches shall be opened, Sec. X151 which will be relocated therein
within one (1) year from the date of approval shall be subject to the special licensing fee
thereof, subject to extension on a case-to- under Subsec. X151.5 upon approval of the
case basis: Provided, That the entire period relocation: Provided, further, That the
from date of approval shall not exceed opening of the relocated branch/OBO shall
three (3) years.1 be made within the prescribed period
The opening of approved branches may, mentioned above from date of Monetary
however, be suspended or revoked by the Board approval of its establishment and
appropriate department of the SES upon shall not be subject to any extension.
approval of the Deputy Governor, should As an incentive to merger/consolidation
any of the following conditions be found to exist: of banks or purchase/acquisition of majority
(1) The bank’s capital as required under or all of the outstanding shares of stock of a
Sec. X111 and Subsec. X111.1 is no longer distressed bank for the purpose of
sufficient to support the remaining rehabilitating the same, opening or
unopened branches; relocation of approved but not yet opened
(2) The bank or any of its subsidiary branches/OBOs may be allowed within
bank is initiated under PCA or is under two (2) years from date of merger/
condition/s subject to PCA or if already consolidation or purchase/acquisition of
under PCA, continuously fails to comply majority or all of the outstanding shares of
with the MOU/PCA plan; stock of a distressed bank for the purpose
(3) The bank has major supervisory of rehabilitating the same.
concerns outstanding on safety and (As amended by Circular Nos. 932 dated 16 December 2016,
soundness. 847 dated 28 August 2014, 777 dated 13 December 2012, 759
Failure to open the approved branch/es dated 30 May 2012, 728 dated 23 June 2011, 697 dated 29
October 2010 and 624 dated 13 October 2008)
within the period provided shall result in
the forfeiture of the bank’s right to open such
§ X151.8 Requirements for opening a
branch/es and of all fees paid to the Bangko branch/other banking office. Not later than
Sentral in relation to such application. five (5) banking days from the date of
b. Approved OBOs shall be opened opening, the bank shall submit to the
within one (1) year from the date of approval appropriate department of the SES of the
thereof and shall not be subject to any following information/documents:
extension.
1
Branch applications that have been approved prior to 07 January 2017 shall be allowed to open the
corresponding branches within three (3) years from date of approval.

§§ X151.8 - X151.9
16.12.31
a. A written notice of the actual date of within one (1) year from the date of closure
opening of its branch/OBO; and of the branch/OBO, shall be allowed in
b. A certification signed by the chief accordance with the following procedures:
compliance officer and the head of the a. Notice of relocation of branch/OBO
branches department with the rank of a vice signed by the president of the bank or officer
president, or its equivalent or by a higher of equivalent rank, together with a certified
ranking officer on compliance with the true copy of the resolution of the bank’s
following: board of directors authorizing said
(1) Adequacy of banking facilities relocation, and an undertaking that the bank
including installation of security devices shall comply with the notification
under Subsec. X181.5 and accessibility to requirement under Item “b” below, shall be
disabled persons under Subsec. X160.10; submitted by the bank to the appropriate
(2) Posting in conspicuous places in the department of the SES. The notice shall
branch premises of the required notices, include information as to the new relocation
schedules and other relevant information site, the timetable for said relocation, date
pertaining to the branch’s lending and and manner of payment of special licensing
deposit operations; fee under Subsec. X151.5, as may be
(3) Availability of efficient means of applicable, and the branch/OBO that will
reporting/communication facilities (to be handle the transactions of the branch/OBO
specified) between the head office, branches to be relocated, as may be applicable.
and extension office; and b. If no reply is received by the bank
(4) The requirements enumerated under from the Bangko Sentral within thirty (30)
Subsecs. X151.2/X151.6 as of the time of calendar days from date of receipt by the
actual opening of the branch/other banking Bangko Sentral of the said notification,
office. notice of relocation shall be sent by the bank
A bank that fails to comply with to the depositors’ and other creditors’ last
any one (1) of the requirements in known addresses by registered mail service
Subsecs. X151.2/X151.6 on the pre- of the Philippine Postal Corporation
requisites for the grant of authority to (Philpost) or delivery service of other mail
couriers or electronic mail, and posters shall
establish a branch/establishment of OBOs
also be displayed in conspicuous places in
as of the date of the intended opening of the
the premises of the branch/OBO to be
branch/OBO shall refrain from opening the
relocated at least forty-five (45) calendar days
branch/OBO on such date until it has
prior to the closure of the branch/OBO to
complied with all of the requirements under
be relocated. Information as to the new
Subsecs. X151.2/X151.6: Provided, That the
relocation site, the date of the opening at
provisions of Subsec. X151.7 on the date of
the new site, and the address of the branch/
opening of banks shall be observed. OBO that will handle the transactions of
dated 29 October 2010 and 624 dated 13 October 2008) the branch/OBO to be relocated, as may be
applicable, shall be indicated in the said
§ X151.9 Relocation of branches/other notice/posters. Proofs of receipt of notice
banking offices1. Relocation of existing by the depositors and the creditors shall be
branches/OBOs, whether to be opened at kept on file and made available upon
the new site on the next banking day or request of the Bangko Sentral;
1

§§ X151.9 - X151.10
16.12.31
c. Within five (5) banking days from the deemed as an establishment of a new
date of closure of the branch/OBO to be branch/OBO, subject to the provisions of
relocated, a notice of such closure signed Subsecs. X151.2/X151.6 on the pre-
by the Chief Compliance Officer (CCO) and requisites for the grant of authority to
the head of the branches department with establish a branch/establishment of OBOs.
the rank of a vice president or equivalent (As amended by Circular Nos. 932 dated 16 December 2016,
rank or by a higher ranking officer, together 847 dated 28 August 2014, 783 dated 21 January 2013, 697
dated 29 October 2010 and 624 dated 13 October 2008)
with a certification that the notification
requirement in Item “b” above has been
§ X151.10 Temporary closure 1 ,
complied with and, for branches/OBOs that
permanent closure and surrender of
will be opened at the new site beyond the branch/other banking office license, and
next banking day, an undertaking that the sale/acquisition of branches/other banking
branch/OBO shall be opened at the new offices.
site within one (1) year from the date of such a. Temporary closure of existing
closure shall be submitted to the appropriate branches/OBOs. Temporary closure of
department of the SES; existing branches/OBOs for the purpose of
d. Within five (5) banking days from the undertaking renovations/major repairs of
date of opening of the relocated branch/ office premises/facilities and for other valid
OBO, a notice of such opening, together reasons may be allowed: Provided, That the
with a certification signed by the CCO and branch/OBO shall be reopened within a
the head of the branches department with period of one (1) year from the date of
the rank of a vice president or its equivalent temporary closure in accordance with the
rank or by a higher ranking officer that the following procedures:
bank has complied with Items “b.1” to “b.4” (1) Notice of temporary closure signed
of Subsec. X151.8 on the requirements for by the president of the bank or officer of
opening a branch/OBO shall be submitted equivalent rank, together with a certified
to the appropriate department of the SES. true copy of the resolution of the bank’s
Information as to the site of the branch/OBO board of directors authorizing said
that was closed and the date of such closure, temporary closure and stating the
as well as the site of the branch/OBO that justifications/reasons therefor; and an
was opened and the date of such opening undertaking that the bank shall comply with
shall be indicated in the said notice; the notification requirement under Item “2”
e. Branches/OBO may be relocated below, shall be submitted to the appropriate
anywhere, subject to the branching department of the SES. The notice shall
guidelines under Subsec. X151.4: Provided, include information as to the timetable for
That branches located outside the cities the said temporary closure and the branch/
previously considered as restricted areas as OBO that will handle the transactions of the
defined under Sec. X151 which will be branch/OBO to be temporarily closed;
relocated therein shall be subject to the (2) If no reply is received by the bank from
special licensing fee under Subsec. X151.5; the Bangko Sentral within thirty (30) calendar
and days from the date of receipt by the Bangko
f. Relocation of branches/OBOs beyond Sentral of the said notification, notice of
one (1) year shall be deemed as permanent temporary closure shall be sent by the bank to
closure and surrender of license of the the depositors’ and other creditors’ last known
branch/OBO at the old site, and the opening addresses by registered mail service of the
of a branch/OBO at the new site shall be PhilPost or delivery service of other mail
1
under Appendix 89a (Circular No. 820 dated 06 December 2013)

§ X151.10
16.12.31
couriers or electronic mail, and posters shall also Permanent closure and surrender of branch/
be displayed in conspicuous places in the OBO license may be effected only with
premises of the branch/OBO at least forty- five (45) prior approval of the Monetary Board in
calendar days prior to the temporary closure. accordance with the following procedures:
Information as to the date of the reopening (1) Request for Monetary Board approval
and the address of the branch/OBO that will to the closure of the branch/OBO signed
handle the transactions of the branch/OBO to by the president of the bank or officer of
be temporarily closed shall be indicated in the equivalent rank, together with a certified
said notice/posters. Proofs of receipts of notice true copy of the resolution of the bank’s
by the depositors and other creditors shall be board of directors authorizing said closure
kept on file and made available upon request and stating the justifications/reasons
of the Bangko Sentral; therefor, shall be submitted by the bank to
(3) Within five (5) banking days from the the appropriate department of the SES;
date of temporary closure of the branch/ (2) Upon receipt of the notice of
OBO, a notice of such closure, signed by Monetary Board approval but at least forty-
the CCO and the head of the branches five (45) calendar days prior to the closure,
department with the rank of a vice president notice of closure shall be sent by the bank
or equivalent rank or by a higher ranking to the depositors’ and other creditors’ last
officer, together with a certification that the known addresses by registered mail service
notification requirement in Item “(2)” above of the PhilPost or delivery service of other
has been complied with and an undertaking mail couriers or electronic mail, and posters
that the branch/OBO shall be reopened shall also be displayed in conspicuous
within one (1) year from the date of such places in the premises of the branch/OBO
closure shall be submitted to the appropriate to be closed. Proofs of receipt of notice by
department of the SES; and the depositors and other creditors shall
(4) Within five (5) banking days from the be kept on file and made available upon
date of reopening of the branch/OBO, a request of the Bangko Sentral;
notice of such reopening together with a (3) Within five (5) banking days from
certification signed by the CCO and the head the date of closure of the branch/OBO, a
of the branches department with the rank notice of such closure signed by the CCO
of vice president or its equivalent or by a and the head of the branches department
higher ranking officer that the bank has with the rank of a vice president or equivalent
complied with Items “b.1” to “b.4” of rank, or by a higher ranking officer, together
Subsec. X151.8 on the requirements for with a certification that the notification
opening a branch/OBO shall be submitted requirement in Item “2” above has been
to the appropriate department of the SES. complied with, shall be submitted to the
Temporary closure of branches/OBOs appropriate department of the SES;
beyond one (1) year shall be deemed as c. Sale/acquisition of branches/OBOs.
permanent closure and surrender of license Sale/acquisition of existing/operating
of the branch/OBO, and re-opening thereof branches/ OBOs may be allowed with prior
shall be deemed as an establishment of a approval of the Monetary Board in
new branch/OBO, subject to the provisions accordance with the following procedures:
of Subsecs. X151.2/X151.6 on the (1) Prior written consent of the PDIC in
prerequisites for the grant of authority to the transfer of assets and assumption of
establish a branch/establishment of OBOs. liabilities as provided under Section 21 of
b. Permanent closure and surrender of the PDIC Charter (R.A. No. 3591), as
branch/other banking office license. amended by R.A. No. 9302 shall be

§ X151.10
16.12.31
obtained by both the selling bank and the (b) Ten percent (10%) risk-based CAR;
acquiring bank; (c) CAMELS composite rating not lower
(2) Request for Monetary Board approval than “3” with Management component score
to close the branch/OBO to be sold signed not lower than “3” in the latest examination
by the president of the bank or officer of of the bank; and
equivalent rank, together with a certified (d) Ceiling on total investments of a bank
true copy of the resolution of the bank’s in real estate and improvements thereon,
board of directors authorizing the sale shall including bank equipment.
be submitted by the selling bank to the A bank may purchase/acquire branches/
appropriate department of the SES; OBOs anywhere, including in Metro Manila
(3) Upon receipt of the notice of Monetary subject to compliance with the applicable
Board approval but at least forty-five (45) minimum capital requirement under
calendar days prior to the closure, notice of Subsec. X111.1.
closure shall be sent to the depositors’ and (6) The acquiring bank shall pay a
other creditors’ last known addresses by licensing fee per branch/OBO acquired, as
registered mail service of the PhilPost or follows:
delivery service of other mail courier or Location of Branch/OBO
electronic mail, and posters shall also be Type of to be Acquired
Acquiring Within Outside
displayed in conspicuous places in the Bank Metro Manila Metro Manila
premises of the branch/OBO to be sold. Proofs UBs and KBs P 1.0 million P 0.5 million
of receipt of notice by the depositors and other TBs P 0.5 million P 0.25 million
creditors shall be kept on file and made and

available upon request of the Bangko Sentral; (7) Within five (5) banking days from the
(4) Within five (5) banking days from date of opening of the acquired branch/
the date of closure of the branch/OBO, a OBO, a notice of such opening, together
notice of such closure signed by the CCO with a certification signed by the CCO and
and the head of the branches department the head of branches department with the
with the rank of a vice president or equivalent rank of a vice president or its equivalent
rank or by a higher ranking officer, together rank or by a higher ranking officer that the
with a certification that the notification bank has complied with Items “b.1” to “b.4”
requirement under Item “3” above has been of Subsec. X151.8 on the requirements for
complied with, shall be submitted to the opening a branch/OBO shall be submitted
appropriate department of the SES; by the acquiring bank to the appropriate
(5) Request for Monetary Board department of the SES.
approval to acquire the branch/other The forty-five (45) – days’ prior notice
banking office signed by the president of requirement for temporary closure of
the bank or officer of equivalent rank, offices (required under Subsec. X151.10) in
together with a certified true copy of the affected areas is hereby waived for offices
resolution of the bank’s board of directors that have been de facto closed since
authorizing the acquisition shall be 08 November 2013. Banks are directed to
submitted by the acquiring bank to the post a notice to the effect that said office
appropriate department of the SES. The has been temporarily closed, together with
acquiring bank shall likewise comply with information on the new location to service
the following: clients.
(a) Minimum capital requirement under
783 dated 21 January 2013, 727 dated 23 June 2011, 697 dated
Subsec. X111.1; 29 October 2010 and 624 dated 13 October 2008)

§§ X151.11 - X152
16.12.31
§ X151.11 Relocation/Transfer of § X151.19 (2008 - X155) Tellering

branch licenses of closed banks. Buyers of booths. The following rules shall govern the
closed banks shall be allowed to relocate/ establishment of tellering booths in BIR
transfer acquired branches subject to the offices:
conditions stated under Items “d” and “e” a. As a general policy, the establishment
of the first paragraph of Subsec. X151.9 on of tellering booths in BIR offices are not
relocation of branches/OBOs. authorized. However, in cases where
(As amended by Circular Nos. 847 dated 28 August 2014, 783 tellering booths in offices are needed as
dated 21 January 2013, 697 dated 29 October 2010 and 624 determined by the BIR, banks shall secure
prior Monetary Board approval;
§ X151.12 Sanctions. b. A bank’s application shall be
a. Any violation of the provisions of accompanied by a letter from the BIR
Subsecs. X151.1 - X151.11 depending on Commissioner or Deputy Commissioner or
the materiality or seriousness of the violation, other officer specifically authorized by the
may constitute a ground for considering the Commissioner to sign such letter, stating
same as unsafe and unsound banking that the BIR has agreed to allow the
practice and may be a ground for applicant bank to establish a tellering booth
cancellation of the franchise and closure of in the specified BIR office;
any branch/OBO established herein without c. The applicant bank has complied
prejudice to the imposition of the applicable with the standard prequalification
criminal and administrative sanctions requirements prescribed in Appendix 5; and
prescribed under Sections 36 and 37, d. Tax collections received shall be
respectively, of R.A. No. 7653; and subject to rules on government deposits.
b. If any part of any certification
submitted by the bank as required in this Sec. X152 Relocation of Head Offices.
Section is found to be false, the following Relocation of a bank’s head office shall
sanctions shall be imposed: require prior approval of the Monetary
1. On the bank. Suspension for one (1) Board in accordance with the following
year of the privilege to establish and/or open procedures:
approved branches/other banking offices, a. Request for Monetary Board approval
and/or relocate branches/other banking of the relocation of the bank’s head office
offices. signed by the president of the bank or officer
2. On the certifying officer. A fine of of equivalent rank shall be submitted to the
P5,000 per day (P200 per day for RBs/Coop appropriate department of the SES together
Banks) from the time the certification was with the following documentary
made up to the time the certification was requirements:
found to be false for each branch/other (1) A certified true copy of the resolution
banking office opened, relocated, closed or of the bank’s board of directors authorizing
sold without prejudice to the sanctions the proposed relocation/transfer of the head
under Section 35 of R.A. No. 7653. office, and stating the justification/reasons
(As amended by Circular Nos. 694 dated 14 October 2010 and
therefor;
(2) A certified true copy of stockholders’
§§ X151.13 - X151.18 (Reserved) resolution authorizing the amendment of the

§§ X152 - X153.1
16.12.31
articles of incorporation of the bank; defined under Sec. X151 which will be
(3) Description of the building and/or relocated therein shall be subject to the
place of relocation, manner of occupancy, special licensing fee under Subsec. X151.5
i.e., whether lease or purchase, estimate of upon approval of the relocation.
the total costs to be incurred in connection The executive offices of the bank shall
with the transfer, and the proposed timetable not be separated from the head office, i.e.,
for such relocation; and these shall be located where the bank’s head
(4) Plan for the disposition of the original office is located.
site. Relocation of any other department/unit
b. Upon receipt of the notice of of the bank not performing front-office
operation, i.e., not dealing with the banking
Monetary Board approval but at least
public, shall not require prior Monetary
three (3) months prior to the relocation,
Board approval: Provided, however, That
notice of relocation shall be sent to
within five (5) banking days from date of
depositors and other creditors by registered relocation, a notice of relocation signed by
mail or POD service of the Philpost or other a vice president or officer of equivalent rank
mail couriers, and poster shall be displayed or by a higher ranking officer, together with
in conspicuous places in the premises of a certified true copy of the resolution of the
the head office to be relocated: Provided, bank’s board of directors authorizing the
That said notification period may be reduced relocation, shall be submitted to the
to forty-five (45) calendar days under any of appropriate department of the SES.
the following circumstances: (As amended by Circular Nos. 932 dated 16 December 2016,
(1) As an incentive to merger or 930 dated 18 November 2016, 847 dated 28 August 2014, 697
consolidation of banks; dated 29 October 2010 and 624 dated 13 October 2008)
(2) As an incentive to the purchase or
§ X152.1 Sanctions. If any part of the
acquisition of majority or all of the
certification submitted by the bank as
outstanding shares of stock of a distressed
required in this Section is found to be false,
bank for the purpose of rehabilitating the the sanctions under Subsec. X151.12 shall
same; or be imposed.
(3) The proposed relocation site is
within the same municipality/city of the Sec. X153 Establishment of Sub-branches
head office to be relocated. of Foreign Bank Branches. Authority to
c. Within five (5) banking days from the establish sub-branches of foreign banks may
date of relocation, a notice of relocation, be granted subject to Monetary Board
together with a certification signed by the approval. The following guidelines shall
president of the bank or officer of equivalent govern the establishment of sub-branches
rank that the notification requirement under of foreign banks in the Philippines
Item “b” above and the installation of the pursuant to R.A. No. 7721, as amended by
required security devices under Item “b” of R.A. No. 10641.
Subsec. X181.5 on minimum security measures (As amended by Circular No. 858 dated 21 November 2014)
have been complied with, shall be submitted
to the appropriate department of the SES. § X153.1 Application for authority to
A bank’s head office may be relocated establish sub-branches. An application for
anywhere it is allowed to establish branches authority to establish sub-branches shall be
as provided in Subsec. X151.4 on signed by the Country Manager or the
branching guidelines: Provided, That head highest ranking officer in the Philippines of
offices located outside the the cities the applicant foreign bank, and shall be
previously considered as restricted areas as accompanied by the following information/

§§ X153.1 - X153.4
14.12.31
documents: § X153.3 Date of opening. The opening

a. Certified true copy of the resolution of approved sub-branches shall be
of the foreign bank’s board of directors subject to the provisions of Subsec. X151.7.
authorizing the foreign bank’s Country (As amended by Circular Nos. 858 dated 21 November 2014
Manager or highest ranking officer in the and 783 dated 21 January 2013)
Philippines to apply for authority to establish
§ X153.4 Requirements for opening a
sub-branch/es and represent the bank in
connection therewith; and sub-branch. After a foreign bank’s
b. Proposed business plan for the sub- application to establish a sub-branch has
branch/es. been approved, it may open the same
(As amended by Circular No. 858 dated 21 November 2014) subject to the following conditions:
a. Submission by the applicant foreign
§ X153.2 Requirements for bank of a written notice at least thirty (30)
establishment of sub-branches. In addition days prior to the intended date of opening,
to the standard pre-qualification requirement accompanied by the following:
for the grant of banking authorities in (1) Proof or evidence of inward
Appendix 5, the applicant foreign bank shall remittance needed to meet the additional
be subject to the branch processing fee capital requirements under Subsec. X111.1,
provided in Subsec. X151.5: Provided, That as applicable;
sub-branch applications in the cities of (2) List of principal and junior officers
Makati, Mandaluyong, Manila, Paranaque, of the proposed sub-branch/es and their
Pasay, Pasig, Quezon and San Juan in Metro respective designations and salaries;
Manila shall also be subject to the special (3) Personal information sheet (bio-data)
licensing fee under Subsec. X151.5, as for each of the officers to enable the Bangko
applicable. Sentral to evaluate their qualifications as
(As amended by Circular Nos. 858 dated 21 November 2014 officers; and

§§ X153.4 - X154
14.12.31
(4) A certification signed by the bank’s c. Issuance by the Governor of the

Philippine Country Manager that the permit to open and operate the approved
requirements enumerated under Subsec. branch/es.
X153.2 has been complied with up to the Banks shall submit a written notice to the
date of the aforementioned written notice. appropriate department of the SES of the actual
A bank that fails to continuously comply date of opening of sub-branches not later than
with the requirements under Subsec. X153.2 ten (10) banking days from such opening.
shall be given an extension of time to open (As amended by Circular Nos. 858 dated 21 November 2014
such branch after it has shown compliance
for another test period of the same § X153.5 Limitations on establishment
duration required of each requirement in of sub-branches
Subsec. X153.2: Provided, That the A foreign bank authorized to establish
provisions of Subsec. X153.3 shall be branches in the Philippines pursuant to the
observed if the branch cannot open within provisions of R.A. No. 7721, as amended
six (6) months from the date of approval by R.A. No. 10641, may open up to five (5)
thereof: Provided, further, That before such sub-branches as may be approved by the
branch opens for business, the bank shall Monetary Board.
submit to the Bangko Sentral the (As amended by Circular No. 858 dated 21 November 2014)
requirements under Subsec. X153.4a with
the certification to the effect that the bank § X153.6 Sanctions. If a bank fails to
has complied with requirements of Subsec. submit any certification as required in this
X153.2 up to the date of the written notice Section, or any part of the certification
within the period prescribed therein; submitted by the bank as required in this
b. The foreign bank branch has adequate Section is found to be false, the sanctions
staff, equipment, and other facilities to meet under Subsec. X151.12 shall be imposed.
the needs of its commercial banking
operations: Provided, That the bank’s Sec. X154 Establishment of Offices Abroad
premises, vault and office equipment, after The following rules shall govern the
inspection by the representatives of the SES establishment by domestic banks of
shall have been found to be substantially in branches and other offices abroad.
compliance with specifications on security For purposes of this Section, the term
standards and ready for use by the bank; offices shall include branches, agencies,
and representative offices, remittance centers,
remittance desk offices and other offices.

§§ X154.1 - X154.3
08.12.31
§ X154.1 Application for authority to (2) Substantial income derived from

establish an office abroad. An application international banking operations; and
for authority to establish an office abroad (3) Established correspondent
shall be signed by the president of the bank relationship with reputable banks.
and shall be accompanied by the following
information/documents: § X154.3 Conditions attached to the
a. Certified true copy of the resolution approved application. An approved
of the bank’s board of directors authorizing application to establish a banking office
the establishment of that office indicating abroad shall be subject to the following
its proposed site; conditions:
b. Economic justification for such a. Without prejudice to the
establishment, indicating among other qualification requirements in the country
things, the services to be offered, the where the office is to be established, the
minimum outlay such as capital proposed officer(s), at the time of
requirement of the host country, outlay for appointment must be at least:
furniture, fixture and equipment, rental and (1) Twenty-five (25) years of age;
other expenses; (2) A college graduate, preferably with
c. Organizational set up of the training and experience abroad;
proposed office showing the proposed (3) With three (3) years experience in
positions and the names, qualifications international banking operations; and
and experience of the proposed manager (4) Must not possess any of the
and other officers; disqualification of an officer as provided for
d. Certification signed by the under existing regulations;
president or the executive vice president b. The applicant bank shall comply
that the bank has complied with the with the licensing requirements of the host
standard pre-qualification requirements for country and the necessary license to
the grant of banking authorities operate shall be secured from the
enumerated in Appendix 5; and appropriate government agency of the
e. Certification from the host country host country;
that the duly authorized personnel/ c. The outward investment
examiners of the Bangko Sentral will be representing initial capital outlay and other
authorized to examine the proposed office. outlays shall be subject to existing
regulations;
§ X154.2 Requirements for establishing d. The proposed office shall submit
an office abroad. In addition to the periodic reports on its financial condition
standard prequalification requirements of and profitability and such other reports that
Appendix 5, the applicant bank shall may be required by the Bangko Sentral;
comply with the following: e. An office not authorized to perform
a. The citizenship requirements, banking business (e.g., representative and
ownership ceilings and other limitations liaison offices) shall not carry any of the
on voting stockholdings in banks under business of a bank as contemplated within
existing law and regulations; the context of the Philippine banking
b. Experience and expertise in system; and
international banking operations as shown by: f. The applicant shall defray the
(1) Its international banking operations necessary cost and expenses to be
for at least three (3) years prior to the date incurred by the appropriate department
of application; of the SES.

§§ X154.4 - X155.1
13.12.31
§ X154.4 Date of opening. The opening period prescribed therein.

of any office abroad shall be subject to the
provisions of Subsec. X151.7. § X154.6 Sanctions. If any part of the
(As amended by Circular No. 783 dated 21 January 2013) certification submitted by the bank as
required in this Section is found to be false,
§ X154.5 Requirements for opening an the sanctions under Subsec. X151.12 shall
office abroad. After a bank’s application to be imposed.
establish a branch has been approved, it
may open the same subject to the following §§ X154.7 - X154.8 (Reserved)
conditions:
a. Submission by the applicant bank of § X154.9 Establishment of a foreign
a written notice at least thirty (30) days prior subsidiary by a bank subsidiary. The
to the intended date of opening, establishment of a foreign subsidiary by a
accompanied by the following: bank subsidiary are subject to the guidelines
(1) Proof or evidence of outward in Subsec. X382.8.
remittance needed to meet the capital
requirements prescribed by the host Sec. X155 (2008 - X502) Mobile Foreign
country; Exchange Booth; Off-site Automatic Multi-
(2) List of principal and junior officers Currency Money Changers. The operation
of the proposed branch/es and their of mobile foreign currency booths and off-
respective designations and salaries; and site automatic multi-currency money
(3) Personal information sheet (Bio-data) changers (OAMMC) shall be governed by
for each of the officers to enable the Bangko this Section.
Sentral to evaluate their qualifications as
officers; and § X155.1 (2008 - X502.1) Mobile
b. A certification signed by the bank’s foreign exchange booths. Without prior
president or executive vice president that authority from the Bangko Sentral, banks
the standard pre-qualification requirements may operate mobile foreign currency booths,
enumerated in Appendix 5 have been subject to the following guidelines:
complied with up to the date of the a. The bank shall advise the Bangko
aforementioned written notice. Sentral of the number of mobile foreign
A bank that fails to continuously comply currency booths it will operate, the date
with the requirements shall be given an it will start operations, the areas of
extension of time to open such office after operation and the branch where the
it has shown compliance for another test foreign exchange acquisition will be
period of the same duration required of turned over and booked;
each requirement: Provided, That the b. The services of the mobile foreign
provisions of Subsec. X151.7 shall be currency booths shall be solely for changing
observed if the branch cannot open within foreign exchange currency into peso notes
six (6) months from the date of approval and coins, and not pesos to other foreign
thereof: Provided, further, That before such currency;
branch opens for business, the bank shall c. The mobile foreign currency booths
submit to the Bangko Sentral the shall not accept deposit or perform other
requirements under Subsec. X154.5a banking functions other than purchase of
together with a certification stating that the foreign currencies;
bank has complied with the standard pre- d. The internal control system of the
qualification requirements in Appendix 5 proposed mobile foreign currency booths
up to the date of the written notice within the shall be submitted to the appropriate

§§ X155.1 - X156
13.12.31
department of the SES, as well as other Mondays to Fridays unless otherwise

security measures adopted therein; and authorized by the Bangko Sentral in the
e. The mobile foreign currency booths interest of the banking public. On these days,
shall be covered by insurance to protect said institution shall transact business for at
adequately the bank against losses of least six (6) hours each day.
whatever nature arising from its operations. Subject to compliance with other
relevant laws, banks, and/or their branches,
§ X155.2 (2008 - X502.2) Off-site EOs or OBOs, may opt to observe a banking
automatic multi-currency money changers. week in excess of the five (5) days after
With prior approval of the Bangko Sentral, reporting to the Bangko Sentral the
banks which have shown general compliance additional days during which such banks
with banking laws, rules and regulations may or their branches or offices shall transact
install an OAMMC, subject to the following business for at least three (3) hours each
conditions: day.
a. The OAMMC shall be installed only Banks and/or their branches, EOs or
in centers of activities like shopping centers, OBOs are allowed to close on certain days
supermarkets, hotels and airports: Provided, in celebration of important historical and/
That the site is within the area where the or religious events in the locality where
applicant bank has a regular branch to these banks operate, even in the absence of
service the money changers; a Presidential Proclamation approving the
b. The applicant bank shall maintain local holiday: Provided, That said closure
adequate internal control and security has the prior approval of the bankers
measures, which shall include immediate association in the locality and in the case of
rejection and detection of fake currencies bank branches, their respective head offices:
by the machines; Provided, further, That said closure will only
c. The transactions of the money be allowed in the municipality or city where
changers shall be booked in specific the festivities are centered: Provided, finally,
branches which must be identified at the That banks and/or their branches, EOs or
time of application for the putting up of an OBOs shall submit, either individually or
OAMMC; and through their head offices, to the Supervisory
d. The services of the OAMMC shall Data Center, a prior notice of their intended
be solely for changing foreign exchange closure on account of a specific local festivity
currency into peso notes and coins, and not not covered by a Presidential Proclamation
pesos to other foreign currencies. at least two (2) working days before the
intended date of closure.
J. BANKING DAYS AND HOURS The required notice under the previous
paragraph shall be supported by a
Sec. X156 Banking Days and Hours. certification jointly signed by the President
Banks and/or their branches, extension of the bank or officer of equivalent position
offices (EOs) or other banking offices and the head of the branches department, if
(OBOs), doing business in the Philippines, any, that:
shall observe for the conduct of their a) On the date of the temporary closure,
business a regular banking week of five (5) the bank and/or their branches, EOs or OBOs
days, except when such days are non- which are microfinance-oriented/micro-
working holidays, including local holidays, banking office will maintain a skeletal force
declared by Presidential Proclamations. The to handle “out-of town” clearing items in
regular banking week should fall on line with the provisions of Sec. X205;

§§ X156 - X156.2
16.12.31
b) The notice of the bank’s closure to open its head office and/or branch/es and/
and the reason thereof shall be posted or extension offices, shall submit to the
conspicuously in the bank’s premises; appropriate department of the SES at least
and two (2) working days before the intended
c) For branches of banks, the closure has date of opening of the bank’s head office
the prior approval of their respective head and/or branches and/or extension offices, a
offices. notice signed by its president or officer of
The copy of the resolution of the local equivalent rank, of its intention to open
bankers association and in the case of bank during the holidays, together with a copy
branches, their respective head offices, of the board resolution approving the same:
approving said closure shall be filed in the Provided, further, That the notice shall
premises of the banking unit concerned, specify which office (head office and/or
which resolution shall be made available branch/es and/or extension offices) will
during on-site examination or when required open on what dates and their schedule of
by the Bangko Sentral for submission for off- banking hours.
site verification. Subject to submission of a notice signed
In cases of closure of the bank and/or by the bank president or officer of
their branches/EOs/OBOs due to approved equivalent rank, authorized agent banks of
local holidays covered by a Presidential the BIR (BIR-AABs), and/or its branch/es
Proclamation, no notice of temporary and/or extension offices, are allowed to
closure to the Bangko Sentral shall be open for two (2) Saturdays prior to April 15
required. of every year, and daily from April 1 to
(As amended by Circular Nos. 802 dated 21 June 2013, income tax payment deadline, to extend
634 dated 05 December 2008 and 624 dated 13 October 2008) banking hours from 3:00 PM to 5:00 PM to
receive internal revenue tax payments. The
§ X156.1 Banking hours beyond the
notice, which shall specify which office
minimum; banking services during
(head office and/or branch/es and/or
holidays. Banks may, at their discretion,
extension offices) will open or extend
remain open beyond the minimum six (6)
banking hours on what dates, shall be
hours and for as long as they find it
submitted to the appropriate department of
necessary, even before 8:00 AM or after
the SES on or before the last banking day of
8:00 PM, subject to the submission of prior
March of every year.
written notice required under
(As amended by Circular Nos. 930 dated 18 November 2016,
Subsec. X156.2 on report of, and changes 917 dated 08 July 2016, 835 dated 05 June 2014 and 634 dated
in, banking days and hours, and compliance 5 December 2008)
with the provisions of Subsecs. X156.3 on
posting of schedule of banking days and § X156.2 Report of, and changes in,
hours, and X181.5 on minimum security banking days and hours. The banking days
measures. and hours selected for each of the offices of
Banks and/or their branch/es and/or banks shall be reported in writing to the
extension offices may opt to remain open appropriate department of the SES. Banks
during any or all of their regular banking may change the banking days and hours
days that were covered by holidays for the previously reported to the Bangko Sentral
purpose of servicing deposits and by giving prior written notice: Provided, That
withdrawals: Provided, That a bank opting changes in banking days or hours shall not

§§ X156.2 - X160.2
13.12.31
be made oftener than once every thirty (30) shall govern the premises and other fixed
days, except during emergencies. assets of banks.
Emergency shall mean (a) condition of an
area or locality proclaimed by the President § X160.1 (2008 - X606.1) Appreciation
of the Philippines as in a state of emergency; or increase in book value. Bank premises,
or (b) an event or occasion or a combination furniture, fixtures and equipment shall be
of circumstances equivalent to a public accounted for using the cost model under
calamity resulting from fire, flood, or like PAS 16 “Property, Plant and Equipment.”1
disaster, or through some unusual Outstanding appraisal increment as of
occurrence or pressing necessity not 13 October 2005 arising from mergers and
reasonably subject to anticipation calling for consolidation and other cases approved by
immediate action or remedy. the Monetary Board, shall be deemed part
The prior written notice to the Bangko of the cost of the assets. However, appraisal
Sentral on changes in banking days and increment previously allowed to be booked
hours shall be given through the fastest shall be reversed.
means of communication, at least seven (7) Accordingly, the booking of
banking days before the intended effectivity appreciation or increase in the book value
of the change in banking hours or days. In of bank premises and other fixed assets in
case a bank, due to an emergency, has to cases where the market value of the property
open outside, or close during, the banking has greatly increased since the original
hours or days reported to the Bangko Sentral, purchase is no longer allowed.
a written report submitted within twenty- (As amended by Circular No. 520 dated 20 March 2006)
four (24) hours from opening or closing, as
the case may be, will suffice. The report shall § X160.2 (2008 - X606.2) Ceiling on
state the specific nature of the emergency total investments. The total investment of a
and the period the bank opened or closed bank in real estate and improvements
or shall open or close by reason of thereon, including bank equipment, shall not
emergency. exceed fifty percent (50%) of the bank’s net
worth. In determining compliance with
§ X156.3 Posting of schedule of such ceiling, the following rules shall apply:
banking days and hours. The schedule of a. The investment shall include all real
banking days and hours reported to the estate and equipment necessary for the
Bangko Sentral shall be posted bank’s immediate use in the transaction of
conspicuously at all times in the bank’s its business, such as:
premises. (1) Bank Premises - Land and Buildings,
Buildings under Construction, Leasehold Rights
Secs. X157 - X159 (Reserved) and Improvements and Furniture, Fixtures and
Equipment (as defined in the Manual of
K. BANKING PREMISES Accounts for All Banks), owned and used by
the bank in the conduct of its business, including
Sec. X160 (2008 - X606) Bank Premises and staff houses, recreational facilities and
Other Fixed Assets. The following rules landscaping costs, net of accumulated
1

§§ X160.2 - X160.3
10.12.31
depreciation: Provided, however, That equivalent to the amount obtained by

appraisal increment on bank premises shall applying the percentage of the equity of
not be included in the total investment in said stockholders/directors/officers in the
real estate and improvements for purposes lessor to the cost of that portion of the
of these guidelines; and property being leased by the bank, or
(2) Real properties, equipment or (b) the amount obtained by applying the
other chattels purchased by the bank in percentage of the equity of the stockholders/
its name for the benefit of its officers and directors/officers in the lessor to any
employees, net of depreciation and in the outstanding loans of the corporation with
case of land or other non-depreciable the bank, the proceeds of which were used
property, net of payments already made to purchase, construct or develop the real
to the bank by the officers and employees estate used for the bank’s purposes.
for whose benefits the property was The equity investment of a bank in a
bought, where such property has not yet corporation engaged primarily in real
been fully paid and ownership has not yet estate shall be included in the
been transferred to them. computation of the bank’s total investment
b. The following shall be included in in real estate, unless otherwise provided
the computation of a bank’s total by the Monetary Board.
investment in bank premises:
(1) (a) The cost of real estate leased in § X160.3 (2008 - X606.3) Reclassification
whole or in part by the bank from a of real and other properties acquired
corporation, other than a corporation (ROPA) to bank premises, furniture, fixture
primarily engaged in real estate in which and equipment; Sanctions. Banks may
the bank has equity, equivalent to the reclassify ROPA to bank premises, furniture,
amount obtained by applying the fixture and equipment, subject to the
percentage of the equity of the bank in the following conditions:
lessor to the cost of that portion of the (a) Prior written approval of the
property being leased, or majority of the members of the board of
(b) the amount of equity in the lessor, directors has been obtained for such
whichever is lower, plus the amount reclassification. The approval shall be
obtained by applying the percentage of the manifested in a resolution passed by the
equity of the bank in the lessor to any board of directors during a meeting and shall
outstanding loans of the lessor with the contain the following information:
bank, the proceeds of which were used to (1) Date ROPA was acquired;
purchase, construct or develop the real (2) Description of ROPA property;
estate used for the bank’s purposes. (3) Outstanding balance of ROPA at the
(2) The lower of - time of reclassification;
(a) the cost of real estate leased in (4) Specific purpose for reclassifying
whole or in part by the bank from a said property to bank premises, furniture,
corporation in which any or a group of fixture and equipment; and
stockholders owning ten percent (10%) or (5) Justification and plan for expansion,
more of the voting stock of the bank, in the case of real and other property
directors and/or officers of the bank, hold earmarked for future use.
or own more than fifteen percent (15%) of Said resolution shall also be made
the subscribed capital stock of the lessor, available for inspection by BSP examiners,

§§ X160.3
10.12.31
together with the supporting records and A bank which fails to comply with the
documents involving the ROPA account; provisions of this Subsection shall be subject
and to monetary penalties under Appendix 67.
(b) Only such acquired asset, or a 1) For non-submission of the required
portion thereof, that will be (i) immediately certification
used, or (ii) ready and available for use A bank which fails to submit the
within a two (2)-year period from date of required Certification on Compliance with
reclassification (in case of ROPA earmarked Regulations on the ROPA to Bank Premises,
for future use) may be reclassified to bank Furniture, Fixture and Equipment or the
premises, furniture, fixture and equipment; certified true copy of the resolution of the
(c) ROPA reclassified to bank board of directors authorizing said
premises, furniture, fixture and equipment reclassification within the prescribed
shall be recorded at its net carrying amount deadline shall be subject to monetary
where the amounts booked as cost, penalties applicable to minor offenses under
accumulated depreciation and allowances Appendix 67 which shall be reckoned on a
for losses for bank premises, furniture, daily basis from the day following the due
fixture and equipment shall correspond to date of submission until the required
the balance of these accounts under ROPA certification on compliance or the certified
at the time of reclassification. As such, the true copy of the resolution of the board of
reclassification shall not give rise to any directors is filed with the BSP.
gains/(losses) being recognized in the bank 2) For false/misleading statements
books; and A bank which has been found to have
(d) Said reclassification shall not willfully made a false or misleading
cause the bank to exceed the prescribed statement in the required Certification on
ceiling on investment in real estate and Compliance with Rules and Regulations on
improvements thereon, including bank the ROPA to Bank Premises, Furniture,
equipment, provided under Subsec. Fixture and Equipment or in the certified true
X160.2. copy of the resolution of the bank board of
Within five (5) banking days from date directors shall be subject to the monetary
of reclassification, the bank shall submit penalties applicable to minor offenses under
the Certification on Compliance with Appendix 67 for the willful making of a false
Regulations on the Reclassification of or misleading statement which shall be
ROPA to Bank Premises, Furniture, reckoned on a daily basis from the day
Fixture and Equipment (Appendix 96) following the due date of the said
signed by the president of the bank or certification until such time that an amended
officer of equivalent rank, to the or corrected certification on compliance or
appropriate department of the SES. Said certified true copy of the resolution of the
certification shall be accompanied by the board of directors has been submitted to the
certified true copy of the resolution of the BSP.
bank’s board of directors authorizing the 2. On the concerned directors/officers
reclassification. of the bank.
Sanctions. The following sanctions a. For willful non-compliance
shall be imposed for violations noted: Directors/officers of the bank who
1. On the bank willfully fail/refuse to comply with the
a. Monetary fines provisions of this Subsection shall be subject

§§ X160.3 - X161
13.12.31
to the monetary penalties applicable to places, workplaces, public utilities, shall be

minor offenses under Appendix 67. granted or issued unless the owner or
b. For false/misleading statements operator thereof shall install and incorporate
Directors/officers of the bank which in such building, establishment or public
have been found to have willfully falsely utility, such architectural facilities or
certified or willfully submitted misleading structural features as shall reasonably
statements in the required Certification on enhance the mobility of disabled persons
Compliance with the Regulation on the such as sidewalks, ramps, railings and the
Reclassification of ROPA to Bank Premises, like. If feasible, all such existing buildings,
Furniture, Fixture and Equipment or in the institutions, establishments, or public
certified true copy of the resolution of the utilities may be renovated or altered to
bank’s board of directors shall be subject enable the disabled persons to have access
to the monetary penalties applicable to to them.
minor offenses under Appendix 67, which
shall be reckoned on a daily basis from the § X160.11 Republic Act No. 9994 – An
day following the due date of the said Act Granting Additional Benefits and
certification until such time that an amended Privileges to Senior Citizens, Further
or corrected certification on compliance or Amending Republic Act No. 7432 of 1992
certified true copy of the resolution of the as Amended by Republic Act No. 9257 of
board of directors has been submitted to 2003. To be able to give full support to the
the Bangko Sentral. improvement of the total well-being of the
The imposition of the above sanctions elderly and their full participation in society,
is without prejudice to the filing of and to motivate and encourage them to
appropriate criminal charges against contribute to nation building, senior citizens
culpable persons as provided under Section shall be provided with express lanes in all
35 of R.A. No. 7653 for the willful making banking establishments, including all their
of a false/misleading statement. branches and other offices. If the provision
(As amended by Circular No. 701 dated 13 December 2010) of express lanes is logistically impossible in
any particular branch or office of any bank,
§§ X160.4 - X160.9 (Reserved) said branch or office shall ensure that senior
citizens are accorded priority service. The
§ X160.10 (2008 - X606.10) Batas provision of express lanes and/or priority
Pambansa Blg. 344 - An Act to Enhance service shall be made known to the general
the Mobility of Disabled Persons by public through a clearly written notice
Requiring Certain Buildings, Institutions, prominently displayed in the transaction
Establishments and Public Utilities to counters of all banks and/or offices.
Install Facilities and Other Devices. In (Circular No. 805 dated 08 August 2013)
order to promote the realization of the rights
of disabled persons to participate fully in
the social life and the development of the L. MANAGEMENT CONTRACTS AND
societies in which they live and the OUTSOURCING OF BANKING
enjoyment of the opportunities available to FUNCTIONS
other citizens, no license or permit for the
construction, repair or renovation of public Sec. X161 (2008 - X168) Management
and private buildings for public use, Contracts.
educational institutions, airports, sports and a. Management contracts of banks with
recreation centers and complexes, shopping management firms shall be limited to
centers or establishments, public parking consultancy and advisory services;

§§ X161 - X162.4
17.03.31
b. Only a natural person may be b. Granting of loans and extension of

elected or appointed as an officer of a bank, other credit exposures;
without prejudice to such person being a c. Managing of risk exposures; and
nominee of a management corporation: d. General management.
Provided, That the responsibility and/or (Circular No. 899 dated 18 January 2016; 765 dated 03 August
accountability of anyone elected or 2012, as amended by Circular No. 940 dated 20 January 2017)
appointed to an officer position shall be
personal in nature and cannot be delegated § X162.3 (2015 - X162.5) Authority to
to a corporation; and outsource. Only those banks with a
c. Any bank that enters into contracts CAMELS composite rating of at least “3” and
contrary to this policy shall be denied the a Management rating of not lower than “3”
credit facilities of the Bangko Sentral. shall be allowed to outsource designated
activities without prior Bangko Sentral
Sec. X162 Statement of Principle on approval. Otherwise, the bank must secure
Outsourcing. A bank may outsource to third prior approval from the appropriate
parties or to related companies in the group, department of the SES whose evaluation will
in accordance with existing Bangko Sentral be based on the bank’s ability to manage
regulations, certain services or activities to risks attendant to outsourcing.
have access to certain areas of expertise or (Circular No. 765 dated 03 August 2012, as amended by Circular
to address resource constraints: Provided, No. 899 dated 18 January 2016)
That it has in place appropriate processes,
procedures, and information system that can § X162.4 Governance and managing of
adequately identify, monitor, and mitigate outsourcing risks. Key risk areas related to
operational risks arising from the outsourced outsourcing such as strategic; reputation/
activities: Provided, further, That the bank’s legal; operational, compliance, country and
board of directors and senior management concentration risks should be evaluated
shall remain responsible for ensuring that before entering into and while managing
outsourced activities are conducted in a safe outsourcing contracts. In this regard, banks
and sound manner and in compliance with shall:
applicable laws, rules and regulations. a. Perform risk assessment of a business
(As amended by Circular Nos. 899 dated 18 January 2016 and activity and evaluate the implications of
765 dated 03 August 2012)
performing the activity in-house or having
the activity outsourced.
§ X162.1 (2015 - X162.3) Definition.
The following factors shall be
Outsourcing shall refer to any contractual
considered in the assessment:
arrangement between a bank and a qualified
(1) Level of importance to the bank of
service provider for the latter to perform
the activity to be outsourced and potential
designated activities on a continuing basis
impact on bank’s operations, financial
on behalf of the bank.
condition, reputation, and ability to achieve
No. 899 dated 18 January 2016) its objectives, strategies and plans, should
the service provider fail to perform the
§ X162.2 (2008 - X169.1) Prohibition services;
against outsourcing of inherent banking (2) Outsourcing costs in proportion to
functions. No bank shall outsource inherent total operating expenses and compared with
banking functions such as: costs of developing own infrastructure and
a. Taking of deposits from the public; expertise;

§ X162.4
16.03.31
(3) Aggregate exposure to a particular necessary infrastructure and expertise,

service provider, in cases when the bank comparable with market rates, and
outsources various functions to the same reasonable vis-à-vis scope and complexity
service provider; of services);
(4) Ability to maintain appropriate (5) Actual performance vis-à-vis service
controls and meet regulatory requirements, level agreement;
in cases of operational constraints of the (6) Performance of the service provider
service provider; and (past and present engagements) including
(5) Exposure to risk of confidentiality, the reasons/causes of disengagements, if
integrity and availability of customer and any; and
bank data. (7) Compliance with provisions of
In cases when the risk management service agreements, performance standards
system is deemed inadequate for purposes and adherence to applicable laws,
of managing outsourcing-related risks, the regulations, and supervisory expectations.
Bangko Sentral may direct the bank to In cases when the clients are prejudiced
terminate, modify, make alternative due to errors, omissions, and frauds by the
arrangements or re-integrate the outsourced service provider, the bank shall be liable in
activity into its operations, as may be providing the appropriate remedies or
necessary. remuneration as may be allowed under
b. Establish policies and criteria to existing laws or regulations, without
select the “best” service provider for the prejudice to the bank’s right of recourse to
outsourced activities and to get said services the service provider.
at reasonable price. The following factors c. Establish, maintain, and regularly
should be considered in evaluating potential test business continuity and contingency
service providers: plans for situations wherein the service
(1) Reputation, ownership structure (to provider cannot deliver the required
identify potential conflict of interest), services. The contingency plan must
technical expertise, and operational indicate whether another service provider
capability; will be tapped or the service/activity will
(2) Financial performance and be brought back in-house. This should in
condition (e.g., ongoing viability, turn consider the costs, time, and resources
outstanding commitments, capital/funding that would be involved.
strength, liquidity and operating results; and Contingency arrangements in respect of
reliance on subcontractors) of the service daily operational and systems problems
provider and its closely-related affiliates; should be covered in the service provider’s
(3) Operations and internal control own contingency plan. The contingency
environment (e.g., internal controls, plan must be reviewed regularly to ensure
facilities management, training, security of that it remains relevant and ready for
system, privacy protection, maintenance implementation.
and retention of records, business d. Ensure that it has adequate
resumption and contingency plans, systems resources to manage and monitor
development and maintenance, and outsourcing relationships on a continuing
employee background checks); basis. Banks are expected to develop
(4) Fees and charges (e.g., outsourcing acceptable performance metrics to assess
cost should be lower than developing the outsourcing contracts. They shall also

§§ X162.4 - X162.7
16.12.31
maintain records of all outsourcing activities subsidiaries, affiliates and companies related
which should be updated and reviewed to it by at least five percent (5%) common
regularly. ownership; or (ii) the service is rendered to
e. Ensure that personnel with oversight its own depositors on account of the bank
and management responsibilities for service being a depository. The bank, acting as a
providers have the appropriate level of service provider within its group, shall
expertise and stature to manage the uphold the following:
outsourcing arrangement. The oversight a. Confidentiality of deposits and
process, including the level and frequency investments in government bonds as defined
of management reporting, should be risk- under R.A. No. 1405, as amended;
focused. Banks should design and b. Prohibition on cross-selling except
implement risk mitigation plans for higher as allowed under applicable regulations.
risk service providers. These may include (Circular No. 765 dated 03 August 2012, as amended by Circular
certain requirements or processes such as No. 899 dated 18 January 2016)
additional reporting by the service provider
or heightened monitoring. Further, more § X162.7 (2015 – X162.8) Offshore
frequent and stringent monitoring is outsourcing. Offshore outsourcing exists
necessary for service providers that exhibit when the service provider is located
performance, financial, compliance, or outside the country. Subsec. X162.6 on
control concerns. intra-group outsourcing likewise applies in
(Circular No. 765 dated 03 August 2012, as amended by Circular cases of offshore outsourcing. In addition,
No. 899 dated 18 January 2016) offshore outsourcing of bank’s domestic
operations is permitted only when the
§ X162.5 (2015 - X162.6) service provider operates in jurisdictions
Documentations. The bank should maintain which uphold confidentiality. When the
necessary documentation to show that service provider is located in other
outsourcing arrangements are properly countries, the bank should take into
reviewed and the appropriate due diligence account and closely monitor, on
has been undertaken prior to continuing basis, government policies and
implementation. The bank shall keep in its other conditions in countries where the
file the documents shown in Appendix 100 service provider is based during risk
and the same shall be made available to assessment process. The bank shall also
authorized representatives of the Bangko develop appropriate contingency and exit
Sentral for inspection. strategies.
(Circular No. 765 dated 03 August 2012, as amended by Circular The Bangko Sentral examiners shall be
No. 899 dated 18 January 2016)
given access to the service provider and
§ X162.6 (2015 – X162.7) Intra-group those relating to the outsourced domestic
outsourcing. The guidelines and operations of the bank. Such access may be
requirements of outsourcing to third-party fulfilled by on-site examination through
service providers shall be observed when coordination with host authorities, if
outsourcing within a business group necessary. The domestic branch of foreign
including its head office, another branch or bank shall be principally liable in cases
related company. When the bank is the where the clients are prejudiced due to
service provider, the bank may only errors, omissions and frauds of the service
render services it performs in the ordinary provider located offshore.
course of its banking business: Provided, The Bangko Sentral may require the
That (i) the service is rendered to bank to terminate, modify, make alternative

§§ X162.7 - X172.1
17.09.30
outsourcing arrangement or re-integrate the BSFI and/or its directors, officers and/or
outsourced activity into the bank, as may employees.
be necessary, if confidentiality of customer (As amended by Circular No. 899 dated 18 January 2016, as
information, effective customer redress amended by Circular No. 930 dated 18 November 2016)
mechanisms or the ability of the Bangko
Sentral to carry out its supervision functions Secs. X163 - X171 (Reserved)
cannot be assured.
M. BANK OFFICES AS OUTLET OF
Nos. 930 dated 18 November 2016 and 899 dated 18 January 2016) FINANCIAL PRODUCTS OF ALLIED
UNDERTAKINGS/INVESTMENT
§ X162.8 (2015 – X162.10) Transitory HOUSE
provision. All outsourcing agreements must
be aligned with the provisions of Sec. X162. Sec. X1721 (2008 - 1631.1; 2012 - 1172.1)
Existing outsourcing agreements which are Statement of Principles. The Bangko Sentral
recognizes that bank premises may serve as
not in accordance with this Section will not
the point for the presentation and
be unwound. However, it must comply with
distribution of a range of financial products.
the requirements provided herein upon
However, this distribution mechanism can
renewal of the agreements.
give an understanding that these financial
No. 899 dated 18 January 2016) products are created by the bank and thus
could lead to an impression that the bank
§ X162.9 (2015 – Service providers) ultimately bears the responsibility for their
Supervisory enforcement actions. performance. The Bangko Sentral, therefore,
Consistent with Sec. X009, the Bangko provides an enabling environment for cross-
Sentral may deploy enforcement actions to selling activities which defines the
promote adherence with the requirements responsibilities of banks for managing the
set forth in this Section and its Subsections attendant risks and upholding consumer
and bring about timely corrective actions. protection.
(As amended by Circular Nos. 890 dated 02 November 2015,
The Bangko Sentral may issue directives to
844 dated 11 August 2014 and 801 dated 27 June 2013)
improve the management of outsourcing
arrangements, or impose sanctions to limit § X172.1 Definition. The following
the level of or suspend any business activity terms as used in this Section are governed
that has adverse effects on the safety or by the following definition-
soundness of the BSFI, among others. a. Cross-selling means the presentation
Sanctions may likewise be imposed on a and/or sale of a financial product, other than
1
Within thirty (30) calendar days from 30 August 2014, the bank shall review all its existing cross-selling
arrangements and determine its compliance with the revised rules. All deviations shall be reported to the
Bangko Sentral within the same period. If the bank is fully compliant, it shall issue a certification to the Bangko
Sentral to this effect. All financial products that had been allowed and/or approved for cross-selling prior to
30 August 2014 shall be given up to 31 August 2015 within which to comply with the requirements as set forth
under this Section.

§§ X172.1 - X172.3
17.09.30
bank’s own financial product, to a bank Simple retailed financial products which
client inside bank premises through written do not create exposure to investment risks
or verbal communications. may be cross-sold inside bank premises.
b. Financial conglomerate refers to a These include:
group of interrelated entities providing a. Retail lending or loan products such
significant services in at least two (2) as credit cards, home mortgage loans,
different financial sectors (banking, personal loans, auto loans and other related
securities and insurance). A banking group retail loan products;
is subsumed within the context of a financial b. Other retail financial products such
conglomerate. A financial product provider as cash cards, debit cards and other related
must have been disclosed and reported as products; and
part of the group structure pursuant to c. Other similar financial products as
Subsec. X143.1d(8). may be authorized by the Monetary Board.
c. Financial product of an allied Simple insurance products such as
undertaking under Section 20 of the General traditional life (whole life, term,
Banking Law refers to financial products endowment), non-life (marine, fire, casualty,
created by a financial product provider suretyship), and other similar protection-
belonging to the same financial type insurance products, except variable
conglomerate. insurance contracts, as governed by the
d. Financial product provider means a Insurance Code are considered as simple
financial entity which creates the financial retail financial products. These may be
product. The financial product provider cross-sold inside bank premises regardless
should be regulated or supervised by either of whether the financial product provider
the Bangko Sentral, the Securities and belongs to the same financial conglomerate
Exchange Commission (SEC) or the or not.
Insurance Commission (IC). Collective investment schemes (CIS) of
e. Bank premises refer to the physical financial product providers belonging to the
area occupied by the bank’s head office, same financial conglomerate may be cross-
branches and other offices. sold inside bank premises. These refer to:
f. Investment risk refers to the potential a. Mutual funds registered with the
loss of the principal amount (either full or SEC;
partial) invested by the investor. It also refers b. UITFs as authorized by the Bangko
to the possibility of not achieving targeted Sentral;
rate of returns for a given investment c. Variable unit-linked life insurance
transaction. policy (VULs) as governed by the Insurance
(Circular No. 801 dated 27 June 2013, as amended by Circular Code or under the relevant rules and
Nos. 969 dated 22 August 2017 and 844 dated 11 August 2014) regulations as may be issued by the IC.
(As amended by Circular Nos.844 dated 11 August 2014 and
§ X172.2 (2008 - 1631; 2012 – 1172) 801 dated 27 June 2013)
Financial products. Unless otherwise
provided, financial products should be § X172.3 Governance. The board of
created by a financial product provider directors of the bank (or its equivalent in
belonging to the same financial the case of foreign bank branches) shall
conglomerate. Moreover, such financial oversee the implementation of its policies
products should have been duly approved relating to cross-selling arrangements.
by the respective regulator, as provided The bank shall exercise due care and
under its rules, before these can be presented diligence in carrying out cross-selling
and/or sold inside bank premises. activities. This process shall extend to both

§§ X172.3 - 1172.4
14.12.31
the financial products and financial product Bank employees authorized to market and/
providers. The bank shall put in place a or sell CIS shall be clearly identified.
formal written policy to assess the nature of c. The presentation and/or sale of CIS
the financial product and its suitability for shall be conducted in an area distinct from
target customer segments. This written areas where own bank products are sold.
policy should, at the very least, enable the (Circular No. 801 dated 27 June 2013, as amended by Circular
bank to reach an objective assessment of No. 844 dated 11 August 2014)
the suitability of the financial product to be
§ X172.4 (2008 - 1631.1; 2012 –
cross-sold.
1172.3) Minimum documentary
The bank shall recognize the customers’
requirements. The bank should maintain
right to product choice, to refuse bundled
necessary documentation to support that
or tiered financial products or services under
cross-selling arrangements are properly
cross-selling arrangements, and to substitute
reviewed and appropriate due diligence has
equivalent financial products by reputable
been undertaken.
competitors.
This shall, at a minimum, include the
The bank shall ensure that a mechanism
following:
is in place to address any complaints that
a. Approval of the board of directors
may arise from cross-selling transactions.
of both the bank and the financial product
This mechanism shall form part of the
provider to use the former’s bank premises
agreement between the bank and the
for the presentation and sale of the latter’s
financial product provider.
financial products;
The bank shall periodically review all
b. Audited financial statements of the
of its cross-selling arrangements. In
financial product provider for the last three
particular, the bank shall take into account
(3) years;
operational and reputational risks that may
c. Detailed description of the financial
arise in the arrangement. The results of the
product and proof of regulatory approval, if
continuing review shall be reported to the
any;
board of directors of the bank. The bank shall
d. Registration and/or accreditation of
likewise maintain a register of its cross-
the financial product provider from the
selling arrangements particularly on the list
respective regulator;
of financial products and financial product
e. Contract between the bank and the
providers.
financial product provider;
To avoid any impression that the
f. Sample of contracts between the
fulfillment of promises of the CIS products
financial product provider and its clients;
cross-sold within bank premises are
g. Promotional materials; and
guaranteed by the bank, the following shall
h. Training profile and necessary
be observed, at all times:
license, if required, of representatives who
a. Unless specifically trained and
will be handling the cross-selling activity.
qualified for the purpose, the role of bank
These documents shall be made
employees in cross-selling CIS shall be
available when requested by Bangko
limited to the referral of bank clients to the
Sentral examiners.
representatives of financial product (As amended by Circular No. 801 dated 27 June 2013)
providers. Clients should give prior consent
before any such referral. § 1172.4 (2008 - 1631.4) Financial
b. There shall be clear distinction ratios and other related requirements
between representatives of financial product (Deleted by Circular No. 801 dated 27 June 2013)
providers who sell CIS and bank employees.

§§ X172.5 - X172.6
14.12.31
§ X172.5 (2013-X172.6;2012-1172.5; “This contract is between (name of

2008-1631.5) Fair and balanced view of the client) and (name of financial product
product. Advertising materials and contracts provider). All transactions arising out of or
must give a fair and balanced view of the related to this contract shall be binding only
product. These materials may be considered between these two (2) contracting parties.
fair and balanced when they are clear and It is understood that this transaction is
easily understood; highlight the purpose and neither insured by the Philippine Deposit
risks of the financial product; and do not Insurance Corporation (PDIC) nor
omit any material information if such guaranteed by the (name of bank).”
omission would cause the materials to be (As amended by Circular Nos. 844 dated 11 August 2014 and
misleading. 801 dated 27 June 2013)
Promotional materials. The bank shall
§ X172.6 Cross-selling of collective
ensure that the identity of the financial
investment schemes and its suitability to
product provider is prominently displayed
customers. In the cross-selling of CIS,
in the relevant marketing and advertising
enhanced consumer protection standards
materials. The relationship of the bank with
are necessary since bank clients who
the financial product provider may be
invest in these products are exposed to
reflected in the promotional materials as
investment risk. At the onset, banks must
long as it does not create an impression that
ensure that CIS as financial products are
it is the product of the bank whose premises
compliant with relevant prudential
are used.
regulations issued by the respective
The promotional materials should
government bodies and agencies
explicitly state that the product is not a
governing their issuance before entering
deposit. The information contained in any
into any cross-selling arrangements. With
document used in the presentation and sale
respect to consumer protection features,
of financial products inside bank premises
a cross-selling bank must ensure that
must contain, at a minimum, the words:
financial product providers observe the
“financial product/s of (financial product
following minimum practices:
provider) is/are not insured by the Philippine
a. Product Highlight Sheet (PHS).
Deposit Insurance Corporation and is/are
Potential clients must be provided with a
not guaranteed by the (name of bank)”, as
PHS. This succinct document summarizes
the case may be. This shall be printed in
the key information of the financial
capital letters, black letters against light
product which will be material to the
background/white letters against dark
proper understanding by the client of the
background with the following print size:
product, its features and risks. The PHS
should at least be a separate document but
Size of Promotional
may form part of the prospectus or
Material Print Size
contract.
Legal/letter size 12
Among the key questions that must be
15" x 20" 24
covered in the PHS are:
19" x 25" 36 (1) What are you investing in and who
are you investing with?
Contracts. The following paragraph shall (2) What are the key risks of this
be printed at the end of the contract in the investment?
print size as the rest of the contract, or font (3) What are the fees and charges for
size 12 whichever is bigger, in capital letters this investment?
and in bold font: (4) How often are valuation available?

§§ X172.6 - X172.8
14.12.31
(5) How can you exit from this X172.5. The text should be in bold with a
investment and what are the risks and costs minimum font size of 12.
in doing so? The cross-selling bank shall maintain
(6) How do you contact us? adequate documentation, available for
(7) What other important information inspection by the Bangko Sentral examiners,
should you know before you invest? to evidence that above requisites are
b. Client Suitability Assessment (CSA) properly undertaken.
A CSA of each client shall be undertaken (Circular No. 844 dated 11 August 2014)
prior to the acquisition of an investment
product by the client. The CSA should § X172.7 Financial product providers
determine the client’s understanding of, The bank shall exercise due care and
tolerance for and capacity in managing diligence in selecting financial product
various risks. providers. The bank shall consider the
c. Investment Policy Statement (IPS). As integrity, operational capability, financial
a complement to a CSA, an IPS must have capacity and track record of the financial
been generated for a bank client. The IPS product provider. In particular, the bank
formalizes the investment philosophy of the shall ensure that the financial product
client as well as any investment directive of provider has in place a mechanism to resolve
the client with respect to the handling of all queries, problems and other concerns
his investible funds. arising from cross-selling activities.
d. Disclosure of conflict of interest. It is the responsibility of the financial
Financial product providers should disclose product provider to assess its
any material information which can give rise representatives in terms of sufficient
to an actual or potential conflict of interest knowledge of the financial product,
to the client. Financial product providers adequate training and necessary license,
should take all reasonable steps to ensure when required.
fair dealings with client. The Bangko Sentral should be satisfied
e. Standard disclosure statement. All that the bank and the financial product
promotional materials, product highlights provider belong to the same financial
sheet and contracts of collective investment conglomerate, as applicable, before cross-
schemes should contain a standard selling arrangements may be allowed.
disclosure statement which reads as: When the financial product provider is
“This is not a deposit product. Earnings under the supervision of the Bangko Sentral,
are not assured and principal amount the financial product provider must have a
invested is exposed to risk of loss. This CAMELS composite rating of at least “3” or
product cannot be sold to you unless its its equivalent.
(Circular No. 801 dated 27 June 2013, as amended by Circular
benefits and risks have been thoroughly No. 844 dated 11 August 2014)
explained. If you do not fully understand
this product, do not purchase or invest in § 1172.7 (2008 - 1631.7) Training
it.” (Deleted by Circular No. 801 dated 27 June 2013)
This disclosure statement shall be
placed in the front cover of any material used § X172.8 (2012 – 1172.2; 2008 -
within bank premises for cross-selling 1631.2) Authority to cross-sell. Banks with
purposes. This is in addition to the CAMELS composite rating of at least “3”
minimum information provided in Subsec. or its equivalent and without major
supervisory concerns may be given

§§ X172.8 - X172.10
14.12.31
authority to engage in cross- selling For any product approval, the Bangko
activities. Sentral reserves the right to validate on the
The bank shall secure the approval of bank’s representation of compliance with
the Monetary Board before it can engage in cross-selling rules and regulations as
cross-selling activities. circumstances may warrant.
The application letter to engage in cross- The Monetary Board may suspend any
selling activities shall be signed by the or all cross-selling activities whenever a
President, or the Country Officer in the case bank no longer meets the original conditions
of foreign bank branches, and shall be of the approval and/or by virtue of any
submitted to the appropriate supervising subsequent issuances by the Bangko Sentral
department of the SES. For the initial governing the conduct of cross-selling
financial products for cross-selling, the activities. The bank may re-submit an
application letter shall also contain an application to enter into cross-selling
explanation of the relationship of the bank arrangements only when the CAMELS
with the financial product provider in the composite rating or its equivalent is at least
context of the financial conglomerate, as “3” in the latest report of examination or any
applicable. It shall also contain brief noted major supervisory concerns have
description of the financial products and been satisfactorily addressed as determined
justification of the cross-selling by the appropriate supervising department
arrangements. of the SES.
In addition, the bank shall submit the (As amended by Circular Nos. 844 dated 11 August 2014 and
801 dated 27 June 2013)
following:
a. Notarized Secretary’s Certificate on
§ 1172.8 (2008 - 1631.8) Other
the approval of the board of directors of the
requirements.
cross-selling of financial products;
b. Notarized Certification, signed by
the bank’s President or the Country Officer § X172.9 Complaints handling. The bank
in the case of foreign bank branches and shall be jointly responsible with the financial
Compliance Officer, of the bank’s product provider in the resolution of any
compliance with pertinent banking laws, complaint arising from cross-selling
rules and regulations on cross-selling. transactions. For this purpose, the bank shall
Once approved, the bank may establish an effective redress mechanism
continuously undertake cross-selling which shall specifically include processes
activities unless otherwise ordered by the and procedures for handling any complaint
Monetary Board. arising from cross-selling transactions.
The bank may subsequently apply for (Circular No. 801 dated 27 June 2013, as amended by Circular
additional financial products for cross- No. 844 dated 11 August 2014)
selling. The application shall be supported
by a notarized certification as indicated in § X172.10 (2008 - 1631.11; 2012 –
Item “b” above. Approval of the same is 1172.11) Sanctions. Violations of the
delegated to the SES Subsector Head with provisions of this Section shall constitute
responsibility for the bank, except for the grounds for the imposition on the bank and/
CIS-type financial products, the approval of or its directors/officers of any or a
which is delegated to the Deputy Governor, combination of the following:
SES: Provided, That all such approvals under a. Monetary penalty - Any amount as
delegated authority are subject to may be authorized by the Monetary Board
confirmation by the Monetary Board prior not to exceed P30,000 a day for each
to effectivity. violation from the time the violation was

§§ X172.10 - 2172
16.09.30
committed until it is corrected; and shall ensure that microinsurance products

b. Non-monetary sanction - Any presented and marketed are clearly
sanctions that the Monetary Board may distinguishable from bank products.
deem appropriate and allowed by law Towards this end, all organic documents,
considering the gravity of the offense. informational and promotional materials
(As amended by Circular Nos.844 dated 11 August 2014 and used in the presentation and sale of these
801 dated 27 June 2013) products shall prominently display both the
name of the issuing insurance provider and
Sec. 2172 Marketing, Sale and Servicing of a clause stating that the insurance product/s
Microinsurance Products by Thrift Banks1. of (name of issuing insurance provider) is/
In order to better serve microfinance clients are not insured by the PDIC and is/are not
pursuant to the financial inclusion thrust of guaranteed by the (name of bank)”. The bank
National Strategy and Regulatory shall also ensure compliance with pertinent
Framework for Microinsurance, a TB, laws and rules on the sale of microinsurance
including its authorized branch/es, extension products set by the Insurance Commission.
office/s and other banking offices (OBOs), As part of product due diligence, the bank
can present, market and sell microinsurance should check whether the microinsurance
products as defined under the Insurance product-issuing insurance provider has a
Commission’s Memorandum Circular (IMC) functioning customer care and claims-
No. 1-2010 2: Provided, That the handling mechanism to handle consumer
microinsurance product is duly approved by protection issues.
the Insurance Commission. A bank, prior to selling and/or marketing
The presentation, marketing and sale of microinsurance products, shall submit
microinsurance products by TBs has been the following documents to the Bangko
determined to be a necessary and Sentral as bases for the latter’s
complementary component of the primary evaluation:
business of TBs considering the relationship 1. Copy of the approval of the bank’s
of the latter with their microfinance clients. board of directors on the presentation, sale
For this purpose, the Monetary Board has and servicing (i.e., collect premiums and pay
defined that for TBs, microinsurance claims) of microinsurance products;
products as defined under IMC 2. Copy of duly executed written
Nos. 9-20063 and 1-20102 shall serve as a agreement between the bank and the
“financial product of an allied undertaking” insurance provider on the presentation, sale
under Section 20 of the General Banking and servicing by the bank of the financial
Law. products of the latter, including the terms
A TB can also service (i.e., collect of compensation for the services;
premiums and pay claims) microinsurance 3. Copy of the letter of approval from
products as collection and payment agents the Insurance Commission covering each
pursuant to Section 53.3 of the General of the microinsurance product to be
Banking Law. marketed or sold by the bank;
A TB which intends to avail of the option 4. Copy of the corresponding Certificate
to market or sell microinsurance products of Authority from the Insurance
1
Insurance Commission (IC) issued Circular Letter (CL) No. 2015-54 dated 16 October 2015 requiring the
adoption and implementation of the Enhanced Microinsurance Regulatory Framework
2
Dated 29 January 2010
3
Dated 25 October 2006

§§ 2172 - X173
17.09.30
Commission of the insurance provider/s b. Copies of the letters of approval

issuing the microinsurance products to be from the Insurance Commission covering
marketed or sold; and all the microinsurance products to be
5. Bank’s license from the Insurance marketed or sold;
Commission as a microinsurance agent or c. Bank’s license from the Insurance
broker, as may be applicable.1 Commission as a microinsurance agent or
6. Certification from the bank president broker or in lieu of a bank’s license as a
that he/she ascertained and will ensure microinsurance agent or broker, copies of
continuing compliance with the following: the license from the Insurance Commission
a. The product is authorized for cross covering all its marketing personnel for
selling under existing Bangko Sentral rules microinsurance products; and
and regulations; 8. Such other information that may be
b. The microinsurance product is required by the Bangko Sentral.
approved by the Insurance Commission (Circular No. 683 dated 23 February 2010 and M-2011-015 dated
18 March 2011, as amended by Circular No. 917 dated
and issued by an entity duly licensed and 08 July 2017, M-2015-041 dated 27 November 2015 and Circular
held in good standing by the Insurance No. 890 dated 02 November 2015)
Commission;
c. The bank conducted product due Sec. 3172 Marketing, Sale and Servicing
diligence to be suitable to its customers; of Microinsurance Products by Rural and
d. The organic, informational and Cooperative Banks2. The marketing, sale
promotional materials for the and servicing of microinsurance products
microinsurance products comply with by RBs and Coop Banks shall comply with
Bangko Sentral requirements; and the guidelines in Sec. 2172.
e. The bank personnel concerned has (Circular No. 683 dated 23 February 2010, as amended
undertaken the necessary training and by Circular No. 917 dated 08 July 2017 and M-2015-041 dated
passed the qualifying examination for the 27 November 2015)
presentation and sale of microinsurance
products, in compliance with the N. RISK MANAGEMENT
requirements set forth by the Insurance
Commission on marketing personnel for Sec. X173 Supervision by Risks. The
insurance products. guidelines on supervision by risk to provide
7. A letter of undertaking from the bank guidance on how many banks should
president that he/she will ensure the identify, measure, monitor and control
retention of the following: risks are shown in Appendix 72.
a. Copies of the latest Certificate of The guidelines set forth the expectations
Authority from the Insurance Commission of the Bangko Sentral with respect to the
covering all insurance companies whose management of risks and are intended to
microinsurance products are being provide more consistency in how the
marketed or sold by the bank; risk-focused supervision function is applied
1
To act as a microinsurance agent of an authorized insurance provider, a bank needs to acquire the appropriate
license from the lC. The requirements for such application consist of: (i) attendance in prescribed microinsurance
training course and passing the qualifying examination at the end of the course; and (ii) amending a bank’s
articles of incorporation (AOl). In view of the latter requirement, applicant banks shall amend their AOI by
including a secondary purpose of acting as a microinsurance agent, and shall submit simultaneously the
amended AOI to the appropriate Bangko Sentral office and the lC. (See lC Memo Circular No. 6-2011
2
IC issued Circular Letter (CL) No. 2015-54 dated 16 October 2015 requiring the adoption and implementation
of the Enhanced Microinsurance Regulatory Framework

§§ X173 - X174
17.09.30
to these risks. The Bangko Sentral will review b. Risk management policy. Risk
the risks to ensure that a bank’s internal risk management policies shall cover:
management processes are integrated and (1) structure of limits and guidelines to
comprehensive. All banks should follow the govern risk-taking. These shall include
guidelines in their risk management efforts. actions that shall be taken when risk limits
Applicability to branches of foreign are breached, including notification and
banks. Branches of foreign banks shall escalation to higher level of Management
comply with the governance policies, and corresponding sanctions for excessive
practices and systems of the head office risk taking;
as well as meet the applicable standards, (2) clearly delineated responsibilities for
principles and requirements set forth managing risk based on the three (3) lines
under Secs. X142, X143, X145, and X174, of defense;
except the reportorial requirements under (3) system for measuring risk;
Subsec. X143.1d(8) on group structures. (4) checks and balances system; and
Reports of assessment of the risk (5) framework for risk data aggregation
management, compliance function and and risk reporting.
internal audit group of branches of foreign c. Risk management processes and
banks shall be made available to the infrastructure. The degree of sophistication
Bangko Sentral, during on-site of the risk management and internal control
examination or any time upon request. processes and infrastructure shall keep pace
(As amended by Circular Nos. 969 dated 22 August 2017,
with developments in the BSFI such as
749 dated 27 February 2012 and 510 dated 19 January 2006)
balance sheet and revenue growth;
Sec. X174 (2017 - Risk Management increasing complexity of the business; risk
Function) Risk Governance Framework. The configuration or operating structure;
risk governance framework shall include geographical expansion; mergers and
policies, supported by appropriate processes acquisitions; or the introduction of new
and control procedures, designed to ensure products or business lines, as well as with
that the risk identification, aggregation, the external risk landscape; business
mitigation and monitoring capabilities are environment; and industry practice. This
commensurate with the BSFI’s size, should enable a dynamic, comprehensive,
complexity, risk profile, and systemic and accurate risk reporting both at the
importance. The risk governance framework disaggregated (including material risk
shall consider the entities in the residing in subsidiaries) and aggregated level
conglomerate and shall be applied on a to allow for a BSFI-wide or integrated
group-wide scale. perspective of risk exposures.
a. Risk appetite. The BSFI’s risk appetite In this respect, BSFIs shall ensure that
shall be clearly conveyed through a risk their risk data aggregation capabilities meet
appetite statement that can be easily the following principles:
understood by all relevant parties, e.g., board (1) Accuracy and integrity – this refers
of directors itself, senior management, to the capability to generate accurate and
employees, the public, regulators, and other reliable risk data to meet normal and stress
stakeholders. The risk appetite statement reporting accuracy requirements.
shall represent the individual and aggregate (2) Completeness – this refers to the
level and types of risk that the BSFI is willing capability to capture and aggregate all
to assume in order to achieve its business material risk data across the banking group.
objectives and considering its capability to Data should be available by business line,
manage risk. legal entity, asset type, industry, region and

§§ X174 - X174.1
17.09.30
other groupings, as relevant for the risk in framework, which should accurately
question, and should permit the communicate risk exposures and results of
identification and reporting of risk stress tests and should promote robust
exposures, concentrations, and any discussion of risk exposures.
emerging risks. The risk reporting framework should be
(3) Timeliness - this refers to the governed by the following principles:
capability to generate aggregate and (1) Accuracy - Reports should accurately
up-to-date risk data in a timely manner while and precisely convey aggregated risk data
also meeting the principles relating to and reflect risk in an exact manner. In this
accuracy and integrity, completeness and regard, relevant reports should be
adaptability. Timing shall depend upon the reconciled and validated.
nature and potential volatility of the risk (2) Comprehensiveness - Reports should
being measured as well as its criticality to cover all material risk areas within the
the overall risk profile of the BSFI. Timing organization. The depth and scope of these
shall also depend on the BSFI-specific reports should be consistent with the size
frequency requirements for risk and complexity of the BSFI’s operations and
management reporting, under both normal risk profile, as well as the requirements of
and stress/crisis situations, set based on the users of information.
the characteristics and overall risk profile (3) Clarity and usefulness - Reports
of the BSFI. should communicate information in a clear
(4) Adaptability - this refers to the and concise manner. Reports should be easy
capability to generate aggregate risk data to to understand and comprehensive enough
meet a broad range of on-demand, ad hoc to facilitate informed decision-making.
risk management reporting requests, Reports should include meaningful
including requests during stress/crisis information tailored to the needs of the
situations, requests due to changing internal recipients.
needs and requests to meet supervisory (Circular No. 971 dated 22 August 2017)
queries.
d. Risk identification, monitoring and § X174.1 (2017 - X174) Risk
controlling. BSFIs shall identify and assess management function. The risk
all material risks including new and management function shall be responsible
emerging risks, as well as hard to quantify for overseeing the risk-taking activities across
risks, e.g., reputational risk, on a group-wide the BSFI, as well as in evaluating whether
and entity specific levels. In this respect, these remain consistent with the BSFI’s
BSFIs should use accurate internal and risk appetite and strategic direction. It shall
external data and consider the external ensure that the risk governance framework
operating environment in the risk assessment remain appropriate relative to the
process to inform strategic business complexity of risk taking activities of the BSFI.
decisions and risk management approaches. The risk management function shall be
e. Risk communication. BSFI shall responsible for identifying, measuring,
promote an open communication about risk monitoring and reporting risk on an
issues, including risk strategies across the enterprise-wide basis as part of the second
organization. They shall adopt an effective line of defense. It shall directly report to the
information sharing and communication Risk Oversight Committee (ROC) or the
system enabling the timely, accurate, board of directors, as applicable. Personnel
concise, and understandable transfer of in the risk management function should
information. This includes the risk reporting collectively have knowledge and technical

§§ X174.1 - X174.2
17.09.30
skills commensurate with business activities Section, and comply with the policies,
and risk exposures of the BSFI. practices, and systems of its head office
UBs/KBs shall create a separate risk related to the management of risks.
management function that shall primarily The board of directors of TBs, RBs, and
assist management in meeting its Coop banks, may, at its own discretion, or
responsibility to understand and manage as directed by the appropriate supervising
risk exposures and ensure the development department, create a risk management
and consistent implementation of risk function, that shall report directly to the
policies, processes, and procedures ROC or the board of directors, as applicable.
throughout the bank. (Circular Nos. 757 dated 08 May 2012 and 749 dated 27 February
In case of group structures, there 2012,as amended by Circular No. 971 dated 22 August 2017)
should be a board-approved policy that
defines the risk management framework § X174.2 (2017 - X174.1) Chief Risk
that shall apply to entities across the group. Officer (CRO). UBs/KBs shall appoint a
The policy shall provide the structure that CRO to head the risk management function.
Other banks, may at their own discretion,
shall be adopted by the group, either to
or as directed by the appropriate supervising
establish the risk management function
department, appoint a CRO, or any
centrally at the parent bank or in each of
equivalent position to carry out the
the identified subsidiaries. Such policy shall
responsibilities of the position. The
also include the overall responsibility of the
appointment, dismissal and other changes
parent bank’s risk management function with
to the CRO or its equivalent position shall
respect to the management of risk exposures
have prior approval of the board of directors.
of subsidiaries/affiliates.
In cases, when the CRO will be replaced,
The establishment of risk management
the BSFI shall report the same to the
function centrally by the parent bank in
appropriate supervising department within
group structures shall not fall under the five (5) days from the time it has been
outsourcing framework as provided under approved by the board of directors.
Sec. X162. In this respect, the head of the The CRO shall have sufficient stature,
risk management function of the parent bank authority, and seniority within the BSFI. He
shall define the risk management strategies, shall be independent from executive
processes, and communication framework functions and business line responsibilities,
for the entire group: Provided, That this shall operations and revenue-generating
be done in consultation and coordination functions, and shall have access to such
with the respective board of directors of the information as he deems necessary to form
subsidiary or affiliate BSFI: Provided, further, his judgment. The CRO shall have direct
That the board of directors of the subsidiary access to the board of directors and the
or affiliate BSFI, shall remain ultimately ROC without any impediment. He shall
responsible for the management of risk serve on a full-time basis and shall
exposures. functionally meet/report to the board of
Branches of foreign banks may establish directors or board-level committee:
their own risk management function or may Provided, That in cases of branches of
be covered by the parent/regional/group risk foreign banks, the CRO shall report to the
management function: Provided, That all regional/group risk function. Meetings with
branches of foreign banks shall meet the the board of directors or board-level
applicable provisions set forth under this committee shall be duly minuted and

§§ X174.2 - X175
17.09.30
adequately documented. In this regard, the structure. The CRO shall likewise propose
board of directors/board-level committee enhancements to risk management policies,
shall review and approve the performance processes, and systems to ensure that the
and compensation of the CRO, and budget BSFI’s risk management capabilities are
of the risk management function. sufficiently robust and effective to fully
a. Qualifications of the CRO. The CRO support strategic objectives and risk-taking
should have the knowledge and skills activities.
necessary to oversee the BSFI’s risk (Circular Nos. 757 dated 08 May 2012 and 749 dated 27 February
management activities. This will be 2012, as amended by Circular No. 971 dated 22 August 2017)
assessed based on the ability of the CRO to
influence decisions that affect the BSFI’s Sec. X175 (2011 - X174) Market Risk
exposure to risk. The CRO should have the Management. The guidelines on market risk
ability to interpret and articulate risk in a management in Appendix 73 set forth the
clear and understandable manner and, expectations of the Bangko Sentral with
without compromising his independence, respect to the management of market risk
can engage in a constructive dialogue with and are intended to provide more
the board of directors, chief executive consistency in how the risk-focused
officer, and other senior management on key supervision function is applied to this risk.
risk issues. Banks are expected to have an integrated
b. Duties and responsibilities of the approach to risk management to identify,
CRO. The CRO shall be responsible for measure, monitor and control risks. Market
overseeing the risk management function and risk should be reviewed together with other
shall support the board of directors in the risks to determine overall risk profile.
development of the risk appetite and risk The Bangko Sentral is aware of the
appetite statement of the BSFI and for increasing diversity of financial products and
translating the risk appetite into a risk limits that industry techniques for measuring and

§§ X175 - 1176.1
16.12.31
managing market risk are continuously give time for corrective actions to be taken
evolving. As such, the guidelines are by the bank management and/or the Bangko
intended for general application; specific Sentral.
application will depend to some extent on a. The LCR is the ratio of HQLAs to total
the size, complexity and range of activities net cash outflows. Under a normal situation,
undertaken by individual banks. the value of the ratio should be no lower
(Circular No. 544 dated 15 September 2006, as amended by than 100% on a daily basis because the
Circular Nos. 903 dated 29 February 2016, 757 dated 08 May
stock of encumbered HQLA is intended
2012, and 749 dated 27 February 2012)
to serve as a defense against the potential
Sec. X176 (2011 - X175) Liquidity Risk onset of liquidity stress. The detailed
Management. The guidelines on liquidity risk LCR framework is provided as Part 1 of
management in Appendix 74 set forth the Appendix 74a (Attachment 1).
expectations of the Bangko Sentral with b. The LCR shall initially apply to all
respect to the management of liquidity risk universal and commercial banks, including
and are intended to provide more consistency branches of foreign banks.
in how the risk-focused supervision function c. Required periodic reports. Banks shall
is applied to this risk. Banks are expected to comply with the minimum LCR on a daily
have an integrated approach to risk basis. However, for reporting purpose,
management to identify, measure, monitor banks shall report to the Bangko Sentral,
and control risks. Liquidity risk should be through the Supervisory Data Center (SDC),
reviewed together with other risks to their LCR position for liquidity risk
determine overall risk profile. exposures as follows:
The guidelines are intended for general i. In the prescribed form (Appendix 74b)
application; specific application will depend in the following manner.
on the size and sophistication of a particular
bank and the nature and complexity of its Reporting Solo1 Consolidated2
Details
activities.
Frequency Monthly Quarterly
(Circular No. 545 dated 15 September 2006, as amended by
Measurement End-of-month End-of-quarter
Circular Nos. 903 dated 29 February 2016, 757 dated 08 May
Date
2012 and 749 dated 27 February 2012)
LCR 30 calendar days from
Calculation measurement date
§ 1176.1 Liquidity Coverage Ratio Period
(LCR). To promote short-term resilience of Submission 15 banking 30 banking
a bank’s liquidity risk profile, a bank shall Deadlines days from days from
maintain, over a thirty (30) - calendar day measurement measurement
horizon, an adequate level of unencumbered date date
high-quality liquid assets (HQLAs) that
consists of cash or assets that can be The monthly LCR Report shall be
converted into cash at little or no loss of accompanied by a certification under oath
value in private markets, to offset the net to the effect that the bank has fully complied
cash outflows it could encounter under a with the LCR requirement on all calendar
liquidity stress scenario. At a minimum, the days of the reference month. The solo and
stock of liquid assets should enable the bank consolidated LCR Reports, together with the
to withstand significant liquidity shocks that Sworn Certification, shall be classified as
last thirty (30) calendar days, which would Category A-1 reports.
1
Head office plus branches/other offices
2
Parent bank plus subsidiary financial allied undertakings, but excluding insurance companies

§§ 1176.1 - 1176.3
17.06.30
ii. In a “single currency”, i.e., in peso § 1176.3 Sanctions. It is the

equivalent terms. However, for monitoring responsibility of the Senior Management of
purposes, banks shall also be required to the bank to ensure the accuracy of LCR
submit an LCR Report per significant calculations and the integrity of the related
currency. Using the same LCR Report monitoring and reporting system. It is
template, banks shall report their liquidity likewise their responsibility to cause the
position in currencies in which they have reporting of LCR shortfalls both to its
significant activity as of LCR measurement board of directors immediately, and to the
date. A currency is considered “significant” Bangko Sentral, through the appropriate
if the aggregate liabilities denominated in Central Point of Contact Department
that currency amount to five percent (5%) (CPCD) within the prescribed timeline.
or more of the bank’s total liabilities as of Any willful violation of the foregoing
LCR measurement date. provisions will subject the bank and/or its
d. The Bangko Sentral reserves the right, concerned directors/officers to the
upon the authority of the Deputy Governor, following:
SES, to require submission of reports and a. On the bank: A bank which fails to
information prescribed under Item “c” of comply with the provisions on LCR
Subsec. 1176.1 outside the regular reporting standards shall be subject to penalties under
period, and to conduct on-site inspection Appendix 67.
outside of regular or special examination,
i. For non-submission, non-reporting or
for the purpose of ascertaining the accuracy
willful making of false/misleading
of LCR calculations as well as the integrity
statements. A bank which:
of LCR monitoring and reporting systems.
(1) Failed to submit the duly notarized
The LCR, as prescribed under Part III of
Sworn Certification and/or LCR Report; or
Appendix 74a, shall be implemented in a
(2) Failed to report an LCR shortfall
phased-in arrangement to help ensure the
below the prescribed minimum; or
banking sector can meet the standard
(3) Has been found to have willfully
through reasonable measures without
made a non-disclosure or false/misleading
disrupting credit extension and financial
statement in the said required certification,
market activities.
(Circular No. 905 dated 10 March 2016, as amended by Circular LCR Report, and/or AFS or PBS,
No. 930 dated 18 November 2016) shall be subject to the penalties applicable
to serious offenses under Appendix 67,
§ 1176.2 LCR disclosure requirements. which shall be reckoned on a daily basis
To improve the transparency of regulatory from the day following the due date of the
liquidity requirement, enhance market said certification/reports until such
discipline, and reduce uncertainty in the time that an amended or corrected
market, banks are required to publicly report has been submitted to the Bangko
disclose information related to the LCR. The Sentral in the case of false/misleading
mandatory disclosure requirements should statements.
be published in the quarterly published ii. For Erroneous/Delayed/Erroneous and
balance sheet, and either, on the bank’s Delayed/Unsubmitted sworn certification
website or in its other published financial and/or LCR report. A bank shall be subject
reports or publicly available regulatory to the penalties for Erroneous/Delayed/
reports (e.g., the audited financial Erroneous and Delayed/Unsubmitted sworn
statements) as prescribed under Part II of certification and/or LCR report in
Appendix 74a. accordance with the provisions of
(Circular No. 905 dated 10 March 2016) Subsec. X184.3.

§§ 1176.3 - X177.2
17.06.30
The imposition of the above penalties on cyber security.

shall be without prejudice to the imposition (Circular No. 511 dated 03 February 2006, as amended by
of other administrative sanctions under Circular Nos. 808 dated 22 August 2013, 757 dated 08 May
2012 and 749 dated 27 February 2012)
Section 37 of R.A. No. 7653, and of other
sanctions under existing laws and § X177.1 Declaration of policy. A
regulations. growing number of Bangko Sentral
b. On the concerned directors/officers supervised financial institutions (BSFIs)
of the bank: Directors/Officers of a bank employ the advances in technology as
which have been found to have falsely leverage to offer innovative products, deliver
certified/submitted misleading statements fast and efficient service at affordable prices,
and/or violated any of the provisions of this and venture to new markets. Moreover,
standard shall be subject to the penalties technology drives the efficiency of operations
provided applicable to serious offenses and financial accounting of these institutions,
under Appendix 67 and/or the other and improves their decision-making process.
administrative sanctions under Section 37 As technology becomes an integral part of
of R.A. No. 7653. the business and operations of BSFIs, such
The imposition of the above penalties technology usage and dependence, if not
and/or administrative sanctions is without properly managed, may heighten technology
prejudice to the filing of appropriate criminal risks. The Bangko Sentral expects BSFIs to
charges against culpable persons as have the knowledge and skills necessary to
provided under Section 35 of R.A. No. 7653 understand and effectively manage
for the willful making of false/misleading technology risks. These institutions are
statement. required to have an integrated approach
c. Other sanctions: The imposition of to risk management to identify, measure,
the foregoing sanctions shall be without monitor and control risks.
prejudice to the imposition of other (Circular No. 808 dated 22 August 2013, as amended by Circular
administrative sanctions as provided in No. 958 dated 25 April 2017)
other regulations and as may be determined
by the Bangko Sentral as applicable. § X177.2 Purpose and scope. The
(Circular No. 905 dated 10 March 2016, as amended by Circular enhanced guidelines aim to provide
No. 963 dated 27 June 2017) guidance in managing risks associated with
use of technology. The guidelines outlined
Sec. X177 Information Technology Risk are based on international standards and
Management (ITRM). The enhanced recognized principles of international
guidelines on ITRM keep abreast with the practice for ITRM and shall serve as Bangko
aggressive and widespread adoption of Sentral’s baseline requirement for all BSFIs.
technology in the financial service industry The guidelines shall apply to BSFIs
and consequently strengthen existing which include banks, non-banks with
Bangko Sentral framework for IT risk quasi-banking function (NBQB), non-bank
supervision. ITRM should be considered a electronic money issuers and other non-
component and integrated with the bank institutions which under existing
institutions’ risk management program. The Bangko Sentral rules and regulations and
guidelines likewise provide practical plans special laws are subject to Bangko Sentral
to address risks associated with emerging supervision and/or regulation. Moreover,
trends in technology and growing concerns subject guidelines shall also apply to BSFIs
Part I - Page 113

§§ X177.2 - X177.4
17.06.30
with offshore data processing as may be affected or lowly impacted by IT-related

appropriate to their situation. The risks.
framework covers different facets of ITRM, However, to facilitate classification, a
some of which are supplemented with TB, RB or Coop Bank shall be deemed as a
detailed guidelines in Appendices 75a, 75b, simple BSFI, while UBs and KBs, which
75c, 75d, 75e and 75f. The Bangko Sentral generally have more complex types of
shall keep the Appendices updated and, in products and services, shall be deemed as
the future, issue additional regulations on complex BSFIs. Nonetheless, a UB or KB
new and emerging products, services, may apply with the Bangko Sentral for a
delivery channels, and other significant reclassification as simple BSFI in order to
applications of technology. avail of reduced compliance with the
Subject guidelines, including the provisions of this Section. The Bangko
Sentral may likewise declare a TB, RB or
Appendices 75a, 75b, 75c, 75d, 75e and
Coop Bank as complex based on the
75f, are not “one-size-fits-all” and
assessment of the BSFIs IT profile report
implementation of these need to be risk-
(pursuant to Subsec. X176.8) and other
based and commensurate with size, nature
internal supervisory tools. Said banks shall
and types of products and services and
receive notification in writing from the
complexity of IT operations of the individual Bangko Sentral informing them of the
BSFIs. BSFIs shall exercise sound judgment deviation from the default classification and
in determining applicable provisions the basis for classifying them as complex
relevant to their risk profile. BSFIs.
Nos. 958 dated 25 April 2017 and 833 dated 28 May 2014)
Non-bank institutions which under
existing Bangko Sentral rules and regulations
§ X177.3 Complexity of IT risk profile and special laws are subject to Bangko
The Bangko Sentral shall risk profile all BSFIs Sentral supervision/regulation shall likewise
and classify them as either “Complex” or be notified in writing of their classification
“Simple”. The assessment of complexity of immediately after 14 September 2013.
IT risk profile is based largely on the degree Nos. 958 dated 25 April 2017)
of adoption of technology and considers
size, nature and types of products and § X177.4 IT rating system. The Bangko
services and complexity of IT operations Sentral, in the course of its on-site
among the risk factors. In assessing IT examination activities, shall evaluate BSFIs’
operations, the nature of IT organization, ITRM system and measure the results based
degree of automation of core processes and on Bangko Sentral’s IT rating system. A
applications and extent and reach of online composite rating is assigned based on a “1”
branch network are likewise considered. to “4” numerical scale, as follows:
A BSFI with “Complex” IT risk profile is
highly dependent on technology. IT 4 BSFIs with this rating exhibit strong
components are integral to the core business performance in every respect. Noted
activities that major weaknesses on IT weaknesses in IT are minor in nature
systems, maintenance and support, if not and can be easily corrected during
properly addressed, may cause operational the normal course of business.
inefficiencies, business disruptions and/or
financial losses. On the other hand, a BSFI 3 BSFIs with this rating exhibit
with “Simple” IT risk profile relies or satisfactory performance but may
depends less on technology in the demonstrate modest weaknesses
operations of its business, thus, is not in operating performance,

§§ X177.4 - X177.5
17.06.30
monitoring, management Terminology Definitions

processes or system development. Cyberfraud A deliberate act of
omission or
2 BSFIs with this rating exhibit less commission by any
than satisfactory performance and person carried out
require considerable degree of using the Internet and/
supervision due to a combination or other electronic
of weaknesses that may range channels, in order to
from moderate to severe. communicate false or
fraudulent
1 BSFIs with this rating exhibit
representations to
deficient IT environment that may
prospective victims,
impair the future viability of the
entity, thereby requiring to conduct fraudulent
immediate remedial action. transactions, or to
(Circular No. 808 dated 22 August 2013, as amended by Circular transmit the proceeds
Nos. 958 dated 25 April 2017) of fraud to BSFIs
connected with the
§ X177.5 Definition of terms. In these
perpetrator. Examples
guidelines, terms are used with the
of cyberfraud in the
following meanings:
financial industry may
Terminology Definitions include, but are not
limited to, theft of
Board of The governing body credit card data,
Directors elected by the computer hacking,
(Board) stockholders that electronic identity
exercises the corporate theft, phishing scams,
powers of a locally ATM skimming and
incorporated BSFI. In non-delivery of
case of a BSFI merchandise
incorporated or purhased online,
established outside among others.
the Philippines, this Electronic The delivery of
may refer to the Products and banking and financial
functional oversight Services products and services
equivalent such as
through electronic,
the Country Head
interactive
(for foreign banks) or
communication
management
channels which
committee or body
empowered with include ATMs, point
oversight and of sales (POS) terminals,
supervision internet, mobile
responsibilities. phones, touch tone

§ X177.5
17.06.30
Terminology Definitions Terminology Definitions

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 products and "organization-wide"
and services offered are interchangeably
by BSFIs. used.
EMV (stands It is a global standard Information Encompass people and
for Europay, for credit, Asset/ organization, IT
Mastercard debit 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,
cards are a more secure disruption, modification
alternative to traditional or destruction in order
magnetic stripe payment to provide
cards. confidentiality, integrity
Encryption A data security and availability.
technique used to Information A single or a series of
protect information Security unwanted or
from unauthorized Incident unexpected
inspection or alteration. information security
Information is encoded events that have a
so that data appears as significant probability
meaningless string of of compromising
letters and symbols business operations
during delivery or and threatening the
transmission. Upon confidentiality, integrity
receipt, the information or availability of BSFI's
is decoded using an information or
encryption key. information systems.

§ X177.5
17.06.30

Information Automated means of support. The related
Technology originating, processing, IT service is integral to
(IT) storing and the provision by BSFI of
communicating a financial service and
information and covers the BSFI is dependent
recording devices, on the service on an
communications ongoing basis.
network, computer IT Risk Any potential adverse
systems (including outcome, damage, loss,
hardware and software violation, failure or
components and data) disruption associated
and other electronic with the use of or
devices. reliance on computer
IT Group/ The unit of an hardware, software,
Department organization within a devices, systems,
BSFI responsible for the applications and
activities of IT networks.
operations control, IT Strategic A long-term plan (i.e.,
monitoring of IT Plan three- to five-year
services, infrastructure horizon) in which
support and a business and IT
combination of management
technology, people cooperatively describe
and processes. how IT resources will
IT Operations Encompasses all contribute to the
processes and services institution's strategic
that are provisioned by objectives.
an IT Unit to internal IT Risk Risk management
and external clients. Management system that enables a
IT An arrangement under System BSFI to identify, measure,
Outsourcing which another party (ITRMS) monitor and control
(either an affiliated IT-related risks.
entity within a Management A general term for the
corporate group or an Information computer systems in an
entity external to the System (MIS) institution that provide
corporate group) information about its
undertakes to provide business operations.
to a BSFI all or part of an Network Two (2) or more
IT function or service. computer systems that
A BSFI would use IT are grouped together to
outsourcing for share information,
functions ranging from software and hardware.
infrastructure to Offshore Have their critical
software development, BSFIs system processing and
maintenance and data located outside of

§ X177.5
17.06.30

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 BSFIs belong to, (3DES) times. Three (3) 64-bit
such as their head office, keys are used, instead of
subsidiary and/or one (1) , for an overall key
affiliate. Locally- length of 192 bits (the
maintained systems, if first encryption is
any, are limited to non- encrypted with second
core supporting key, and the resulting
applications such as cipher text is again
collaboration systems encrypted with a third key.
and report processing (Circular No. 808 dated 22 August 2013, as amended by Circular
tools. No. 958 dated 25 April 2017)
Project Planning, monitoring
Management and controlling an § X177.6 Description of IT-related
activity. risks. As BSFIs increase their reliance on IT
Senior Officers of the to deliver products and services,
Management/ institution given the inappropriate usage of IT resources may
Management authority by the Board have significant risk exposures. While IT
to implement the does not trigger new types of risks, it brings
policies it has laid in new dimensions to traditional banking
down in the conduct risks (i.e. strategic risk, credit risk, market
of the business of the risk, liquidity risk and operational risk) that
require new or enhanced control activities
institution.
(e.g. a failure of a credit risk measurement
Service Level Establishes mutual
application is an IT failure and, therefore, a
Agreement expectations and
systems failure in the sense of operational
provide a baseline to
risk). Moreover, IT is an implied part of any
measure IT
system of internal controls, regardless of the
performance. An SLA
type of risk and, consequently, forms an
should contain,
important element in organization-wide risk
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,
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

§§ X177.6 - X177.7
17.06.30
decisions. The risk is a function of the in 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 BSFIs’ risk management
against these goals and the quality of system. BSFIs 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, 3) IT
communication channels, operating controls implementation, and 4) risk
systems, delivery networks and managerial measurement and monitoring.
capacities and capabilities; 1. IT Governance. This is an integral part
3. Reputation risk is the risk to earnings of BSFIs’ governance framework and
and capital arising from negative public consists of the leadership and organizational
opinion. This affects the institution’s ability structures and processes that ensure the
to establish new relationships or services alignment of IT strategic plan with BSFIs’
or continue servicing existing relationships. business strategy, optimization of resources
The risk can expose the institution to management, IT value delivery, performance
litigation, financial loss or damage to its measurement and the effective and efficient
reputation; and
use of IT to achieve business objectives and
4. Compliance risk is the risk to earnings
effective IT risk management implementation.
and capital arising from the violations of,
BSFIs must establish an effective IT
or non-conformance with laws, rules and
governance framework covering the
regulations, prescribed practices or ethical
following:
standards. Compliance risk also arises in
a. Oversight and organization of IT
situations where the laws and rules
functions. Accountability is a key concern
governing certain products activities of the
of IT governance and this can be obtained
BSFI’s clients may be ambiguous or untested.
with an organizational structure that has
Compliance risk exposes the institution to
well-defined roles for the responsibility of
monetary penalties, non-monetary sanctions
information, business processes,
and possibility of contracts being annulled
applications, IT infrastructure, etc.
or declared unenforceable.
(Circular No. 808 dated 22 August 2013, as amended by Circular The board of directors is ultimately
Nos. 958 dated 25 April 2017) responsible for understanding the IT risks
confronted by a BSFI and ensuring that they
§ X177.7 IT Risk Management System are properly managed, whereas the Senior
(ITRMS). As BSFIs become more dependent Management is accountable for designing
on IT systems and processes, technology and implementing the ITRMS approved by
risks and information security issues have the Board. For Complex BSFIs, the Board
become progressively more complex and may delegate to an IT Steering Committee
pressing in recent years. Information (ITSC) or its equivalent IT oversight function
security is just as important as the new to cohesively monitor IT performance and
technologies being installed by BSFIs. As institute appropriate actions to ensure
progress in technology shifts to higher gear, achievement of desired results. The ITSC,
the trend in cyber-attacks, intrusions, and at a minimum, should have as members a
other form of incidents on computer systems non-executive Board director who oversees
shows that it will not only persist but will the institution’s IT function, the head of IT
continue to increase in frequency and spread group/department, and the highest rank

§ X177.7
17.06.30
officer who oversees the business user of executive management with direct
groups. The head of control groups should involvement in key decisions for the BSFI
participate in ITSC meetings in advisory and usually reports directly to the President
capacity only. or 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
ITSC should regularly provide adequate be implemented to reduce the possibility
information to the Board regarding IT for an individual to compromise a critical
performance, status of major IT projects or process. A mechanism should be in place
other significant issues to enable the Board to ensure that personnel are performing only
to make well-informed decisions about the the functions relevant to their respective jobs
BSFIs’ IT operations. and positions. In the event that an institution
BSFIs should develop an IT strategic plan finds it difficult to segregate certain IT control
that is aligned with the institution’s business responsibilities, it should put in place
strategy. This should be undertaken to adequate compensating controls (e.g. peer
manage and direct all IT resources in line reviews) to mitigate the associated risks.
with the business strategy and priorities. IT b. IT policies, procedures and
strategic plan should focus on long term standards. IT controls, policies, and
goals covering three (3) to five (5) year procedures are the foundation of IT
horizon and should be sufficiently governance structure. It helps articulate the
supplemented by tactical IT plans which rules and procedures for making IT
specify concise objectives, action plans and decisions, and helps to set, attain, and
tasks that are understood and accepted by monitor IT objectives.
both business and IT. The IT strategic plan BSFIs should adopt and enforce
should be formally documented, endorsed IT-related policies and procedures that are
by the Board and communicated to all well-defined and frequently communicated
stakeholders. It should be reviewed and to 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
BSFIs 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.
BSFIs, 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;

§ X177.7
17.06.30
• Information security; In case in-house IT audit expertise is not

• Electronic Banking/Electronic available, such as for a simple BSFI, 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 BSFIs, some of the above consistent with existing Bangko Sentral rules
areas (i.e., development, electronic banking, and regulations on outsourcing. (Detailed
etc.) may not be applicable, thus sound guidelines/standards on IT Audit are shown
judgment should be employed to ensure that in Appendix 75a)
the BSFI’s IT policies and procedures have d. Staff competence and training. The
adequately 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 BSFIs 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. BSFIs 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 BSFIs’ 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.
Advances in technology have increased
• Documentation of IT audits,
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

§ X177.7
17.06.30
is not properly managed, the potential for ITRM processes should be integrated
inaccurate reporting and flawed decision into the enterprise-wide risk management
making increases. Because report processes to allow BSFIs to make
generation systems can rely on manual data well-informed decisions involving business
entry or extract data from many different plans and strategies, risk responses, risk
financial and transaction systems, tolerance levels and capital management,
management should establish appropriate among others.
control procedures to ensure information is 2. Risk identification and assessment.
correct, relevant, and adequately protected. BSFIs should maintain a risk assessment
Since MIS can originate from multiple process that drives response selection and
equipment platforms and systems, the controls implementation. An effective IT
controls should ensure all information assessment process begins with the
systems have sufficient and appropriate identification of the current and prospective
controls to maintain the integrity of the IT risk exposures arising from the
information and the processing institution’s IT environment and related
environment. Sound fundamental principles processes. The assessments should identify
for MIS review include proper internal all information assets, any foreseeable
controls, operating procedures, safeguards, internal and external threats to these assets,
and audit coverage. the likelihood of the threats, and the
f. IT risk management function. adequacy of existing controls to mitigate the
Management of risk is a cornerstone of IT identified risks. Management should
Governance. BSFIs should have a policy continually compare its risk exposure to the
requiring the conduct of identification, value of its business activities to determine
measurement, monitoring and controlling of acceptable risk levels.
IT risks for each business function/service Once management understands the
on a periodic basis. BSFIs should define and institution’s IT environment and analyzes
assign these critical roles to a risk the risk, it should rank the risks and prioritize
management unit or to a group of persons its response. The probability of occurrence
from different units collectively performing and the magnitude of impact provide the
the tasks defined for this function. foundation for reducing risk exposures or
The function should have a formal establishing mitigating controls for safe,
technology risk acknowledgement and sound, and efficient IT operations
acceptance process by the owner of risk to appropriate to the complexity of the
help facilitate the process of reviewing, organization. Periodic risk assessment
evaluating and approving any major process should be done at the enterprise-
incidents of non-compliance with IT control wide level and an effective monitoring
policies. The process can be supported by program for the risk mitigation activities
the following: should be manifested through mitigation or
• a description of risk being corrective action plans, assignment of
considered for acknowledgement by owner responsibilities and accountability and
of risk and an assessment of the risk that is management reporting.
being accepted; 3. IT controls implementation. Controls
• identification of mitigating controls; comprise of policies, procedures, practices
• formulation of a remedial plan to and organizational structures designed to
reduce risk; and provide reasonable assurance that business
• approval of risk acknowledgement objectives will be achieved and undesired
from the owner of the risk and senior events will be mitigated. Management
management. should establish an adequate and effective

§ X177.7
17.06.30
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 BSFIs, 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. BSFI mentioned in this Subsection. (Detailed
Management should implement satisfactory guidelines/standards on Information Security
control practices that address the following are shown in Appendix 75b)
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 BSFIs 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
BSFI management in making decisions.
cover allocation of responsibilities, activity
BSFIs should have a comprehensive
breakdown, budgeting of time and
information security program, approved by
resources, milestones, checkpoints, key
the Board, to maintain the confidentiality,
dependencies, quality assurance, risk
integrity, and availability of computer
assessment and approvals, among others.
systems for reliable and timely information.
In the acquisition and/or development of IT
Unauthorized access, destruction, or
solutions, BSFIs should ensure that business
disclosure of confidential information can
and regulatory requirements are satisfied.
adversely affect earnings and capital. The
program should monitor information (Detailed guidelines/standards on Project
security function throughout the Management/Development and Acquisition
organization’s business processes and and Change Management are shown in
establish clear accountability for carrying Appendix 75c)
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

§ X177.7
17.06.30
infrastructure is sufficient to accomplish its BSFI management should implement an

strategic plans. BSFI management should effective outsourcing oversight program that
ensure that IT operates in a safe, sound, and provides the framework for management to
efficient manner throughout the institution. understand, monitor, measure, and control
Given that most IT systems are the risks associated with outsourcing. BSFIs
interconnected and interdependent, failure outsourcing IT services should have a
to adequately supervise any part of the IT comprehensive outsourcing risk
environment can heighten potential risks for management process which provides
all elements of IT operations and the guidance on the following areas: 1) risk
performance of the critical business lines of assessment; 2) selection of service
the BSFIs. Such scenario necessitates the providers; 3) contract review; and
coordination of IT controls throughout the 4) monitoring of service providers. Detailed
institution’s operating environment. guidelines/standards on IT Outsourcing/
(Detailed guidelines/standards on IT Vendor Management and on the adoption
Operations are shown in Appendix 75d) of outsourced cloud computing model are
d. IT outsourcing/vendor management shown in Appendix 75e.
program. IT outsourcing refers to any e. Electronic products and services. The
contractual agreement between a BSFI and evolution in technology revolutionized the
a service provider or vendor for the latter to way banking and financial products and
create, maintain, or reengineer the services are delivered. Physical barriers
institution’s IT architecture, systems and were brought down enabling clients to
related processes on a continuing basis. A access their accounts, make transactions or
BSFI may outsource IT systems and processes gather information on financial products and
except those functions expressly prohibited services anywhere they are, at any time of
by existing regulations. The decision to the day and at their own convenience. As
outsource should fit into the institution’s development in technology continues to
overall strategic plan and corporate accelerate, innovative electronic products
objectives and said arrangement should and services are foreseen to bring more
comply with the provisions of existing accessibility and efficiency. However, BSFIs
Bangko Sentral rules and regulations on may be confronted with challenges relating
outsourcing. Although the technology to capacity, availability and reliability of the
needed to support business objectives is electronic services. Likewise, fraudulent
often a critical factor in deciding to activities via electronic channels are also
outsource, managing such relationships rising in number.
should be viewed as an enterprise-wide BSFIs should protect customers from
corporate management issue, rather than a fraudulent schemes done electronically.
mere IT issue. Otherwise, consumer confidence to use
While IT outsourcing transfers electronic channels as safe and reliable
operational responsibility to the service method of making transactions will be
provider, the BSFIs retain ultimate eroded. To mitigate the impact of cyber
responsibility for the outsourced activity. fraud, BSFIs should adopt aggressive
Moreover, the risks associated with the security posture such as the following:
outsourced activity may be realized in a i. The entire ATM system shall be
different manner than if the functions were upgraded/converted to allow adoption of
inside the institution resulting in the need end-to-end Triple DES (3DES) encryption
for controls designed to monitor such risks. standards by 01 January 2015. The 3DES

§ X177.7
17.06.30
encryption standards shall cover the whole effectively, resources are operating properly
ATM network which consists of the host and used efficiently and IT operations are
processors, switches, host security module performing within established parameters.
(HSM), automated teller machines (ATMs), Any deviation noted in the process should
point-of-sale (POS) terminals and all be evaluated and management should
communication links connected to the initiate remedial action to address
network; underlying causes. The scope and frequency
ii. ATMs to be installed after of these performance measurement activities
04 September 2014 should be 3DES will depend on the complexity of the BSFI’s
compliant; and IT risk profile and should cover, among
iii. ATMs, POS terminals and payment others, the following:
cards are also vulnerable to skimming a. Performance vis-à-vis approved IT
attacks due to the lack of deployment of strategic plan. As part of both planning and
globally recognized EMV enabled monitoring mechanisms, BSFI management
technology by BSFIs. Magnetic stripe only should periodically assess its uses of IT as
ATMs, POS Terminals and cards are largely part of overall business planning. Such an
defenseless against modern fraud enterprise-wide and ongoing approach helps
techniques. Therefore, all concerned BSFIs to ensure that all major IT projects are
should shift from magnetic stripe technology consistent with the BSFI’s overall
to EMV chip-enabled cards, POS Terminals strategic goals. Periodic monitoring of IT
and ATMs. The entire payment card network performance against established plans shall
should be migrated to EMV. This confirm whether IT strategic plans remain
requirement shall cover both issuing and in alignment with the business strategy and
acquiring programs of concerned BSFIs. A the IT performance supports the planned
written and Board-approved EMV migration strategy.
plan should be submitted to the Bangko b. Performance benchmarks/service
Sentral within six (6) months from levels. BSFIs should establish performance
22 August 2013. The guidelines on EMV benchmarks or standards for IT functions
Implementation are shown in Appendix 108. and monitor them on a regular basis. Such
The guidelines on the EMV Card Fraud monitoring can identify potential problem
Liability Shift Framework (ECFLSF) are in areas and provide assurance that IT
Appendix 108a.1 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 75f. reruns, out of balance conditions,
4. Risk measurement and monitoring. response time, error rates, data entry
BSFI Management should monitor IT risks volumes, special requests, and problem
and the effectiveness of established reports.
controls through periodic measurement of Management should properly define
IT activities based on internally services and service level agreements (SLA)
established standards and industry that must be monitored and measured in
benchmarks to assess the effectiveness and terms understandable to the business units.
efficiency of existing operations. Timely, SLA with business units and IT department
accurate, and complete risk monitoring and should be established to provide a baseline
assessment reports should be submitted to to measure IT performance.
management to provide assurance that c. Quality assurance/quality control.
established controls are functioning BSFI should establish quality assurance (QA)
1
This paragraph shall take effect on 01 January 2017.

§§ X177.7 - X177.9
17.06.30
and quality control (QC) procedures for all end of reference year (Guidelines to be
significant activities, both internal and external, observed in the preparation and submission
to ensure that IT is delivering value to business of this report was issued under Bangko
in a cost effective manner and promotes Sentral Memorandum to All Banks No.
continuous improvement through ongoing M-2012-011 dated 17 February 2012);
monitoring. QA activities ensure that product b. Report on breach in information
conforms to specification and is fit for use security, especially incidents involving the use
while QC procedures identify weaknesses in of electronic channels, pursuant to the
work products and to avoid the resource drain provisions of Items “a” or “b” of Subsec. X192.4
and expense of redoing a task. The personnel following the guidelines provided in Item “d”
performing QA and QC reviews should be of the same Subsection. Depending on the
independent of the product/process being nature and seriousness of the incident,
reviewed and use quantifiable indicators to Bangko Sentral may require the BSFI to
ensure objective assessment of the provide further information or updates on
effectiveness of IT activities in delivering IT the reported incident until the matter is
capabilities and services. finally resolved; and
d. Policy compliance. BSFIs should c. Notification letter to the Core
Information Technology Specialist Group
develop, implement, and monitor processes
(CITSG) of the Bangko Sentral of disruption
to measure IT compliance with their
of IT services/operations that resulted to the
established policies and standards as well
activation of disaster recovery and business
as regulatory requirements. In addition to
continuity plan immediately upon activation
the traditional reliance on internal and third
of the plan.
party audit functions, BSFIs should perform (Circular No. 808 dated 22 August 2013, as amended by Circular
self-assessments on a periodic basis to gauge No. 958 dated 25 April 2017)
performance which often lead to early
identification of emerging or changing risks § X177.9 Sanctions and penalties. BSFIs
requiring policy changes and updates. should make available all policies and
e. External assessment program. procedures and other documents/
Complex BSFIs may also seek regular requirements related to the foregoing during
assurance that IT assets are appropriately on-site examination as well as provide
secured and that their IT security risk copies thereof to the Bangko Sentral when
management framework is effective. This a written request is made to determine their
may be executed through a formal external compliance with this Section.
assessment program that facilitates a Consistent with Sec. X009, the Bangko
systematic assessment of the IT security risk Sentral may deploy enforcement actions to
and control environment over time. promote adherence with the requirements
(Circular No. 808 dated 22 August 2013, as amended by Circular set forth in Sec. X177 and its subsections
Nos. 958 dated 25 April 2017, 936 dated 28 December 2016, and bring about timely corrective actions.
859 dated 24 November 2014 and 833 dated 28 May 2014) Any violation of the provisions of this
Section, its appendices and annexes, shall
§ X177.8 Reports. To enable the Bangko subject the BSFI and/or its directors, officers,
Sentral to regularly monitor IT risk profile and/or employees to the monetary and
and electronic products, services, delivery non-monetary sanctions, as provided
channels, processes and other relevant under existing laws, Bangko Sentral rules
information regarding the use of technology, and regulations. Enforcement actions shall
BSFIs are required to submit the following: be imposed on the basis of the overall
a. Annual IT Profile, electronically to the assessment of BSFIs’ ITRMS. Whenever a
Bangko Sentral Supervisory Data Center BSFI’s ITRMS is rated “1” pursuant to
(SDC) within twenty five (25) days from the Subsec. X177.4, the following additional

§§ X177.9 - X178.1
17.06.30
sanctions may be imposed: credit risk management framework of FIs

a. Suspension/revocation of authority to and shall cover the following areas:
provide electronic products and services; and a) establishing an appropriate credit risk
b. Prohibition against offering/provision environment; b) operating under a sound
of new electronic products and services. credit granting process; and c) maintaining
On the EMV migration requirement, appropriate credit administration,
BSFIs should endeavor to achieve full measurement, monitoring and control
compliance within a period as may be processes over credit risk. While FIs may
allowed by the Bangko Sentral. Prior to full employ different approaches in the
compliance, failure on the part of BSFIs to management of their credit risk, the Bangko
submit and implement their EMV migration Sentral expects that all these areas are
plan shall be subject to additional effectively addressed.
enforcement actions pursuant to Sec. X009. For purposes of these guidelines, FIs
On the requirement to adopt multi-factor refer to UBs, KBs, TBs, RBs and Coop Banks
authentication techniques for sensitive and their respective credit-granting financial
communications and/or high risk subsidiaries (if any) as well as stand-alone
transactions pursuant to Item “4.1.2” of QBs.
Appendix 75f, the Bangko Sentral may issue (Circular No. 855 dated 29 October 2014)
directives to improve authentication and
authorization procedures for sensitive § X178.1 Evaluation of credit risk
communications and/or high risk management system. The Bangko Sentral
transactions, or impose sanctions to limit shall evaluate the FI’s credit risk management
the level of or suspend any electronic system not only at the level of individual
products and services that are not compliant legal entities but also across the subsidiaries
with such requirements. within the consolidated banking
(Circular No. 808 dated 22 August 2013, as amended by Circular organization. It will not restrict the scope of
Nos. 958 dated 25 April 2017 and 936 dated 28 December 2016) the credit risk-taking activities of an FI, so
long as the FI is authorized to engage in such
Sec. X178 Credit Risk Management;
Statement of Policy1. It is the policy of the activities and:
Bangko Sentral to ensure that FIs under its a. Understands, measures, monitors
supervision have adequate and effective and controls the risk assumed;
credit risk management systems b. Adopts risk management practices
commensurate to their credit risk-taking whose sophistication and effectiveness are
activities. Towards this end, the following commensurate to the risk being taken; and
guidelines on credit risk management set c. Maintains capital commensurate with
forth the expectations of the Bangko Sentral the risk exposure assumed.
with respect to the comprehensive If the Bangko Sentral determines that an
management of credit risk. The guidelines FI’s risk exposures are excessive relative to
further articulate sound principles and the FI’s capital, or that the risk assumed is
practices that shall be embedded in the not well-managed, the Bangko Sentral will
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.
Part I - Page 114l Manual of Regulations for Banks

§ X178.1
14.12.31
direct the FI to reduce its exposure to an of an FI’s credit risk management process
appropriate level and/or to strengthen its risk and adequacy of capital relative to exposure.
management systems. In evaluating the The Bangko Sentral shall consider the
above parameters, the Bangko Sentral following factors:
expects FIs to have sufficient knowledge, (1) The FI’s business strategies, operating
skills and appropriate system and environment, and the competencies of its
technology necessary to understand and officers and personnel; and
effectively manage their credit risk (2) The major sources of credit risk
exposures. exposure and the complexity and level of
The principles set forth in the credit risk risk posed by the assets, liabilities, and
management guidelines shall be used in off-balance sheet activities.
determining the adequacy and effectiveness (Circular No. 855 dated 29 October 2014)
Manual of Regulations for Banks Part I - Page 114m

§§ X178.2 - X178.3
14.12.31
A. Establishing an Appropriate Credit Risk different phases of the credit risk

Environment management process.
b. Depending on the size, complexity
§ X178.2 Role of the board and senior and scope of credit activities, and in addition
management. to the roles and responsibilities of the board
a. Board of directors. The board of and senior management, an FI’s credit risk
directors shall be responsible for the management organization may be broadly
approval and regular review of credit risk classified into three functional lines of
strategy and credit policy, as well as the activities: the front, back and middle offices,
oversight of the implementation of a to properly segregate accountabilities, ensure
comprehensive and effective credit risk that no individual is assigned conflicting
management system appropriate for the size, responsibilities, and effectively monitor and
complexity and scope of operations of an control the risks being taken.
FI. The board shall ensure that the system c. The front office function performs
provides for adequate policies, procedures credit originating; recommends internal
and processes to identify, measure, monitor credit ratings, classifications and allowances
and control all credit risks inherent in an for losses including changes thereon, when
FIs products and activities, both at the necessary; and the on-going monitoring of
individual and portfolio levels on a credit exposures of borrowers on a day-to-
consistent and continuing basis; and that an day basis.
independent assessment of the system is d. The back office provides support in
periodically performed, the results of which the overall credit administration, including,
shall be reported to it or to a board-level among others: ensuring complete
committee for appropriate action. documentation, credit disbursement and
b. Senior management. Senior recording of payments received; maintenance
management shall be responsible for of credit and collateral files; and compilation
ensuring that the credit risk-taking activities of management information reports.
of an FI are aligned with the credit risk e. The middle office performs risk
strategy approved by the board of directors. management and control functions that are
It shall also be responsible for developing independent from the credit originating and
and implementing an FI’s credit policies and administration functions. The risk
procedures that lay down the conditions and management function provides meaningful
guidelines for an effective credit risk inputs in policy formulation and limits
management process, as well as proper setting; designs and implements the FI’s
channels of communication to ensure that internal credit risk rating system; and
these policies are clearly communicated and performs periodic exposure and exception
adhered to by all levels of the organization. monitoring. The risk management function
(Circular No. 855 dated 29 October 2014) shall report directly to the Risk Management
Committee (RMC) or appropriate board-
§ X178.3 Credit risk management level committee or the board.
structure. f. An independent credit review is a
a. Senior management or an appropriate function within the middle office that
level of management shall implement a performs an unbiased assessment of the
board-approved credit risk management quality of individual credits and the
structure that clearly delineates lines of aggregate credit portfolio, including
authority, establish accountabilities and appropriateness of credit risk rating,
responsibilities of individuals involved in the classification and adequacy of allowance
Part I - Page 114n Manual of Regulations for Banks

§§ X178.3 - X178.5
14.12.31
for loan losses. In the case of simple FIs, § X178.4 Credit risk strategy. The credit
such independent credit review function risk strategy must reflect the FI’s profitability
may be concurrently performed by and portfolio growth targets, and must be
qualified personnel fulfilling other consistent with the credit risk tolerance and
independent control oversight functions overall corporate strategy and business
(e.g. compliance, internal audit). goals of the FI.
g. The workout or problem loan a. In formulating the credit risk strategy,
management is another function within the the FI shall articulate the desired market
middle office that is independent from the segments and types of credit exposures
credit originating function to ensure that (e.g., commercial credits, retail credits, real
problem loans are managed effectively to estate, investments, trading products, credit
minimize potential losses. For simple FIs, commitments and/or guarantees); specific
however, the function may still be characteristics of clients, economic sector,
performed by the credit originating function geographical location; the portfolio mix that
and/or unit responsible for monitoring the reflects the acceptable level of diversification
quality of such credit. and concentration; and consider the risk/
h. The structure shall likewise provide reward trade-off by factoring in, to the
for independent audits, i.e., internal audit greatest extent possible, price and non-price
and compliance, to conduct independent (e.g. collateral, restrictive covenants, etc.)
credit and compliance audits of the credit terms as well as likely downside scenarios
risk management system of the FI. The scope and their possible impact on the obligors.
of internal audit shall include the evaluation The FI shall likewise define acceptable
of the independence and overall and unacceptable types of credits, clients,
effectiveness of the credit review function. activities, transactions and behaviors that
i. Regardless of the organizational could result or potentially result in conflict
structure that an FI adopts, the board shall of interest, personal gain at the expense of
ensure that the aforementioned key the FI, or unethical conduct.
functions are considered and independence b. The credit risk strategy shall consider
and control oversight functions are effective the cyclical aspects of the economy and the
to avoid or address any potential conflict of varying effects of the economic cycle on the
interest. credit portfolio of the FI.
j. Personnel or staff involved in all (Circular No. 855 dated 29 October 2014)
phases of the credit risk management
§ X178.5 Credit policies, processes and
process shall be qualified, competent and
procedures. FIs shall have in place a sound,
have the necessary training and experience
comprehensive and clearly defined credit
to exercise prudent judgment in assessing,
policies, processes and procedures
managing and/or controlling credit risk, and
consistent with prudent standards, practices,
a solid understanding of an FI’s strategic
and relevant regulatory requirements
direction, policies, procedures, risk
adequate for the size, complexity and scope
tolerance and limits. Their qualification
of an FI’s operations. The board-approved
standards, roles and responsibilities shall
policies, processes and procedures shall
be clearly defined in the credit operating
cover all phases of the credit risk
policies and procedures manual of the FI.
management system.
The board and senior management shall
a. FIs shall establish appropriate
ensure that adequate resources and
processes and procedures to implement the
appropriate level of staffing are allocated to
credit policy and strategy. These processes
execute all kinds of credit activities.
(Circular No. 855 dated 29 October 2014) and procedures, as well as the credit policy,
Manual of Regulations for Banks Part I - Page 114o

§§ X178.5 - X178.7
14.12.31
shall be documented in sufficient detail, and individuals and sufficient controls to

effectively communicated throughout the ensure acceptable credit quality at
organization to provide guidance to staff, origination.
and periodically reviewed and updated to (Circular No. 855 dated 29 October 2014)
take into account new activities and
products, as well as new lending § X178.7 Credit granting and loan
approaches. Subsequent major changes evaluation/analysis process and
must be approved by the board. underwriting standards. Consistent with
b. The credit policy shall likewise safe and sound banking practice, an FI shall
provide for the maintenance of an audit trail grant credits only in amounts and for the
documenting that the credit risk periods of time essential for the effective
management process was properly observed completion of the activity to be financed and
and identifying the unit, individual(s) and/ after ascertaining that the obligor1 is capable
or committee(s) providing input into the of fulfilling his commitments to the FI.
process. Towards this end, an FI shall establish well-
c. The credit culture, which reflects the defined credit-granting criteria and
FI’s credit values, beliefs and behaviors, underwriting standards, which shall include
shall likewise be articulated in the credit a clear indication of the FI’s target market
policy and communicated to credit officers and a thorough understanding of the obligor
and staff at all levels through the strategic or counterparty, as well as the purpose and
plan. The credit practices shall be assessed structure of the credit and its source of
periodically to ensure that the officers and repayment.
staff conform to the desired standard and a. FIs shall conduct comprehensive
value. assessments of the creditworthiness of their
(Circular No. 855 dated 29 October 2014) obligors, and shall not put undue reliance
on external credit assessments. Credit shall
B. Operating Under a Sound Credit be granted on the basis of the primary source
Granting Process of loan repayment or cash flow, integrity
and reputation of the obligor or counterparty
§ X178.6 Credit approval process. The as well as their legal capacity to assume the
approval process for new credits as well as liability.
the amendment, renewal and refinancing of b. Depending on the type of credit
existing credit exposures shall be aligned exposure and the nature of the credit
with the credit risk management structure relationship, the factors to be considered
and clearly articulated in an FI’s written and documented in approving credits
credit policy. The process shall include the shall include, but are not limited to, the
different levels of appropriate approving following:
authority and the corresponding approving (1) The purpose of the credit which
authority limits, which shall be shall be clearly stated in the credit
commensurate with the risks of the credit application and in the contract between
exposures, as well as expertise of the approving the FI and the obligor;
individuals involved. It shall also include an (2) The current risk profile (including the
escalation process where approval for nature and aggregate amounts of risks, risk
restructuring of credits, policy exceptions or rating or credit score, pricing information)
excesses in internal limits is escalated to units/ of the borrower, collateral, other credit
officer with higher authorities. Further, there enhancements and its sensitivity to
shall be proper coordination of relevant units economic and market developments;
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.
Part I - Page 114p Manual of Regulations for Banks

§ X178.7
14.12.31
(3) The sources of repayment, to determine the source and volatility of

repayment history and current capacity to credit exposure.
repay based on financial analysis from f. When granting consumer credits, an
historical financial trends and indicators FI shall conduct its credit assessment in a
such as equity, profitability, turnover, holistic and prudent manner, taking into
leverage, and debt servicing ability via cash account all relevant factors that could
flow projections, under various scenarios; influence the prospect for the loan to be
(4) For commercial credits, the repaid according to its terms and conditions.
borrower’s business expertise, its credit This shall include an appropriate
relationships including its shareholders and consideration of the potential obligor’s other
company directors, as applicable, and the debt obligations and repayment history and
status of the borrower’s economic sector an assessment of whether the loan can be
and its track record vis-à-vis industry peers; expected to be repaid from the potential
(5) The proposed terms and conditions obligor’s own resources without causing
of the credit (i.e., type of financing, tenor, undue hardship and over-indebtedness.
repayment structure, acceptable collateral) Adequate checkings, including with relevant
including covenants designed to limit credit bureaus, shall be made to verify the
changes in the future risk profile of the obligor’s credit applications and repayment
obligor; records.
(6) Use of credit reports; and g. FIs shall factor into their credit-granting
(7) Where applicable, the adequacy, decisions the likelihood of providing
valuation and enforceability of collateral or allowance for identified and expected losses
guarantees. and holding adequate capital to absorb
c. In performing the financial analysis, unexpected losses for credits with apparent
FIs shall use, to the extent available, credible weaknesses.
audited financial statements and other h. FIs may utilize physical collateral (like
relevant documents and sources. FIs may real estate), financial guarantees and other
opt to use financial information/data from instruments to help mitigate risk in credit
other sources provided that the process for
exposures. However, these shall not
arriving at such disposition and an
substitute for a comprehensive assessment
evaluation of how much reliance or value
of the obligor or fully compensate for
was attached into the financial information
insufficient information.
used is clearly articulated and documented.
i. FIs shall establish adequate policies in
d. When participating in loan
determining the acceptability of various
syndications, an FI shall not place undue
forms of credit mitigants and appropriate
reliance on the credit analysis done by the
collateral value limits; procedures for
lead underwriter and shall perform its own
analysis and review of syndicate terms. It regularly assessing the value of physical
shall analyze the risk and return on collaterals and availability of financial
syndicated loans in the same manner as guarantees; and a process to ensure that
directly sourced loans and ensure that the these are, and continue to be, enforceable,
loan is consistent with its credit risk strategy. realizable and marketable. Finally, FIs need
e. When an FI purchases securities to consider that the realizable value of the
issued by an obligor that is different from physical collateral or the quality of financial
the counterparty (e.g. asset swaps), it shall guarantees and other credit mitigants may
also analyze issuer risk. For treasury and be impaired by the same factors that have
capital market activities, the structure of led to the diminished recoverability of the
products and transactions shall be analyzed credit.
Manual of Regulations for Banks Part I - Page 114q

§§ X178.7 - X178.9
14.12.31
In the case of guarantees, the level of (1) Upon re-establishment of the

coverage being provided in relation to the creditworthiness of the obligor using the
credit quality, financial and legal capacity same credit-granting criteria for the
of the guarantor shall be evaluated. evaluation and approval of new loans; and
For credit exposures secured by deposits, (2) When the corresponding accrued
FIs shall likewise require obligors to provide interest receivable has been paid.
a written waiver of his rights under existing b. A policy on clean-up of principal,
laws to the confidentiality of his deposits, either partial or full, shall be established and
and make this available for inspection and/ appropriate controls put in place to prevent
or examination by the appropriate continuous renewal or extension over a long
department of the SES. period of time without reduction in
j. Netting arrangements also mitigate principal; otherwise, such credits and other
risks, especially in interbank and off-balance accommodations shall be subject to
sheet transactions. In order to actually classification and allowance for credit
reduce risk, such agreements need to be losses.
sound and legally enforceable in all relevant c. Specific and reasonable standards
jurisdictions. shall be provided for renewals or extensions
k. For more complex credit risk of certain types of credit exposures that take
exposures, (e.g., asset securitization, credit into consideration the following factors:
derivatives, credit-linked notes, credit (1) Borrower’s normal operating, trade
granted internationally, etc.), a more or production cycle, in the case of credit
sophisticated tool shall be used for exposures for working capital, trade
identifying, measuring, monitoring and financing, production, and/or other similar
controlling credit, country and transfer risks. purposes to ensure a realistic repayment
Each complex credit risk product or activity, schedule;
especially those that are new to banking, (2) Transaction history such as frequency
shall be subject to a thorough analysis in of renewal or extension, rate of utilization
addition to the regular assessment that is of facilities granted, and business
done with traditional credit-granting requirements;
activities. (3) Status of collateral and other
l. For new products and activities, the guarantees in the case of secured credit
credit risk shall be appropriately identified exposures, including requiring the FI to re-
and managed through a formal risk appraise the property especially when there
assessment program. FIs shall ensure that is a material change in market conditions
they fully understand the risk involved in or in the physical aspects of the property
new products and activities and put in place that threatens the collateral protection; and
adequate policies, procedures and controls (4) Age of the account, utilization rate,
before being introduced or undertaken. average balance carried, delinquency status,
(Circular No. 855 dated 29 October 2014) payment history, and account profitability
(if available) in the case of retail credits.
§ X178.8 Renewal or extension of (Circular No. 855 dated 29 October 2014)
maturity date of credits. FIs shall adopt and
adhere to the following explicit standards § X178.9 Credit limits, large exposures,
that control the use of renewals and and credit risk concentrations. An FI is
extensions of maturity date of credits: exposed to various forms of credit risk
a. Credits and other accommodations concentration which if not properly
shall only be renewed or its maturity date managed, monitored and controlled may
extended: cause significant losses that could threaten
Part I - Page 114r Manual of Regulations for Banks

§§ X178.9 - X178.10
14.12.31
its financial strength and undermine public trading books and off-balance sheet
confidence in the FI. Concentration risk can transactions.
arise from excessive exposures to c. Defining limit structure on each of
individual obligors, groups of connected the foregoing categories. Limits shall
counterparties and groups of meaningfully aggregate credit exposures,
counterparties with similar characteristics both in the banking, trading book and on
(e.g., counterparties in specific geographical and off the balance sheet and shall be
locations, economic or industry sectors) or reasonable in relation to the FI’s level of risk
entities in a foreign country or a group of tolerance, historical loss experience, capital
countries with strongly interrelated and resources. Such limits can be based in
economies. part on the internal risk rating assigned to
While concentration of credit risks is the obligor or counterparty.
inherent in banking and cannot be totally d. Procedures shall ensure that limits
eliminated, this can be mitigated by adopting are not exceeded and are clearly
policies and processes that would limit and communicated, periodically reviewed and
control credit exposures and employing modified, as appropriate. Should exceptions
portfolio diversification strategies. Policies to policy be allowed, the circumstances
and procedures may include, but are not under which limits may be exceeded and
limited to the following: the party authorized to approve such
a. Policies and procedures for excesses shall be clearly articulated in the
identifying, reviewing, managing and credit policy.
reporting large exposures and concentration (Circular No. 855 dated 29 October 2014)
risks of the FI.
b. Segmenting its portfolio into the § X178.10 Country and transfer risks
following diverse categories or such other Country risk refers to uncertainties arising
segmentations consistent with the FI’s credit from economic, social and political
strategy. conditions of a country which may cause
(1) Various types of borrowers/ obligors in that country to be unable or
counterparties or loan category (e.g., unwilling to fulfill their obligations. Transfer
government, banks and other FIs, corporate risk exists when an obligor is unable to
and individual borrowers, including secure foreign exchange to service external
exchanges, electronic communication obligations due to restrictions imposed by
networks or ECNs and clearing houses); the country on foreign exchange remittance
(2) A group of connected borrowers/ or repayment on foreign-currency
counterparties (includes aggregating denominated assets to a foreign lender. FIs
exposures to groups of accounts exhibiting that have cross-border credit risk exposures
financial or economic interdependence, shall have adequate internal capacity for
including corporate or non-corporate, identifying, measuring, monitoring and
where they are under common ownership controlling country and transfer risks in its
or control or with strong connecting links, international lending and investment
e.g. common management, familial ties); activities, and shall not place undue reliance
(3) Individual industry sectors; on external ratings. An FI shall consider the
(4) Geographic regions or countries; following:
(5) Loan structure, collateral, and tenor; a. Establishing credit-granting criteria
and taking into consideration country risk factors
(6) Various types of investments, that shall include the potential for default of
including other credit instruments in the foreign private sector obligors arising from
Manual of Regulations for Banks Part I - Page 114s

§§ X178.10 - X178.12
14.12.31
country-specific economic, social and affiliates, and other related parties, ensuring
political factors, the enforceability of loan that there is effective compliance with existing
agreements, and the timing and ability to laws, rules, and regulations at all times and
realize collateral under the national legal that no stakeholder is unduly disadvantaged.
framework. The results of the country risk a. All extensions of credit must be made
analysis shall be integrated into the internal on an arm’s-length basis, in accordance with
credit risk rating of the obligor. These the FI’s credit-granting criteria and in the
country risk factors shall be regularly regular course of business, and upon terms
monitored. An FI shall also assess an not less favorable to the FI than those offered
obligor’s ability to obtain foreign exchange to non-related borrowers.
to service cross-currency debt and honor b. FI policies shall cover standards that
contracts across jurisdictions. require directors and/or officers to avoid
b. Country risk limits shall be put in placing themselves in a position that creates
place and regularly reviewed to determine conflict of interest or the appearance of
that approved limits still reflect the FI’s conflict of interest. The board and
business strategy in line with the changing management shall likewise establish and
market conditions. FIs shall ensure that implement policies that require full
country exposures are reported and disclosure of personal interests that they
monitored against these limits. Significant may have in credit transactions. Directors
country risks shall be assessed and and officers with personal interest in a
highlighted in credit proposals submitted to transaction shall not participate in any
management for approval. deliberation, approval, or voting on the
c. Credit policy shall clearly articulate
matter.
appropriate countermeasures that an FI shall
take in the event of an adverse development
in a particular country where it has
C. Maintaining an Appropriate Credit
exposures. These measures shall include
Administration, Measurement, and
closer analysis of the obligor’s capacity to
Monitoring Process
repay, provisioning and preparation of
contingency plans if country risk continues
§ X178.12 Credit administration. FIs
to deteriorate. It shall consider in its monitoring
shall have in place a system for the ongoing
and evaluation of country and transfer risks,
administration of their various credit
the internal and external country risk rating
portfolios. Credit administration refers to
transitions and economic social and political
the back office activities that support and
developments of the relevant countries. Any
significant changes to the conditions of a control extension and maintenance of
country shall also be elevated to the BOD credit. FIs shall ensure the efficiency and
promptly particularly if the FI has substantial effectiveness of the following credit
exposure to that country. administration functions:
(Circular No. 855 dated 29 October 2014) a. Credit documentation. Procedures
shall be put in place to ensure completeness
§ X178.11 Credits granted to related of documentation in accordance with policy
parties. Consistent with sound corporate including a file documentation tickler
governance practices, the board and senior system;
management shall articulate and implement b. Disbursement. Proper approval shall
clear policies in handling transactions with be obtained and complete documentation
directors, officers, stockholders, their related ensured prior to disbursement. Exceptions,
interests (DOSRI), the FI’s subsidiaries and if any, shall be duly approved;

§§ X178.12 - X178.13
15.12.31
c. Billing and repayment. Payments integral part of the process of evaluation and
received shall be properly recorded. review of prospective and existing
Measures shall be in place to ensure that exposures. Credit underwriting criteria shall
late payments are tracked and collected; and become progressively more stringent as
d. Maintenance of credit files. Credit credit rating declines;
files shall include sufficient and updated (2) It must be fully documented and
information necessary to ascertain the shall address topics such as coverage, rating
financial condition of the obligor or criteria, responsibilities of parties involved
counterparty and include documents in the ratings process, definition of what
covering the history of an FI’s relationship constitutes a rating exception, parties that
with the obligor. All loan and collateral have authority to approve exceptions,
documents shall be kept in a secured area frequency of rating reviews, and
under joint custody. management oversight of the rating process.
(Circular No. 855 dated 29 October 2014) In addition, FIs must document the rationale
for its choice of rating criteria and must be
§ X178.13 Credit risk measurement,
able to provide analyses demonstrating that
validation and stress testing. FIs shall adopt
the rating criteria and procedures are likely
sound and appropriate risk measurement
to result in ratings that meaningfully
methodologies which shall provide a
differentiate risk;
framework to control and monitor the
(3) All credit exposures shall be rated
quality of credit as well as total loan
for risk. Where individual credit risk ratings
portfolio.
are not assigned, e.g., small-denomination
a. Internal credit risk rating system. FIs performing loans, FIs shall assign the
shall develop and utilize an internal risk portfolio of such exposures a composite
rating system appropriate to the nature, size credit risk rating that adequately defines its
and complexity of the FI’s activities in order risk, i.e., repayment capacity and/or loss
to help the board and senior management potential;
differentiate risks across the individual (4) The board shall receive sufficient
credits and groups and to facilitate informed information to oversee management’s
decision making. implementation of the process. Migration
FIs shall have sophisticated rating analysis/transition matrix of ratings shall be
systems involving sufficiently granular regularly reported to show the actual
rating grades. Simple FIs may adopt simpler performance of the rating system over time;
systems. In all cases, however, FIs shall (5) The risk rating system shall
demonstrate the influence of the internal risk encompass an adequate number of ratings.
rating system in the following important FIs shall ensure that “pass” credits are
functions: i) credit approval and sufficiently differentiated and more precisely
underwriting; ii) loan pricing; defined. There shall be a proper process to
iii) relationship management and credit map the internal rating system to regulatory
administration; iv) allowance for credit classification. The FI shall readjust the
losses and capital adequacy; and v) portfolio mapping after every review of its internal
management and board reporting. risk rating methodology. For FIs whose
Internal risk rating systems shall internal rating systems have several pass
generally observe the following standards: grades, special mention loans may pertain
(1) It must be operationally integrated to several risk ratings while substandard,
into the FI’s internal credit risk management doubtful and loss generally correspond to
process. Its output shall accordingly be an the lowest three risk ratings;

§ X178.13
15.12.31
(6) Risk ratings must be reasonable, migration in order to eventually track the
timely and dynamic. Ratings shall be predictive power of the risk rating system.
reviewed at least annually and shall be As used in these standards, a default is
modified whenever the borrower’s considered to have occurred in the following
creditworthiness changes; cases:
(7) The rating criteria shall reflect an (a) If a credit obligation is considered
established blend of qualitative (e.g., the non-performing under existing rules and
quality of management, willingness to regulations;
repay, etc.) and quantitative (e.g., cash flow, (b) If a borrower/obligor has sought or
profitability, and leverage) factors. The has been placed in bankruptcy, has been
criteria for assigning each rating shall be found insolvent, or has ceased operations
clearly defined; in the case of businesses;
(8) The rating policy shall indicate a time (c) If the bank sells a credit obligation
horizon for the risk rating. Generally, the at a material credit-related loss 1 ,
time horizon used for probability of default i.e., excluding gains and losses due to
estimation is one year. However, FIs may interest rate movements. Banks’ board-
use a different time horizon to cover one approved internal policies that govern the
business cycle; use of their internal rating systems must
(9) Ratings shall reflect the risks posed specifically define when a material credit-
by both the borrower’s expected related loss1 occurs; and
performance and the transaction’s structure. (d) If a credit obligation of a borrower/
The ratings output of internal credit risk obligor is considered to be in default, all
rating systems must contain both a borrower credit obligations of the borrower/obligor
and a facility dimension. The borrower with the same bank shall also be considered
dimension shall focus on factors that affect to be in default.
the inherent credit quality of each borrower. b. Credit scoring model. FIs may use a
The facility dimension, on the other hand, credit scoring model in measuring credit risk
shall focus on security/collateral for pools of loans that are similar in
arrangements and other similar risk purpose,risk characteristics and/or general
influencing factors of each transaction; exposure to groups, industries or
(10) The rating assigned to a credit shall geographical locations granted in small
be well supported and documented in the denomination; Provided, That the FI ensures
credit file; and that the credit scoring model sufficiently
(11) Rating histories on individual captures the credit behavior and other
accounts shall be maintained, which shall characteristics of the targeted borrowers.
include the ratings of the account, the dates These loans include retail loans, loans to
the ratings were assigned, the methodology micro and small enterprises, microfinance
and key data used to derive the ratings and loans and unsecured small business loans,
the analyst who gave the ratings. The identity and consumer loans (i.e., housing loans, car
of borrowers and facilities that default, and or auto loans, loans for the purchase of
the timing and circumstances of such appliance and furniture and fixtures, loans
defaults, must be retained. FIs must also for payment of educational and hospital
retain data on the realized default rates bills, salary loans and loans for personal
associated with rating grades and ratings consumption, including credit card loans).
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.

§ X178.13
15.12.31
Risks for these types of portfolio are impact of market dislocations and changes
generally measured at portfolio level. in economic conditions or key risk factors
c. Other credit risk measurement/ on its profile and earnings.
methodologies. FIs may likewise adopt (1) Whether stress tests are performed
other appropriate credit risk measurement manually, or through automated modeling
methodologies/models to estimate expected techniques, FIs shall ensure that:
losses from credit portfolio. (a) Policies and processes –
d. Validation of internal rating systems. (i) Are adequate and clearly
Validation is a process to assess the documented, rational, easily understood and
performance of risk component approved by the board and senior
measurement systems consistently and management; and
meaningfully, to ensure that the realized risk (ii) Includes methodology for
measures are within an expected range. It constructing appropriate and plausible
not only increases the reliability of a model, single and multi-factor stress tests, and
but also promotes improvements and a possible events, scenarios, or future changes
clearer understanding of a model’s strengths in economic conditions that could have
and weaknesses among management and adverse impact on credit exposures, and
user groups. assess the FI’s ability to withstand such
FIs shall establish comprehensive changes;
policies and procedures on effective (b) The inputs are reliable and relate
validation of the rating system (e.g. review directly to the subject portfolios;
of model design/developmental evidence, (c) The process includes frequency of test
backtesting, benchmarking and assessment and procedures for convening periodic
of the discriminatory power of the ratings) meetings to identify the principal risk factors
and rating process (e.g. review of data affecting the portfolio, setting loss limits and
quality, internal reporting, problem handling the authority for setting these limits, and
and how the rating system is used by the monitoring stress loss limits;
credit officers). This shall be adequately (d) Assumptions are well documented
documented and results reported to and conservative;
appropriate levels of the FI. The process shall (e) Models (if any) are subject to a
likewise be subject to periodic review by comprehensive validation process;
qualified, independent individuals. (f) Exceptions to limits and stress testing
Moreover, FIs shall periodically conduct results are reported to the senior
back-testing in evaluating the quality of their management and board of directors for
credit risk assessment models and establish appropriate remedial actions; and
internal tolerance limits for differences (g) Results are discussed and actions and
between expected and actual outcomes and resolutions are made arising from the
processes for updating limits as conditions discussion.
warrant. The policy shall also include (2) The linkages between different
remedial actions to be taken when risk categories of risk that are likely to emerge
tolerances are exceeded. in times of crisis shall be fully identified. In
e. Stress testing. When appropriate, an case of adverse circumstances, there may
FI shall conduct stress testing and scenario be a substantial correlation of various risks,
analysis of its credit portfolio including off- especially credit, liquidity, and market risk.
balance sheet exposures, both at an f. FIs shall develop a contingency plan
individual and group levels to assess the for scenarios and outcomes that involve

§§ X178.13 - X178.15
15.12.31
credit risk in excess of the FI’s established (4) Aggregate credit exposures to
risk tolerances. This plan may include individual borrowers and counterparties as
increasing monitoring, limiting portfolio well as to a group of accounts under
growth, and hedging or exit strategies for common ownership or control;
both significant individual transactions and (5) Permit additional analysis of the
key portfolio segments. credit portfolio, including stress testing; and
(Circular No. 855 dated 29 October 2014, as amended by Circular (6) Maintain a database for research and
No. 890 dated 02 November 2015)
use of analytical techniques, report
§ X178.14 Credit risk management exposures, track quality and account
information and reporting systems. FIs performances, and maintain limits.
shall render accurate, reliable and timely b. The credit policy shall clearly define
information and reports. Thus, adequate the types of information and reports to be
management information and reporting generated, frequency of reporting, deadline
systems shall be in place to identify and of submission, and the users/ recipients of
measure credit risk inherent in all on- and and personnel responsible for the
off-balance sheet activities and ensure the preparation of such information and reports.
overall effectiveness of the risk management c. FIs shall provide sufficient controls
process. The information generated from to ensure integrity of the MIS. Reports shall
such systems shall enable the board and all be periodically reviewed to ensure
levels of management to fulfill their adequacy of scope and reliability and
respective oversight roles, including accuracy of the information generated.
determining the level of capital Internal audit shall also periodically assess
commensurate to the credit risk exposure the controls over MIS.
of the FI. (Circular No. 855 dated 29 October 2014)
a. At a minimum, an effective
management information system (MIS) shall § X178.15 Credit monitoring. FIs shall
enable FIs to: develop and implement comprehensive
(1) Provide adequate information on the processes, procedures and information
quality and composition of the credit systems to effectively monitor the condition
portfolio (including off-balance sheet and quality of individual credits and group
accounts); of credits across the FIs’ various portfolios.
(2) Determine accurately the level of These shall include criteria that identify and
credit risk exposures of an FI through its report problem credits to reasonably assure
various activities (e.g. renewal and that they are appropriately monitored as
extension of loans, collection process, status well as administered and provided for.
of delinquent accounts, write-offs, a. The system shall be able to, among
provisioning, among others); others, provide measures to ensure that the
(3) Timely identify and monitor credit board and management are kept informed
risk concentrations, exposures approaching of the current financial condition of the
risk limits, exceptions to credit risk limits borrower and the various credit portfolios;
and overrides to ensure that policy and loan covenants are consistently adhered to;
underwriting deviations as well as breaches cash flow projections meet repayment
and other potential problems are promptly requirements; prudential and internal limits
reported to the board and management for are not exceeded; portfolios are stress-
appropriate corrective action; tested; and potential problem credits and

§§ X178.15 - X178.16
14.12.31
other transactions are identified. adequacy of loan-loss provisioning;

Exceptions, breaches and potential determine trends; and identify problems
problems noted shall be promptly reported (e.g., risk concentration, risk migration,
to management for corrective action, deficiencies in credit administration and
possible classification and/or provisioning monitoring processes).
and more frequent monitoring. b. FIs may employ an appropriate
b. P e r s o n n e l o r u n i t a s s i g n e d t o sampling methodology to determine the
monitor, on an ongoing basis, credit quality scope of credit review. At a minimum, credit
and underlying physical collateral and review shall be conducted on all individual
financial guarantees shall ensure that obligors with substantial exposures, and on
relevant information is communicated to a consolidated group basis to factor in the
those personnel or unit assigned to provide business connections among related entities
internal credit risk ratings. in a borrowing group. Credit review for
c. FIs shall perform post-validation of credits that are similar in purpose or risk
the actual use of funds to determine that characteristics may be performed on a
credits were drawn down for their intended portfolio basis. The portfolio sample
purposes. Should funds be diverted for selected for review shall provide reasonable
purposes other than what has been applied assurance that all major credit risk issues
for and approved, the FI shall immediately have been assessed and valid conclusions
re-evaluate its approval or if necessary can be drawn. Moreover, sampling
terminate the credit accommodation and methodology shall be documented and
demand immediate repayment of the periodically reviewed to ensure its quality
obligation. and minimize bias.
d. FIs shall monitor individual and c. Credit review shall also evaluate
aggregate exposures against prudential and credit administration function and ensure
internal limits on a regular basis. Large that credit files are complete and updated,
exposures shall be subject to more intensive and all loan approvals and other necessary
monitoring. documents have been obtained.
e. FIs shall develop a system that d. Credit reviews shall be performed at
allows monitoring of asset quality indicators least annually, and more frequently for
substantial exposures, new accounts and
(e.g. non-performing loans, collateral values,
classified accounts. Assessments shall be
etc.) and trends in loan growth to identify
promptly discussed with the officers
potential weaknesses in the portfolio.
responsible for the credit activities and
escalated to senior management.
e. Results of the credit review shall be
D. Maintaining an Appropriate Credit
promptly reported to the board of directors
Control Process
or the appropriate board-level committee for
their appropriate action. The board shall
§ X178.16 Credit review process.
mandate and track the implementation of
a. FIs shall implement an independent corrective action in instances of unresolved
and objective credit review process to deficiencies and breaches in policies and
determine that credits are granted in procedures. Deficiencies shall be addressed
accordance with the FI’s policies; assess the in a timely manner and monitored until
overall asset quality, including resolved/corrected.
appropriateness of classification and (Circular No. 855 dated 29 October 2014)

§ X178.17
15.12.31
§ X178.17 Credit classification and market, and the borrower’s total

provisioning1. relationship with the FI. Basic
a. Classification of loans and other characteristics include, but are not limited
credit accommodations2. FIs shall have in to, any of the following:
place a reliable credit classification system (i) Deficiencies in underwriting,
to promptly identify deteriorating credit documentation, structure and/or credit
exposures and determine appropriate administration that can compromise an FI’s
allowance for credit losses. Classification ability to control credit relationship if
can be done on the basis of internal credit economic or other events adversely affect
risk rating system, including payment the borrower;
deliquency status. All credit classifications, (ii) Continuous renewal/extension
not only those reflecting severe credit without reduction in principal, except when
detoriation, shall be considered in the capacity to pay of the borrower has been
determining the appropriate allowance for clearly re-established;
credit losses. (iii) Adverse economic or market
(1) All FIs shall map their classification conditions, that in the future may affect the
of loans and other credit accommodations borrower’s ability to meet scheduled
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 credit repayment of principal, interest or periodic
accommodations that do not have a greater- amortizations of loans and other credit
than-normal credit risk. The borrower has accommodations granted by the FI or by
the apparent ability and willingness to satisfy other FIs, where such information is
his obligations in full and therefore no loss available.
in ultimate collection is anticipated. (c) Substandard. These are loans and
(b) Especially Mentioned (EM). These are other credit accommodations that have
loans and other credit accommodations that well-defined weakness/(es), that may
have potential weaknesses that deserve jeopardize repayment/liquidation in full,
management’s close attention. If left either in respect of the business, cash flow
uncorrected, these weaknesses may affect or financial position, which may include
the repayment of the loan. Some degree of adverse trends or developments that affect
structural weakness may be found in willingness or repayment ability of the
virtually any aspect of the loan arrangement borrower. Basic characteristics include any
or type of loan, and the presence of one (or of the following:
more) need not be indicative of an overall (i) Weak financial condition and results
credit weakness deserving criticism. of operation that leads to the borrower’s
Instead, the FI must evaluate the relative inability to generate sufficient cash flow for
importance of such factors in the context of debt servicing, except for start-up firms
the borrower’s overall financial strength, the which shall be evaluated on a case-to-case
condition of the borrower’s industry or basis;
1
See Appendix 89 on Regulatory Relief for Banks Affected by Calamities.
2
Other credit accommodations include other credits such as accounts receivables, sales contract receivables,
accrued interest receivables and advances.

§ X178.17
15.12.31
(ii) Past due secured loans and other the loans may have some recovery or salvage
credit accommodations where properties value. This shall be viewed as a transitional
offered as collateral have been found with category for loans and other credit
defects as to ownership or with other accommodations which have been
adverse information; identified as requiring write-off during the
(iii) Breach of any key financial current reporting period even though partial
covenants/agreements that will adversely recovery may be obtained in the future.
affect the capacity to pay of the borrower; or Their basic characteristics include any of the
(iv) Classified “Especially Mentioned” as following:
of the last credit review without adequate (i) When the borrower’s and co-makers’/
corrective action. guarantors’ whereabouts are unknown, or
(d) Doubtful. These are loans and other they are insolvent, or their earning power is
credit accommodations that exhibit more permanently impaired; or
severe weaknesses than those classified as (ii) Where the collaterals securing the
“Substandard”, whose characteristics on the loans are without recoverable values.
basis of currently known facts, conditions (2) Split classification may apply for non-
and values make collection or liquidation performing secured loans and other credit
highly improbable, however the exact accommodations, depending on the
amount remains undeterminable as yet.
recoverability and liquidity of the collateral.
Classification as “Loss” is deferred because
The secured portion may be classified as
of specific pending factors which may
“substandard” or “doubtful”, as appropriate,
strengthen the assets. Some basic
while the unsecured portion shall be
characteristics include any of the following:
classified “loss” if there is no other source
(i) Secured loans and other credit
of payment other than the collateral.
accommodations where properties offered
(3) In the case of syndicated loans, each
as collateral are either subject to an adverse
participating FI shall maintain credit
claim rendering settlement of the loan
through foreclosure doubtful or whose information on the borrower, and grade and
values have materially declined without the make provision for its portion of the
borrower offering additional collateral for syndicated loan in accordance with the
the loan/s to cover the deficiency; or requirements of these guidelines. The lead
(ii) Loans and other credit FI shall provide participating FIs with the
accommodations wherein the possibility of credit information on the borrower upon
loss is extremely high but because of certain request by the participating FI and inform
important and reasonable pending factors the latter if the loan will be classified so as
(i.e., merger, acquisition, or liquidation to achieve uniform classification of the
procedures, capital infusion, perfecting liens syndicated loan.
on additional collateral, and refinancing (4) FIs may upgrade a classified loan or
plans) that may work to the advantage and restore it to a pass rating provided that it
strengthening of the asset, its classification does so on the basis of a written policy on
as an estimated loss is deferred until the next the upgrading of classification or rating and
credit review. the credit review function is reliable and
(e) Loss. These are loans and other effective. Such policy shall include a
credit accommodations which are comprehensive analysis of the repayment
considered uncollectible or worthless and capability/financial strength of the borrower
of such little value that their continuance as and the corrective actions made on the
bankable assets is not warranted although weaknesses noted to support the upgrade

§ X178.17
15.12.31
in classification. Upgrading may be inherent in the methodology, including roles

supported by the following developments: and responsibilities of the FI’s board of
(a) When all arrears or missed directors and senior management;
payments on principal and interests (b) A detailed analysis of the entire loan
including penalties have been cleared portfolio, including off-balance sheet
rendering the account to be fully facilities, performed on a regular basis;
compliant with the original terms of the (c) A realistic view of its lending
loan; activities and adequately consider
(b) Upon establishing that the uncertainty and risks inherent in those
weaknesses were substantially addressed activities in preparing accounting
and that the borrower has exhibited a information. Loan accounting policies and
sustained trend of improvement and practices shall be selected and applied in
willingness and capability to fully pay its a consistent way that reasonably assures
loans and advances in a timely manner to that loan and loan loss provision
justify the upgrade; information is reliable and verifiable;
(c)Offering of new or additional (d) Identification of loans to be
collateral security; or evaluated individually and segmentation of
(d) In the case of restructured loans, the remaining portfolio into groups of loans
the classification shall only be upgraded with similar credit risk characteristics for
after establishing a satisfactory track collective assessment.
record of at least six (6) consecutive (i) Individually assessed loans. FIs
payments of the required amortization of shall establish a materiality threshold for
principal and interest, or until the significant credit exposures that will
borrower has sufficiently exhibited that warrant an individual assessment, which
the loan will be fully repaid (continued threshold shall be regularly reviewed.
collection in accordance with the terms The loan loss estimates shall reflect
of the loans is expected) and the loan consideration of the facts and circumstances
meets the criteria of lower loan that affect the repayment of each individual
classification. loan as of the evaluation date. The following
b. Loan Loss Estimation Methodology, factors are relevant in estimating loan losses
Provisioning and Allowance for Credit for individually assessed loans:
Losses (aa) Significant financial difficulty of the
(1) All FIs shall develop and document borrower;
a sound loan loss methodology that can (bb) Probable bankruptcy or other
reasonably estimate provisions for loans financial reorganization of the borrower;
and other credit accommodations and risk (cc) Breach of contract, such as a default
assets in a timely manner, using their or delinquency in interest or principal
experience and research and this guidance payments; or
to ensure that the specific and collective (dd) Concession granted by the FI, for
allowance for credit losses 1 (ACL) are economic or legal reasons relating to the
adequate and approximates the expected borrower’s financial difficulty, which would
losses in their credit portfolio. not otherwise be considered.
An FI’s loan loss methodology shall The methodology shall include
consider the following: procedures describing the determination
(a) Written policies and procedures for and measurement of the amount of any
the credit risk systems and controls impairment, the impairment measurement
1
ACL represents the aggregate amount of individual and collectively assessed probable credit losses.

§ X178.17
15.12.31
techniques available and steps performed (i) Use experienced credit judgment.
to determine which technique is most Assessment of expected losses shall not be
appropriate in a given situation. based solely on prescriptive rules or formula
(ii) Collectively assessed loans. FIs but must be enhanced with experienced
may use different methods to group loans credit judgment by the appropriate levels of
for the purpose of assessing credit risk and management2 in as much as historical loss
valuation. More sophisticated credit risk experience or observable data may be
assessment models or methodologies for limited or not fully relevant to current
estimating expected future cash flows, circumstances. However, the scope for
including credit risk grading processes, may actual discretion shall be prudently within
combine several of the following the following constraints:
characteristics: loan type, product type, (i) Experienced credit judgments shall
market segment, estimated default be subject to established policies and
probabilities or credit risk grading and procedures;
classification, collateral type, geographical (ii) With approved and documented
location and past-due status. analytical framework for assessing loan
Estimated credit losses shall reflect quality applied consistently over time;
consideration of the FI’s historical net (iii) Estimates shall be based on
charge-off rate1 of the groups, adjusted for reasonable and verifiable assumptions and
changes in trends, conditions and other supported by adequate documentation; and
relevant factors that affect repayment of the (iv) Assumptions concerning the impact
loans in these groups as of the evaluation on borrowers of changes in general
date, and applied consistently over time; economic activity, both favorable and
(e) Methods used to determine whether unfavorable, shall be made with sufficient
and how loans individually evaluated, but prudence.
not considered to be individually impaired, The method of determining loan loss
shall be grouped with other loan (excluding provisions shall reasonably assure the timely
individually assessed loans that are recognition of loan losses. While historical
impaired) that share similar credit risk loss experience and recent economic
characteristics for collective impairment conditions are a reasonable starting point
evaluation; for the institution’s analysis, these factors
(f) The quality and net realizable values are not, by themselves, sufficient basis to
of physical collateral and other financial determine the appropriate level of aggregate
guarantees and credit risk mitigants loan loss provisions. Management shall also
incorporated in the loan agreement, where consider any current factors that are likely
applicable; to cause loan losses to differ from historical
(g) Address the methods used to loss experience, including changes in the
validate models for credit risk assessment; following:
(h) The analyses, estimates, reviews • Lending policies and procedures,
and other provisioning methodology including underwriting standards and
functions shall be performed by competent collection, charge-off, and recovery
and well-trained personnel and be well practices;
documented, with clear explanations of the • International, national and local
supporting analyses and rationale; and economic and business conditions and
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.

§ X178.17 - X178.18
15.12.31
developments, including the condition of prescribed in Appendix 18: Provided, That

various market segments; the FIs notify the Bangko Sentral, through
• Trend, volume and severity of past their respective Central Points of Contact,
due loans and loans graded as low quality, of this preference. Nevertheless, such FIs
as well as trends in the volume of impaired shall still use experienced credit judgment,
loans, troubled debt restructurings and other subject to the criteria prescribed in this
loan modifications; Subsection, in determining the ACL.
• The experience, ability, and depth of (3) FIs shall set up general loan loss
lending management and staff; provision equivalent to one percent (1%) of
• Changes related to new market the outstanding balance of individually and
segments and products; collectively assessed loans for which no
• Quality of the FI’s loan review system specific provisions are made and/or for
and the degree of oversight by senior which the estimated loan losses are less than
management and board of directors; one percent (<1%), less loans which are
• The existence and effect of any considered non-risk under existing laws,
concentrations of credit, and changes in the rules and regulations.
level of such concentrations; and (4) FIs shall ensure the adequacy of the
• Credit risk profile of the loan portfolio individual and collective ACL for the entire
as a whole as well as the effect of external loan portfolio. They shall have a policy for
factors such as competition and legal and the regular review of the ACL, which shall
regulatory requirements on the level of be conducted at least semi-annually after
estimated credit losses in the FI’s current considering results of the credit review, level
portfolio. of classified loans, delinquency reports,
Experienced credit judgment shall also historical losses and market conditions.
be used to determine an acceptable period Failure to make adequate provisions for
that will yield reliable historical loss rates estimated future losses results in material
as loss rate periods shall not be restricted to misrepresentation of an FI’s financial
condition.
a fixed time period to determine the average
(Circular No. 855 dated 29 October 2014, as amended by
historical loss experience for any group of M-2015-039 dated 04 November 2015, M-2015-035 dated 07
loans with similar credit risk characteristics. October 2015, M-2015-009 dated 28 January 2015, M- 2015-005
An FI shall maintain sufficient historical loss dated 20 January 2015)
data over a full credit cycle to provide robust
and meaningful statistical loan loss estimates § X178.18 Credit workout and remedial
for establishing the level of collective management of problem credits. FIs shall
impairment losses for each group of loans develop and maintain a disciplined and
with similar credit risk characteristics. vigorous process for the early identification
When applying experienced credit and intervention for potential or existing
judgment, an FI shall provide a sound problem credits. The process shall ensure
rationale for excluding any historical loss that timely and adequate management
data that is deemed not representative of the action is taken to maintain the quality of
performance of the portfolio. the credit portfolio, prevent further
(2) FIs with credit operations that may deterioration, and minimize the likelihood
not economically justify a more of future losses.
sophisticated loan loss estimation a. Problem credits refer to credits that
methodology or whose practices fell short display signs of potential problems and/or
of expected standards shall, at a minimum, well-defined weaknesses such as those not
be subject to the regulatory guidelines in performing according to the terms of the
setting up allowance for credit losses contract, or with credit quality impairment,

§ X178.18
14.12.31
or deficiencies relating to their approval his obligation and available credit

and/or conduct that are not in keeping with enhancements such as financial guarantees
sound and prudent credit policies. These and physical collateral. Thus, except in
shall include past due loans, non-performing special cases which also require approval
loans and restructured loans. by the Monetary Board, such as loans
b. FIs shall adopt appropriate and cost funded by foreign currency obligations, FIs
effective workout, restructuring or remedial shall have full discretion on whether to
management policies, processes and restructure loans in order to provide
strategies to revive and recover problem flexibility in arranging the repayment of such
credits. The strategies shall take into account loans without impairing or endangering the
the specific condition of the obligor and the FI’s interest.
FI’s interest, and shall be approved by the (2) Accounts shall not be restructured
board of directors or management, in unless the financial capacity of the obligor
accordance with internal policy. to repay has been re-established, the events
c. At a minimum, the policies and or crises that triggered the financial stress
strategies shall cover the following areas: had been identified, and the nature and
(1) authority and responsibilities of extent of protection of the FI’s exposure had
officers and staff in managing problem been determined, to justify the need for
credits; restructuring.
(2) collection strategy to be adopted for (3) At a minimum, the classification and
different types of loans; provisioning of a loan, prior to the execution
(3) restructuring and handling of of the restructuring agreement shall be
restructured accounts and/or loans for retained until the borrower has sufficiently
workout; exhibited that the loan will be fully repaid.
(4) supervision and monitoring of loan (4) A second restructuring of a loan
recovery performance; shall be allowed only if there are reasonable
(5) management and disposal of real and justifications: Provided, That it shall be
other properties acquired (ROPA), including considered a non-performing loan and
appraisal process; classified, at least, “Substandard”. The
(6) management information system to restoration to a performing loan status and/
support the reporting, monitoring and or upgrading of loan classification, e.g.,
decision making processes; from “Substandard” to “Especially
(7) defined timelines and provision for Mentioned”, may be allowed if
regular monitoring; and circumstances warrant an upgrading in
(8) other strategies, such as the use of accordance with this Subsection.
collection agencies, and criteria for hiring a (5) When restructuring of exposures to
consultant on problem credits. DOSRI and other related parties is pursued,
d. Restructuring strategies this shall be upon terms not less favorable
(1) Restructuring may be resorted to for to the FI than those offered to others and
the purpose of lessening the financial shall be approved by the board, excluding
difficulty of the obligor towards full the concerned director.
settlement of his obligation, and (6) Physical collaterals offered, such as
restructuring agreements shall always take real estate, shall be appraised by an
into account the borrower’s capacity to pay independent appraisal company (not a

§§ X178.18 - X178.20
14.12.31
subsidiary or an affiliate of the FI) acceptable reasonable period of time within which to
to the Bangko Sentral at the time of write off loans already classified as “Loss”.
restructuring and every year thereafter to There shall be no undue delay in
ensure that current market values are being implementing write-offs. Notice of write-
used. A credit exposure benchmark of P1.0 off of problem credits shall be submitted in
million for simple FIs and P5.0 million for the prescribed form to the Bangko Sentral
all other FIs shall be observed, such that through the appropriate Central Point of
physical collaterals for credit exposures Contact within thirty (30) business days after
beyond this amount will require an every write-off with a sworn statement
independent appraisal. signed by the President of the FI or officer
e. Problem credits, including of equivalent rank that write-off did not
restructured accounts, shall be subjected to include 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
§ X178.19 Writing off problem credits be maintained and must be periodically
Policies for writing off problem credits must reviewed for updates on individual loan
be approved by the board of directors in obligor’s information.
accordance with defined policies, and shall (Circular No. 855 dated 29 October 2014)
incorporate, at a minimum, well-defined
criteria (i.e., circumstances, conditions and § X178.20 Enforcement actions. The
historical write-off experience) under which Bangko Sentral reserves the right to deploy
credit exposures may be written off. its range of supervisory tools to promote
Procedures shall explicitly narrate and adherence to standards and principles set
document the necessary operational steps forth in these guidelines, bring about timely
and processes to execute the policies. corrective actions and compliance with
Policies and procedures shall be Bangko Sentral directives and ensure that
periodically reviewed and if necessary, FIs continuously observe the said standards.
revised in a timely manner to address Persistent non-observance of the provisions
material internal changes (e.g., change in of Sec. X178 and its subsections, which may
business focus) or external circumstances lead to material misstatement of the
(e.g., changes in economic conditions). financial condition or illiquidity of the FI,
FIs shall write off problem credits, may be a ground for declaration of unsafe
regardless of amount, against ACL or current or unsound practices under Section 56 of
operations within a reasonable period as R. A. No. 8791 and subject the FI to
soon as such problem credits are appropriate sanctions.
determined to be worthless as defined in Enforcement actions shall be based on
the FIs’ written policies. However, problem a holistic assessment to determine if FIs
credits to DOSRI shall be written off only adopt appropriate risk management
upon prior approval of the Monetary Board. practices and maintain capital
Policies shall define and establish the commensurate with the risk assumed based

§§ X178.20 - X179.1
16.03.31
on existing rules and regulations. These concealment of past due and/or problem
may include, but are not limited to, the loans is noted; or
following: (5) Other appropriate non-monetary
a. Corrective actions. These are enforcement actions that the Monetary Board
measures intended to primarily require FIs may impose.
to rectify any deviations from the standards (Circular No. 855 dated 29 October 2014)
and principles expected in the conduct of
its credit risk-taking activities to address the Sec. X179 Operational Risk Management;
negative impact of such deviation. Policy Statement1. It is the thrust of the
Corrective actions generally include Bangko Sentral to promote the adoption of
issuance of specific directives to address effective risk management systems to sustain
supervisory concerns within a reasonable the safe and sound operations of banks.
timeframe. Cognizant that operational risk is inherent
b. Sanctions. The Monetary Board may in all activities, products and services, and
impose sanctions on an FI and/or its Board, is closely tied in with other types of risks
directors and officers, as provided under (e.g., credit, liquidity and market risks), the
existing laws, Bangko Sentral rules and Bangko Sentral is issuing these guidelines
regulations proportionate to the gravity/ to clearly set out its expectations and define
seriousness of offense. the minimum prudential requirements on
c. Other enforcement actions. Subject operational risk management. These
to prior Monetary Board approval, the guidelines align existing regulations to the
Bangko Sentral, when warranted, may extent possible, with international standards2
deploy other enforcement actions such as: and best practices. Bangko Sentral expects
(1) Initiation into the prompt corrective banks to adopt an operational risk
action (PCA) framework whenever grounds management framework, as part of the
for PCA exist; enterprise-wide risk management system,
(2) Issuance of cease and desist order that is suited to their size, complexity of
(CDO) in case of persistence of unsafe/ operations, and risk profile.
unsound banking practices and/or violation (Circular No. 900 dated 18 January 2016)
of any banking law or any order, instruction
or regulation issued by the Monetary Board § X179.1 Definition of operational risk.
or any order, instruction or ruling issued by Operational risk refers to the risk of loss
the Governor; resulting from inadequate or failed internal
(3) Additional capital infusion in case processes, people and systems; or from
hazardous lending practices resulted in external events. This definition includes legal
excessive provisions for credit losses leading risk, but excludes strategic and reputational
to capital deficiency; risk. Operational risk is inherent in all
(4) Requiring the FI to gross up the activities, products and services, and cuts
amount of required allowance for credit across multiple activities and business lines
losses based on the examination of a within the bank and across the different
representative sample of loans, if in the entities in a banking group or conglomerate
course of the Bangko Sentral examination, where the bank belongs.
a high incidence of non-reporting/ (Circular No. 900 dated 18 January 2016)
1
Banks 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 bank 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. X179
as well as Subsecs. X179.1 to X179.11.
2
Embodied in the relevant documents issued by the Basel Committee on Banking Supervision.

§ X179.2
17.09.30
§ X179.2 Duties and responsibilities. objectives as well as the type of risks that
a. Board of directors. Consistent are not acceptable to the board and
with the principles embodied under management), which should consider all
Subsec. X143.1, the duties and material risk exposures as well as the bank’s
responsibilities of the board of directors in financial condition and strategic direction;
relation to the effective management of risk (b) Approve appropriate thresholds or
include the establishment of a limits to ensure that the level of operational
comprehensive and effective operational risk is maintained within tolerance and at
risk management framework as part of the prudent levels and supported by adequate
enterprise-wide risk management system. capital. Relative to this, the board shall
In this regard, the board of directors shall: approve policy on resolving limit breaches
(1) Ensure that it is aware of and which should cover escalation procedures
understands the nature and complexity of for approving or investigating breaches,
the major operational risks in the bank’s approving authorities, and requirements in
business and operating environment, reporting to the appropriate level of
including risks arising from transactions or management or the board;
relationships with third parties, vendors, (c) Ensure that operational risk is
suppliers including outsourced service appropriately considered in the capital
providers, and clients of services provided. adequacy assessment process;
This should include understanding of both (d) Ensure that it receives adequate
the financial and non-financial impact of information on material developments in the
operational risk to which the bank is operational risk profile of the bank,
exposed to; including pertinent information on the
(2) Approve the operational risk current and emerging operational risk
management framework which shall form exposures and vulnerabilities as well as
part of the bank’s enterprise-wide risk information on the effectiveness of the
management system and shall cover all operational risk management framework.
business lines and functions of the bank, The board must challenge the quality and
including outsourced services and services comprehensiveness of the operational risk
provided to external parties. The operational information it receives. It should also be
risk management framework should satisfied with the reliability of the said
include an enterprise-wide definition of information and the monitoring system for
operational risk, which should be consistent operational risk;
with the definition under Subsec. X179.1, (e) Ensure that business objectives, risk
governance, and reporting structures appetite, the operational risk management
including the roles and responsibilities of framework, and the respective roles and
all personnel, feedback mechanism, as well responsibilities of personnel and officers at
as standards and tools for operational risk all levels in terms of implementing the
management. In this respect, the board shall: operational risk management framework,
(a) Define the operational risk are properly disseminated, clearly
management strategy and ensure that it is communicated/discussed, and understood
aligned with the bank’s overall business by personnel concerned;
objectives. Relative to this, the board should (f) Provide senior management with
set and provide clear guidance on the bank’s clear guidance and direction regarding the
operational risk appetite (i.e., the level of principles underlying the operational risk
operational risk the bank is willing to take management framework. The board shall
and able to manage in pursuit of its business ensure that senior management

§ X179.2
17.09.30
appropriately implements policies, confidential information, and use of

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 bank’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 reinforce the conduct and values being
management of risks arising from these promoted in the organization.
activities. In this regard, the board of Further, the board shall oversee the
directors shall approve a framework design and implementation of remuneration
governing outsourcing activities, which policies. It shall ensure that the
includes a system to evaluate the risk and remuneration policies do not encourage
materiality of all existing and prospective excessive risk-taking or provide incentives
outsourcing engagements and the policies to people to perform contrary to the desired
that apply to such arrangements; risk management values. It shall also ensure
(4) Ensure observance of expectations that remuneration policies are appropriate
and requirements prescribed under relevant and aligned with the bank’s long-term
laws, rules and regulations, industry-set strategic direction and risk appetite, as well
standards, and policies on internal control, as with relevant legal or regulatory
internal audit, and disclosure; requirements;
(5) Promote a culture of high standards (7) Ensure that all units in the
of ethical behavior. The board shall adopt a organization have adequate resources,
code of conduct of ethical behaviors with including personnel complement, and are
corresponding disciplinary actions for non- supported by appropriate technological
compliance, which should cover, among systems. The use of technological systems
others, guidance and protocols on conflicts must be commensurate to the activities
of interest situations, safeguarding of being undertaken; and

§ X179.2
17.09.30
(8) Oversee implementation of a sound reporting that utilizes appropriate

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

§§ X179.2 - X179.3
17.09.30
(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, as amended by Circular
c. Business units. Business line No. 969 dated 22 August 2017)
management and personnel, as the first line
of defense, are responsible on a day-to-day § X179.3 Roles and functions.
basis for identifying, managing and reporting a. Operational risk management
operational risks inherent in the products, function. UBs/KBs shall create a separate
activities, processes and systems for which ORMF or assign specific personnel under
they are accountable. In this regard, business the risk management unit to handle
line management shall ensure that: operational risk concerns. The ORMF shall
(1) Internal controls and practices primarily assist management in meeting its
within their business lines are consistent responsibility to understand and manage
with the enterprise-wide policies and operational risk exposures and ensure the
procedures to support the management of development and consistent implementation
operational risk; of operational risk policies, processes, and
(2) Business line specific policies, procedures throughout the bank. In this
regard, the ORMF shall:
processes, and procedures are adequate and
(1) Recommend to the board of
effectively implemented, and personnel are
directors and senior management
adequate and competent to manage
appropriate policies and procedures relating
operational risk for all material products,
to operational risk management and
activities, and processes;
controls;
(3) Operational risk management
(2) Design and implement the bank’s
framework within each business line reflects
operational risk assessment methodology
the scope of that business line and its
tools and risk reporting system;
inherent operational complexity and (3) Coordinate risk management
operational risk profile; activities across the organization;
(4) Risk mitigation strategies and (4) Consolidate all relevant operational
processes as approved by the board and risk information/reports to be elevated/
senior management are established and presented to the board and senior
executed; management;
(5) Internal controls, and operational risk (5) Provide operational risk
mitigation strategies and processes are management training and advice to business
periodically reviewed within the business units on operational risk management issues;
units to effectively manage operational risks and
within approved risk tolerance, and (6) Coordinate with compliance
consistent with enterprise-wide policies and function, internal audit, and external audit
procedures established. There must be clear on operational risk matters.
expectations and processes established to ORMF personnel should have technical
ensure prompt escalation and actions to proficiency, appropriate educational
address any gap or issue identified; and background, and exposure to enable them
(6) Operational risk-related information to effectively perform the unit’s mandate.
(e.g., loss events, incidents, et al.) are Banks shall have in place a training program
adequately and timely communicated/ to keep its personnel up-to-date on different
coordinated to Operational Risk operational risk issues and challenges.
Management Function (ORMF) for risk The ORMF shall be supported by a
monitoring and reporting, in addition to the board-approved charter that defines its

§§ X179.3 - X179.4
16.12.31
stature, authority, and independence. It shall ROC or the board, as applicable. The ROC
directly report to the head of the Risk or the board shall be responsible for
Management Unit (RMU) or to the board- assessing the annual performance of the unit
level Risk Oversight Committee (ROC), as taking into account how said unit carried
appropriate. The head of the RMU or the out its duties and responsibilities.
ROC, as appropriate, shall be responsible b. Compliance function. The
for assessing the annual performance of said compliance function shall conduct an
function taking into account how it carried independent assessment of the bank’s
out its duties and responsibilities. compliance with relevant laws, rules and
In case of group structures, there should regulations, as well as internal policies, and
be a board-approved policy that defines the determine areas that may potentially result
operational risk management framework in risk of loss due to inadequate or failed
that shall apply to entities across the group. internal processes, systems, and people. The
The policy shall provide the structure that latter includes inappropriate conduct/
shall be adopted by the group, either to behavior of personnel, officers, and the
establish the ORMF centrally at the parent board, that may lead to fraud or any form of
bank or in each of the identified subsidiary. business disruption. The compliance
Such policy shall also include the overall function shall assess whether the identified
responsibility of the parent bank’s ORMF operational risk exposure by the business
with respect to the management of units or by the function itself shall affect the
operational risk exposures of subsidiaries/ franchise value of the bank. In this regard,
affiliates. it shall advise and assist management in
Branches of foreign banks may establish establishing guidance on the appropriate
their own ORMF or may be covered by the implementation of relevant laws, rules and
parent/regional/group ORMF: Provided, That regulations, and internal policies.
all branches of foreign banks shall comply c. Internal audit. Internal audit shall
with the policies, practices and systems of conduct an independent assessment of the
its head office relative to the management operational risk management framework,
of operational risk, as well as meet the including the implementation of operational
applicable provisions set forth under this risk management policies and procedures.
Section. The board of directors, either directly or
TBs, RBs and Coop Banks are not indirectly through the board-level Audit
required to create an ORMF. However, the Committee shall ensure that the scope and
board of directors is expected to discuss frequency of audit is appropriate to the risk
operational risk issues during its board exposures. Any operational risk issue
meetings with discussions adequately identified and reported in the audit process
documented in the minutes of meetings. The should be addressed by senior management
board of directors of complex1 TBs, RBs, in a timely and effective manner, or raised
Coop Banks may, at its own discretion, or to the attention of the board as appropriate.
as directed by the appropriate supervising (Circular No. 900 dated 18 January 2016)
department of the Bangko Sentral, create an
RMU and assign specific personnel under § X179.4 Operational risk management
said unit to handle operational risk concerns. framework. Banks shall have in place an
The said RMU shall directly report to the appropriate operational risk management
( Next Page is Part I - Page 116)
1
Subsec. X141.3 provides the grounds for classifying banks as ‘Complex’ for regulatory purposes.
Part I - Page 115r Manual of Regulations for Banks

§ X179.4
16.12.31
framework, as part of the enterprise-wide (d) Clients, products and business

risk management system, that is effective and practices, e.g., fiduciary breaches, misuse of
efficient in identifying, assessing, confidential customer information, improper
monitoring and controlling/mitigating trading activities on the bank’s account,
operational risk. They shall ensure that their money laundering, and sale of unauthorized
operational risk management framework is products;
commensurate with the complexity of their (e) Damage to physical assets, e.g.,
operations, range of products and services, terrorism, vandalism, earthquakes, fires and
organizational structure, and risk profile. floods;
a. Risk identification and assessment. (f) Business disruption and system
Risk identification and assessment are failures, e.g., hardware and software failures,
fundamental elements of an effective telecommunication problems, and utility
operational risk management system. outages; and
Effective risk identification shall consider (g) Execution, delivery, and process
both internal factors (such as bank structure, management, e.g., data entry errors,
nature of activities, the quality of human collateral management failures, incomplete
resources, organizational changes and legal documentation, unapproved access
employee turnover, among others) and given to client accounts, non-client
external factors (such as changes in the counterparty misperformance, and vendor
broader environment and the industry, disputes.
advances in technology, and developments (2) Banks shall adopt tools and
in political, legal, and economic factors, mechanisms that are appropriate to their
among others). Risk identification and size, complexity of operations and risk
assessment allow the bank to better profile to properly identify and assess
understand its risk profile and allocate risk operational risk. The tools that may be used
management resources and strategies more for identifying and assessing operational risk
effectively. Since the business lines are may include, but not limited to:
expected to have the best knowledge of their (a) Results of internal/external audit and
risk exposures and processes, these units supervisory issues raised in the Bangko
should play a major role in the identification Sentral Report of Examination (ROE) –
and assessment of operational risk. Internal audit surfaces issues on effectiveness
(1) Banks shall consider the following of internal control, risk management, and
loss event-type categories as part of their risk governance systems and processes of an
identification and assessment processes: organization, while external audit focuses
(a) Internal fraud, e.g., intentional on control weaknesses and susceptibility of
misreporting of positions, employee theft, the bank to material misstatements in the
and insider trading on an employee’s own financial statements. On the other hand, the
account; Bangko Sentral ROE highlights deficiencies
(b) External fraud, e.g., robbery, forgery, in the risk management systems and
check kiting, and damage from computer governance processes as well as issues on
hacking; compliance with relevant laws, rules and
(c) Employment practices and regulations, which could have adverse
workplace safety, e.g., workers effects on the safety and soundness of the
compensation claims, violation of health and bank;
safety rules, organized labor activities, (b) Internal loss data collection and
discrimination claims, and general liability; analysis – Internal operational loss data

§ X179.4
16.12.31
provides meaningful information for help prioritize subsequent management

assessing bank’s exposure to operational risk action;
and the effectiveness of internal controls. (e) Risk and performance indicators –
Analysis of loss events can provide insights Risk and performance indicators, such as
into the causes of large losses and Key Risk Indicators (KRIs) and Key
information on whether control failures are Performance Indicators (KPIs), provide an
isolated or pervasive. Banks may consider insight into a bank’s emerging risk exposure.
mapping internal loss data to the following KRIs are used to monitor the main drivers
business lines: of exposure associated with key risks that
(i) Corporate finance; contribute to early detection of heightened
(ii) Trading and sales; risk, ongoing monitoring of their
(iii) Retail banking; movements, and preemptive reactions as
(iv) Commercial banking; necessary. KPIs, on the other hand, provide
(v) Payment and settlement; insight into the status of operational
(vi) Agency services; processes, which may in turn provide
(vii) Asset management; and insights into operational weaknesses,
(viii) Retail brokerage. failures, and potential loss. Risk and
Loss events linked to credit and market performance indicators are often used with
risk may also relate to operational issues and escalation triggers to warn when risk levels
should be segmented in order to obtain a approach of exceed acceptable ranges and
more comprehensive view of the bank’s prompt mitigation plans;
operational risk exposure; (f) Scenario analysis – This refers to the
(c) Risk Self Assessments (RSA)/Risk process of obtaining expert opinion of
Control Self Assessments (RCSA) – RSA is a business line and risk managers to identify
tool to assess processes underlying bank’s potential operational risk events and assess
the potential outcome. Scenario analysis is
operations against a library of potential
an effective tool when considering potential
threats and vulnerabilities including their
sources of significant operational risk and
potential impact. A similar approach, RCSA,
the need for additional risk management
typically evaluates inherent risk (the risk
controls or mitigation solutions. Given the
before controls are considered), the
subjectivity of the scenario process, a robust
effectiveness of the control environment, and
governance framework is essential to ensure
residual risk (the risk exposure after controls
the integrity and consistency of the process;
are considered). Scorecards on RCSAs may
(g) Model measurement – Larger banks
be developed by allocating weights to
may deem it useful to quantify their
residual risks to provide a means of operational risk exposures by using the
translating the RCSA output into metrics that output of the risk assessment tools as inputs
will give a relative ranking of the control into a model that estimates operational risk
environment; exposure. The results of the model can be
(d) Business process mappings – These used in an economic capital process and
help identify key steps in business processes, can be allocated to business lines to link
activities, and organizational functions as risk and return; and
well as the key risk points in the bank’s (h) Comparative analysis – Comparative
overall business process. Process maps can analysis consists of comparing the results
reveal individual risks, risk of the various assessment tools to provide a
interdependencies, and areas of control or more comprehensive view of the bank’s
risk management weakness. They can also operational risk profile.

§ X179.4
16.12.31
Comparison of external loss data, if (d) Business line classification;

available, such as industry experiences, vis- (e) Date of occurrence;
à-vis bank’s internal loss data can also be (f) Date of discovery;
made to explore possible weaknesses in the (g) Date of booking of actual losses;
financial institution’s control environment (h) Actual loss amount or potential loss
and enable it to consider previously amount, if a near-miss event;
unidentified risk exposures. (i) Amount recovered and date of
In choosing among these tools, each recovery;
bank must carefully consider what is (j) Causes of the event (e.g., control
proportionate to its size, risk profile, and weaknesses identified);
complexity of operations. Data/information (k) Consequence of the loss event
gathered from these tools should enable (e.g., market loss, fees paid to a counterparty,
banks to make a thorough causal analysis, a lawsuit or damage to the bank’s
identify control gaps, and consequently reputation); and
adopt appropriate corrective actions. (l) Action(s) taken.
UBs/KBs are expected to adopt more Banks shall define appropriate
sophisticated tools in identifying and thresholds for internal loss data collection
assessing their operational risk exposures. and must be able to justify the same.
TBs, RBs and Coop Banks, on the other
Thresholds should be reasonable and
hand, are expected to adopt at the minimum,
should not omit any operational loss event
the (i) results of internal/external audit and
data that is material for operational risk
supervisory issues raised in the Bangko
exposure and for effective risk management.
Sentral ROE and (ii) internal loss data
Banks shall ensure that the choice of
collection and analysis.
threshold should not adversely impact the
(3) Banks shall develop databases to
credibility and accuracy of operational risk
accumulate at least a five (5)-year history of
measurement.
operational risk losses which can be fed
back into the operational risk management (4) Banks shall determine based on the
process. Apart from capturing events that results of the risk assessment process
resulted to actual loss, banks shall also whether the risks are within the scope of its
gather potential loss or near-misses1. Said operational risk management strategy and
database of loss events provides basis for policies. It shall identify the risk exposures
analysis which can help direct corrective that are unacceptable or are outside its risk
action to improve the control environment, appetite and/or risk management capacity,
as well as determine risk mitigating actions. and design and prioritize appropriate risk
Banks should assess the depth of its data mitigation and corrective actions with clear
collection which is vital in understanding accountabilities, roles and responsibilities
the risk environment. The loss event for implementation within reasonable
database shall at a minimum disclose the timelines.
following: (5) Banks shall continually assess its
(a) Short description of the event; operational risk exposures in order to gain
(b) Loss event type category; broader recognition and understanding of
(c) Department/Unit/Branch sustaining their effects. It shall consider the following
the loss; factors in the assessment:
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.

§ X179.4
16.12.31
(a) Expected and unexpected changes to monitor their operational risk profiles and
the bank’s operating environment; material exposures to losses on a continuing
(b) Actual operational loss events that basis. The process shall take into account
could have resulted in substantial losses/ both qualitative and quantitative assessment
damage but were avoided (e.g., near misses) of exposure to all types of operational risk,
or recovered; assess the quality and appropriateness of
(c) Reported external operational losses corrective or mitigating actions, and ensure
and incidents which have damaged investor that adequate controls and systems are in
confidence and caused serious reputational place to identify and address problems
harm; before they become major concerns.
(d) Areas of concern or unusual volumes (1) Risk monitoring should be an integral
or high number of exceptions; and part of a bank’s activities, the frequency of
(e) Results of internal assessment of risks which should reflect the risks involved in
and controls. these activities as well as the frequency and
(6) Banks shall ensure that their risk nature of changes in the operating
management and control infrastructure keep environment. The results of the monitoring
pace with the growth of or changes in their activities, findings of compliance, internal
business activities, i.e., when they engage audit and risk management functions,
in any new activity; introduce a new management letters issued by external
product; enter new or unfamiliar markets; auditors, and reports generated by
implement new business processes or supervisory authorities, as appropriate,
technology systems; establish subsidiaries/ should be included in regular reports to the
branches that are geographically remote board and the senior management to ensure
from the head office; and/or embark on an that timely and appropriate measures are
aggressive growth strategy by acquiring undertaken to address the issues/findings.
problem banks to rapidly increase branch (2) Management shall ensure that regular
network during a short period of time. reports on operational risk are received on
Banks should have relevant policies and a timely basis and in a form and format that
procedures that address the process for will aid in the monitoring and control of their
review and approval of new products, business areas. The board should receive
activities, processes and systems. The review sufficient high-level information to enable it
and approval process shall consider the to understand the bank’s overall operational
following: risk profile and focus on the material and
(a) Inherent risks in the new product, strategic implications for the business.
service, or activity; (3) Management reports should contain
(b) Changes to the bank’s operational relevant internal financial, operational, and
risk profile, appetite and tolerance, including compliance data, as well as external market
the impact on existing products or activities; information about events and conditions that
(c) Necessary controls, risk management are relevant to decision making. They should
processes, and risk mitigation strategies; aim to provide information such as:
(d) Any residual risk; and (a) The critical operational risks facing,
(e) Procedures and metrics to measure, or potentially facing, the bank (e.g., as
monitor, and manage the risk of the new shown in KRIs and their trend data, changes
product or activity. in risk and control self-assessments,
b. Risk monitoring and reporting. Banks comments in audit/compliance review
shall implement a process to regularly reports, etc.);

§§ X179.4 - X179.5
16.12.31
(b) Major risk events/loss experience, an annual review of the bank’s risk and
issues identified and intended remedial insurance management program.
actions; Banks, however, should not consider
(c) The status and/or effectiveness of 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 bank’s operational risk mitigation tools such as insurance reduces
policy and likely or actual breaches in risk, transfer the risk to another business
predefined thresholds for operational sector or area, or create a new risk
exposures and losses). (e.g., counterparty risk).
(4) Reports should be analyzed with a (Circular No. 900 dated 18 January 2016, as amended by Circular
view to improving existing management No. 930 dated 18 November 2016)
performance as well as developing new risk
management policies, procedures and § X179.5 Management of human
practices. Moreover, to ensure the resource-related risk. One of the major
usefulness and reliability of the reports sources of operational risk is “people risk”.
received, management should regularly In this regard, banks shall embed in their
verify the timeliness, accuracy, and enterprise-wide risk management
relevance of reporting systems and internal framework measures to identify, measure,
controls in general. monitor, and control human resource
(5) Management should keep track of related risks. Banks shall ensure that there
are adequate policies and risk management
the information provided in the reports,
and control measures in the following areas:
particularly the loss data, to establish a
a. Recruitment and selection. The
framework for systematically tracking and
board shall establish efficient process that
recording the frequency, severity and other
will facilitate timely recruitment and
relevant information on loss events.
selection of personnel from a broad pool of
c. Risk control and mitigation. Strong
candidates with appropriate educational
control environment is key to effective
background, skills, experience and
risk control and mitigation. In this respect, competencies to fulfill the duties and
banks are expected to adhere to the standards responsibilities of the function. Management
set forth under Secs. X185 and X186, shall also ensure that the bank’s culture,
Subsec. X426.1 and Appendix 112 on values and expectations on behavior are
Internal Control and Internal Audit. compatible with those of its employees so
Banks shall decide whether to use that there is unity of direction and purpose.
appropriate procedures to control and/or b. Performance management. The
mitigate the risks, or bear the significant risks board shall establish effective performance
that have been identified. In those instances management framework that will ensure
where internal controls do not adequately that personnel’s performance is at par with
address risk and accepting the risk is not a the standards set by the board/senior
reasonable option, banks may seek to management. Results of performance
transfer the risk to another party such as evaluation should be linked to other human
through insurance. Relative thereto, the resource activities such as training and
board shall determine the maximum loss development, remuneration, and succession
exposure the bank is willing to take and has planning. These should likewise form part
the capacity to assume, and should perform of the assessment of the continuing fitness
Manual of Regulations for Banks Part I - Page 116d

§§ X179.5 - X179.6
16.03.31
and propriety of personnel in carrying out The program should be adequately

their respective duties and responsibilities. documented to facilitate monitoring and
The assessment of continuing fitness and assessment of its implementation.
propriety of personnel should take into f. Adequacy of complement. The
account factors that may affect the board shall establish effective strategic
performance of an individual. For instance, manpower planning to ensure that there is
the financial circumstances of an employee adequate and right manpower complement
who will be responsible for the custody of, to meet the strategic goals and operational
or handling of cash related transactions, plans of the organization.
shall be taken into consideration in the g. Disciplinary actions. The board,
evaluation of his continuing qualification. officers and all employees are expected to
c. Training and development. The conform to prescribed ethical culture and
board shall establish training and guidelines, meet performance standards,
development programs that will ensure and to behave ethically/appropriately in the
continuing development of employees’ workplace. Disciplinary or corrective
knowledge, competence, and skill. Results actions may be taken to improve/arrest
of gaps assessment in the performance unacceptable behavior or performance.
evaluation/appraisal process can be used in Disciplinary action must be in accordance
the creation of training and development with the laws and the applicable rules.
programs for employees. h. Separation from service. The board
d. Remuneration and compensation. shall establish policies and procedures
The board shall establish sound governing the separation of employees from
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 workforce. which should include transfer of
Said policies should appropriately motivate accountabilities and/or salient information
personnel and discourage excessive risk (e.g., client data, business strategies and
taking. This can be achieved through timely formula, other trade secrets, etc.) to the
assessment of performance and successor, and clearance requirements.
competencies based on set standards. Policies may also include “non-compete”
Results of performance assessment/ clauses, in accordance with existing laws.
appraisal can be used in the organization’s The Human Resource Department shall
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 § X179.6 Management of information
skills and competencies; assessing gaps; and technology-related risk. Banks shall refer to
designing developing, and delivering Sec. X177 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)
Part I - Page 116e Manual of Regulations for Banks

§§ X179.7 - X179.10
16.03.31
§ X179.7 Management of integrity of respect to suits filed in line with the

prudential reports or reports submitted to performance of their duties. Said system
Bangko Sentral. Banks shall adopt a should cover a periodic review of the status
prudential reporting framework that ensures of cases, an assessment of potential outcome
the integrity of information submitted to the including probable liability or receivable, and
Bangko Sentral. They shall establish a system regular reporting of the same to the
for ensuring effective compliance with the appropriate level of management and the
standards prescribed by the Bangko Sentral board.
on acceptable reporting quality. Banks shall (Circular No. 900 dated 18 January 2016)
likewise maintain adequate documentation
of the processes and procedures covering § X179.9 Management of operational
the prudential reporting framework and risk arising from financial inclusion
conduct a periodic review of their continuing initiatives. Banks that provide financial
relevance. services to the unserved and underserved
Management should be cognizant of sector generally handle small and
relevant guidelines that may be issued by voluminous transactions, which have
the Bangko Sentral relative to issues on the inherently high operational risk. Incremental
integrity and accuracy of prudential reports. operational risk also comes from the higher
Persistent concerns on the integrity and number of personnel or from the use of
accuracy of prudential reports including technology-based platform to effectively and
failure to comply with the directives of the efficiently deliver financial services. Banks
Bangko Sentral in this respect may be are expected to identify and understand the
considered by the Bangko Sentral as distinct operational risk arising from the
conducting business in an unsafe or products and services they offer or
unsound manner, subject to applicable innovative delivery channels they use. They
provision of laws and regulations. should also be cognizant of potential
(Circular No. 900 dated 18 January 2016) transformation or transfer or risk exposures.
In this regard, banks shall adopt an
§ X179.8 Management of legal risk operational risk management framework
exposures. Bank shall adopt a system for appropriate to the nature and scale of their
identifying and assessing legal risks related operations. Said framework shall consider
to business line functions as well as the principles embodied in this Section
products and services offered. This shall designed to suit the bank’s business model
include a process for assessing the banks and ensure sustained delivery of financial
rights and obligations in contractual services to the unserved and underserved
relationships and in ensuring that all sector.
agreements/contracts entered into by the (Circular No. 900 dated 18 January 2016)
bank conform with legal and regulatory
requirements and that no party is unduly § X179.10 Notification/Reporting to
disadvantaged. This shall also include the Bangko Sentral. Banks shall notify the
assessment of trends of customer complaints appropriate department of the Supervision
to determine potential legal risk exposures. and Examination Sector, Bangko Sentral,
There should be a system in place to within ten (10) calendar days from the date
manage outstanding legal cases involving the of discovery, of any operational risk event1
bank or any of its directors and officers, with that may result in any of the following:
1
As enumerated under Subsec. X179.4.a.(1).
Manual of Regulations for Banks Part I - Page 116f

§§ X179.10 - X180.1
17.09.30
a. Significant operational losses or customers fairly, or effectively manage risks

exposures; arising from money laundering and terrorist
b. Activation of business continuity plan; financing activities. Compliance risk
or management should be an integral part of
c. Any material change in business and the culture and risk governance framework
operating environment. of the BSFI. In this respect, it shall be the
Upon receipt of notification, the Bangko responsibility and shared accountability of
Sentral may require, if warranted, the all personnel, officers, and the board of
reporting bank to submit a report detailing directors.
the causes and impact of such events and (As amended by Circular Nos. 972 dated 22 August 2017 and
an acceptable action plan to address the issue
and any other weakness identified. § X180.1 (2017 - Definition of business
(Circular No. 900 dated 18 January 2016) risk) Compliance function. The compliance
function shall have a formal status within
§ X179.11 Supervisory enforcement the organization. It shall be established by
actions. Consistent with Sec. X009, the a charter or other formal document
Bangko Sentral may deploy enforcement approved by the board of directors that
actions to promote adherence with the defines the compliance function’s standing,
requirements set forth in this Section and authority and independence. It shall have
bring about timely corrective actions. The the right to obtain access to information
Bangko Sentral may issue directives to necessary to carry out its responsibilities,
improve the operational risk management conduct investigations of possible breaches
system, or impose sanctions to limit the level of the compliance policy, and shall directly
of or suspend any business activity that has report to and have direct access to the board
adverse effects on the safety or soundness of directors or appropriate board-level
of the bank, among others. Sanctions may committee.
likewise be imposed on a bank and/or its The compliance function shall
directors, officers and/or employees. facilitate effective management of
(Circular No. 900 dated 18 January 2016, as amended by Circular compliance risk by:
No. 930 dated 18 November 2016) a. Advising the board of directors and
senior management on relevant laws, rules
Sec. X180 (2017 - Compliance System; and standards, including keeping them
Compliance Officer; 2008 - X170) informed on developments in the area;
Compliance Risk Management. BSFIs shall b. Apprising BSFI personnel on
establish a dynamic and responsive compliance issues, and acting as a contact
compliance risk management system. The point within the BSFI for compliance queries
compliance risk management system shall from BSFI personnel;
be designed to specifically identify and c. Establishing written guidance to staff
mitigate risks that may erode the franchise on the appropriate implementation of laws,
value of the BSFI such as risks of legal or rules and standards through policies and
regulatory sanctions, material financial loss, procedures and other documents such as
or loss to reputation, a BSFI may suffer as a compliance manuals, internal codes of
result of its failure to comply with laws, rules, conduct and practice guidelines;
related self-regulatory organization d. Identifying, documenting and
standards, and codes of conduct applicable assessing the compliance risks associated
to its activities. Said risk may also arise from with the BSFI’s business activities, including
failure to manage conflict of interest, treat new products and business units;
Part I - Page 116g Manual of Regulations for Banks

§§ X180.1 - X180.3
17.09.30
e. Assessing the appropriateness of the bank or in each of the identified subsidiary.

BSFI’s compliance procedures and Such policy shall also include the overall
guidelines, promptly following up any responsibility of the parent bank’s
identified deficiencies, and where compliance function with respect to the
necessary, formulating proposals for management of compliance risk exposures
amendments; of subsidiaries/affiliates.
f. Monitoring and testing compliance by The establishment of compliance
performing sufficient and representative function centrally by the parent bank in
compliance testing; group structures shall not fall under the
g. In the case of branches of foreign outsourcing framework as provided under
banks, the compliance function shall be Sec. X162. In this respect, the head of the
responsible for maintaining official English compliance function of the parent bank shall
translation of bank documents including, define the compliance risk management
but not limited to policies, procedures, strategies, processes, and communication
manuals, and all documents supporting the framework for the entire group: Provided,
approval of transactions and contracts/ That this shall be done in consultation and
agreements entered into; and coordination with the respective board of
h. Maintaining a constructive working directors of the subsidiary or affiliate BFSI:
relationship with the Bangko Sentral and Provided, further, That the board of directors
other regulators. of the subsidiary or affiliate BSFI, shall
(As amended by Circular Nos. 972 dated 22 August 2017 and remain ultimately responsible for the
747 dated 06 February 2012) performance of the compliance risk
management activities.
§ X180.2 (2017 - Status of the (As amended by Circular Nos. 972 dated 22 August 2017 and
compliance function; 2011 - X180.5) 747 dated 06 February 2012)
Compliance program. The compliance
program shall set out the planned activities § X180.3 (2017 - Compliance system;
of the compliance function, such as the 2011 - X180.1) Chief Compliance Officer
review and implementation of specific (CCO). The CCO should have the necessary
policies and procedures; compliance risk qualifications, experience, and professional
assessment; compliance testing; educating background and should have a sound
staff on compliance matters; monitoring understanding of relevant laws and
compliance risk exposures; and reporting regulations and their potential impact on the
to the board of directors or board-level BSFI’s operations. The CCO should be
committee. The program shall espouse a up-to-date with the developments in laws,
risk-based approach and shall have rules and standards maintained through
appropriate coverage across businesses and continuous training. BSFIs shall appoint a
units. For this purpose, the compliance CCO who shall serve on a full-time basis
program shall be updated on a regular basis and shall functionally report to the board of
or at least annually. directors or board-level committee. BSFIs
In case of group structures, there should operating on a business model deemed
be a board-approved policy that defines the simple by the Bangko Sentral, by virtue of
compliance framework that shall apply to their scale and complexity of activities, may
entities across the group. The policy shall designate its Internal Auditor to serve as the
provide the structure that shall be adopted CCO in concurrent capacity. Banks with
by the group, either to establish the subsidiary banks and quasi-banks may
compliance function centrally at the parent appoint a CCO for the banking group:
Manual of Regulations for Banks Part I - Page 116h

§§ X180.3 - X180.5
17.09.30
Provided, That the parent bank can show to § X180.4 [2017 - Chief Compliance
the Bangko Sentral that the compliance Officer (CCO); 2011 - X180.2]
function is conducted on a group-wide Responsibilities of the board of directors
basis. In cases of branches of foreign banks, and senior management. Aside from the
the CCO shall report to the regional/group duties and responsibilities of the board of
compliance function. directors mentioned under Subsec. X143.1,
An appointed CCO has the burden to the board of directors shall ensure that a
prove that he possesses all the minimum compliance program is defined for the BSFI
qualifications and none of the and that compliance issues are resolved
disqualifications by submitting to the expeditiously. For this purpose, a
Bangko Sentral proof of such qualifications1. board-level committee, chaired by a
Non-submission of complete documentary non-executive director, shall oversee the
requirements within the prescribed period compliance program.
shall be construed as his failure to establish The board of directors shall ensure that
his qualifications for the positions and results BSFI personnel and affiliated parties adhere
in his removal as CCO. The Bangko Sentral to the pre-defined compliance standards of
shall also consider its own records in the BSFIs rests collectively with senior
determining the qualifications of a CCO. management, of which the CCO is the lead
The CCO shall oversee the identification operating officer on compliance. Senior
and management of the BSFI’s compliance management, through the CCO, should
risk and shall supervise the compliance periodically report to the board of directors
function staff. He is expected to liaise with or its designated committee matters that
the Bangko Sentral on compliance related affect the design and implementation of the
issues and shall also be responsible for compliance program. Any changes, updates
ensuring the integrity and accuracy of all and amendments to the compliance
documentary submissions to the Bangko program must be approved by the board of
Sentral. He shall functionally meet/report to directors. However, any material breaches
the board of directors or board-level of the compliance program shall be reported
committee and such meetings shall be duly to and promptly addressed by the CCO
minuted and adequately documented. In within the mechanisms defined by the
this regard, the board of directors/ compliance manual.
board-level committee shall review and A compliance system found to be
approve the performance and compensation materially inadequate shall be construed as
of the CCO, as well as the budget of the unsafe and unsound banking practice.
compliance function. (As amended by Circular Nos. 972 dated 22 August 2017,969
In case of group structure, the head of dated 22 August 2017, 893 dated 16 November 2015, 758 dated
11 May 2012, 747 dated 06 February 2012, CL-2011- 045 dated
the compliance function of the parent bank 01 July 2011 and Circular No. 598 dated 11 January 2008)
shall define the compliance activities for the
entire group: Provided, That this shall be § X180.5 (2017- Responsibilities of the
done in consultation and coordination with board of directors and senior management
the respective board of directors and CCO on compliance; 2011 - X180.8; 2008 -
of the subsidiary or affiliate BSFI: Provided, X170.8) Cross-border compliance issues.
further, That the board of directors of the The compliance function for institutions that
subsidiary or affiliate BSFI, shall remain conduct business in other jurisdictions
ultimately responsible for the performance should be structured to ensure that local
of compliance activities. compliance concerns are satisfactorily
1
Using the list in Appendix 98 as a guide.
Part I - Page 116i Manual of Regulations for Banks

§§ X180.5- X181.3
17.09.30
addressed within the framework of the causes;

compliance policy for the organization as a b. Prevent and discourage perpetration
whole. As there are significant differences of crimes against bank; and
in legislative and regulatory frameworks c. Assist law enforcement agencies in
across countries or from jurisdiction to the identification, apprehension and
jurisdiction, compliance issues specific to prosecution of the perpetrators of crimes
each jurisdiction should be coordinated committed against banks.
within the structure of the institution’s (As amended by Circular No. 620 dated 03 September 2008)
group-wide compliance policy. The
organization and structure of the § X181.2 (2008 - X171.2) Designation
compliance function and its responsibilities of a chief security officer1. The board of
should be in accordance with local legal directors of each bank, or the country head
and regulatory requirements. in the case of a foreign bank branch, shall
(As amended by Circular Nos. 972 dated 22 August 2017 and designate a chief security officer (CSO).
747 dated 06 February 2012) A full-time CSO shall be designated
whenever the bank operates an extensive
§ X180.6 (2017 - Cross-border physical network of branches and other
compliance issue; 2011 - X180.9) offices that regularly handle cash. For
Outsourcing of compliance risk assessment purposes of this section, extensive branch
and testing. The review, assessment and network means a bank has at least ten (10)
testing of the compliance program may be branches and/or other cash handling
outsourced to qualified third parties. The banking offices.
handling and management of this A bank that falls outside the preceding
outsourcing arrangement shall be governed criteria is considered to have reduced
by Sec. X162. security risk exposure and may designate a
senior officer to act as concurrent CSO
provided that such designation shall not
§ X180.7 (2011 - X180.9) Outsourcing result to a conflict of interest situation.
of compliance risk assessment and testing. In banking group or conglomerate
(Transferred to Subsec. X180.6 pursuant to Circular No. 972 structure, the parent bank or the primary
dated 22 August 2017) bank may establish a group-wide security
management system to facilitate a
Sec. X181 (2008 - X171) Bank Protection. consolidated approach in handling security
Each bank shall adopt an adequate security risks. This, however, does not relieve each
program commensurate to its operations, bank from appointing its own CSO.
taking into consideration its size, location, (As amended by Circular Nos. 890 dated 02 November 2015,
number of offices and business operations. 823 dated 10 January 2014 and 620 dated 03 September 2008)
(As amended by Circular No. 620 dated 03 September 2008)
§ X181.3 Qualification and
§ X181.1 (2008 - X171.1) Objectives. responsibilities of the CSO.
These regulations are designed to: a. Before appointing its CSO, the board
a. Promote maximum protection of life of directors must ensure that its security
and property against crimes (e.g., robbery, officer-designate meets the following
hold-up, theft, etc.) and other destructive minimum qualifications:
1
Banks were given three (3) months from 03 February 2014 to submit a certification to the appropriate
department of the SES whether or not they are compliant with Subsecs. X181.2 and X183.3. Within the same
period, non-compliant banks where required to submit an acceptable plan of action to achieve compliance
within six (6) months from 03 February 2014.
Manual of Regulations for Banks Part I - Page 116j

§§ X181.3 - X181.4
17.09.30
(1) Be at least thirty (30) years of age; (6)Implementing new techniques,

(2) Be a college graduate; methods and equipment to enhance bank
(3) Have at least five (5) years experience protection measures in a cost effective
in the field of law enforcement and/or manner.
security operations, two (2) years of which (As amended by Circular Nos. 969 dated 22 August 2017, 823
is in a managerial position; and dated 10 January 2014 and 620 dated 03 September 2008)
(4) Possess all the qualifications and
§ X181.4 (2008 - X171.3) Security
none of the disqualifications provided for
program. The security program of each bank
under Secs. X145 and X150, respectively.
shall be in writing, duly approved by its
In the event that the senior officer, acting
board of directors or the country head in
concurrently as the bank’s CSO, does not
the case of a foreign bank branch. In
meet the minimum experience defined
addition, the security program shall define
under Item “(3)”, said officer shall be
measures and procedures to detect and
supported by a competent consultant/
adviser who may be a person or a firm prevent the commission of bank crimes, as
independent of the bank with special well as provide contingency plans in case
knowledge, skill and experience on security of calamities, terrorist attacks and other
management matters. The hiring of said emergency situations. The security program
consultant/adviser shall be approved by the shall include the following:
board of directors of the bank or the country i. Installation of the prescribed
head in the case of a foreign bank branch. minimum security devices;
When assessing competency, the board ii. A schedule for the periodic
of directors of the bank should consider the inspection, testing and servicing of all
reputation and integrity, the extent of security devices installed in each of the
relevant education/training and the bank’s offices, designation of an officer or
knowledge and experience of the consultant/ employee responsible for ensuring that such
adviser on security management matters. devices are inspected, tested, serviced and
b. All CSOs, including those acting in kept in good working order, and requiring
concurrent capacity shall be responsible for: record of such inspections, testing and
(1) Developing and administering a servicing;
security program appropriate to the risk iii. Standard operating procedures for
profile of the bank; the safekeeping of all currencies, negotiable
(2) Constituting a security management securities and similar valuables in vaults or
team, as appropriate; safes;
(3) Conducting a security awareness iv. Provision for other security measures
program among bank employees on a and procedures aimed at giving added
continuing basis; protection to the bank, e.g., procedures for
(4) Investigating bank robberies/ the transport of funds and other cash items,
hold-ups, recommending the filing of and defining responsibility for their
appropriate charges in court as the evidence implementation;
may warrant and assisting in the prosecution v. Provision for the training and periodic
of the perpetrator(s) thereof; re-training of employees in their respective
(5)Establishing an effective working areas of responsibility under the security
relationship with the Bangko Sentral, PNP program, including the proper use of security
and other law enforcement agencies in the devices and proper employee conduct
prevention of bank crimes and other natural during and after an emergency situation;
and man-made hazards; vi. Contingency measures for security
Part I - Page 116k Manual of Regulations for Banks

§§ X181.4 - X181.5
14.12.31
and rescue operations in emergency attempted, ongoing or perpetrated robbery;

situations; (5) Anti-burglary or intrusion system
vii. Provision for the posting of adequate capable of detecting promptly an attack on the
number of security personnel in all vital and/ outer doors, walls, floor or ceiling of the bank
or critical areas in the bank’s premises, and premises, including the vault(s); and
the minimum number of hours when each (6) Such other devices like the closed
personnel shall be on duty; and circuit television (CCTV) and video
viii. Such other provisions/measures as recording system appropriate to deter the
the president of the bank or country head commission of bank crimes and assist in the
in the case of a foreign bank branch may, in identification and apprehension of the
consultation with its security officer, deem culprit/s: Provided, That the bank security
appropriate. officer shall consider, among other things,
(As renumbered by Circular No. 823 dated 10 January 2014, the following:
amended by Circular No. 620 dated 03 September 2008) (i) The incidence of crimes against the
particular banking office and other business
§ X181.5 (2008 - X171.4) Minimum
establishments in the area where the
security measures.
banking office is located;
a. Guard system. All banking offices
(ii) The amount of currency or other
shall be manned by an adequate number of
valuables exposed to robbery and other
security personnel to be determined by the
man-made hazards;
bank, taking into consideration its size,
(iii) The distance of the banking office
location, costs and overall bank protection
from the nearest law enforcement office and
requirement: Provided, That cash centers
the time ordinarily required for
shall be manned by an adequate number of
law-enforcement officers to arrive at the
security guards as may be necessary during
banking office;
banking hours. For this purpose, cash
(iv) The cost of the security devices;
centers shall refer to branches which also
(v) Other existing security measures in
handle the cash requirements of other
effect at the banking office; and
branches of the same bank.
(vi) The physical characteristics of the
b. Security devices. Within 120 calendar
banking office structure and its
days from 23 September 2008 in the case
surroundings.
of existing offices and before opening for
Each bank shall install, operate and
business in the case of offices to be opened
maintain security devices which are
after 23 September 2008, banks shall effect
expected to give a general level of bank
the installation, operation and maintenance,
protection equivalent, at least, to the
as individually appropriate, of the following
standards prescribed herein.
security devices in each banking office;
c. Vaults and safes. Vault walls, ceilings
(1) A time delay device in the cash vault/
and floors, shall be made of steel-reinforced
safe;
concrete or such other equally safe
(2) A lighting system for illuminating the
area around the vault, if the vault is visible materials/specifications. Vault doors shall be
from outside the banking office; made of steel or other drill and torch
(3) Tamper-resistant locks on exterior resistant material, equipped with a dual
doors and windows; combination lock and time-delay device,
(4) A robbery alarm system or other and provided with inner and outer grill
appropriate device for promptly notifying doors: Provided, That all vaults constructed
the nearest law enforement office either after 23 September 2008 shall be equipped
directly or through an intermediary of an with a breathing/ventilation device and
Manual of Regulations for Banks Part I - Page 116l

§ X181.5
14.12.31
emergency button capable of giving audible terminated or transferred to another place

and visible signal in case of accidental of assignment. A record of the names of the
lock-up. holder of the keys and combinations shall
A vault record book shall be maintained be maintained for each lock, safe, vault and
to record all activities relative to the opening compartment. Changing of combinations shall
and closing of the vault. be documented to pinpoint responsibility and
Safes should be sufficiently heavy or be to ensure confidentiality and proper
securely anchored to the premises where observance of this requirement.
located. The door shall be equipped with a d. Security of the premises. For
combination lock with a time-delay device emergency purposes and where applicable,
if used for safekeeping cash and other each banking office shall be provided with
valuables. The body shall consist of steel a back door with a steel or grill door which
with an ultimate tensile strength of shall be used as an alternative exit door for
50,000 pounds per square inch or the evacuation in case of fire, flood, bomb
equivalent in metric system. threats, wind damage, explosion, civil
Safe and vault combinations must be disturbance, earthquake, or other
changed whenever the custodian is emergency.
Part I - Page 116m Manual of Regulations for Banks

§§ X181.5 - X181.7
14.12.31
Steel grills, where applicable, shall provided with at least two (2) armed guards
support exterior glass doors and windows and its operations must be supervised by at
of all banking offices for protection against least two (2) officers of the bank.
any forcible entry. Access to the back door All canvass bags that contain cash and
shall be limited to authorized bank other items of value shall be provided with
personnel. Opening and closing thereof padlocks for security and control purposes.
before and after banking hours shall be Armored cars shall not be operated a mobile
recorded in a registry. bank.
Firearms and other deadly weapons shall (As renumbered by Circular No. 823 dated 10 January 2014,
not be allowed inside bank premises except amended by Circular No. 620 dated 03 September 2008)
when so authorized by the bank. A signage
for this purpose shall be conspicuously § X181.6 (2008 - X171.5) Reports.
placed near the main entrance door of the Banks shall conduct a review and
bank. Specific guidelines as to when to allow self-assessment of their security program to
firearms and other deadly weapons inside ensure their compliance with prescribed
bank premises should be incorporated in the security requirements. Any substantive
security program. amendment thereto shall be approved by
A bank shall maintain within its the bank’s board of directors or country
premises a record of the addresses and head in the case of branches of foreign
telephone numbers of the nearest law banks. The self-assessment of compliance
enforcement agencies, hospitals, rescue with prescribed security requirements
agencies and fire departments. together with the updated security program
The security officer of each bank shall (if amended during the year) shall be
conduct, at least annually, a security survey submitted annually to the appropriate
of bank premises and make available the department of the SES on or before
inspection report to Bangko Sentral 30 January of the following year in
examiners during regular examination. accordance with the format shown in
The bank shall conduct fire, earthquake Appendix 10. The self-assessment together
and bomb threat drill at least once a year. with the updated security program shall be
e. ATM. ATM sites shall be provided considered Category A-2 reports.
with adequate security. Where there are no (As renumbered by Circular No. 823 dated 10 January 2014,
security personnel assigned to secure the amended by Circular No. 620 dated 03 September 2008)
ATM, an anti-tampering device shall be
installed or the ATM and its immediate § X181.7 (2008 - X171.6) Bangko
surroundings shall be regularly inspected to Sentral inspection. During regular
promptly detect any attempt to rob or examination, the Bangko Sentral reserves the
destroy the same. right to perform a compliance assessment
f. Armored Car Operation. To ensure of the adequacy of a bank’s security
the protection of crew members and arrangements. The Bangko Sentral, with
valuables, all armored vehicles shall be built approval of the Governor, may also conduct
with bullet-resistant materials capable of at any time a targeted inspection of the
withstanding the firepower of high-powered bank’s implementation of its security
firearms, e.g., M16 and M14 rifles. program to determine compliance with
Moreover, armored vehicles shall be regulations. For this purpose, the Bangko
equipped with a vault or safe or a partition Sentral may avail of the services of experts
wall with a combination lock designed to as resource persons.
prevent retrieval of the cargo while in transit. (As renumbered by Circular No. 823 dated 10 January 2014,
When in use the armored vehicles shall be amended by Circular No. 620 dated 03 September 2008)

§§ X181.8 - X182.2
17.03.31
§ X181.8 (2008 - X171.8) Sanctions. These align existing regulations, to the

Any violation of the provisions of this extent possible, with leading standards and
Section, as well as non-compliance with the recognized principles on BCM, and shall
minimum standards set forth or any serve as the Bangko Sentral’s baseline
directive of the Monetary Board issued requirement for all BSFIs.
pursuant hereof, shall be subject to the The guidelines shall apply to BSFIs
administrative sanctions provided under which include banks, non-banks with
Section 37 of R.A. No. 7653 and may, quasi-banking function (NBQB), non-bank
depending on the materiality or seriousness electronic money issuers and other
of the violation, constitute a ground for non-bank institutions which under
considering the same as an unsafe and existing Bangko Sentral rules and
unsound banking practice. regulations and special laws are subject to
(As amended by Circular No. 620 dated 03 September 2008) Bangko Sentral supervision and/or
regulation. Moreover, subject guidelines
Sec. X182 Business Continuity Management; shall also apply to BSFIs with offshore data
Policy Statement.1 BSFIs can be adversely processing as may be appropriate to their
affected by disruption of critical operations situation.
due to internal and external threats, which (Circular No. 951 dated 20 March 2017)
may be natural, man-made or technical in
origin. Extreme events may cause major § X182.2 Definition of terms. In these
disruptions whose impact are very broad guidelines, terms are used with the
in scope, duration or both and can pose a following meanings:
substantial risk to the continued operation a. Alternate and Business Recovery Sites
of BSFIs. Because BSFIs play a crucial role shall refer to standby facilities for use
in the financial system and economy as a during disruption of critical operations
whole, it is important to ensure that their to ensure business continuity. These
operations can withstand the effects of major provide work space and/or the necessary
disruptions. Thus, BSFIs need to have a technology environment needed to
comprehensive business continuity process business-critical information.
management (BCM) process as an integral Organizations may have more than
part of their operational risk management one (1) alternate site. In some cases,
alternate sites may involve facilities that
system. A well-designed BCM process
are used for normal day-to-day operations
enables BSFIs to resume critical operations
but which are able to accommodate
swiftly and minimize operational, financial,
additional business processes when a
legal, reputational, and other material risks
primary location becomes inoperable.
arising from a disruption. This also helps
Examples of alternate sites include
mitigate systemic risks as well as maintain
relocation and disaster recovery sites,
public trust and confidence in the financial
whether managed directly or maintained by
system.
(Circular No. 951 dated 20 March 2017)
a third party for a BSFI or for use by multiple
organizations.
§ X182.1 Purpose, applicability, and b. Business Continuity shall refer to a
scope. The guidelines aim to promote sound state of continued, uninterrupted operation
management of business continuity risks. of a business.
1
BSFIs shall comply with the foregoing standards on BCM within a period of one (1) year from 11 April 2017.
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. X182 starting July 2017, upon request
of the Bangko Sentral.

§§ X182.2 - X182.3
17.03.31
c. Business Continuity Management i. Cyber Resilience shall refer to an

(BCM) shall refer to an enterprise-wide organization’s ability to anticipate, handle,
framework encompassing policies, adapt to, and/or recover from evolving cyber
standards, facilities, personnel and practices threats.
that provides for continuous functioning of j. Events shall refer to disruption scenarios
the institution during disruptions. It is such as loss of people, technology, alternate
proportionate to the BSFI’s internal and site, and service providers.
external risk exposures and tailored to the k. Pandemic shall refer to epidemics or
nature, scale, and complexity of its business. outbreaks in humans of infectious diseases
d. Business Continuity Plan (BCP)/Plan that have the ability to spread rapidly over
shall refer to a documented plan detailing large areas, possibly worldwide.
the orderly and expeditious process of l. Recovery Point Objective (RPO) shall
recovery, resumption, and restoration of refer to acceptable amount of data loss
business functions in the event of should a disruption occur without severe
disruptions. It should be able to cover and impact on the recovery of operations.
establish linkages among its multiple m. Recovery Time Objective (RTO) shall
components, such as communication plan, refer to the period of time following an
crisis management plan, contingency incident within which a product, system or
funding plan, and technology recovery plan. business process must be resumed or
e. Business Impact Analysis (BIA) shall resources must be recovered.
refer to the process of identifying and n. Resilience shall refer to the ability of
measuring (quantitatively and qualitatively) an organization to anticipate, handle, adapt
the business impact or loss of business to and/or recover from a disruption and
processes in the event of a disruption. It is resume operations.
used to identify recovery priorities, recovery o. Risk Assessment shall refer to the
resource requirements, essential staff, and process involving the identification and
dependencies (internal and external) to be assessment of potential threats and
incorporated in the plan. vulnerabilities that could severely interrupt
f. Crisis shall refer to a situation that a BSFI’s business activities and the
requires urgent action due to its disruptive corresponding likelihood and magnitude
impact on the BSFI’s core activities or of impact on business processes.
business and operating environment. p. Technology Recovery Plan (TRP)/
g. Crisis Management Plan (CMP) shall Disaster Recovery Plan (DRP) shall refer to
refer to a documented plan detailing the a documented plan detailing the technology
actions to be taken when a crisis strikes a strategy and requirements during recovery
BSFI and designed to maintain order amidst for business and support functions. The
the confusion surrounding such situations. relevant regulations are in Item “3.3.2.13”
During and immediately after a crisis, the of Appendix 75d.
members of the crisis management team (Circular No. 951 dated 20 March 2017)
will convene and activate the plan to attain
control over the crisis and minimize its § X182.3 Roles and responsibilities.
impact to operations. a. Board of directors and senior
h. Critical Process shall refer to any management. The BSFI’s board and senior
activity, function or service, which when management are responsible for overseeing
lost would materially affect the continued the implementation of a sound BCM process,
operation of the BSFI. which involves the creation and promotion

§ X182.3
17.03.31
of an organizational culture that places high responsibilities on the prevention of crisis

priority on business continuity. This should and recovery of business operations during
be reinforced by providing sufficient disruptions. Business and support functions
financial and human resources associated should allocate responsibilities for
with the BSFI’s business continuity managing disruptions and provide clear
initiatives. Senior management should guidance regarding the succession of
establish BCM policies, standards, and authority to account for unavailability of key
processes, which must be duly endorsed to personnel in the event of a disruption.
and approved by the board. d. Audit. An independent review of the
Awareness training and periodic BSFI’s BCM framework and corresponding
reporting to board and senior management plans should be periodically performed with
on matters related to business continuity frequency based on a sound risk assessment
are equally important to ensure their process. This is to ensure that significant
continuing commitment and support. At policy revisions resulting from changes in
a minimum, periodic management the operating environment, lessons learned
reports should include the following: from plan tests, and internal and regulatory
(1) implementation status of the BCP; audit recommendations have been
(2) incident reports; (3) plan test results; considered. Moreover, plan testing exercises
(4) changes to the plan; and (5) related action should be independently observed, verified,
items to strengthen the BSFI’s ability to and evaluated to ensure reasonableness and
recover during disruptions. validity of the testing process and the
b. BCM Coordinator/Unit. Coordination accuracy of test results.
and supervision of all business continuity (Circular No. 951 dated 20 March 2017)
activities should be assigned to a competent
individual and/or unit with technical § X182.4 Business Continuity
knowledge and experience consistent with Management Framework. BSFIs should
the nature and complexity of the BSFI’s adopt a cyclical, process-oriented
business activities. A complex1 BSFI may BCM framework, which, at a minimum,
need a BCM unit with a team of should include five (5) phases, namely: BIA
departmental liaisons throughout the and risk assessment, strategy formulation,
organization. For a simple BSFI, an plan development, plan testing, and
individual BCM coordinator may suffice. personnel training and plan maintenance.
While the BCM coordinator/unit may This framework represents a continuous
recommend initiatives or activities to be cycle that should evolve over time based
prioritized, the board and senior on changes in business and operating
management are ultimately responsible for environment, audit recommendations,
understanding the critical business processes and test results. This framework should
and subsequently establishing plans to meet cover each business function and the
business process requirements in a safe and technology that supports it. Other related
sound manner. policies, standards, and processes should
c. BSFI Personnel. BSFI personnel also be integrated in the overall BCM
should understand their roles and framework.
1
Pursuant to Subsec. X177.3. BSFIs are classified as “simple” but maybe re-classified as “complex” depending on
extent or degree of realiance of core business functions to technology.

§ X182.4
17.03.31
Figure 1. Business Continuity Management Process
a. Business impact analysis and risk BSFIs identified as DSIBs by the Bangko
assessment. A comprehensive BIA and risk Sentral, pursuant to Subsec. X115.5, should
assessment should be undertaken to serve set the RTO for each of their critical processes
as the foundation in the development of the to a maximum of four (4) hours from the
plan. The BIA entails determining and point of disruption. For non-DSIB BSFIs, the
assessing the potential impact of disruptions RTO of critical processes should be primarily
to critical business functions, processes, driven by their BIA and risk assessment.
and their interdependencies through work- b. Strategy formulation. Recovery and
flow analyses, enterprise-wide interviews, resumption strategies to achieve the agreed
and/or inventory questions. Accordingly, time-frame and deliver the minimum
the BSFI should determine the recovery required services as identified in the BIA
priority, RTO, RPO, and the minimum level should be defined, approved, and tested.
of resources required to ensure continuity The minimum requirements for the provision
of its operations consistent with the of essential business and technology service
criticality of business function and levels during disruptions should be
technology that supports it. The BSFI should established by concerned business and
then conduct risk assessment incorporating support functions.
the results of the BIA and evaluating the (1) Recovery strategy. As business
probability and severity of a wide-range of resumption relies primarily on the recovery
plausible threat scenarios in order to come of technology resources, adequate provisions
up with recovery strategies that are should be in place to ensure systems
commensurate with the nature, scale, and availability and recoverability during
complexity of its business functions. disruptions as prescribed under Appendix 75d.
Domestic systemically important banks Recovery strategies should be able to meet
(DSIBs). To minimize the extent or impact the agreed requirements between business
of a DSIB’s failure in the financial system, units and support functions for the provision

§ X182.4
17.03.31
of essential business and technology service but not limited to: (a) key recovery personnel;
levels. (b) computer hardware and software;
(2) Continuity of operations/business (c) communication systems; (d) office
resumption strategy. The business equipment; and (e) vital records and data;
continuity models adopted by the BSFI to (4) Relevant information about the
handle prolonged disruptions should be alternate and recovery sites; and
based on the risk assessment of its business (5) Procedures for restoring normal
environment and the characteristics of its business operations. This should include
operations. The resumption strategies and the orderly entry of all business transactions
resource requirements should be approved and records during disruption into the
by the board as recommended by senior relevant systems up to completion of all
management or the relevant board verification and reconciliation procedures.
committees to ensure alignment with Communication is a critical aspect of a
corporate goals and business objectives. BCP. In this respect, the BSFI should include
c. Plan development. Plans are an a communication plan for notifying all
important, tangible evidence of the BSFI’s relevant internal and external stakeholders
business continuity initiatives. The (e.g., employees, customers, vendors,
objective of the plan is to provide detailed regulators, counterparties, and key service
guidelines and procedures on response and providers, media and the public) following
management of a crisis, recovery of critical a disruption. The BSFI should maintain an
business services and functions and to up-to-date call tree and contact list of key
ultimately resume to normal operations. personnel and service providers, including
The plan should be formulated on an communication flow and channels for
enterprise-wide basis, reviewed and internal and external stakeholders. Clear
approved by the board of directors and and effective communication will facilitate
senior management at least annually and escalation for appropriate management
disseminated to all concerned employees. action and instruction to all concerned and
The plan should include provisions for both help manage reputation risks. The BSFI
short-term and prolonged disruptions. should consider alternate methods of
A well-written plan should describe the communication and preparation of
various types of events or scenarios that predetermined messages tailored to a
could prompt BCP activation. It should number of plausible disruption scenarios to
include, at a minimum, the following ensure various stakeholders are timely,
components: consistently, and effectively informed.
(1) Escalation, declaration and A crisis management plan should be
notification procedures; included in the BCP to assist senior
(2) Responsibilities and procedures to management in dealing with and containing
be followed by each continuity or recovery an emergency and avoid spillover effects to
teams and their members. The procedures the business. Senior management should
should enable the BSFI to respond swiftly identify potential crisis scenarios and
to a crisis (i.e., a crisis management plan) develop corresponding crisis management
and to recover and resume the critical procedures. This includes identifying a mix
processes outlined in the plan within the of individuals from various departments
stipulated time frame during disruptions; who are authorized to make instantaneous
(3) A list of resources required to decisions during crisis situations. This team
recover critical processes in the event of a shall be responsible for the actual
major disruption. This would include, declaration of an event, activation of the

§ X182.4
17.03.31
plan, and internal and external notification process in disseminating

communication process. information to employees, vendors, and key
When outsourcing plan development, clients.
management should ensure that the chosen (d) Alternate site test/exercise - tests the
service provider has the expertise required capability of staff, systems, and facilities,
to analyze the business needs of the BSFI located at alternate sites to effectively
and that the arrangement conforms with support production processing and
legal and regulatory requirements. The workloads.
service provider should be able to design (e) Component test/exercise- A testing
executable strategies relevant to the BSFI’s activity designed to validate the continuity
risk environment and design education and of individual systems, processes, or
training programs necessary to achieve functions, in isolation.
successful BCP deployment. (f) Functional drill/parallel test – test to
d. Plan testing determine capability of alternate site and
(1) Types of testing methods. Plan BSFI employees to support strategy as
testing is a vital element of the BCM. It defined in the plan, which involves actual
ensures that the plan remains accurate, mobilization of personnel, establishing
relevant, and operable. Tests should be communications, and recovery processing.
conducted periodically, with the nature, (g) Enterprise-wide full-interruption/
scope, and frequency determined by the full-scale test – the most comprehensive
criticality of the applications, business type of test encompassing the entire
processes, and support functions. In some organization and requires activation of all
cases, plan tests may be warranted due to the components of the plan at the same time
changes in BSFI’s business, responsibilities, to simulate a real-life emergency and
systems, software, hardware, personnel, processing data and transactions using
facilities, or the external environment. back-up media at the recovery site.
Testing methods can vary from simple (2) Test policy/plan. Testing should be
to complex each bearing its own viewed as a continuously evolving cycle.
characteristics, objectives, and benefits. The BSFI should incorporate the results of
Types of testing methods in order of BIA and risk assessment and work towards
increasing complexity include: a testing strategy that increases in scope and
(a) Tabletop exercise/structured complexity to address a variety of threat
walk-through test – the primary objective is scenarios. Test scenarios should vary from
to ensure that critical personnel from all isolated system failures to wide-scale
areas are familiar with the plan and that it disruptions and promote testing its primary
accurately reflects the BSFI’s ability to and alternate facilities, as well as with key
recover from a disruption. counterparties and third-party service
(b) Walk-through drill/simulation test – providers.
similar to a tabletop exercise but with a A testing policy should define roles and
more focused application. During this test, responsibilities for the implementation and
participants choose a specific scenario to evaluation of the testing program. Test plans
which relevant plan provisions shall be with pre-determined goals and test criteria
applied. should be developed for each testing activity.
(c) Communication/call tree test – an It should clearly define the objectives of
exercise that validates the capability of crisis testing, identify the functions, systems, or
management teams to respond to specific processes to be tested and the criteria for
events and the effectiveness of the call tree assessing what constitutes a successful test.

§§ X182.4 - X182.5
17.03.31
Formal testing documentation (i.e., test plans, BCM-related documents (i.e., BCP, test
test scenarios, test procedures, test results) program, policy guidelines, and program
should be prepared to ensure thoroughness requirements) should be subject to change
and effectiveness of testing and properly management process to ensure these are
maintained for audit and review purposes. updated with proper approval and
(3) Annual enterprise-wide business documentation with respect to any
continuity testing. The BSFI must conduct significant changes in the business
an enterprise-wide business continuity test environment or as a result of audit findings.
at least annually, or more frequently (Circular No. 951 dated 20 March 2017)
depending on changes in the operating
environment, to ensure its plan’s relevance, § X182.5 Other policies, standards and
effectiveness, and operational viability. The processes. The following policies, standards
scope of testing should be comprehensive and processes should be integrated into the
to cover the major components of the plan BCM process:
as well as coordination and interfaces a. Pandemic planning. Similar to natural
among important parties. disasters or technical disruptions,
(4) Analysis and report of test result. pandemics may also interrupt a BSFI’s
Plan tests, including successes, failures, and business activities. However, the difficulty
lessons learned, should be thoroughly in determining a pandemic’s scope and
analyzed to promote continuous BCM duration present additional challenges in
improvement. Exceptions noted should be ensuring resilience and continuity of a BSFI’s
documented and corrective actions should operations.
be closely monitored to ensure that they are Generally, pandemic plans are
implemented in a timely manner by integrated in the BSFI’s BCP and follow the
concerned parties, including the board of same BCM process with additional
directors and senior management, business considerations, such as:
line management, risk management, IT (1) Business impact analysis and risk
management, and other internal assessment. The BCM process should
stakeholders. consider pandemics as early as the BIA and risk
e. Personnel training and plan assessment phase. The BIA and risk
maintenance. assessment should be updated to
(1) Training program. A business incorporate complexities that may arise from
continuity training program should be pandemics, such as (a) increasing level of
provided to all concerned employees to absenteeism based on a pandemic’s
promote awareness, familiarity, and severity; and (b) the need for another layer of
understanding of their roles and contingency plans as regular disaster or
responsibilities in the event of a disruption. emergency response methods are no longer
The training program should be offered on feasible.
a continuing basis for existing and new (2) Strategy formulation. To
employees and should be updated to address complement strategies for natural and
changes to the plan. technical disruptions, the following should
(2) Plan maintenance. Plans and results be given due consideration when planning
of BIA and risk assessment should be for pandemics:
reviewed and updated on an ongoing basis (a) Trigger events – Trigger events and
(at least annually or when necessary) so that strategies should be defined depending on
they remain consistent with the BSFI’s the nature of a pandemic. Pandemic
current operations and business strategies. planning should have the flexibility to

§ X182.5
17.03.31
accommodate varying degrees of epidemic concerned local public health teams and
or outbreak as pandemics normally occur government agencies; and
in waves or phases and of varying severity. (d) Tools, systems and procedures
(b) Remote access capability – In the available to ensure continuity of its critical
event of a pandemic, enabling remote access operations even with the unavailability of
may be one of the primary strategies BSFI’s staff for prolonged periods.
available to a BSFI. To support a (4) Plan testing. Test policy/plan should
telecommuting strategy, the BSFI should include strategies to assess capability to
ensure adequate capacity, bandwidth and continue critical operations, systems and
authentication mechanisms in its applications even in the event of a severe
technological infrastructure against expected pandemic. When regular tests are unable
network traffic or volume of transactions. to cover pandemic scenarios, separate
(c) External parties – With pandemics pandemic plan tests should be carried out.
not limited to the BSFI, establishing working (5) Personnel training and plan
relationships with external parties is an maintenance. The plan should be updated
essential component. In addition to the as developments and information become
communication plan for all relevant internal available. As needed, employee training
and external stakeholders, the BSFI should programs should cover pandemic risks,
establish open relationships and including the roles and responsibilities of
communication channels with local public each employee during pandemic situations.
health and emergency response teams or b. Cyber resilience. Cyber-threats and
other government authorities. The BSFI attacks against the financial services industry
should inform concerned parties of any have become increasingly widespread,
potential outbreaks and, at the same time, sophisticated and coordinated. Recent
be aware of any developments in the cyber-attacks worldwide highlight, not only
expected scope and duration of a pandemic. the degree of disruption to a BSFI’s
(d) Employee awareness – As operations, but also the extent of
information becomes available from reputational damage which could
reputable sources or local agencies, the BSFI undermine public trust and confidence. As
should ensure that steps to limit or reduce such, the BSFI should consider the potential
the risk of being affected by the pandemic impact of these cyber events into its BCM
are cascaded to its employees. process and institute adequate cyber
(3) Plan development. Pandemic plans resilience capabilities.
should be commensurate to the nature, size Given the unique characteristics of
and complexity of a BSFI’s business activities cyber-threats and attacks, traditional back-up
and have sufficient flexibility to address the and recovery arrangements adopted by the
various scenarios that may arise. At a BSFI may no longer be sufficient and even
minimum, the pandemic plan should increase the damage to the BSFIs’ network,
include: operations and critical information assets.
(a) Strategy that is scalable dependent In worst case scenarios, back-up systems
on the extent and depth of the outbreak; and alternate recovery sites are likewise
(b) Preventive measures, including affected rendering both sites inoperable. To
monitoring of current environment and ensure cyber resilience, the BSFI should take
hygiene tools available to employees; into consideration a wide-range of
(c) Communication plan with internal cyber-threat scenarios perpetrated from
and external stakeholders, including diverse threat sources (e.g., skilled hackers,

§ X182.5
17.03.31
insiders, state-sponsored groups) which seek clients pending full business resumption.
to compromise the confidentiality, Guidelines on liquidity risk management are
availability and integrity of its information in Appendix 74.
assets and networks. Defensive strategies f. Project management. Senior
and innovative recovery arrangements management should ensure that availability
should be explored that are commensurate and business continuity requirements are
with the BSFI’s cyber-security risk exposures considered at the planning and development
and aligned with its information security stages of new business products and
program in accordance with Appendix 75b. services and other critical technology
c. Information security. Mitigation processes, such as systems development and
strategies should consider security controls acquisition, and change management.
to manage risks that may arise once an event g. Event/problem management.
triggers plan activation. Security during Operations personnel should be properly
disasters and disruptions is an important trained to recognize events that could trigger
consideration to manage risks arising from implementation of the plan. Although an
the change in working environment. The event may not initially activate the plan, it
relevant guidelines/standards on information may become necessary as conditions and
security that may be considered in strategy circumstances change. Management should
formulation and/or in choosing alternate train and test BSFI personnel to implement
sites are in Appendix 75b. and perform appropriate business continuity
d. Interdependencies. An effective procedures within the timeframes of the
plan coordinates across its many internal plan.
and external components, identifies h. Outsourcing. When a BSFI enters into
potential process or system dependencies, an outsourcing arrangement, it should
and mitigates risks from interdependencies. put due consideration on the business
The BSFI may have very complex operating continuity and disaster recovery
and recovery environment wherein arrangements of the service provider to
interdependencies need to be duly ensure continuity of operations. Detailed
considered, such as telecommunications, guidelines/standards on business continuity
third party service providers, and recovery considerations for outsourcing arrangements
site. Given the critical resources and services are in Appendix 75e.
that are being shared with the BSFI or other i. Insurance. Insurance is an option
entities, additional mitigating controls and available to a BSFI for recovery of losses
recovery strategies need to be integrated in that cannot be completely prevented and
the plan. the expenses related to recovering from a
e. Liquidity risk management. Sound disruption. The BSFI should regularly
liquidity risk management practices enable review the adequacy and coverage of its
a BSFI to maintain availability of funds even insurance policies in reducing any
foreseeable risks caused by disruptive
in times of financial stress or adverse
events, such as loss of offices, critical
changes in market conditions. In the event
facilities and equipment, and casualty.
of a business disruption, sound liquidity risk
Insurance policies may also need to
management practices should similarly
address the BSFI’s legal responsibilities
apply. The BSFI should ensure it has for failing to deliver services to its customers
sufficient liquidity to support its recovery and counterparties. To facilitate the
strategies and continue supporting the claims process, the BSFI should create and
delivery of basic banking services to the retain a comprehensive hardware and

§§ X182.5 - X183.1
17.03.31
software inventory list in a secure off-site and improve customer interaction

location and detailed expenses should be experience to help drive business objectives/
documented to support insurance claims. strategies.
(Circular No. 951 dated 20 March 2017) Similar to any new technology,
however, social media introduces a new
§ X182.6 Supervisory enforcement attack vector which may expose BSFIs to
actions. BSFIs should make available all compliance, legal, reputational, strategic,
policies and procedures and other and operational risks. Risks in social media
documents/information related to the include susceptibility to account take-over,
foregoing during on-site examination as well malware distribution, brand bashing,
as provide copies thereof to the regulator
inadvertent disclosure of sensitive
when a written request is made to determine
information and privacy violation, among
compliance.
other possible threats. As such, BSFIs should
Consistent with Sec. X009, the Bangko adopt an appropriate risk management
Sentral may deploy enforcement actions to system, commensurate to the extent and
promote adherence with the requirements degree of their social media usage, to
set forth in Sec. X182 and bring about timely effectively identify, measure, manage and
corrective actions. The Bangko Sentral may monitor risks arising from the use of social
issue directives to improve the BCM media platforms. This should form an
process, or impose sanctions to limit the integral part of their operational risk
level of or suspend any business activity management system.
that has adverse effects on the safety and (Circular No. 949 dated 15 March 2017)
soundness of the BSFI, among others.
Monetary and non-monetary sanctions, as § X183.1 Applicability and scope. The
provided under existing laws, Bangko guidelines underscore the importance of
Sentral rules and regulations, may likewise having a well-defined social media risk
be imposed on a BSFI and/or its directors, management strategy in supporting BSFI’s
officers and/or employees for violation of overall business goals and objectives. These
subject Sec. X182. guidelines align existing regulations, to the
(Circular No. 951 dated 20 March 2017) extent possible, with leading standards and
recognized principles. They outline the
Sec. X183 Social Media Risk Management; minimum standards/basic principles that
Policy Statement.1 Social media, a low-cost shall govern the BSFI’s framework to aid in
solution capable of disseminating real-time the sound management of risks associated
information via the internet, presents vast with the use of social media for official
opportunities for growth, customer purpose or employees’ personal use, within
engagement and business benefits as usage, and outside the organization.
customer reach and adoption scale up and It is not intended to provide procedural
become widespread and ubiquitous. specifics or a “one-size-fits-all” solution for
Considering these potential benefits carrying out compliance and risk
alongside exponential growth in the number management responsibilities. Each BSFI
of social media users and its massive reach, is therefore expected to establish its own
BSFIs have started to leverage on social risk management strategy; suitable to
media platform/s to promote their business its size, risk tolerance level, and the nature
1
BSFIs shall comply with the foregoing standards on social media risk management within a period of six (6)
months from 04 April 2017. In this regard, a BSFI should be able to show, upon request of the Bangko Sentral,
its plan of actions with specific timelines, as well as the status of initiatives being undertaken to fully comply with
the provisions of this Section.

§§ X183.1 - X183.3
17.03.31
and scope of social media activities Linkedln)

engaged in. (2) Micro-blogging (e.g., Twitter,
The guidelines shall apply to all BSFIs Tumblr)
which include banks, NBQB, non-bank (3) Blogging (e.g., Wordpress, Blogger)
electronic money issuers, and other non-bank (4) Photo Sharing (e.g., Flicker,
institutions which under existing Bangko Instagram, Pinterest)
Sentral rules and regulations and special (5) Video Sharing (e.g., Youtube, Vimeo,
laws are subject to Bangko Sentral Vine)
supervision and/or regulation. (6) Crowdsourcing (e.g., Ushahidi, Inc.)
(Circular No. 949 dated 15 March 2017) f. Technical controls shall refer to the
controls incorporated into the computer
§ X183.2 Definition of terms. In these hardware, software, or firmware to aid in
guidelines, terms are used with the the effective implementation of policies and
following meanings: standards (e.g., access control,
a. Attack vector shall refer to the path authentication, web scanner/crawler).
or means by which an attacker can gain (Circular No. 949 dated 15 March 2017)
access to a computer system in order to
deliver a malicious code (e.g., virus, worms, § X183.3 Social media risk management
trojans). system. BSFIs should establish an
b. Non-technical controls shall refer to appropriate framework that will result in
management, administration, and operational sound social media governance and risk
controls employed that are manual and management. At a minimum, the framework
procedural in nature (e.g., security-related shall include the following elements:
policies and procedures; operational a. Clearly defined governance structure
procedures; personnel, physical, and indicating the roles and responsibilities of
environmental security controls; the board of directors and senior
performance management and measurement). management in setting the direction on the
c. Risk assessment shall refer to the BSFI’s use of social media, including its
process involving the identification and alignment to the BSFI’s strategic goals/
assessment of potential threats and plans; establishing adequate standards,
vulnerabilities related to the use of social policies, procedures, and controls; and
media and determination of the likelihood implementing ongoing risk assessment of
that the threat will occur as well as the social media-related activities.
corresponding impact to the business should The board of directors shall be primarily
the threat occur. responsible for defining the BSFI’s risk
d. Social media shall refer to online tolerance level, understanding the nature
communication channels dedicated to and degree of risks the BSFI will be exposed
community-based content generation and to, and ensuring that these risks are properly
sharing, interaction, and collaboration. addressed. Moreover, the board of
e. Social media platform shall refer to directors, as part of its duties, shall approve
any form of interactive communication and oversee the design and implementation
medium wherein users can generate and of the social media strategy; related
disseminate content (e.g., text, images, audio, standards, policies and procedures; and
video) through social networks using the means to ensure compliance with said
internet. Examples of popular social media standards and/or policies as well as
platfrom categories include the following: applicable laws and regulations. Senior
(1) Social networking (e.g., Facebook, management, on the other hand, shall be

§ X183.3
17.03.31
responsible for the implementation of the media and committing non-permissible

social media risk management system activities;
approved by the board of directors. (7) Use and monitoring of the BSFI’s
The governance process should also proprietary social media sites/pages to
include reporting mechanisms to the board ensure compliance with applicable laws,
of directors and/or senior management to regulations and internal policies;
enable periodic evaluation of the (8) Monitoring and recording of
effectiveness of the BSFI’s social media suspicious transactions and customer
strategy/program, in terms of achieving its activities on the BSFI’s proprietary social
stated objectives, and measures put in place media sites/pages;
to manage the risks related to its use. (9) Adoption of technical and non-technical
b. Policies and procedures governing controls to address risks associated with the
the following, among others: use of social media platform/s including
(1) Scope and definition of social media; methodologies to manage risks from online
(2) Social media regulatory landscape postings, edits, replies and retention;
reflecting applicable laws, rules and (10) Due diligence process for selecting,
regulations for compliance; managing and continuous monitoring of
(3) Individuals and/or composition of the third-party service providers (TSP) that
team/s who will be responsible for the administer the BSFI’s social media site(s)/
creation, maintenance, and monitoring of page(s). In addition, the specific roles and
the BSFI’s proprietary social media sites/ responsibilities of the TSP, including liabilities
pages. Their corresponding roles and and accountabilities for errors, ommissions,
accountabilities should also be clearly fraud, and other instances, resulting from
defined; the TSP’s actions, which may adversely affect
(4) Content management and approval the BSFI, should also be defined;
process; (11) Social media crisis management
(5) Ongoing assessment, management, plan and escalation procedures;
and monitoring of risks associated with (12) Enterprise-wide employee training
social media-related activities; and awareness programs covering relevant
(6) Acceptable use as well as topics such as the BSFI’s social media use
prohibitions/restrictions on the business/ policies, employee roles and responsibilities
official use of social media platforms. These and non-permissible activities;
guidelines shall likewise apply to the (13) Records retention of social media
employees’1 personal use of social media, data; and
insofar as it may impact the BSFI’s (14) Communication of the BSFI’s
operations, reputation and/or compliance official social media sites/pages to its
with applicable laws and regulations. These customers to avoid confusion and being
should cover matters such as, but not misled to unofficial sites.
limited to, expectations, ethical behavior, c. Specific roles and responsibilities of
types/nature and extent of BSFI and/or the risk management, consumer protection,
customer-related information that can be audit and compliance functions to ensure
posted, statements that can or cannot be that social media risks are adequately
made about or in behalf of the institution, managed and integrated in the BSFI’s
comments that should not be made about a enterprise-wide risk management systems.
competitor, and corresponding sanctions/ BSFIs that do not utilize social media
penalties for inappropriate use of social should nevertheless have clear policies and
1
Include the BSFI’s employees, contractual employees and/or project hires, and third-party service providers.

§§ X183.3 - X184
17.06.30
measures in place to address the potential § X183.5 Supervisory enforcement

reputation risks that may arise within the actions. BSFIs should make available all
various social media platforms and provide policies and procedures and other
guidance on employee use of social media. documents/information related to the
(Circular No. 949 dated 15 March 2017) foregoing during the on-site examination as
well as provide copies thereof when a
§ X183.4 Compliance with relevant written request is made to determine
regulations. BSFIs, in formulating and compliance.
implementing their social media policies,
Consistent with Sec. X009, the Bangko
should ensure compliance with the
Sentral may deploy enforcement actions to
applicable requirements of Bangko Sentral
promote adherence with the requirements
rules and regulations on financial consumer
set forth in Sec. X183 and bring about timely
protection, especially those relating to
corrective actions. The Bangko Sentral may
disclosures and transparency in advertising
issue directives to improve the social media
and promotional materials, protection of
risk management system or impose
client information, effective recourse, and
monetary and non-monetary sanctions on
financial education and awareness. They
a BSFI and/or its directors, officers and/or
should likewise conform with the relevant
provisions of Bangko Sentral outsourcing employees.
framework should they decide to outsource
the conduct of social media-related activities
Sec. X184 Governance Process on the
to a service provider.
Quality of Bank Reporting; Statement of
The use of social media platforms,
including information gathered therein, for Policy. The proper conduct of monetary
the conduct of account origination activities policy and effective banking supervision are
should comply with applicable rules and core mandates of the Bangko Sentral. These
regulations, especially on the provisions mandates are facilitated by the accurate and
relating to customer identification timely submission of required information
procedures under the existing anti-money concerning a bank’s financial condition and
laundering rules and regulations. In the event results of operations. At the same time, high
that BSFIs opt to use social media for quality individual bank reports contribute
processing financial transactions, the to the preparation of aggregate statistics that
applicable Bangko Sentral rules and enable banks to make better informed
regulations on electronic banking/electronic business decisions.
services and technology risk management It is incumbent upon the Board and
should likewise be observed to ensure Senior Management to implement an
security, reliability and authenticity of such effective reporting system to generate
transactions. complete, accurate, consistent, reliable and
The regulations mentioned herein are timely reports to the Bangko Sentral. Banks
not exhaustive. It is the BSFI’s responsibility are expected to capitalize on available
to ensure that all applicable laws and information technology in establishing an
regulations relevant to the activities it will effective reporting system that is appropriate
choose to engage in using social media will for their size and complexity of operations.
be adequately complied with. Moreover, the The Bangko Sentral shall prescribe
BSFI is expected to stay abreast of and reasonable reporting standards which shall
continuously adapt to changes in the consider the cost of reporting relative to the
regulatory requirements. expected benefits.
(Circular No. 949 dated 15 March 2017) (Circular No. 963 dated 27 June 2017)

§§ X184.1 - X184.3
17.06.30
§ X184.1 Reporting standards. Reports b. Written policies and procedures

submitted to the Bangko Sentral must be documenting the bank’s standards and
complete, accurate, consistent, reliable and processes in generating quality internal and
timely to be considered compliant with the external reports;
Bangko Sentral reporting standards. It c. Timely and periodic review of the
follows that the report shall conform to the systems, policies and procedures to ensure
relevant submission and validation their continuing relevance and effectiveness
guidelines as prescribed by the Bangko conducted by an independent unit within
Sentral. Likewise, reports with incomplete the bank (e.g., internal audit) or an external
schedules or attachments shall be party contracted by the bank for such
considered non-compliant with the purpose;
reporting standards. As such, said reports d. A process to implement appropriate
should have been reviewed and validated enhancements in response to changes in the
by the bank prior to submission to the bank’s operating environment or in the
Bangko Sentral to ensure its completeness process of addressing weaknesses noted
and correctness. Adequate internal controls during periodic reviews conducted; and
should likewise be in place to ensure e. A process for the timely reporting
adherence to the reporting standards. to the Board and Senior Management of
Reports as contemplated in this Section significant transactions, events and activities
pertain to a bank’s financial condition that have material impact on the quality of
(i.e., solvency, liquidity, and profitability) reports of the bank.
as well as its operations and management. Bank reports shall meet the reporting
(Circular No. 963 dated 27 June 2017) standards prescribed under Subsec. X184.1.
To ensure the quality of bank’s reporting,
§ X184.2 Governance process. An Subsec. X184.3 prescribes the
effective governance process over the corresponding sanctions for banks that
bank’s reporting system must be established fail to comply with such reporting standards.
by the Board and implemented by Senior The Bangko Sentral shall conduct, as
Management to ensure the bank’s adherence described in Subsec. X184.4, an assessment
to the reporting standards. The bank’s of the quality of a bank’s reporting
reporting system should be supported by a system in order to determine the underlying
combination of systems, policies and integrity of reports being submitted and root
procedures that are intended to cause of persistent submission problems, if
facilitate the accurate and timely any.
generation of bank reports. A bank’s (Circular No. 963 dated 27 June 2017)
periodic review of the governance process
is likewise integral in d e t e r m i n i n g § X184.3 Sanctions on reports for
whether the reporting system continues non-compliance with the reporting standards.
to be relevant and effective. a. Definitions
An effective reporting system shall (1) Erroneous report - A report
include the following key components: submitted within the prescribed deadline,
a. A management information system but is found to be non-compliant with the
and technology infrastructure capable Bangko Sentral reporting standards
of supporting the bank’s reporting described in Subsec. X184.1 shall be
requirements as well as the conduct of classified as “Erroneous”. Submission of an
its own internal validation prior to Erroneous Report shall be considered as
the submission of reports to ensure willful failure to comply with a regulation.
compliance with the Bangko Sentral (2) Delayed report – A report that was
reporting standards; able to comply with the Bangko Sentral

§ X184.3
17.06.30
reporting standards after the submission number of times the subject report was
deadline for said report shall be classified submitted before being considered
as “Delayed”. Submission of a compliant compliant.
report after the submission deadline shall be Delayed
considered as willful delay in submission of For Delayed reports, the penalty shall
reports. be computed by multiplying the prescribed
(3) Unsubmitted – A report that was not fine by the number of calendar days delayed.
submitted, or was submitted but not able to Erroneous and delayed
comply with the Bangko Sentral reporting If the report initially considered
standards, by the time the next report Erroneous was able to comply with the
becomes due or upon the lapse of thirty (30) reporting standards but after the prescribed
banking days from the report’s submission deadline (i.e., Delayed), the penalty shall be
deadline, whichever comes first shall based on the sum of the penalty for being
be classified as “Unsubmitted”. See Table 2 Erroneous and the penalty for being Delayed.
as reference for the defined number of Unsubmitted
banking days after submission deadline for For reports classified as Unsubmitted
a report to be considered “Unsubmitted”. (regardless if said report was not
Non-submission of reports under this item submitted or was previously submitted but
shall be considered as willful refusal to remains non-compliant as described in
comply with a regulation. Subsec. X184.3.a.3), the monetary penalty
b. Monetary penalties shall be three times (3x) the number of days
The applicable monetary penalty shall applied for determining such classification,
be based on a prescribed fine for each as provided in Table 2:
occurrence (in case of Erroneous reports) or
for each day (in case of Delayed or Table 2 - Defined number of days for penalty
Unsubmitted reports) which will computation of reports considered Unsubmitted
(Column A) (Cloumn B) (Column C)
accumulate until such time the report has Reporting Defined # of # of days for
been determined compliant with the Frequency banking days penalty
prescribed reporting standards, as provided after submission computation
for in Table 1: deadline to be of reports
considered considered
“Unsubmitted” “Unsubmitted”
Table 1 - Prescribed fines for reporting violations
(A) (B) = (A multiplied
Bank Type Primary Secondary
by 3)
Reports Reports
Weekly 7 21
UBs/KBs P 3,000 P 600
Monthly
TBs 1,500 300
Quarterly
RBs/Coop
Semestral 30 90
Banks 450 150
Annual
Event-based*
The list of reports classified as * Refers to reports that are not due under a regular
Primary and Secondary are provided under periodicity since their required submission is instead
Appendix 6. reckoned from the occurence of an event/incident
or upon knowledge thereof.
Erroneous
For a report initially considered In the event that a compliant report is
Erroneous but subsequently complied with received after it has been considered
the reporting standards within the prescribed Unsubmitted, the applicable penalty
deadline, the penalty shall be computed by shall be based on the number of days
multiplying the prescribed fine by the provided in Column C of Table 2. This will

§ X184.3
17.06.30
be the case even if the actual number of should it fall on a non-working day in the
banking days delayed is less than the locality where the reporting bank is situated
constant number of days provided in said or on a working day where business
Column C1. operations in government offices were
Failure to submit a report on time due suspended due to typhoon, flood, or similar
to fortuitous events such as fire and other fortuitous events.
natural calamities, public disorders The submission of reports with the
including strike and lockout affecting a bank appropriate department of the SES or with
as defined in the Labor Code or of a national the Bangko Sentral Regional Offices shall
emergency affecting the operation of banks be effected by sending them electronically
shall not be considered as willful delay or or through registered mail/courier or
willful failure. through messengerial services, unless
In cases of reports falling due in a period otherwise specified in the circular or
affected by a fortuitous event or within a memorandum of the Bangko Sentral.
regulatory relief period as contemplated The date when the report was sent
under Appendix 89, said reports should electronically or the date of mailing
comply with the reporting standards of postmarked on the envelope or the date of
the Bangko Sentral within fifteen (15) receipt from the messengerial service, as the
banking days after the end of the said case may be, shall be considered as the date
fortuitous event or regulatory relief. of filing.
Otherwise, they shall be considered d. Habituality
Unsubmitted and imposed with a monetary Habituality shall refer to the repetitive
penalty equivalent to the applicable incurrence of reporting violations. For the
fine prescribed in Table 1 multiplied by purpose of objectively determining
forty-five (45) days [i.e., three times (3x) habituality, a demerit points system shall be
fifteen (15) days]. put into effect. A bank that incurs more than
A bank is still required to submit a 100 demerit points within a calendar year
compliant report regardless if said report shall be considered a habitual violator.
has been classified as “Unsubmitted” unless The total number of demerit points for
the non-submission is approved by the a calendar year shall be computed based
Bangko Sentral. Otherwise, failure to submit on the total amount of penalties approved
a compliant report within seven (7) banking for the said year divided by the prescribed
days from the time an instruction was made fine for the applicable reporting category.
to submit the said Unsubmitted report shall For purposes of determining demerit points,
result in disciplinary enforcement action the coverage of approved penalties shall
against the bank in accordance with existing apply to reports prescribed for submission to
regulations such as, but not limited to, the the SES.
Bangko Sentral’s Supervisory Enforcement The demerit points system as well as the
Policy under Sec. X009. coverage of reports for determining
c. Implementation habituality shall remain in effect unless
In the implementation of the rules in this otherwise specified by the Bangko Sentral.
Section, the submission deadline is Table 3 provides an example of how
considered moved to the next banking day demerit points are computed:
1
For instance, a weekly report received on the eighth (8th) banking day after the submission deadline will still
be penalized the equivalent of twenty-one (21) days, while it likewise follows that a weekly report received on
the twenty-eighth (28th) banking day shall still be penalized for twenty-one (21) days.

§§ X184.3 - X185
17.06.30
Table 3 - Determination of demerit point incurred to submit a Board-approved action plan.

by a bank in a reporting calendar year Such action plan shall include measures
Report Category
Primary Secondary Total
that the bank must undertake within a
A. Monetary P180,000 P30,000 specified period of time to address the
penalties deficiencies noted.
approved for Failure of the Board and Senior
imposition
B. Prescribed P3,000 P600
Management of the bank to implement the
fine per required corrective measures within the
applicable specified time frame shall be grounds to
category based subject the bank including its Board, Senior
on Table 1
Management and other responsible official/
C. Number of P60 P50 P110
demerit points s to the Bangko Sentral’s Supervisory
(A/B) Enforcement Policy under Sec. X009.
This is without prejudice to imposition of
Based on the sample computation, the sanctions provided under applicable
bank is considered a habitual violator since regulations and law, such as but not limited
it has incurred more than 100 demerit points to, Sections 34, 35, and 36 of R.A. No. 7653
within the calendar year. (The New Central Bank Act).
When a bank is considered habitual in (Circular No. 963 dated 27 June 2017)
incurring reporting violations, the Bangko
Sentral shall require the bank to undertake § X184.5 Transitory provisions. Banks
measures to address the root cause/s of the have until 31 December 2017 to make the
problem. The bank may also be subject to necessary preparations to their systems and
non-monetary sanctions provided under processes to ensure compliance with
Section 37 of R.A.No. 7653 (The New Sec. X184. The period of preparation shall
Central Bank Act), as well as restriction/ be treated as an observation period wherein
suspension of branching privileges and banks will be provided information on their
other special authorities involving the accumulated demerit points described
offering of new products and services to the under Subsec. X184.3 as of various periods
public. in 2017. The Bangko Sentral shall provide
The non-monetary sanctions shall banks with information on their
continue to be in effect until the habituality accumulated demerit points within the
is considered addressed. The habituality months of August, and December 2017.
is considered addressed and the non- Full implementation will take effect
monetary sanctions will be lifted if the bank beginning 01 January 2018.
did not incur any demerit points (i.e., none (Circular No. 963 dated 27 June 2017)
of the reports of the bank was classified as
either Erroneous, Delayed, Erroneous and Sec. X185 (2008 - X163) Internal Control
Delayed, or Unsubmitted) for at least three Framework. Internal control is a process
(3) consecutive months from the time the designated and effected by the board of
habituality was observed. directors, senior management, and all
(Circular No. 963 dated 27 June 2017) levels of personnel to provide reasonable
assurance on the achievement of
§ X184.4 Assessment of reporting objectives through efficient and effective
system. If the results of the assessment operations; reliable, complete and timely
disclose significant deficiencies in the financial and management information; and
reporting system, the bank shall be required compliance with applicable laws,

§§ X185 - X185.1
17.09.30
regulations, supervisory requirements, commensurate with the size, risk profile and
and the organization’s policies and complexity of operations of the bank. The
procedures. board of directors shall also ensure that the
Banks shall have in place adequate and internal audit function has an appropriate
effective internal control framework for the stature and authority within the bank and is
conduct of their business taking into provided with adequate resources to enable
account their size, risk profile and it to effectively carry out its assignments with
complexity of operations. The internal control objectivity.
framework shall embody management Further, the board of directors shall, on
oversight and control culture; risk a periodic basis:
recognition and assessment; control (1) conduct discussions with
activities; information and communication; management on the effectiveness of the
and monitoring activities and correcting internal control system;
deficiencies. (2) review evaluations made by the audit
(As amended by Circular No. 871 dated 05 March 2015) committee on the assessment of effectiveness
of internal control made by management,
§ X185.1 (2014 - Proper accounting internal auditors and external auditors;
records; 2008 - X163.1) Management (3) ensure that management has promptly
oversight and control culture. Consistent followed up on recommendations and
with the principles provided under concerns expressed by auditors and
Subsecs. X143.1 and X145.2, the board of supervisory authorities on internal control
directors and senior management shall be weaknesses; and
responsible for promoting high ethical and (4) review and approve the remuneration
integrity standards; establishing the of the head and personnel of the internal audit
appropriate culture that emphasizes, function. Said remuneration shall be in
demonstrates and promotes the importance accordance with the bank’s remuneration
of internal control; and designing and policies and practices and shall be structured
implementing processes for the prevention in such a way that these do not create
and detection of fraud. conflicts of interest or compromise
a. The board of directors shall be independence and objectivity.
ultimately responsible for ensuring that The board of directors of UBs/KBs shall
senior management establishes and likewise commission an assessment team
maintains an adequate, effective and outside of the organization to conduct an
efficient internal control framework independent quality assurance review of the

§ X185.1
17.09.30
internal audit function at least every five (5) In particular, the audit committee shall
years. be responsible for:
b. The audit committee shall be (1) ensuring independence of the
responsible for overseeing senior internal audit service provider;
management in establishing and maintaining (2) reporting to the board of directors
an adequate, effective and efficient internal on the status of accomplishments of the
control framework. It shall ensure that outsourced internal audit activities,
systems and processes are designed to including significant findings noted during
provide assurance in areas including the conduct of the internal audit;
reporting, monitoring compliance with (3) ensuring that the internal audit
laws, regulations and internal policies, service provider comply with sound internal
efficiency and effectiveness of operations, auditing standards such as the Institute of
and safeguarding of assets. Internal Auditors’ International Standard for
The audit committee shall oversee the the Professional Practice of Internal Auditing
internal audit function and shall be and other supplemental standards issued by
responsible for: regulatory authorities/ government agencies,
(1) monitoring and reviewing the as well as with relevant code of ethics;
effectiveness of the internal audit function; (4) ensuring that the audit plan is
(2) approving the internal audit plan, aligned with the overall plan strategy and
scope and budget; budget of the bank and is based on robust
(3) reviewing the internal audit reports risk assessment; and
and the corresponding recommendations to (5) ensuring that the internal audit
address the weaknesses noted, discussing service provider has adequate human
the same with the head of the internal audit resources with sufficient qualifications and
function and reporting significant matters to skills necessary to accomplish the internal
the board of directors; audit activities.
(4) ensuring that the internal audit c. Senior management shall be
function maintains an open communication responsible for maintaining, monitoring and
with senior management, the audit evaluating the adequacy and effectiveness
committee, external auditors, and the of the internal control system on an ongoing
supervisory authority; basis, and for reporting on the effectiveness
(5) reviewing discoveries of fraud and of internal controls on a periodic basis.
violations of laws and regulations as raised Management shall develop a process that
by the internal audit function; identifies, measures, monitors and controls
(6) reporting to the board of directors risks that are inherent to the operations of
the annual performance appraisal of the the bank; maintain an organizational
head of the internal audit function; structure that clearly assigns responsibility,
(7) recommending for approval of the authority and reporting relationships; ensure
board of directors the annual remuneration that delegated responsibilities are effectively
of the head of the internal audit function and carried out; implement internal control
key internal auditors; policies and ensure that activities are
(8) appointing, reappointing or removing conducted by qualified personnel with the
the head of the internal audit function and necessary experience and competence.
key internal auditors; and Management shall ensure that bank
(9) selecting and overseeing the personnel undertake continuing professional
performance of the internal audit service development and that there is an appropriate
provider. balance in the skills and resources of the

§§ X185.1 - X185.3
17.09.30
front office, back office, and control Internal controls shall be revised to address
functions. Moreover, Management shall any new or previously uncontrolled or
promptly inform the internal audit function unidentified risks.
of the significant changes in the bank’s risk (Circular No. 871 dated 05 March 2015)
management systems, policies and
processes. § X185.3 (2014 - Division of duties and
d. All personnel need to understand responsibilities; 2008 - X163.3) Control
their roles and responsibilities in the internal activities. Control activities shall form part
control process. They should be fully of the daily activities of the bank and all
accountable in carrying out their levels of personnel in the bank. Control
responsibilities effectively and they should activities are designed and implemented to
communicate to the appropriate level of address the risks identified in the risk
management any problem in operations, assessment process. These involve the
action or behavior that is inconsistent with establishment of control policies and
documented internal control processes and procedures, and verification that these are
code of ethics. being complied with.
(Circular No. 871 dated 05 March 2015, as amended by Circular Banks shall have in place control
No. 969 dated 22 August 2017) activities defined at every business level,
which shall include a system that provides
§ X185.2 (2014 - Independent for top and functional level reviews;
balancing; 2008 - X163.2) Risk recognition checking compliance with exposure limits
and assessment. An effective internal and follow-up on noncompliance; a system
control system shall identify, evaluate and
of approvals and authorizations, which shall
continually assess all material risks that
include the approval process for new
could affect the achievement of the bank’s
products and services; and a system of
performance, information and compliance
verification and reconciliation.
objectives. The potential for fraud shall be
Control activities complement existing
considered in assessing the risks to the
policies, procedures and other control
achievement of said objectives. Further, the
systems in place such as, among others,
risk assessment shall cover all risks facing
the bank, which include, among others, having clearly defined organizational
credit; country and transfer; market; interest structure and reporting lines, and
rate; liquidity; operational; compliance; arrangements for delegating authority;
legal; and reputational risks. adequate accounting policies, records and
Effective risk assessment identifies and processes; robust physical and
considers both internal (e.g., complexity of environmental controls for tangible assets
the organization’s structure, nature of the and access controls to information assets;
bank’s activities and personnel profile) and and appropriate segregation of conflicting
external (e.g., economic conditions, functions.
technological developments and changes in a. Clear arrangements for delegating
the industry) factors that could affect the authority. The functions and scope of
internal control framework. The risk authority and responsibility of each
assessment shall be conducted at the level personnel should be adequately defined,
of individual business units and across all documented and clearly communicated.
bank activities/groups/units and The extent to which authorities may be
subsidiaries, in the case of a parent bank. delegated and the corresponding

§§ X185.3
15.10.31
accountabilities of the personnel involved within the third degree of consanguinity or

shall be approved by the appropriate level affinity shall not be made joint custodians;
of management or the board of directors. (3) adopting dual control wherein the
b. Adequate accounting policies, work of one (1) person is to be verified by a
records and processes. Banks shall maintain second person to ensure that the transaction
adequate financial policies, records and is properly authorized, recorded and settled;
processes. These records shall be kept (4) incorporating sequence number
up-to-date and contain sufficient detail to control in the accounting system which shall
establish an audit trail. Further, banks shall also be used in promissory notes, checks
conduct independent balancing and and other similar instruments. Management
reconciliation of records and reports to shall also put in place appropriate controls
ensure the integrity of the reported data and to monitor the usage, safekeeping and
balances. Banks shall also put in place a recording of accountable forms;
reliable information system that covers all (5) restricting access to information
of its significant activities which shall allow assets by classifying information as to degree
the board of directors and management of sensitivity and criticality and identifying
access to data and information relevant to information owners or personnel with
decision making such as, among others, authority to access particular classifications
financial, operations, risk management, based on job responsibilities and the
compliance and market information. necessity to fulfill one’s duties; and
Moreover, these systems shall be secured, (6) implementing authentication and
monitored independently and supported access controls prior to granting access to
by adequate contingency arrangements. information such as, among others,
c. Robust physical and environmental implementing password rules. This shall
controls to tangible assets and access be supplemented by appropriate monitoring
controls to information assets. Banks shall mechanisms that will allow audit of use of
adopt policies and practices to safeguard information assets.
its tangible and information assets. These d. Segregation of conflicting functions.
shall include, but shall not be limited to: Banks shall ensure that areas of potential
(1) identifying officers with authorities conflicts of interest shall be identified,
to sign for and on behalf of the bank. Signing minimized and subjected to independent
authorities shall be approved by the board monitoring. Further, appropriate
of directors and the extent of authority at segregation of functions shall be observed
each level shall be clearly defined; in identified areas that may pose potential
(2) implementing joint custody on conflict of interest. Moreover, periodic
certain assets. Joint custody shall mean the reviews of responsibilities and functions
processing of transactions in the presence, shall be conducted to ensure that personnel
and under the direct observation, of a second are not in a position to conceal
person. Both persons shall be equally inappropriate actions.
accountable for the physical protection of Examples of internal control measures
the items and records involved: Provided, are in Appendix 112.
That persons who are related to each other (Circular No. 871 dated 05 March 2015)

§§ X185.4 - X185.12
15.10.31
§ X185.4 (2014 - Joint custody; 2008 - Evaluations of the effectiveness of the

X163.4) Information and communication. internal control system and the
An effective internal control system requires corresponding monitoring activities may be
that there are adequate and comprehensive done by personnel from the same
internal financial, operational and operational area in the form of self-
compliance data, as well as external assessment or from other areas such as
information about events and conditions internal audit: Provided, That, self-
that are relevant to decision making. assessment done by business units shall be
Information shall be reliable, timely, subject to independent validation.
accessible, and provided in a consistent Evaluations done shall be adequately
format. Banks shall have in place a reliable documented and internal control
management information system that covers deficiencies and weaknesses identified shall
significant activities of the bank and has the be reported on a timely basis to the
capability to generate relevant and quality appropriate level of management or the
information to support the functioning of board of directors, where necessary, and
internal control. addressed promptly.
Banks shall also establish effective (As amended by Circular No. 871 dated 05 March 2015)
channels of communication to ensure that
all personnel fully understand and adhere § X185.6 (2008 - X163.6) Dual control.
to policies and procedures and control (Deleted by Circular No. 871 dated 05 March 2015)
measures relevant to their duties and
responsibilities and that relevant § X185.7 (2008 - X163.7) Number
information is reaching the appropriate control.
personnel. Management shall also ensure (Deleted by Circular No. 871 dated 05 March 2015)
that all personnel are cognizant of their duty
to promptly report any deficiency to § X185.8 (2008 - X163.8) Rotation of
appropriate levels of management or to the duties.
board of directors, where required. These (Deleted by Circular No. 871 dated 05 March 2015)
shall enable them to quickly respond to
changing conditions and avoid unnecessary § X185.9 (2008- X163.9) Independence
costs. of the internal auditor.
Circular No. 871 dated 05 March 2015) (Deleted by Circular No. 871 dated 05 March 2015)
§ X185.5 (2014 - Signing authorities; § X185.10 (2008 - X163.10)

2008 - X163.5) Monitoring activities and Confirmation of accounts.
correcting deficiencies. The overall (Deleted by Circular No. 871 dated 05 March 2015)
effectiveness of the internal controls shall
be monitored on an ongoing basis. § X185.11 (2008 - X163.11) Other
Monitoring functions and activities shall be internal control standards.
adequately defined by management, (Deleted by Circular No. 871 dated 05 March 2015)
integrated in the operating environment and
should produce regular reports for review. § X185.12 (2008 - X163.12) Internal
In this regard, all levels of review shall be control procedures for dormant/inactive
adequately documented and results thereof accounts.
reported on a timely basis to the appropriate (Deleted by Circular No. 871 dated 05 March 2015)
level of management.

§ X186
17.09.30
Sec. X186 (2008 - X164) Internal Audit The establishment of internal audit
Function. An effective and efficient internal function centrally by the parent bank in
audit function constitutes the third line of group structures shall not fall under the
defense in the system of internal control. outsourcing framework as provided under
Internal audit is an independent, Sec. X162. In this respect, the head of the
objective assurance and consulting function internal audit function of the parent bank
established to examine, evaluate and shall define the internal audit strategies,
improve the effectiveness of internal control, methodology, scope and quality assurance
risk management and governance systems measures for the entire group: Provided, That
and processes of an organization, which this shall be done in consultation and
helps management and the board of coordination with the respective board of
directors in protecting the bank and its directors and of the subsidiary or affiliate
reputation. The internal audit function shall BSFI: Provided, further, That, the board of
both assess and complement operational directors of the subsidiary or affiliate BSFI,
management, risk management, compliance shall remain ultimately responsible for the
and other control functions. In this respect, performance of the internal audit activities.
internal audit shall be conducted in c. Outsourcing of internal audit
frequencies commensurate with the assessed activities. Banks may outsource, in
levels of risk in specific banking areas. accordance with existing Bangko Sentral
a. Permanency of the internal audit regulations on outsourcing, internal audit
function. Each bank shall have a permanent activities except for areas covered under
internal audit function. In the case of group existing statutes on deposit secrecy.
structures involving a parent bank and Outsourcing of internal audit activities shall
subsidiary or affiliate Bangko Sentral- however, be done on a limited basis to have
supervised financial institutions (BSFIs), the access to certain areas of expertise that are
internal audit function shall either be not available to the internal audit function
established in each of the BSFI or centrally or to address resource constraints: Provided,
by the parent bank. That the internal audit activity shall not be
b. Internal audit function in group outsourced to the bank’s own external
structures. In case each BSFI belonging to auditor/audit firm nor to internal audit
group structures has its own internal audit service provider that was previously
function, said internal audit function shall engaged by the bank in the same area
be accountable to the financial institution’s intended to be covered by the internal audit
own board of directors and shall likewise activity that will be outsourced, without a
report to the head of the internal audit one-year “cooling off” period: Provided,
function of the parent bank within a further, That the head of the bank’s internal
reasonable period and frequency prescribed audit function shall ensure that the
by the board of directors of the parent bank. knowledge or inputs from the outsourced
On the other hand, in case the parent experts shall be assimilated into the bank to
bank’s internal audit function shall cover the greatest extent possible.
the internal audit activities in the subsidiary Non-complex TB, RB and Coop banks
or affiliate BSFI, the board of directors of on the other hand, shall be allowed to
the parent bank shall ensure that the scope outsource internal audit activities covering
of internal audit activities is adequate all areas of bank operations except for areas
considering the size, risk profile and covered by existing statutes on deposit secrecy:
complexity of operations of the subsidiary Provided, That the board of directors, through
or affiliate concerned. the audit committee, shall be ultimately

§§ X186 - X186.1
17.09.30
responsible for the conduct of audit on areas areas of its operations. He must also possess
covered by existing statutes on deposit the following qualifications:
secrecy. a. The head of the internal audit function
d. Internal audit function of branches of of a UB or a KB must be a Certified Public
foreign banks. Branches of foreign banks Accountant (CPA) or a Certified Internal
may establish their own internal audit Auditor (CIA) and must have at least five (5)
function or may be covered by the regional/ years experience in the regular audit
group internal audit function: Provided, (internal or external) of a UB or KB as
That in case the regional/group internal auditor-in-charge, senior auditor or audit
audit function performs the internal audit manager. He must possess the knowledge,
activities in branches of foreign banks, the skills, and other competencies to examine
Senior Management team in branches of all areas in which the institution operates.
foreign banks shall conduct a periodic self- Professional competence as well as
assessment of the effectiveness of internal continuing training and education shall be
control, risk management and governance required to face up to the increasing
systems and processes in the branch and complexity and diversity of the institution’s
report the results thereof to the regional/ operations.
group internal audit function to ensure that b. The head of the internal audit function
the scope of internal audit activities is of a complex TB, RB and Coop Bank; QB
adequate considering the size, risk profile and; trust entity must be a graduate of any
and complexity of operations of the branch: accounting, business, finance or economics
Provided, further, That the regional/group course with technical proficiency on the
internal audit function shall likewise inform conduct of internal audit and must have at
the senior management team in branches least five (5) years experience in the regular
of foreign banks of the results of internal audit (internal or external) of a TB, national
audit conducted: Provided, finally, That in Coop Bank or, at least three (3) years
cases when the risk assessment of the senior experience in the regular audit (internal or
management team in branches of foreign external) of a UB or KB.
banks or of the Bangko Sentral differs from c. The head of the internal audit function
the risk assessment of the regional/group of a simple or non-complex TB, RB and
internal audit function, the senior Coop Bank; and NSSLA must be a graduate
management team in branches of foreign of any accounting, business, finance or
banks or the Bangko Sentral may require the economics course with technical
regional/group internal audit function to proficiency on the conduct of internal audit
subject the branch to an immediate or more and must have at least two (2) years
frequent internal audit. experience in the regular audit (internal or
(As amended by Circular Nos. 969 dated 22 August 2017 and external) of a UB, KB, TB, RB, Coop Bank,
871 dated 05 March 2015) QB or NSSLA.
A qualified head of the internal audit
§ X186.1 (2008 - X164.1) 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
have an unassailable integrity, relevant affiliates engaged in allied activities, and
education/experience/training, and has an other financial institutions under Bangko
understanding of the risk exposures of the Sentral supervision. A qualified internal
bank, as well as competence to audit all auditor of a complex TB, RB, and Coop

§§ X186.1 - X186.3
15.10.31
Bank; QB and trust entity shall likewise covers regulatory matters. The head of the
be qualified to audit non-complex TB, RB internal audit function shall also ensure that
and Coop Bank and NSSLA. the audit plan, including any revisions
The head of the internal audit function thereto, shall be approved by the audit
shall be appointed/reappointed or replaced committee;
with prior approval of the audit committee. e. To ensure that the internal audit
In cases when the head of the internal audit function has adequate human resources
function will be replaced, the bank shall with sufficient qualifications and skills
report the same and the corresponding necessary to accomplish its mandate. In this
reason for replacement to the appropriate regard, the head of the internal audit
supervising department of the Bangko function shall periodically assess and
Sentral within five (5) days from the time it monitor the skill-set of the internal audit
has been approved by the board of directors. function and ensure that there is an adequate
(As amended by Circular No. 871 dated 05 March 2015) development program for the internal audit
staff that shall enable them to meet the
§ X186.2 (2014 - Scope; 2008 - X164.2) growing technical complexity of banking
Duties and responsibilities of the head of operations.
the internal audit function or the chief (As amended by Circular No. 871 dated 05 March 2015)
audit executive.
a. To demonstrate appropriate § X186.3 (2014 - Qualifications and
leadership and have the necessary skills to standards of the internal auditor; 2008 -
fulfill his responsibilities for maintaining the X164.3) Professional competence and
unit’s independence and objectivity; ethics of the internal audit function. The
b. To be accountable to the board of internal audit function shall be comprised
directors or audit committee on all matters of 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
submit a report to the audit committee or bank’s operations. The skill set of the
board of directors on the status of internal audit staff shall be complemented
accomplishments of the internal audit unit, with appropriate audit methodologies and
including findings noted during the conduct tools as well as sufficient knowledge of
of the internal audit as well as status of auditing techniques in the conduct of audit
compliance of concerned departments/units. activities.
c. To ensure that the internal audit All internal audit personnel shall act
function complies with sound internal with integrity in carrying-out their duties
auditing standards such as the Institute of and responsibilities. They should respect
Internal Auditors’ International Standards for the confidentiality of information acquired
the Professional Practice of Internal Auditing in the course of the performance of their
and other supplemental standards issued by duties and should not use it for personal gain
regulatory authorities/government agencies, or malicious actions. Moreover, internal
as well as with relevant code of ethics; audit personnel shall avoid conflicts of
d. To develop an audit plan based on interest. Internally-recruited internal auditors
robust risk assessment, including inputs shall not engage in auditing activities for
from the board of directors, audit committee which they have had previous responsibility
and senior management and ensure that before a one-year “cooling off” period has
such plan is comprehensive and adequately elapsed. The internal audit personnel shall

§§ X186.3 - X186.5
15.10.31
adhere at all times to the bank’s Code of competence and expertise to avoid
Ethics as well as to an established code of unwarranted effects of continuously
ethics for internal auditors such as that of performing similar tasks or routine jobs that
the Institute of Internal Auditors. may affect the internal auditor’s judgment
(As amended by Circular No. 871 dated 05 March 2015) and objectivity.
§ X186.4 (2014 - Code of Ethics and
Internal Auditing Standards; 2008 - X164.4) § X186.5 Internal audit charter. Banks
Independence and objectivity of the shall have an internal audit charter approved
internal audit function. The internal audit by the board of directors. The internal audit
function must be independent of the charter shall be periodically reviewed by
activities audited and from day-to-day the head of the internal audit function and
internal control process. It must be free to any changes thereto shall be approved by
report audit results, findings, opinions, the board of directors.
appraisals and other information through The internal audit charter shall establish,
clear reporting line to the board of directors among others, the following:
or audit committee. It shall have authority a. Purpose, stature and authority, and
to directly access and communicate with responsibilities of the internal audit function
any officer or employee, to examine any as well as its relations with other control
activity or entity of the bank, as well as to functions in the bank. The charter shall
access any records, files or data whenever recognize the authority of the internal audit
relevant to the exercise of its assignment. function, to initiate direct communication
If independence or objectivity of internal with any bank personnel; to examine any
audit function is impaired, in fact or activity or entity; and to access any records,
appearance, the details of the impairment files, data and physical properties of the
must be disclosed to the audit committee. bank, in performing its duties and
Impairment to organizational independence responsibilities;
and individual objectivity may include, but b. Standards of independence,
is not limited to, personal conflict of interest, objectivity, professional competence and
scope limitations, restrictions on access to due professional care, and professional
records, personnel, and properties, and ethics;
resource limitations, such as funding. c. Guidelines or criteria for
The internal audit function shall inform outsourcing internal audit activities to
senior management of the results of its external experts;
audits and assessment. Senior management d. Guidelines for consulting or advisory
may consult the internal auditor on matters services that may be provided by the internal
related to risks and internal controls without audit function;
tainting the latter’s independence: Provided, e. Responsibilities and accountabilities
That, the internal auditor shall not be of the head of the internal audit function;
involved in the development or f. Requirement to comply with sound
implementation of policies and procedures, internal auditing standards such as the
preparation of reports or execution of Institute of Internal Auditor’s International
activities that fall within the scope of his Standards for the Professional Practice of
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

§§ X186.5 - X189
15.10.31
g. Guidelines for coordination with the 12 August 2009, binding the Bangko Sentral,
external auditor and supervisory authority. SEC, Professional Regulation Commission
(Circular No. 871 dated 05 March 2015) (PRC)– Board of Accountancy (BOA) and
the Insurance Commission (IC) for a
§ X186.6 Scope. All processes, systems, simplified and synchronized accreditation
units, and activities, including outsourced requirements for external auditor and/or
services, shall fall within the overall scope auditing firm, following are the revised rules
of the internal audit function. The scope of and regulations that shall govern the
internal audit shall cover, among others, the selection and delisting by the Bangko Sentral
following: of external auditors and auditing firms of
a. Evaluation of the adequacy, efficiency covered institutions which under special
and effectiveness of internal control, risk laws are subject to Bangko Sentral
management and governance systems in the supervision.
context of current and potential future risks; Statement of policy. It is the policy of
b. Review of the reliability, effectiveness the Bangko Sentral to ensure effective audit
and integrity of management and financial and supervision of banks, QBs, trust entities
information systems, including the and/or NSSLAs including their subsidiaries
electronic information system and electronic and affiliates engaged in allied activities and
banking services; other FIs which under special laws are
c. Review of the systems and subject to Bangko Sentral supervision, and
procedures of safeguarding the bank’s to ensure that reliance by Bangko Sentral
physical and information assets; and the public on the opinion of external
d. Review of compliance of trading auditors and auditing firms by prescribing
activities with relevant laws, rules and the rules and regulations that shall govern
regulations; the selection, appointment, reporting
e. Review of the compliance system and requirements and delisting for external
the implementation of established policies auditors and auditing firms of said
and procedures; and institutions, subject to the provisions of and
f. Review of areas of interest to implementing regulations issued pursuant
regulators such as, among others monitoring to the aforesaid MOA.
of compliance with relevant laws, rules and a. Rules and regulations. The revised
regulations, including but not limited to the rules and regulations that shall govern the
assessment of the adequacy of capital and selection and delisting by the Bangko Sentral
provisions; liquidity level; regulatory and of external auditors and auditing firms of
internal reporting. covered institutions which under special
(Circular No. 871 dated 05 March 2015) laws are subject to Bangko Sentral
supervision are shown in Appendix 43.
Secs. X187 - X188 (Reserved) b. Sanctions. The applicable sanctions/
penalties prescribed under Sections 36 and
Sec. X189 (2008 - X165) Selection, 37 of R.A. No. 7653 to the extent applicable
Appointment, Reporting Requirements and shall be imposed on the covered institution,
Delisting of External Auditors and/or its audit committee and the directors
Auditing Firm; Sanctions; Effectivity. approving the hiring of external auditors/
Pursuant to Section 58, R.A. No. 8791, and auditing firm who/which are not in the
the existing provisions of the executed Bangko Sentral list of selected auditors for
Memorandum of Agreement (MOA) dated covered institutions for hiring, and/or

§§ X189 - X190.1
17.06.30
retaining the services of the external auditor/ internal control and risk management
auditing firm in violation of any of the systems was noted in the course of the audit
provisions of this Section and for non-compliance of the bank to the board of directors or
with the Monetary Board directive under country head; and (c) the absence of any
Item “K” in Appendix 43. Erring external direct or indirect financial interest and other
auditors/auditing firms may also be reported circumstances that may impair the
by the Bangko Sentral to the PRC for independence of the external auditor;
appropriate disciplinary action. (2) Reconciliation Statement between the
(As amended by Circular Nos. 660 dated 25 August 2009 and AFS and the balance sheet and income
529 dated 11 May 2006) statement for bank proper (regular and
FCDU) and trust department submitted to
Sec. X190 (2008 - X166) Audited Financial the Bangko Sentral including copies of
Statements of Banks. The following rules adjusting entries on the reconciling items;
shall govern the utilization and submission and (3) other information that may be
of AFS of banks. required by the Bangko Sentral.
For purposes of this Section, AFS shall In addition, the external auditor shall
include the balance sheets, income be required by the bank to submit to the
statements, statements of changes in equity, board of directors or country head, a LOC
statements of cash flows and notes to indicating any material weakness or breach
financial statements which shall include in the institution’s internal control and risk
among other information, disclosure of the management systems within thirty (30)
volume of past due loans as well as loan-loss calendar days after submission of the
provisions. On the other hand, financial financial audit report. If no material
audit report shall refer to the AFS and the weakness or breach is noted to warrant the
opinion of the auditor. The AFS of banks issuance of an LOC, a certification under
with subsidiaries shall be presented side by oath stating that no material weakness or
side on a solo basis (parent) and on a breach in the internal control and risk
consolidated basis (parent and subsidiaries). management systems was noted in the
(As amended by Circular No. 540 dated 09 August 2006) course of the audit of the bank shall be
submitted in its stead, together with the
§ X190.1 (2008 - X166.1) Financial financial audit report.
audit. Banks shall cause an annual financial Material weakness shall be defined as
audit by an external auditor acceptable to a significant control deficiency, or
the Bangko Sentral not later than thirty (30) combination of deficiencies, that results in
calendar days after the close of the calendar more than a remote likelihood that a material
year or the fiscal year adopted by the bank. misstatement of the financial statements will
Report of such audit shall be submitted to not be detected or prevented by the entity’s
the board of directors or country head, in internal control. A material weakness does
the case of foreign bank branches, and the not mean that a material misstatement has
appropriate department of the SES not later occurred or will occur, but that it could
than 120 calendar days after the close of the occur. A control deficiency exists when the
calendar year or the fiscal year adopted by design or operation of a control does not
the bank. The report to the Bangko Sentral allow management or employees, in the
shall be accompanied by the: normal course of performing their assigned
(1) certification by the external auditor on functions, to prevent or detect misstatements
the: (a) dates of start and termination of audit; on a timely basis. A significant deficiency
(b) date of submission of the financial audit is a control deficiency, or combination of
report and certification under oath stating control deficiencies, that adversely affects
that no material weakness or breach in the the entity’s ability to initiate, authorize,

§ X190.1
17.06.30
record, process, or report financial data financial audit by an acceptable external

reliably in accordance with generally auditor: Provided, That when warranted by
accepted accounting principles. The phrase supervisory concern such as material
more than remote likelihood shall mean that weakness/breach in internal control and/or
future events are likely to occur or are risk management systems, the Monetary
reasonably possible to occur. Board may, upon recommendation of the
The board of directors, in a regular or appropriate department of the SES, require
special meeting, shall consider and act on the financial audit to be conducted by an
the financial audit report and the certification external auditor acceptable to the Bangko
under oath submitted in lieu of the LOC and Sentral, at the expense of the institution
shall submit, within thirty (30) banking days concerned: Provided, further, That when
after receipt of the reports, a copy of its circumstances such as, but not limited to
resolution to the appropriate department of loans from multilateral FIs, privatization, or
the SES. The resolution shall show, among public listing warrant, the financial audit of
other things, the actions(s) taken on the the institution concerned by an acceptable
reports and the names of the directors external auditor may also be allowed.
present and absent. Banks under the concurrent jurisdiction
The board shall likewise consider and of the Bangko Sentral and COA shall,
act on the LOC and shall submit, within however, submit a copy of the annual audit
thirty (30) banking days after receipt thereof, report (AAR) of the COA to the appropriate
a copy of its resolution together with said department of the SES within forty (40)
LOC to the appropriate department of the calendar days after receipt of the AAR by
SES. The resolution shall show the action(s) the board of directors. The AAR shall be
taken on the findings and recommendations accompanied by the: (1) certification by the
and, the names of the directors present and institution concerned on the date of receipt
absent, among other things. of the AAR by the board of directors;
The country head of foreign banks with (2) reconciliation statement between the AFS
branches in the Philippines shall submit a in the AAR and the balance sheet and
report on the action taken by management income statement of bank proper (regular
(head office, regional, or country, as the case and FCDU) and trust department submitted
may be) on the financial audit report and to the Bangko Sentral, including copies of
the certification under oath submitted in lieu adjusting entries on the reconciling items;
of the LOC within thirty (30) banking days and (3) other information that may be
after receipt thereof. required by the Bangko Sentral.
The country head shall likewise submit The board of directors of said
a report on the action taken by management institutions, in a regular or special meeting,
on the LOC within thirty (30) banking days shall consider and act on the AAR, as well
after receipt thereof. as on the comments and observations and
The LOC shall be accompanied by the shall submit, within thirty (30) banking days
certification of the external auditor of the after receipt of the report, a copy of
date of its submission to the board of its resolution to the appropriate department
directors or country head, as the case of the SES. The resolution shall show the
may be. action(s) taken on the report, including on
Government-owned or-controlled the comments and observations and the
banks, including their subsidiaries and names of the directors present and absent,
affiliates under Bangko Sentral supervision, among other things.
which are under the concurrent jurisdiction The financial audit report required to
of the Commission on Audit (COA) shall be submitted shall in all respect be PFRS/
be exempt from the aforementioned annual PAS compliant: Provided, That banks shall

§§ X190.1 - X190.4
17.06.30
submit to the Bangko Sentral adjusting The disclosure of information by the

entries reconciling the balances in the external auditor to the Bangko Sentral shall
financial statements for prudential reporting not be a ground for civil, criminal or
with that in the audited annual financial disciplinary proceedings against the former.
statements. Bank management shall be present
Banks as well as external auditors shall during discussions or at least be informed
strictly observe the requirements in the of the adverse findings in order to preserve
submission of the financial audit report and the concerns of the supervisory authority
reports required to be submitted under and external auditors regarding the
Appendix 61. confidentiality of information.
The reports and certifications of b. Sanction. The auditing firm(s) shall
institutions concerned, schedules be blacklisted by the Monetary Board for
and attachments required under this a period as the Board may deem
Subsection shall be considered Category B
appropriate for their failure to perform
reports, wherein Delayed/Unsubmitted
their duty of reporting to the Bangko
reports are subject to the penalties under
Sentral any matter adversely affecting the
Subsec. X184.3.
(As amended by Circular Nos. 963 dated 27 June 2017, 957
condition or soundness of the bank.
dated 17 April 2017, 911 dated 02 May 2016, 554 dated 22 Banks shall not be allowed to engage
December 2006 and 540 dated 09 August 2006) the services of the blacklisted auditing firm.
§ X190.2 (2008 - X166.2) Posting of § X190.4 (2008 - X166.4) Disclosure

audited financial statements. Local banks requirement in the notes to the audited
shall post in conspicuous places in their head financial statements. Banks shall require
offices, all their branches and other banking their external auditors to include the
offices, as well as in their respective following additional information in the
websites, their latest financial audit report.
notes to financial statements:
The abovementioned documents shall
a. Basic quantitative indicators of
also be posted by foreign bank branches in
financial performance such as return on
all their banking offices in the Philippines.
average equity, return on average assets and
net interest margin;
§ X190.3 (2008 - X166.3) Disclosure For purposes of computing the
of external auditor’s adverse findings to indicators, the following formulas shall be
the Bangko Sentral; sanction. used:
a. Findings to be disclosed. Banks shall
require their external auditors to report to (1) Return on Average Equity (%) =
Net Income (or Loss) after Income Tax x 100
the Bangko Sentral any matter adversely Average Total Capital Accounts
affecting the condition or soundness of the
bank, such as, but not limited to: Where:
Average Total = Sum of Total Capital Accounts as of the 12
(1) Any serious irregularity, including Capital month-ends in the calendar/fiscal year
those involving fraud or dishonesty, that may Accounts adopted by the Bank
jeopardize the interest of depositors and 12
(2) Return on Average Assets (%) =
creditors; Net Income (or Loss) after Income Tax x 100
(2) Losses incurred which substantially Average Total Assets
reduce the capital funds of the bank; and
Where:
(3) Inability of the auditor to confirm Average = Sum of Total Assets as of the 12 month-ends in
that the claims of creditors are still covered Total the calendar/fiscal year adopted by the Bank
by the bank’s assets. Assets 12
(No page 128)


§§ X190.4 - X190.5
17.06.30
(3) Net Interest = Net Interest Income x 100 i. Accounting policies which shall
Margin (%) Average Interest Earning Assets
include, but shall not be limited to,
Where: general accounting principles, changes in
Net = Total Interest Income – Total Interest Expense
accounting policies/practices, principles
Interest
Income of consolidation, policies and methods
Average = Sum of Total Interest Earning Assets as of the for determining when assets are impaired,
Interest 12 month-ends in the calendar/fiscal year
Earning adopted by the Bank
recognizing income on impaired assets
Assets 12 and losses on non-performing credits,
income recognition, valuation policies
b. Risk-based capital adequacy ratio and accounting policies on securitizations,
under Section 34 of R.A. No. 8791 and foreign currency translations, loan fees,
applicable and existing capital adequacy premiums and discounts, repurchase
framework; agreements, premises/fixed assets, income
c. Concentration of credit as to taxes and derivatives.
industry/economic sector where (As amended by Circular Nos. 890 dated 02 November 2015
and 827 dated 28 February 2014)
concentration is said to exist when total loan
exposures to a particular industry/economic
§ X190.5 (2008 - X166.5) Disclosure
sector exceeds thirty percent (30%) of total
requirements in the annual report. It is
loan portfolio;
the thrust of the Bangko Sentral to promote
d. Breakdown of total loans as to
greater disclosure and transparency to the
secured and unsecured and breakdown of
public. In line with this, the Bangko Sentral
secured loans as to type of security;
recognizes the importance of the annual
e. Total outstanding loans to bank’s
report in providing financial information on
DOSRI, percent of DOSRI loans to total loan
the bank, which will be useful to the public
portfolio, percent of unsecured DOSRI loans
in understanding the true condition of the
to total DOSRI loans, percent of past due
bank. This is consistent with financial
DOSRI loans to total DOSRI loans and
consumer protection and aligned with
percent of non-performing DOSRI loans to
international best practices. Accordingly,
total DOSRI loans;
f. Nature and amount of contingencies the Bangko Sentral revised the minimum
and commitments arising from off-balance disclosure requirements in the annual
sheet items [include direct credit substitutes report of banks to ensure that proper
(e.g., export LCs confirmed, underwritten disclosure is made on all significant
accounts unsold), transaction-related matters regarding the bank, including its
contingencies (e.g., performance bonds, bid financial condition, performance,
bonds, standby LCs), short-term ownership and governance.
self-liquidating trade-related contingencies Consistent with the principles
arising from the movement of goods embodied under Subsec. X141.3, the
(e.g., sight/usance domestic LCs, sight/ board of directors shall have the overall
usance import LCs), sale and repurchase responsibility in ensuring that the annual
agreements not recognized in the balance report of the bank fully discloses the
sheet; interest and foreign exchange rate minimum disclosure requirements as
related items; and other commitments]; included in this subsection. The board of
g. Provisions and allowances for directors may delegate its oversight
losses and how these are determined; function to a board-level committee which
h. Aggregate amount of secured shall have oversight over the preparation
liabilities and assets pledged as security; and of the annual report.

§§ X190.5 - X190.7
17.06.30
All banks shall prepare an annual report place in its head office, all its branches and
which shall include a discussion and/or other offices. The annual report should also
analysis of the following minimum be published in the bank’s website.
information in no particular order: Covered banks shall submit the Annual
a. Corporate policy; Report Assessment Checklist (ARAC)
b. Financial summary/Financial together with the annual report. The ARAC
highlights; identifies the pages and sections of the
c. Financial condition and results of annual report corresponding to the
operations; disclosures.
d. Risk management framework, The deadline for the submission of the
including practices to mitigate and/or annual report and ARAC to the appropriate
prevent money laundering and terrorist department of the SES is 180 calendar days
financing risks; after the close of the calendar or fiscal year
e. Corporate governance; adopted by the bank.
f. Corporate information; and Banks under the concurrent jurisdiction
g. Audited Financial Statements (AFS). of the Bangko Sentral and COA, however,
For banks with subsidiaries, the AFS should shall submit the annual report and ARAC
be presented side by side on a solo basis to the appropriate department of the SES
(parent) and on a consolidated basis within 100 calendar days after receipt of the
(parent and subsidiaries) as provided under annual audit report by the board of
Sec. X190. directors.
For complex banks 1 with various The annual report shall be submitted in
business segments, it shall also disclose the soft copy to the Bangko Sentral and shall be
“Financial Results of Business Segments”. in Portable Document Format (PDF) as
The guidelines for the preparation of provided in Appendix 6. Transmittal of the
disclosure requirements in the annual report soft copy of the report shall be covered by a
are provided in Appendix 119. letter to the appropriate department of the
Additional disclosure requirements for SES. On the other hand, banks shall
UBs and KBs, as well as their subsidiary continue to submit the ARAC in hard copy.
banks, are found under Part IX of Appendix 63b. (As amended by Circular Nos. 956 dated 17 April 2017, M-2017-
For stand-alone TBs, RBs, and Coop Banks, 011 dated 31 March 2017, Circular No. 911 dated 02 May 2016,
890 dated 02 November 2015 and M-2014-007 dated 04 March
additional disclosure requirements are 2014)
found under Part V of Appendix 63c.
Locally incorporated subsidiary banks § X190.7 Sanctions for non-disclosure
of foreign banks shall likewise be covered of certain information and/or delayed
by the requirements of this Subsection. submission of annual report.
Branches of foreign banks are exempted a. Non-disclosure of certain
from compliance with the guidelines. information. Willful non-disclosure or
The revised disclosures shall commence erroneous disclosure of any item required
with annual reports for financial year 2017. to be disclosed under Subsec. X190.5 on
(Circular No. 781 dated 15 January 2013, as amended by Circular disclosure requirements in the annual report
No. 956 dated 17 April 2017)
shall be considered as a serious offense for
§ X190.6 (2008 - X166.6) Posting and purposes of determining the appropriate
submission of annual report. A copy of the penalty that will be imposed on the bank.
latest annual report shall be posted/ The Bangko Sentral shall also determine
displayed by the bank in a conspicuous if the non-disclosure or erroneous disclosure
1
As defined under Subsec. X141.3.

§§ X190.7 - X191.2
17.06.30
involves material information that may Bangko Sentral examination shall be

mislead the public, which warrants stiffer preserved until such time that the issue has
sanctions as provided under Sec. X009. been fully resolved with finality by the
Material information refers to Bangko Sentral.
information which if omitted or misstated, (As amended by Circular No. 957 dated 17 April 2017)
could change or influence the assessment
or decisions of a person relying on the § X191.1 (2008 - X161.1) Adoption of
disclosure, such as depositors, creditors, the Manual of Accounts. Banks shall strictly
investors, and professional analysts, for the adopt the Manual of Accounts prescribed
purpose of making deposits and by the Bangko Sentral for recording daily
investments, among others. transactions including reportorial and
b. Delayed/Unsubmitted annual report. publication requirements.
Sanctions in case of delayed/unsubmitted Local branches of foreign banks may
annual report and the ARAC shall be in continue using their parent bank’s general
accordance with the provision under ledger accounts: Provided, That published
Subsec. X184.3. statements and reports submitted to the
(Circular No. 956 dated 17 April 2017, as amended by Circular
Bangko Sentral follow the account
No. 963 dated 27 June 2017)
definitions in the Bangko Sentral-prescribed
Sec. X191 (2008 - X161) Records. Banks Manual of Accounts: Provided, further, That
shall have a true and accurate account, the mathematical formulas for reconciling
record or statement of their daily such published statements and submitted
transactions. For this purpose, the definition reports with the general ledger accounts of
of records under Sec. X001 shall apply. The the bank are submitted to the appropriate
making of any false entry or the willful department of the SES: Provided, finally, That
omission of entries relevant to any said banks prepare for Bangko Sentral use,
transaction is a ground for the imposition of reconciliations of their ledger accounts with
administrative sanctions under Section 37 the Bangko Sentral prescribed Manual of
of R.A. No. 7653 and the disqualification Accounts during regular or special bank
from office of any director or officer examinations.
responsible therefor under Section 9-A of Any bank which fails or refuses to adopt
R.A. No. 337, as amended. This is without the prescribed Manual of Accounts, or any of
prejudice to their criminal liability under the applicable accounts contained therein,
Sections 35 and 36 of R.A. No. 7653 or adopts any general ledger account not
and/or the applicable provisions of the specified in the said Manual of Accounts
Revised Penal Code. without prior written approval of the Governor
Records shall be retained for a period of the Bangko Sentral, shall be penalized by
of at least five (5) years, unless they are revocation or suspension of its authority to
otherwise required by law or other engage in quasi-banking function.
regulations, or as directed by the Bangko
Sentral to be retained for a longer period. § X191.2 (2008 - X162.16) Financial
RBs and Coop banks shall follow the Reporting Package. In line with the
guidelines on the retention and disposal of adoption of the Philippine Financial
records in Appendix 50. However, records Reporting Standards (PFRS) and Philippine
which are the subject of, or are pertinent to, Accounting Standards (PAS) effective the
an issue that has been raised during a annual financial reporting period beginning

§§ X191.2 - X191.3
17.06.30
01 January 2005, the Manual of Accounts Accounting treatment for prudential

and the Bangko Sentral reportorial reporting. For prudential reporting, banks
requirements consisting of the Consolidated shall adopt in all respect the PFRS and PAS
Statement of Condition (CSOC), except as follows:
Consolidated Statement of Income and a. In preparing consolidated financial
Expense (CSIE) and their supporting statements, only investments in financial
schedules are amended through the issuance allied subsidiaries except insurance
of the new Financial Reporting Package subsidiaries shall be consolidated on a
(FRP) for banks. line-by-line basis; while insurance and
The general features as well as the non-financial allied subsidiaries shall be
implementing guidelines of the FRP is accounted for using the equity method.
provided in Appendix 77. Financial/non-financial allied/non-allied
(Circular No. 512 dated 03 February 2006, as amended by associates shall be accounted for using the
Circular Nos. 890 dated 02 November 2015, 837 dated 18 June equity method in accordance with the
2014, M-2014-009 dated 17 March 2014, Circular No. 691 dated
23 June 2010, M-2010-016 dated 16 June 2010 and Circular No.
provisions of PAS 28 “Investments in
568 dated 08 May 2007) Associates”; and
b. Banks shall be required to meet the
§ X191.3 (2008 - X161.2) Philippine Bangko Sentral recommended valuation
Financial Reporting Standards/Philippine reserves.
Accounting Standards. Government grants extended in the form
Statement of policy. It is the policy of of loans bearing nil or low interest rates shall
the Bangko Sentral to promote fairness, be measured upon initial recognition at its
transparency and accuracy in financial fair value (i.e., the present value of the future
reporting. It is in this light that the Bangko cash flows of the financial instrument
Sentral aims to adopt all Philippine Financial discounted using the market interest rate).
Reporting Standards (PFRS) and Philippine The difference between the fair value and
Accounting Standards (PAS) issued by the the net proceeds of the loan shall be
Financial Reporting Standards Council recorded under “Unearned Income-Others”,
(FRSC) to the greatest extent possible. which shall be amortized over the term of
Banks shall adopt the PFRS and PAS the loan using the effective interest method.
which are in accordance with generally The provisions on government grants
accepted accounting principles in recording shall be applied retroactively to all
transactions and in the preparation of outstanding government grants received. FIs
financial statements and reports to Bangko that adopted an accounting treatment other
Sentral. However, in cases where there are than the foregoing shall consider the
differences between Bangko Sentral adjustment as a change in accounting
regulations and PFRS/PAS as when more policy, which shall be accounted for in
than one (1) option are allowed or certain accordance with PAS 8.
maximum or minimum limits are prescribed Notwithstanding the exceptions in Items
by the PFRS/PAS, the option or limit “a” and “b”, the audited financial statements
prescribed by Bangko Sentral regulations required to be submitted to the Bangko
shall be adopted by banks. Sentral in accordance with the provisions
For purposes hereof, the PFRS/PAS shall of Subsec. X190.1 shall in all respect be
refer to issuances of the FRSC and approved PFRS/PAS compliant: Provided, That FIs shall
by the Professional Regulation Commission submit to the Bangko Sentral adjusting
(PRC). entries reconciling the balances in the

§§ X191.3 - X192
17.06.30
financial statements for prudential reporting § X191.5 Penalties and sanctions. The
with that in the audited financial statements. following penalties and sanctions shall be
Guidelines on the preparation of solo/ imposed on BSFIs and concerned officers
separate financial statements. For purposes found to violate the provisions of
of preparing solo/separate financial Appendices 33, 33a and 97.
statements, financial allied, non-financial a. Fines to be imposed on BSFIs for each
allied and non-allied subsidiaries/associates/ violation, reckoned from the date the
joint ventures, including insurance violation was committed up to the date it
subsidiaries/associates, shall be accounted was corrected:
for using the equity method, in accordance (1) P20,000/day for UBs;
with PAS 27, as amended. (2) P10,000/day for KBs;
The rules on the preparation of solo (3) P2,000/day for TBs; and
financial statements are also provided under (4) P1,000/day for RBs/Coop Banks.
Appendix 77 on the Financial Reporting b. Sanctions to be imposed on
Package. concerned officers:
Guidelines on the adoption of PFRS 9 (1) First offense - reprimand the officers
Financial Instruments. Banks, including responsible for the violation; and
their trust entities, shall adopt the full (2) Subsequent offenses - suspension
provisions of PFRS 9 Financial Instruments of ninety (90) days without pay for officers
only upon its mandatory effectivity date of responsible for the violation.
01 January 2018. Prior to said mandatory (As amended by Circular No. 960 dated 04 May 2017)
effectivity date, financial instruments of
banks, including their trust entities, shall §§ X191.6 - X191.9 (Reserved)
continue to be accounted for in accordance
with the provisions of PAS 39 under § 1191.9 (Reserved)
Appendix 33.
§ 2191.9 (Reserved)
As an exception, banks, including their
trust entities, which have early-adopted § 3191.9 (2008 - 3161.9) Retention and
PFRS 9 (2009 and 2010) as of
disposal of records of rural/cooperative
31 December 2015, shall continue to
banks.
account for their financial instruments in (Deleted by Circular No. 957 dated 17 April 2017)
accordance with the provisions of Appendix 97
until 31 December 2017. Sec. X192 (2008 - X162) Reports. Banks
dated 05 July 2016 and 912 dated 27 May 2016, 761 dated
shall submit to the appropriate department
20 July 2012, 733 dated 05 August 2011 and 708 dated of the SES all their statements and/or
10 January 2011 and 572 dated 22 June 2007) periodic reports listed in Appendix 6 in such
frequency and deadlines indicated therein.
§ X191.4 Accounting treatment of In the preparation of said statements/
financial securities. The classification, reports, banks shall use and strictly follow
accounting procedures, valuation, sales and the forms prescribed by the Bangko
transfers of Investment in Debt Securities Sentral.
and Marketable Equity Securities shall be In line with the policy direction of
in accordance with the guidelines in R.A No. 8792 (E-Commerce Act), the
Appendices 33 and 33a. Bangko Sentral is strongly encouraging
(Circular No. 960 dated 04 May 2017) banks to submit their regular reports to the

§§ X192 - X192.2
17.06.30
Bangko Sentral in electronic form. inspection by Bangko Sentral examiners and

However, the Bangko Sentral cannot submitted to the Bangko Sentral upon
presently guarantee the security/ request of the appropriate supervising
confidentiality of data in the course of department of the SES.
electronically transmitting reports to Bangko (4) Reports in computer media that are
Sentral. Bangko Sentral recommends that submitted by banks shall be subject to the
sensitive or confidential information be same requirements regarding authorized
provided by ordinary post or courier. The signatories.
Bangko Sentral will accept no responsibility (5) Any report submitted to the Bangko
for electronic messages/reports/information Sentral that is signed by an officer who is not
that may be hacked or cracked, intercepted, listed or included in any of the resolutions
copied or disclosed outside Bangko Sentral’s mentioned above, shall be considered as not
information system. having been submitted at all.
(6) All authorized agent banks shall
§ X192.1 (2008 - X162.1) Categories submit to the Director, Branch Operations,
and signatories of bank reports. Bangko Sentral, the updated specimen
a. Categories of reports. Reports signatures of Senior Bank Officers in their
required to be submitted to the Bangko respective Head Offices who are authorized
Sentral by banks are grouped into Category to authenticate the signatures of their
A-1, Category A-2, Category A-3 and provincial branch officers transacting
Category B reports as indicated in business with the Bangko Sentral Regional
Appendix 6. Offices/Branches.
b. Authorized signatories The Bangko Sentral Branch Operations
(1) Category A-1 reports shall be signed shall be advised of any changes in
by the bank’s chief executive officer or, in authorized branch signatories, as well as
his absence, by the executive vice president, authenticating Head Office Senior Officers.
and by the comptroller or, in his absence, c. Deadline for submission of reports
by the chief accountant, or officers holding (1) Regular reports. Unless otherwise
equivalent positions. specified, the deadlines for submission of
(2) Category A-2 reports shall be signed reports enumerated in Appendix 6, shall
by the president, executive vice president, be reckoned on the basis of banking days.
vice president or by an officer holding
For this purpose, banking days shall be
equivalent position.
understood to mean Monday through
(3) Category A-3 and Category B reports
Friday or banking days of the Bangko
shall be signed by officers or their alternates,
Sentral.
duly designated by the board of directors.
(2) Call Reports. The deadline of
The designated signatories of Categories
submission of call reports shall be
A-1, A-2, A-3 and B reports including their
specified in the letter calling for the report.
specimen signatures shall be contained in a (As amended by M-2015-015 dated 16 March 2015 and Circular
resolution approved by the board of No. 870 dated 20 February 2015)
directors. A copy of the board resolution
covering the initial designation and § X192.2 (2008 - X162.2) Sanctions in
subsequent change(s) in signatories as well case of willful delay in the submission of
as specimen signatures of the signatories reports/refusal to permit examination.
and alternates, shall be made available for (Deleted by Circular No. 963 dated 27 June 2017)

§ X192.3
17.06.30
§ X192.3 (2008 - X162.3) Submission required reports which shall be classified

of certain required information. as a Category A-2 report, within the
a. Banks shall submit to the appropriate prescribed deadline, shall be subject to
department of the SES the following: monetary penalties applicable for delayed
(1) Information on bank’s profile reporting under existing regulations.
required in Appendix 7. Any change in any (b) For the willful making of a false/
of the required information submitted, after misleading statement in the documents
the initial submission, shall be reported to required under Item “b” of this Subsection.
the said department immediately. A bank which has been found to have
(2) Any or all of the documents/ willfully made a false or misleading
information on bank’s organization structure statement in the documents required under
and operational policies enumerated in Item “b” of this Subsection shall be subject
Appendix 8. Any subsequent change/ to the monetary penalties applicable to less
issuance should be furnished the department serious offenses under Appendix 67. The
within fifteen (15) banking days from such willful making of a false or misleading
change/issuance. statement shall be reckoned on a daily basis
b. Banks registered with SEC to act as from the day following the due date of the
broker, dealer or transfer agent pursuant to said certification until such time that an
Sections 28 and 39 of R.A. No. 8799 and amended or corrected document has been
SRC Rules 28.1 and 36.4 and those submitted to the Bangko Sentral.
accredited by DOF-BTr as GSEDs pursuant 2. On the concerned officer
to DOF Department Order No. 20-10, shall (a) For willful non-compliance. The
submit to the appropriate SES department concerned officer/s of the bank who
not later than December 15 every year, the willfully fail/refuse to comply with the
following reports: provisions of Item “b” of this Subsection shall
(1) List of bank personnel acting as be subject to the monetary penalties
salesmen or associated persons; applicable to less serious offenses under
(2) List of licenses granted by SEC and/or Appendix 67.
DOF-BTr (as broker, dealer, broker-dealer, (b) For false/misleading statements. The
GSED and/or transfer agent); and concerned officers which have been found
(3) Notarized certification stating that to have willfully falsely certified or willfully
the lists submitted pursuant to Items “b(1)” submitted misleading statements in the
& “b(2)” of this Subsection are complete and certification and/or in the list of bank
accurate lists and that the personnel acting as personnel required to be submitted under
salesmen or associated persons are duly Items “b(1)” & “b(2)” of this Subsection, shall
licensed/authorized by the SEC to act as such. be subject to the monetary penalties
The notarized certification shall be applicable to less serious offenses under
signed by the president or officer of Appendix 67, which shall be reckoned on a
equivalent rank. daily basis from the day following the due
c. Sanctions. The following sanctions date of the said certification/list until such
shall be imposed on the bank and/or its time that an amended or corrected
concerned officers for violations of Item “b”, certification and/or list of bank personnel
of this Subsection: have been submitted to the Bangko Sentral.
1. On the bank The imposition of the above sanctions
(a) For willful delay to submit the is without prejudice to the filing of
documents required under Item “b” of this appropriate criminal charges against the
Subsection. A bank failing to submit the culpable persons as provided under

§§ X192.3 - X192.4
17.06.30
Section 35 of R.A. No. 7653 for the wilful Item “a” of this Subsection shall be subject
making of a false/misleading statement. to the monetary penalties applicable to less
(As amended by Circular No. 866 dated 07 January 2015) serious offenses under Appendix 67. The
willful making of a false or misleading
§ 1192.3 Submission of certain required statement shall be reckoned on a daily basis
information by UBs. from the day following the due date of the
a. UBs registered with the SEC as said certification until such time that an
Underwriters pursuant to P.D. No. 129 amended or corrected document has been
(The Investment Houses Law), R.A. No. submitted to the Bangko Sentral.
8791 (The General Banking Law), R.A. No. 2. On the concerned officer
8799 (The Securities Regulations Code) and (a) For willful non-compliance. The
the Omnibus Rules and Regulations for concerned officer/s of the bank who
Investment Houses and UBs registered as willfully fail/refuse to comply with the
Underwriters of Securities shall submit to provisions of this Subsection shall be subject
the appropriate SES department not later than to the monetary penalties applicable to less
December 15 every year, the following serious offenses under Appendix 67.
reports: (b) For false/misleading statements. The
(1) List of bank personnel performing concerned officers which have been found
underwriting functions; and to have willfully falsely certified or willfully
(2) Notarized certification stating that the submitted misleading statements in the
list submitted pursuant to Item “a(1)” of this certification and/or in the list of bank
Subsection is a complete and accurate list and personnel required under Item “a” of this
that the personnel performing underwriting Subsection, shall be subject to the monetary
functions are duly licensed/authorized by the penalties applicable to less serious offenses
SEC to perform such functions. under Appendix 67, which shall be
The notarized certification shall be reckoned on a daily basis from the day
signed by the President or officer of following the due date of the said
equivalent rank. certification/list until such time that an
b. Sanctions. The following sanctions amended or corrected certification and/or
shall be imposed on the bank and/or its list of bank personnel have been submitted
concerned officers for violations of this to the Bangko Sentral.
Subsection: The imposition of the above sanctions
1. On the bank is without prejudice to the filing of
(a) For willful delay to submit the appropriate criminal charges against the
documents required under Item “a” of this culpable persons as provided under
Subsection. A bank failing to submit the Section 35 of R.A. No. 7653 for the willful
required reports which shall be classified making of a false/misleading statement.
as a Category A-2 report, within the (Circular No. 866 dated 07 January 2015)
prescribed deadline, shall be subject to
monetary penalties applicable for delayed § X192.4 (2008 - X162.4) Report on
reporting under existing regulations. crimes/losses. Banks shall report on the
(b) For the willful making of a false/ following matters to the appropriate
misleading statement in the documents department of the SES.
required under Item “a” of this Subsection. a. Crimes whether consummated,
A bank which has been found to have frustrated or attempted against property/
willfully made a false or misleading facilities (such as robbery, theft, swindling
statement in the documents required under or estafa, forgery and other deceits) and

§ X192.4
17.06.30
other crimes involving loss/destruction of have participated in any act or proceeding

bank property when the amount involved, when they did not in fact so participate;
in each crime is P20,000 or more. (c) Attributing to persons who have
Crimes involving bank personnel, participated in an act or proceeding
regardless of whether or not such crimes statements other than those in fact made by
involve the loss/destruction of bank them;
property, even if the amount involved is less (d) Making untruthful statements in a
than P20,000, shall likewise be reported to narration of facts;
the Bangko Sentral. (e) Altering true dates;
b. Incidents involving material loss, (f) Making any alteration or
destruction or damage to the bank’s intercalation in a genuine document which
property/facilities, other than arising from changes its meaning;
a crime, when the amount involved per (g) Issuing in an authenticated form a
incident is P100,000 or more. document purporting to be a copy of an
c. Definition of terms. For the purpose original document when no such original
of this regulation, the following definitions exists, or including in such a copy a
shall apply: statement contrary to, or different from, that
(1) Estafa - a crime committed by a of the genuine original; or
person who defrauds another causing the (h) Intercalating any instrument or note
latter to suffer damage by means of any of relative to the issuance thereof in a protocol,
the following: registry, or official book and other acts
(a) unfaithfulness or abuse of confidence; falling under Articles 169, 171 and 172 of
(b) false pretense; or the Revised Penal Code, as amended.
(c) fraudulent acts/means, under (5) Credit-card related crimes - crimes
Articles 315 to 317 of the Revised Penal arising through the use of credit cards.
Code, as amended. (6) Other crimes that may cause
(2) Theft - a crime committed by a loss to the bank - crimes committed that
person who, with intent to gain but without cannot be appropriately classified under
violence against or intimidation of persons any of the above classifications.
nor force upon things, shall take personal (7) Negligence - the failure to
property of another without the latter’s exercise the care which an ordinarily
consent pursuant to Article 308 and other prudent person would use under the
pertinent provisions of Chapter III, Title X circumstances in the discharge of the duty
of the Revised Penal Code, as amended. then resting upon him (People v. Aguilar,
(3) Robbery - a crime committed by a 2899-R, 18 October 1949).
person who, with intent to gain, shall take (8) Non-crime related loss - Incidents
any personal property belonging to another, that may cause the bank to suffer a loss
by means of violence against or intimidation arising from fortuitous events.
of any person, or using force upon anything (9) Insider - person involved include
pursuant to Article 295 and other pertinent stockholders, directors, officers and
provisions of Chapter 1, Title X of the Revised employees of the bank.
Penal Code, as amended. (10) Outsider - persons involved other
(4) Falsification - a crime committed than an insider.
by a person who falsifies a document by (11) Perpetrator - a person, whether an
(a) Counterfeiting or imitating any insider or outsider, who is responsible for
handwriting, signature or rubric; the commission of crime either by direct
(b) Causing it to appear that persons participation, inducement or cooperation,

§§ X192.4 - X192.5
17.06.30
including accomplices and accessories as bank’s head office unit and shall be certified
defined under Articles 18 and 19 of the correct by the compliance officer. The report
Revised Penal Code, as amended. shall be assigned a prescribed reference
(12) Victim - an insider or outsider other number by the bank using the format
than the perpetrator, who is the aggrieved mm-yyyy-xxx with mm and yyyy as numeric
party to the crime and may as a result of the code for the month and year of reporting
incident, suffered the loss. respectively and xxx as sequence no. (e.g.
(13) Attempted crime - a crime is 01-2007-001) which shall be a continuing
attempted when the perpetrator commences series until the end of the year.
the commission of the crime directly by The report shall be prepared using the
overt acts but does not perform all of the new format in two (2) copies and shall be
acts of execution which constitute the crime submitted to the SDC and to the Bangko
by reason of some cause or act other than Sentral Security Coordinator, thru the
his own voluntary desistance under Article Director, Security, Investigation and
6 of the Revised Penal Code, as amended. Transport Department (SITD) within ten
(14) Frustrated crime - a crime is (10) calendar days from knowledge of the
classified as frustrated, when the perpetrator crime/incident;
performs all the acts of execution which (2) Where a thorough investigation
should produce the crime as a consequence and evaluation of facts is necessary to
but which, nevertheless, do not produce it complete the report, an initial report
by reason of causes independent of the will submitted within deadline may be
of the perpetrator under Article 6 of the accepted: Provided, That a complete
Revised Penal Code, as amended. report is submitted not later than twenty
(15) Consummated crime - a crime is (20) calendar days from termination of
consummated when all the acts of execution investigation.
which constitute the crime was performed. Moreover, initial and/or final reports on
As a result, the bank may have suffered a crimes and losses as required under SES
loss, the recoverable portion of which Form 6G that are considered erroneous/
should be deducted to arrive at the probable delayed/erroneous and delayed/
loss incurred by the bank. unsubmitted shall be subject to the penalties
(16) Termination of the investigation - an for Category B reports under Subsec. X184.3;
investigation is said to be terminated when and
all the material facts/information which are (3) Proof of submission of the report
sufficient to support a conclusion relative shall be determined by the date of postmark,
to the matters involved have already been if the report was sent by mail or by the date
gathered and a finding/conclusion may be received, if handcarried to the SDC and
made based on the gathered information. SITD.
d. The following guidelines shall be (As amended by Circular Nos. 963 dated 27 June 2017 and 587
observed in the preparation and submission dated 26 October 2007)
of the report:
(1) The Branch or Head Office unit’s § X192.5 (2008 - X162.5) Report on real
Report on Crimes and Losses shall be estate/chattel transactions.
submitted to the Bangko Sentral through the (Deleted by Circular No. 737 dated 19 September 2011)
(Next page is Part 1 - Page 137)

§§ X192.6 - X192.9
17.03.31
§ X192.6 (2008 - X162.6) Offices: Provided, That the head office of

Reconciliation of head office and branch a bank may submit to the SDC in electronic
transactions. Banks shall prepare form the batched copy of all its banking
reconciliation statements covering units’ Quarterly Statement of Condition and
transactions between the head office and Statement of Income and Expenses by
all its branches within thirty (30) banking Banking Unit in behalf of its branches and
days after the end of each month. other offices;
The reconciliation statement shall be b. Where a particular report form calls
made available for inspection by Bangko for distribution of copies to other
Sentral examiners and submitted to the departments of the Bangko Sentral, the
Bangko Sentral upon request of the bank concerned shall furnish said
appropriate supervising department of the copies of the report directly to the
SES. respective departments of the Bangko
(As amended by Circular No. 870 dated 20 February 2015) Sentral; and
c. As an exception to Item “a” above,
§ X192.7 (2008 - X162.7) List of the duplicate copy of the bio-data for
stockholders and their stockholdings. directors/officers shall be submitted to the
a. Banks shall submit to the SDC of the Bangko Sentral.
appropriate department of the SES
annually a complete list of stockholders § X192.9 (2008 - X162.9) Publication/
and their stockholdings in the prescribed Posting of balance sheet.
form within the deadline indicated in a. UBs/KBs, TBs, RBs and Coop Banks
Appendix 6. with resources of P1.0 billion and above
b. Any change in the list shall also be (1) Banks belonging to this category
reported to the said department in such shall accomplish the prescribed form and
frequency and within the deadline publish their quarterly Balance Sheet (BS)
indicated in Appendix 6, indicating the as of the cut-off date indicated in the call
name(s) and/or stockholdings involved letter issued by the SES.
which is/are to be cancelled or replaced, The Consolidated Balance Sheet (CBS)
and the new name(s) and/or of a bank and its subsidiaries and affiliates
stockholdings which shall be included shall be published side by side with the BS
for that quarter. In case no change of its head office and its branches/other
occurred during a particular quarter, the offices.
report shall provide a notation, viz “no (2) The CBS of the bank and its
change(s) since last report submitted for subsidiaries and affiliates shall be
quarter ended, , 20 ”. prepared in accordance with the rules of
consolidation provided under the
§ X192.8 (2008 - X162.8) Bangko Financial Reporting Package (FRP), in
Sentral offices, where reports are which case, only financial allied
submitted. Submission of Bangko Sentral subsidiaries, except subsidiary insurance
periodic or call reports shall be as follows: companies, shall be consolidated on a
a. All banking offices shall submit line-by-line basis, while non-financial
the required reports in accordance with allied subsidiaries including subsidiary
Appendix 6 to the Bangko Sentral, Manila insurance companies shall be accounted
or to the nearest Bangko Sentral Regional for using the equity method.

§ X192.9
17.03.31
(3) Such BS, and CBS where applicable, all its branches are located. The posting
shall be published in a newspaper of general shall be printed on 12”x18” white paper,
circulation in the city/province where the preferably white buff paper (cartolina) and
principal office, in the case of a domestic shall be made within twenty (20) banking
bank, or the principal branch/office, in the days from the end of the reference quarter
case of a foreign bank, is located, but if no and for a period of thirty (30) successive
newspaper is published in the same calendar days.
province, then in a newspaper published (2) (a) A TB, RB and Coop Bank that
in Metro Manila or in the nearest city/ shall publish/post its quarterly BS shall
province. submit a soft copy of the same to the SDC
(4) The names and position/ within twenty (20) banking days after the end
designation of the members of the board of the reference quarter.
of directors, president and executive vice (b) Banks that are incapable of
presidents (senior vice presidents, if there submitting the BS in electronic form shall
are no executive vice presidents), shall be submit the same in hard copy to the SDC
published and shown in the right side within the said deadline.
column of the published BS as of June of (c) I n e i t h e r c a s e , a n a f f i d a v i t
every year. executed by the president, or in his absence,
the vice-president or manager, as the
(5) (a) Before publication, a soft copy
case may be, shall likewise be submitted
of the BS shall be submitted to the SDC
to the SDC within the said deadline.
within twelve (12) banking days from the
c. Additional information required
date of the call letter.
Banks shall disclose the following
Further, a hard copy of the control proof
information in the quarterly published/
list for the said report shall likewise be
posted BS:
submitted to the SDC within the said (1) Solo BS (Head Office and Branches/
deadline. Other Offices)
(b) B a n k s t h a t a r e i n c a p a b l e o f (a) Gross total loan portfolio (TLP);
submitting the BS in electronic form (b) Specific allowance for credit losses
shall submit the same in hard copy to on the TLP ;
the SDC within the said deadline. (c) Non-performing loans (NPLs):
(c) The published BS with the (i) Gross NPLs;
publisher’s certificate shall be submitted (ii) Ratio of gross NPLs to gross TLP (%);
within twenty (20) banking days after the (iii) Net NPLs. This shall refer to gross
date of said call letter to the SDC. NPLs less specific allowance for credit losses
b. TBs/RBs/Coop Banks with on NPLs;
resources of less than P1 billion (iv) Ratio of net NPLs to gross TLP (%);
(1) A TB, RB and Coop Bank (v) Ratio of total allowance for credit
belonging to this category shall either losses to gross NPLs (%);
publish its quarterly BS as of the cut-off (vi) Ratio of specific allowance for credit
date indicated in the call letter issued by losses on the gross TLP to gross NPLs (%);
the SES of the Bangko Sentral, in a (d) Classified loans and other risk assets,
newspaper of general circulation as in gross of allowance for credit losses;
Item “a(3)” above or post the same in the (e) DOSRI loans and receivables, gross
most conspicuous area of its premises, in of allowance for credit losses;
the municipal building, municipal public (f) Ratio of DOSRI loans and receivables,
market, barangay hall and barangay gross of allowance for credit losses, to gross
public market where the head office and TLP (%);

§§ X192.9 - X192.10
17.03.31
(g) Gross non-performing DOSRI loans June Semester end Sum of end-month capital
NIAT accounts (December -
and receivables; multiplied by 2. June) divided by 7.
(h) Ratio of gross non-performing DOSRI Sept. Nine (9) mos. Sum of end-month capital
loans and receivables to gross TLP (%); NIAT accounts (December -
multiplied by September) divided by10.
(i) Percent compliance with Magna Carta 1.33333.
• 8% for micro and small enterprises; Dec. Year end Sum of end-month capital
• 2% for medium enterprises; NIAT accounts (December -
December) divided by 13.
(j) Return on equity (ROE) (%); d. Deferment of publication
(k) CAR on solo basis, as prescribed requirement.
under existing regulations: The abovementioned publication
(i) Total CAR requirement may be deferred by the
(ii) Tier 1 CAR Monetary Board by at least five (5)
(iii) CET 1 CAR affirmative votes upon application by the
(l) Deferred charges not yet written bank concerned during periods of national
down; and and/or local emergency or of imminent
(m) Unbooked allowance for credit panic which directly threaten monetary
losses on financial instruments received. and banking stability.
(2) Consolidated Balance Sheet (parent The amended prescribed form for the
bank and financial allied subsidiaries published BS shall be used starting with the
excluding subsidiary insurance companies) quarter-end March 2013 reports.
(a) List of financial allied subsidiaries (As amended by Circular Nos. 941 dated 20 January 2017, 788
(excluding subsidiary insurance companies) dated 26 February 2013, 781 dated 15 January 2013 and 576
(b) List of subsidiary insurance dated 08 August 2007)
companies
(c) CAR on consolidated basis, as § X192.10 (2008 - X162.10) Consolidated
prescribed under existing regulations: financial statements of banks and their
(i) Total CAR subsidiaries engaged in financial allied
(ii) Tier 1 CAR undertakings. Banks shall submit after the
(iii) CET 1 CAR end of the calendar year or the end of the
For purposes of additional information, fiscal year adopted by the bank their
all amounts and ratios shall be as of the same consolidated financial statements and
call date. However, the basis for computing supported by the individual annual financial
the ROE shall be the latest quarter statements of their subsidiaries engaged in
immediately preceding the call date using financial allied undertakings.
the following formula: For purposes of this Subsection, the
consolidated financial statements shall
Return on Average Equity (%) = conform to the guidelines of PAS 27
Net Income (or Loss) after Income Tax x 100
Average Total Capital Accounts “Consolidated and Separate Financial
Statements” except that for purposes of
Where net income/(loss) after tax and consolidated financial statements, the
average total capital accounts shall be: provisions of Subsec. X191.3a shall apply.
The consolidated financial statements
Net Income
After Tax Average Total Capital and the supporting individual financial
Quarter (loss) (NIAT) Accounts statements of their subsidiaries shall be
March Quarter end Sum of end-month capital submitted to the appropriate department of
NIAT accounts (December -
multiplied by 4. March) divided by 4. the SES within the deadline indicated in
Appendix 6.

§§ X192.11 - X192.12
17.09.30
§ X192.11 (2008 - X162.11) Reports regulatory authorities in the country of

of other banking offices. Extension offices operations;
of banks which maintain separate books of c. When material changes noted in the
accounts shall be subject to all reporting annual financial statements warrant an
requirements of a regular branch. interim comprehensive evaluation, the
An extension office whose record of foreign affiliate concerned shall be
transactions/accounts is consolidated daily requested to submit to the appropriate
with its mother unit shall submit only the department of the SES, through its domestic
Selected Financial Accounts form as listed investor-bank, copies of its quarter/interim
in Appendix 6. reports to stockholders or the call reports in
Convenience Banking Centers (CBCs) the case of U.S. banks;
are not required by Bangko Sentral to submit d. Audited financial statements (AFS)
Statement of Condition (SOC) and of the foreign banking offices and
Statement of Income and Expenses (SIE). A subsidiaries; and
CBC is not considered as a branch but as e. Examination reports done by the
an extension office of a bank without foreign bank supervisory authority.
separate books of accounts which directly The submission of the documents in
reports its transactions to its mother branch. Items “d” and “e” to Bangko Sentral shall
not be later than thirty (30) banking days
§ X192.12 (2008 - X162.12) Reports from date of submission/release of said
required of foreign subsidiaries/affiliates/ reports to the foreign banking offices and
banking offices or non-bank entities of subsidiaries of Philippine banks. Material
domestic banks. The submission of findings, if any, contained in said reports
periodic reports of a foreign subsidiary/ should be highlighted.
affiliate/banking offices or non-bank f. For purpose of this Subsection,
entities of domestic banks shall be affiliate shall refer to an entity linked directly
governed by the following rules: or indirectly to a bank by means of:
a. For foreign subsidiaries/affiliates of (1) Ownership, control as defined
domestic banks, the local investor-bank(s) under Subsec. X141.1d, or power to vote,
concerned shall regularly submit to the of at least twenty percent (20%) of the
appropriate department of the SES a outstanding voting stock of the borrowing
quarterly statement of condition and entity, or vice-versa;
quarterly/annual report of income and (2) Interlocking directorship or
expenses concerning the operations of the officership, where the concerned director
foreign subsidiaries/affiliates, including or officer owns; controls, as defined under
such other periodic reports which may be Subsec. X141.1d; or has the power to vote
required from time to time in the forms of at least twenty percent (20%) of the
prescribed by the Bangko Sentral for outstanding voting stock of the borrowing
domestic financial intermediaries to the entity;
extent that their operations are applicable; (3) Common stockholders owning at
b. For foreign subsidiaries/affiliates of least ten percent (10%) of the outstanding
domestic banks, the appropriate department voting stock of the bank and at least twenty
of the SES shall be furnished by said percent (20%) of the outstanding voting stock
domestic banks copies of the annual report of the borrowing entity;
prescribed by any of the supervisory/ (4) Management contract or any

§§ X192.12 - X192.14
17.09.30
arrangement granting power to the bank to all head offices of UBs/KBs to the
direct or cause the direction of management Department of Economic Research of the
and policies of the borrowing entity; or Bangko Sentral not later than 4:00 PM on
(5) Permanent proxy or voting trusts in Thursday after end of reference week.
favor of the bank constituting at least twenty b. Short-term prime rates. All UBs and
percent (20%) of the outstanding voting KBs shall submit in the prescribed form a
stock of the borrowing entity, or vice-versa. report on the volume and interest rates on
For purposes of this Manual, the above credit line availments under short-term
definition of affiliate shall be adopted except prime rates in such frequency and within
where the provision of the regulation the deadline indicated in Appendix 6.
expressly states otherwise. c. (Deleted by Cir. No. 405 dated
(As amended by Circular Nos. 969 dated 22 August 2017 and 28 August 2003).
914 dated 23 June 2016) d. Foreign Exchange Position Report
Banks may be allowed to submit on a
§ X192.13 Report on cross-border weekly basis the notarized certification
financial positions. The Report on signed by the bank’s president/CEO/country
Cross-Border Financial Positions is designed manager and the treasurer to cover the daily
to measure and monitor the cross-border hard copies of Schedule 13, FX Form I and
financial claims and liabilities of UBs and CFXPR pertaining to each day of the week.
KBs and their subsidiary TBs to provide the Delayed submission of the notarized
Bangko Sentral with a comprehensive view certification shall be subject to monetary
of potential financial risks and transmission penalty, as follows:
channels emanating from foreign Daily Penalty
counterparties of Philippines banks. st
1 banking day of P6,000.00 (equivalent
All UBs/KBs and their subsidiary TBs delay P1,200.00 per day for
shall submit the Report on Cross-Border five (5) report dates covered
Financial Positions on a solo basis in by the certification on the
accordance with the Guidelines on the assumption that the five (5)
completion of the Report in Appendix 106. weekdays of the reference
This report shall be considered week are all banking days)
Category B report. nd
2 banking day of P1,200.00/day
(Circular No. 850 dated 08 September 2014, as amended by delay and onwards
Circular No. 890 dated 02 November 2015)
§ 1192.13 (2008 - 1162.13) Additional
reports from UBs/KBs. § 3192.13 (Reserved)
a. Volume and weighted average
interest rates of deposits and loans. Data § X192.14 (2008 - X162.14) Reports
on the volume of transactions and weighted of strikes and lockouts. Banks through
average interest rates of certificates of time their president or chief executive officer
deposits and secured/unsecured loans shall immediately apprise the Deputy
granted, classified by maturity, and Governor of the SES of the Bangko Sentral
outstanding savings deposits classified by on the status of strikes/lockouts involving
interest rates, shall be prepared daily (except their banks, if unsettled after seven (7)
data on savings deposits which shall be calendar days. The bank shall disclose the
prepared weekly) and submitted weekly by following pertinent information on the

§§ X192.14 - X192.18
17.06.30
strike/lockout: Unit of
a. Cause of the strike/lockout and Data Item Expression
I. Month of Loan Granted/ Number
bank management’s position on its
Booked
legality; and II. Location of Property Number
b. Bank operations affected. III. Type of Property Number
IV. Type of Housing Unit Number
§ X192.15 (2008 - X162.15) Report on V. Appraised Value of Peso Amount
Housing Unit
the Sworn Statement on Real Estate/
VI. Total Floor Area Number
Chattel Transactions. VII. Number of Floors Number
(Deleted by Circular No. 737 dated 19 September 2011) VIII. Number of Bedrooms Number
IX. Effective Age of Housing Number
§ X192.16 Notarized contracts/ Unit
X. Appraised Value of Lot Peso Amount
agreements between banks and
XI. Total Lot Area Number
their related microfinance (MF) XII. Total Appraised Value Peso Amount
non-governmental organizations of Property
(NGO’s)/foundations. Business relationships XIII. Housing Segment Number
between banks and their related MF NGO’s/ XIV. Acquisition Cost Peso Amount
XV. Name of Developer Number
foundations shall be covered by notarized XVI. Name of Other Number
contracts/agreements specifying the nature of Developer
transactions and enumerating the terms and (Circular No. 892 dated 16 November 2015, M-2015-042 dated
conditions thereof. 02 December 2015)
Banks shall submit said notarized
contracts/agreements within fifteen (15) § X192.18 Report on Repurchase
banking days from the date of meeting of Agreements. The Report on Repurchase
the board of directors approving said Agreements is designed to capture timely
contracts/agreements. and comprehensive transactional-level data
Said notarized contracts/agreements on repos of UBs and KBs and their
shall be considered Category A-3 reports. subsidiary TBs to strengthen financial
Submission of said reports shall become surveillance, particularly in monitoring
effective starting with the reporting period market trends and vulnerabilities in the repo
ended 30 September 2011. market, and to enable the Bangko Sentral to
(Circular No. 725 dated 16 June 2011) formulate effective policy responses to
ensure continued stability of the financial
§ X192.17 Submission of Bank system.
Quarterly Report on Residential Real All UBs/KBs and their subsidiary TBs
Estate Loans for the Generation of the shall submit the Report on Repurchase
Residential Real Estate Price Index. To Agreements on a solo basis in accordance
generate the Residential Real Estate Price with the Guidelines on the completion of
Index (RREPI) as a valuable tool in the Report in Appendix 116.
assessing the real estate and credit market This report shall be considered a
conditions in the country, all UBs/KBs and Category B report.
TBs on a solo basis, shall submit a Erroneous/delayed/erroneous and
quarterly report to the Bangko Sentral delayed/unsubmitted reports shall be
covering the following data on properties subject to penalties prescribed under
acquired through residential real estate Subsec. X184.3 for Category B reports.
loans granted by banks: (Circular No. 923 dated 31 August 2016, as amended by Circular
No. 963 dated 27 June 2017)

§§ X193 - X196.2
11.12.30
O. PROMPT CORRECTIVE ACTION Secs. X194 - X195 (Reserved)

FRAMEWORK
P. LIQUIDATION AND RECEIVERSHIP
Sec. X193 (2008 - X106.4) Prompt
Corrective Action Framework. A bank may Sec. X196 Voluntary Liquidation.
be subject to PCA whenever any or all of The following guidelines shall be observed
the following conditions obtain: when a bank decides to undertake
(1) When either of the Total Risk-Based voluntary liquidation as a consequence of
CAR, Tier 1 risk-based ratio, or leverage voluntary dissolution, such as (i) by vote
ratio (total capital/total assets) falls below of the board of directors and stockholders,
ten percent (10%), six percent (6%) and five where no creditors are affected;
percent (5%), respectively, or such other (ii) judgment of the SEC after hearing the
minimum levels that may be prescribed for petition for voluntary dissolution;
the said ratios under relevant regulations, (iii) amending the articles of incorporation
and/or the combined capital account falls to shorten the corporate term.
below the minimum capital requirement
prescribed under Subsec. X111.1; § X196.1 Prior Monetary Board
(2) CAMELS composite rating is less approval. Upon voluntary dissolution of
than three “3” or a Management component a bank pursuant to the provisions of the
rating of less than three “3”; and Corporation Code, voluntary liquidation
(3) A serious supervisory concern has may be undertaken by the bank itself
been identified that places a bank at through its board of directors, by a trustee
more-than-normal risk of failure in the appointed by the bank, or by a receiver
opinion of the Director of the examination appointed to the bank: Provided,
department concerned, which opinion is however, That no voluntary dissolution
confirmed by the Monetary Board. Such shall be undertaken by a bank without
concerns could include, but are not limited, prior approval of the Monetary Board:
to any one (1) or a combination of the Provided, further, That requests for
following; approval of a voluntary dissolution shall
(a) Finding of unsafe and unsound be accompanied by a liquidation plan
activities that could adversely affect the which lays down the procedure to be
interest of depositors and/or creditors; adopted by the bank in the event of
(b) A finding of repeat violations of liquidation: Provided, finally, That written
law or continuing failure to comply with notice shall be sent to the Monetary Board
Monetary Board directives; and before actual liquidation is undertaken in
(c) Significant reporting errors that accordance with the liquidation plan
materially misrepresent the bank’s previously approved by the Monetary
financial condition. Board.
The framework for the enforcement of
PCA on banks and other FIs under Bangko § X196.2 Liquidation plan.
Sentral supervision is in Appendix 69. The minimum requirements to be set forth
(Circular No. 523 dated 23 March 2006, as amended by Circular in a liquidation plan are the following:
Nos. 729 dated 08 July 2011 and 664 dated 15 September 2009)

§§ X196.2 - X198.2
08.12.31
a. Inventory/Appraisal of assets and § X196.8 Final liquidation report. The

liabilities. Submission to the Monetary board of directors/trustee/receiver shall
Board within thirty (30) days from written submit to the Monetary Board a final
notice of liquidation, a schedule/inventory liquidation report after winding up the
and status/appraisal reports on assets and affairs of the bank.
liabilities of the bank.
b. Notice to creditors requirement. Sec. X197 (Reserved)
Notice by registered mail to all recorded
claimants of the bank, and notice by Sec. X198 Insolvency or Receivership
publication in a newspaper of general of Banks. The rules and regulations
circulation at least once a week for two (2) governing insolvency and receivership
consecutive weeks, to be made within are as follows:
thirty (30) days from submission of
aforesaid inventory of assets and liabilities. § X198.1 Definition of term. A “bank
c. Conversion of assets into money. declared insolvent or placed under
Projected timetable in the conversion, receivership by the Monetary Board”
manner of sale (public auction, sealed shall refer to a banking institution that has
bidding, or on negotiated basis), notice by been forbidden from doing business in
publication requirement, and report on the Philippines by the Monetary Board
liquidation to be submitted to the Monetary under the applicable grounds provided
Board. for under Section 30 of R.A. No. 7653
d. Final notice to claimants/creditors. and placed under receivership of the
Undertaking of the board of directors/ PDIC.
trustee/receiver to cause, within thirty (30)
days from conversion into money of all or § X198.2 Prohibited acts. Any director
substantially all of the assets of the bank, or officer of a bank declared insolvent
the publication in a newspaper of general or placed under receivership by the
circulation at least once a week for two (2) Monetary Board shall not commit any of
consecutive weeks of a notice giving the following acts:
claimants/creditors fifteen (15) days within a. refusing to turn over the bank’s
which to file their claims. records and assets to the designated
e. Inventory of remaining claims receivers;
against the bank. Submission to the b. tampering with bank records;
Monetary Board of a complete list of all c. appropriating for himself or
remaining claims against the bank, within another party, or destroying or causing
thirty (30) days from the deadline given in misappropriation and destruction of the
the final notice to claimants/creditors. bank’s assets;
f. Plan for distribution of proceeds d. receiving or permitting or causing
of sales and distribution of liquidating to be received in said bank any deposit,
dividends. Submission to the Monetary collection of loans and/or receivables;
Board of a distribution plan of assets e. paying out or permitting or
within thirty (30) days from conversion causing to be paid out any funds of said
of all or substantially all of the assets of bank; and
the bank. f. transferring or permitting or
causing to be transferred any securities or
§§ X196.3 - X196.7 (Reserved) property of said bank.

§§ X198.3 - X199
08.12.31
§§ X198.3 - X198.8 (Reserved) Q. GENERAL PROVISION ON

SANCTIONS
§ X198.9 Penalties and sanctions. Any
director or officer of a bank declared Sec. X199 General Provision on
insolvent or placed under receivership by Sanctions. Except as otherwise provided,
the Monetary Board who commits any of any violation of the provisions of this Part
the foregoing acts shall be subject to the shall be subject to Sections 36 and 37 of
sanctions under Sections 36 and 37 of R.A. R.A. No. 7653.
No. 7653, in correlation with Section 66 of The guidelines for the imposition of
R.A. No. 8791. Moreover, any such director monetary penalty for violations/offenses
or officer thereby sanctioned shall be with sanctions falling under Section 37
included in the watchlist files of directors/ of R.A. No. 7653 on banks, their
officers disqualified by the Monetary Board directors and/or officers are shown in
from holding any position in any bank or FI. Appendix 67.

§§ X201 - X201.3
10.12.31
PART TWO
DEPOSIT AND BORROWING OPERATIONS
A. DEMAND DEPOSITS deposits has been approved, it may actually

accept such deposits, subject to the
Section X201 Authority to Accept or following conditions:
Create Demand Deposits. Banks may a. Submission of a certification signed
accept or create demand deposits subject by the President/Chairman of the Board of
to withdrawal by check. the bank stating that the requirements
A UB/KB may accept or create demand enumerated under Subsec. X201.1 have
deposits subject to withdrawal by check, been complied with up to the day before
without prior authority from the Bangko the checking account services are actually
Sentral. offered/extended to the public;
A TB/RB/Coop Bank may accept or b. That if it is not a member of the
create demand deposits upon prior authority Philippine Clearing House Corporation
of the Bangko Sentral. (PCHC), it has appointed a commercial
bank, or a normally operating thrift bank
§ X201.1 Prerequisites to accept or which is a direct participant in the clearing
create demand deposits for thrift banks/ with the PCHC/Bangko Sentral and has
rural banks/cooperative banks. In addition complied with the minimum capital required
to the Standard Pre-qualification for commercial banks, thru which it shall
Requirements for the Grant of Banking participate in the check clearing system;
Authorities enumerated in Appendix 5, a and
TB/RB/Coop Bank applying for authority to c. That it has complied with all other
accept or create demand deposits shall also conditions that the Bangko Sentral may
comply with the following requirements: impose.
a. The applicant TB/RB/Coop Bank The applicant bank shall submit a written
must have complied with the minimum notice to the appropriate supervising and
capital required under Subsec. X111.1. examining department of the Bangko Sentral
The terms capital and net assets shall of the actual date when the demand deposit
have the same meaning as in Sec. X111. service is offered to the public not later than
b. It has neither unpaid assessment due ten (10) banking days from such offering of
nor past due obligations with the PDIC; and the service.
c. The applicant bank must have been
examined by the Bangko Sentral within § X201.3 Sanctions. If any part of the
one (1) year prior to the date of submission certification submitted by the bank as
of complete documentary requirements required in these guidelines is found to be
with the appropriate department of the SES. false, the following sanctions shall be
(As amended by Circular Nos. 696 dated 29 October 2010, imposed, without prejudice to the sanctions
674 dated 10 December 2009 and 667 dated 01 October 2009) under Section 35 of R.A. No. 7653.
a. On the bank
§ X201.2 Requirements for accepting Suspension of its authority to accept or
demand deposits. After a TB’s/RB’s/Coop create demand deposits for one (1) year.
Bank’s application to accept demand b. On the certifying officer
Manual of Regulations for Banks Part II - Page 1

§§ X201.3 - X202
16.09.30
A fine of P5,000 per day from the time The checks lodged under “RCOCI”
the certification was made up to the time which were dishonored due to insufficiency
the certification was found to be false. of funds shall be returned not later than
7:30 a.m. on the clearing day immediately
Sec. X202 Temporary Overdrawings; following the original date of presentation
Drawings Against Uncollected Deposits. of the COCI to PCHC or RCC.
The following regulations shall govern (2) Clearing through CICS
temporary overdrawings and drawings In case a check clearing item is
against uncollected deposits (DAUDs). dishonored under the CICS, the Drawee
a. Temporary overdrawings. bank shall generate the pertinent electronic
Temporary overdrawings against demand documents1 on the dishonored clearing item
deposit account (DDA) shall not be due to insufficiency of funds and
allowed, unless caused by normal bank electronically submit the same to the
charges and other fees incidental to Presenting Bank through the CICS within
handling such accounts. the prescribed period or not later than
Banks which violate these regulations 7:30 a.m. on the clearing day immediately
shall be subject to a fine of one-tenth of one following the original date of presentation
percent (1/10 of 1%) per day of violation, for clearing of the check clearing item
computed on the basis of the amount of through the CICS.
overdrawing or fines in amounts as may be Peso DDAs maintained by foreign
determined by the Monetary Board, but not correspondent banks with UBs/KBs shall not
to exceed P30,000 a day for each violation. be subject to the above-mentioned
Technical overdrawings arising from regulations: Provided, That:
“force posting” in-clearing checks shall be (a) The maintenance of non-resident
debited by banks under “Returned Checks correspondent bank’s peso DDAs and
and Other Cash Items (RCOCI)” which is overdrawings therefrom are covered by
part of “Other Assets” in the Balance Sheet. reciprocal arrangement;
Items to be lodged under this account shall (b) Temporary overdrawings are
consist only of in-clearing checks which covered within fifteen (15) banking days
may result in “technical overdrawn” from the date overdrawings are incurred;
accounts. and
(1) Clearing under MICR (c) Such accounts are credited only
The RCOCI shall be immediately through foreign exchange inward
reversed the following day, value dated on remittance.
date of original presentation of Checks and b. DAUDs. DAUDs shall be
Other Cash Item (COCI) to PCHC for prohibited except when the drawings are
Integrated Greater Manila local exchanges made against uncollected deposits
(Integrated GM LX) or to Regional Clearing representing manager’s/cashier’s/treasurer’s
Center (RCC) for regional local exchanges checks, treasury warrants, postal money
(RLX). orders and duly funded “on us” checks
1
Such as but not limited to the Return Image Cash Letter (Return ICL) containing the dishonored Regular
Clearing Item [i.e., electronically generated document showing a Check Image with Electronic Payment
Information transmitted via Check Image Clearing System (CICS) to the Drawee bank for collection of the
amount]. Image Cash Letter (ICL) is an ANSI standard interface file specifications (X9.100-187) for electronic
exchange of check and image data. It is generated by the front-end system of a Presenting Bank or Drawee
Bank containing CICS Items transmitted to the Drawee bank or presenting bank, respectively.
Part II - Page 2 Manual of Regulations for Banks

§§ X202 - X203
16.09.30
which may be permitted at the discretion (i) The Drawee bank shall indicate in
of each bank. the electronic documents2 the date when the
(As amended by Circular Nos. 924 dated 07 September 2016, check is returned and the reason for the
705 dated 29 December 2010 and 681 dated 08 February 2010) refusal to pay the same to the holder thereof.
(ii) The Drawee bank shall indicate the
Sec. X203 Returned Checks.
remark or notation “Payment Stopped” or
a. For Checks Cleared through the
“With Stop Payment Order” on the pertinent
MICR/Automated Check Clearing Facility.
electronic documents.
The guidelines on the handling of
(c) The Presenting bank, on the other
returned checks under the MICR/Automated
hand, shall generate the necessary
Check Clearing Facility are provided in documents3 with the images of the clearing
Appendix 117.1 item printed with information on the reason
b. For Checks Cleared through the CICS. for the dishonor. This document together
(1) Checks without sufficient funds/ with the original check shall be handed over
with stop payment orders. to the depositor which shall serve as the
To complement the provisions of Batas official notification on the return or the
Pambansa Blg. 22, (An Act Penalizing the dishonor of the check.
Making or Drawing and Issuance of a Check (d) In front of the original check to be
Without Sufficient Funds or Credit), the handed over to the depositor, the Presenting
following regulations shall govern checks bank shall affix a return stamp, indicating
drawn against insufficient funds and checks therein the date when the check is returned
drawn against closed accounts: and the reason for refusal to pay the same
(a) The Drawee bank shall generate and to the holder thereof.
transmit to the Presenting bank through the (2) Checks dishonored due to technical
CICS, the pertinent electronic documents2 reasons. In a similar manner, the Drawee
containing information on the dishonored bank shall generate and transmit to the
check or the check clearing item including Presenting bank, through CICS pertinent
the date when the check is returned and electronic document/s 2 containing
the reason for the refusal to pay the same to information on the dishonored check or the
the holder thereof. check clearing item including the reason for
(b) Notwithstanding receipt of an order the refusal to pay the same to the holder
to stop payment, the Drawee bank shall thereof. The Presenting bank, on the other
likewise indicate that there are no sufficient hand, upon receipt of the electronic
funds in or credit with such bank for the document/s, shall likewise generate the
payment in full of such check or the account necessary documents3 with the images of
is closed, if such be the fact. The bank shall the clearing item printed with information
also indicate receipt of a stop payment order. on the reason for the dishonor. The same
For checks which shall be dishonored procedure of affixing a return stamp on the
for the reason that payment has been check to be handed over to the depositor
stopped, the following shall be observed: shall be observed.
1
These guidelines shall be in effect until 05 January 2017 or repealed and deleted once Check Clearing
through CICS becomes the sole method for clearing checks through PCHC.
2
exchange of check and image data. It is generated by the front-end system of a Presenting Bank or Drawee Bank
containing CICS Items transmitted to the Drawee bank or presenting bank, respectively.
3
Such as but not limited to the Return Check Advice (RCA).

§§ X203 - X204
16.09.30
(3) The Drawee bank shall transmit the degree of consanguinity and affinity,
electronic documents 1 relative to the including partnerships, associations or
dishonor to the Presenting bank through corporations in which such officers and
CICS within the prescribed period or not employees, their spouses and relatives
later than 7:30 AM on the clearing day within the second degree of consanguinity
immediately following the original and affinity, individually or as a group, own
presentation for clearing of the clearing item or control at least a majority of the capital
through the CICS in accordance with the are prohibited from maintaining demand
following procedures: deposits or current accounts with the
(a) The settlement of interbank banking office in which they are assigned.
transactions vis-à-vis covering reserve However, officers and employees without
requirement/deficiency of banks’ DDA is direct access and involvement in the
shown in Appendix 39. handling of transactions and/or records
(b) The AM clearing window for clearing pertaining to demand deposit operations
items dishonored due to insufficiency of may be allowed to maintain demand
deposits or current accounts in the banking
funds or credit, technical reasons, closed
office where they are assigned subject to
account and/or stop payment order shall be
the following conditions:
conducted from 4:31 PM of the same day
a. It shall be the responsibility of the
up to 7:30 AM on the clearing day
bank concerned to identify the officers,
immediately following the original date of employees, departments or units with direct
presentation of the clearing item to PCHC. involvement in its demand deposit
(c) Returned clearing item in the AM operations and/or deposit records;
clearing window shall be given value on the b. The opening of current accounts of
same date as the date of original presentation officers and employees shall be subject to
of the COCI to PCHC. The amount of debits approval of the head of the branches
and credits on the date of original department or any designated higher ranking
presentation shall be reversed to the extent officer; and
of the amount of credits and debits arising c. The following minimum operating
from the returned clearing item. The process control measures shall be implemented to
restores the balances of the demand deposits ensure systems integrity and mitigate
of banks with the Bangko Sentral to their technology-related risks:
position prior to the settlement of the (1) Tagging of accounts. Savings and
clearing results affected by the clearing items demand deposits of officers and employees,
later returned due to insufficient funds or their spouses and relatives within the
credit, closed account and/or stop payment second degree of consanguinity and affinity,
order. including partnerships, associations or
(As amended by Circular Nos. 924 dated 07 September 2016, corporations in which such officers and
705 dated 29 December 2010 and 681 dated 08 February 2010) employees, their spouses and relatives
within the second degree of consanguinity
Sec. X204 Current Accounts of Bank and affinity, individually or as a group, own
Officers and Employees. As a general rule, or control at least a majority of the capital
officers and employees of banks, their shall be tagged in the bank’s current
spouses and relatives within the second accounts/savings accounts (CA/SA) system;
1
exchange of check and image data. It is generated by the front-end system of a Presenting Bank or Drawee Bank
containing CICS Items transmitted to the Drawee bank or presenting bank, respectively.

§§ X204 - X205
10.12.31
(2) Monitoring of accounts. All accounts authenticated user session including every
maintained by officers, employees and said user input; and
relatives including their business interests (5) Audit trails. Detailed records and
shall be monitored by a designated officer audit trails shall be maintained to
who shall be responsible for ensuring that substantiate the processing of all
accounts of officers and staff are properly transactions. Audit trails must be reviewed
maintained. Any irregularity in the account periodically by a designated officer
activity shall be promptly investigated and commensurate with the risk level of the
reported to the appropriate management information system. The review process
level; must ensure that the reviewer does not
(3) Access controls. Access to all data, review his/her own activity.
application software, operating systems and (As amended by Circular No. 508 dated 24 January 2006)
utilities must be restricted to authorized
persons through appropriate identification Sec. X205 (2008 - X603) Check Clearing
mechanisms and access codes and such Rules for Banks Authorized to Accept
authentication and authorization controls Demand Deposits.1 The following are the
must be fully documented and auditable. check clearing rules for banks authorized
No officer or employee, regardless of rank to accept demand deposits:
or position, shall be allowed to process any a. Banks authorized to accept
transaction from initiation to final demand deposits may participate in the
authorization; clearing process conducted by the PCHC,
(4) Data capture. Operating procedures subject to the latter’s accreditation rules,
for data capture, update and retrieval must either through (i) direct participation in
be strictly adhered to. The operating system clearing operations; or (ii) indirect
shall maintain a permanent record of each participation through conduit
1
See schedule of revised clearing and settlement process shown as footnote of Sec. X202.

§ X205
10.12.31
arrangements with UBs/KBs. Other banks month, two (2) months prior to the date of
may indirectly participate through application with the DLC; otherwise, its
maintenance of DDAs with UBs/KBs as outward clearing items shall be subject to
settlement account for demand deposit or second day value dating.
NOW accounts of TBs/RBs. Other banks may also apply for
b. Banks authorized to participate collateralized OCL in any amount.
directly in the clearing in PCHC shall be (3) Provided the overdraft does not
subject to the following measures to manage exceed the ceiling as defined in Item “2”
the settlement risks: hereof, the bank may avail of the clean/
(1) Settlement of both inward and collateralized OCL. The availments against
outward items shall be value dated on the the approved clean/collateralized OCL shall
day the checks are originally presented to bear interest at a rate equivalent to one-tenth
PCHC or RCC, net of AM returns. For this of one percent (1/10 of 1%) per day or the
purpose, the value date or settlement date ninety-one (91)-day T-Bill rate of the last
referred to herein shall be defined uniformly auction immediately preceding the
as the date of original presentation of the availment, plus three percentage (3%)
COCI to PCHC for the Integrated GM LX points, whichever is higher.
and to the RCC for the RLX. For the (4) The availment shall be for a
Integrated GM Outward to Region, maximum period of five (5) consecutive
Integrated GM Inward from Region and clearing days or five (5) clearing days within
Region to Region clearing, the value date or any thirty (30)-day rolling calendar period,
settlement date shall be on the day the after which the OCL shall be suspended.
COCIs are received and processed at (5) Should the overdraft exceed the
PCHC. ceiling, as defined in Item “2” hereof, no
(2) A ceiling shall be set on the amount availment of the clean/collateralized OCL
of overdraft a bank may incur due to failure shall be allowed.
to cover clearing losses through interbank (i) In the case of end-of-day overdraft,
borrowings and/or repurchase agreements the Payments and Settlements Office (PSO)
with the Bangko Sentral. The ceiling is shall advise the PCHC of the amount
defined as the sum of clean Overdraft Credit available for settlement of the drawee bank’s
Line (OCL) equivalent to fifteen percent net clearing loss, beyond which amount
(15%) of rediscounting line with the Bangko inward clearing items will be unwound in
Sentral, and the collateralized OCL that will accordance with the PCHC Clearing House
be extended by Bangko Sentral. A bank not Rules and Regulations.
meeting the following criteria: (ii) In the case of final overdraft, i.e.,
(i) CAMELS composite rating of at after AM returns, where unwinding is no
least “3”; longer possible, the bank shall be excluded
(ii) CAR of at least ten percent (10%); from next clearing. The PSO shall advise
or the PCHC of such exclusion upon prior
(iii) No chronic reserve deficiencies for Monetary Board approval.
the immediately preceding one (1) year, or (6) The collateralized OCL may be
other measures as may be defined by the converted into an emergency loan provided
Bangko Sentral for this purpose, should the bank complies with the guidelines
apply for collateralized OCL in an amount governing the grant of emergency loans
equivalent to at least five percent (5%) of under Subsec. X272.2 or may be subject to
their demand deposit liabilities as of end of foreclosure of collateral.

§§ X205 - X213
17.09.30
The guidelines implementing Item “b” its Check Image and Clearing System (CICS)
of this Section are in Appendix 31. upon receipt by the Bangko Sentral of a
c. In indirect participation through written notice from the PCHC that CICS is
conduit arrangement, where the clearing operational.1
results of participating TBs/RBs are Banks shall observe the clearing
consolidated with those of the conduit UBs/ procedures in accordance with the PCHC
KBs, caps shall be set on the net clearing Clearing House rules and regulations for the
losses to be passed on to the conduit UB/ clearing of checks including the Banks’
KB by the TB/RB. responsibility to verify the accuracy of
The cap is defined as the combined value reports and directly communicate with the
of the following amounts: concerned party regarding any clearing
(1) the TB/RB’s DDA with the Bangko discrepancy or error noted in the course of
Sentral; and proving their incoming/outgoing clearing
(2) the value of clean/collateralized items.
overdraft credit line that may be extended (As amended by Circular No. 974 dated 29 September 2017, M-
by the conduit UB/KB to the TB/RB. 2017-010 dated 15 March 2017, Circular Nos. 948 dated 01
The conduit arrangement should include March 2017, M-2017-001 dated 17 January 2017, Circular No. 924
dated 07 September 2016, M-2016-012 dated 08 September 2016,
provisions setting aforementioned cap on the 705 dated 29 December 2010 and 681 dated 08 February 2010)
net clearing losses.
(As amended by Circular Nos. 705 dated 29 December 2010 and
681 dated 08 February 2010) Sec. X207 Check Clearing Operations
During Public Sector Holidays. The
Sec. 1205 (Reserved) guidelines on check clearing operations
during public sector holidays are shown in
Sec. 2205 Check Clearing Rules for Thrift Appendix 84.
Banks Authorized to Accept Demand (M-2008-025 dated 13 August 2008)
Deposits.
(Deleted by Circular No. 825 dated 07 February 2014) Secs. X208 - X212 (Reserved)
Sec. 3205 Check Clearing Rules for Rural B. SAVINGS DEPOSITS

Banks Who Are Members of the Philippine
Clearing House Corporation. Sec. X213 Servicing Deposits Outside Bank
(Deleted by Circular No. 825 dated 07 February 2014) Premises. Subject to approval by the Deputy
Governor, SES, a bank may solicit and
Sec. X206 (2008 - X603) Clearing accept deposits outside of its premises
Operations. The Philippine Clearing House through its employees. This includes
Corporation (PCHC) was appointed and deposit pick-up/delivery services with the
designated by the Bangko Sentral as a use of vehicles accompanied by an
processing agency and exclusive provider authorized bank teller or of an authorized
of nationwide Magnetic Ink Character mobile bank teller or solicitor, subject to the
Recognition (MICR)/Automated Clearing following conditions:
Facility. It shall implement Clearing of a. The bank has no major supervisory
Checks via Electronic Presentment through concerns on its safety and soundness;
(Next Page is Part II - Page 7)
1
The new check clearing process shall be implemented on 20 January 2017. For participant banks which will not
be compliant with the CICS standard on 20 January 2017, they shall execute a Letter of Commitment stating,
among others, the actions that they will be taking to be compliant with the CICS standard until 21 April 2017.
Manual of Regulations for Banks Part II - Page 6a

§§ X213 - X215
17.03.31
b. The bank shall observe prudent depositors concerned to present their

security measures and shall obtain passbooks and accomplishing the necessary
appropriate insurance coverage; and withdrawal slips, except for banks
c. Transaction with depositors outside authorized by the Bangko Sentral to adopt
bank premises by bank personnel is deemed the no passbook withdrawal system:
a transaction within bank premises and shall Provided, That banks which are already
be recognized and/or recorded by the bank adopting the no passbook withdrawal
as occurring at actual point of transaction system shall be given six (6) months from
consistent with procedures for transactions effectivity of this Manual to seek approval
made within bank premises. from the Bangko Sentral.
The bank’s board of directors shall adopt The provisions of Sec. X202b shall also
clearly-defined written policies, procedures apply to withdrawals from savings deposits.
and controls for the operation of deposit
servicing activities outside of bank premises, Sec. X215 Rental Deposits of Lessees.
including but not limited to the criteria for The following guidelines shall govern the
determining to whom the service will be opening and handling by banks of deposits
made available, and the terms and made by lessees under Section 5(b) of Batas
conditions for such services. Pambansa Blg. 25, otherwise known as the
Once a bank is allowed to solicit and Rent Control Law:
accept deposit outside bank premises, it a. The deposit made by the lessee shall
may continuously undertake these activities only be accepted by the bank under a special
unless otherwise ordered by the Bangko savings account in the name of the lessor;
Sentral. b. The bank shall require the lessee to
Transitory provisions. Banks with submit a copy of the written notice sent to
existing authority to solicit and accept the lessor for the deposit made, stating
deposits outside bank premises shall submit among other things, the date and amount
a certification of compliance with the basic of the deposit and the name and address of
conditions hereof within three (3) months the lessor;
from 09 February 2017, otherwise, said c. The bank, at its option, may require
authority shall be deemed automatically the lessee to submit any supporting document,
revoked. such as the lease contract or official receipts
(As amended by Circular No. 940 dated 20 January 2017 of previous rentals paid, which will show the
specimen signature of the lessor, or other
Sec. X214 Withdrawals. Banks are papers to identify the lessor;
prohibited from issuing/accepting d. The bank shall segregate from its
withdrawal slips or any other similar regular savings deposit accounts and
instruments designed to effect withdrawals maintain a separate subsidiary control ledger
of savings deposits without requiring the for deposits made under Section 5(b)

§§ X215 - X223.2
10.12.31
of Batas Pambansa Blg. 25; § X223.1 Prerequisites to accept

e. Any withdrawal against these negotiable order of withdrawal accounts
special savings deposit accounts may only for thrift banks/rural banks/cooperative
be allowed in favor of the lessee concerned banks. In addition to the Standard
before the amount deposited under Pre-qualification Requirements for the Grant
consignation has been accepted by the of Banking Authorities enumerated in
lessor, or when authorized by the lessor; Appendix 5, a TB/RB/Coop Bank applying
f. The expenses which may be for authority to accept NOW accounts
incurred by the bank with respect to such shall also comply with the following
rental deposits shall be charged against the requirements:
lessor; a. The applicant TB must have
g. All the minimum internal control complied with the minimum capital required
standards applicable to savings deposit under Subsec. X111.1.
accounts prescribed in Sec. X185 shall be In the case of RB/Coop Bank, it must
complied with; and have net assets of at least P5.0 million:
h. The acceptance of such rental Provided, That RBs which have been
deposits, however, shall be optional or authorized to accept or create NOW
discretionary only upon the bank concerned. accounts prior to the approval of R.A. No.
7353 (Rural Banks Act of 1992) shall be
Secs. X216 - X220 (Reserved) allowed to continue servicing such
deposits.
Sec. X221 Peso Savings Deposit Accounts The terms capital and net assets shall
of Embassy Officials. Embassy officials have the same meaning as in Sec. X111.
are allowed to open peso savings deposit b. It has neither unpaid assessment
accounts with Philippine banks: Provided, due nor past due obligations with the PDIC.
That they submit proof of conversion of (As amended by Circular Nos. 696 dated 29 October 2010 and
foreign currency to peso with Philippine 674 dated 10 December 2009)
banks.
(M-2007-021 dated 15 September 2007) § X223.2 Requirements for accepting
negotiable order of withdrawal accounts.
Sec. X222 (Reserved) After a TB’s/RB’s/Coop Bank’s application
to accept NOW account has been
C. NEGOTIABLE ORDER OF approved, it may actually accept the same
WITHDRAWAL ACCOUNTS subject to the following conditions:
a. Submission of a certification signed
Sec. X223 Authority to Accept Negotiable by the president/chairman of the board of
Order of Withdrawal Accounts. Negotiable the bank stating that the requirements
Order of Withdrawal (NOW) accounts are enumerated under Subsec. X223.1 have
interest-bearing deposit accounts that been complied with up to the day before
combine the payable on demand feature of the NOW account services are actually
checks and investment feature of savings offered/extended to the public; and
accounts. b. That it has complied with all other
A UB/KB may offer NOW accounts conditions that the Bangko Sentral may impose.
without prior authority of the Monetary Board. The applicant bank shall submit a
A TB/RB/Coop Bank may accept NOW written notice to the appropriate
accounts upon prior approval of the department of the SES of the actual date
Monetary Board. when the NOW account deposit service

§§ X223.2 - X232
16.09.30
is offered to the public not later than Nothing herein shall be construed as
ten (10) banking days from such offering of precluding a TB, RB or Coop Bank from
the service. applying for authority to accept both
demand deposits and NOW accounts.
§ X223.3 Sanctions. If any part of the
certification submitted by the bank as Sec. X225 Minimum Features. The
required in these guidelines is found to be standards and design of the order of
false, the following sanctions shall be withdrawal form shall be in accordance
imposed, without prejudice to the sanctions with the Philippine Clearing House
under Section 35 of R.A. No. 7653: Corporation (PCHC) rules and regulations
a. On the bank if said order of withdrawal form is intended
Suspension of its authority to accept or to be cleared through PCHC. Oherwise, the
create NOW accounts for one (1) year. minimum features of the pro-forma order of
b. On the certifying officer withdrawal shall conform with Appendix 11.
A fine of P5,000 per day from the time (Circular No. 924 dated 07 September 2016)
the certification was made up to the time
the certification was found to be false. Sec. X226 Clearing of Negotiable Order
of Withdrawal Accounts. Any NOW
Sec. X224 Rules on Servicing Negotiable account which may be deposited with a
Order of Withdrawal Accounts. The bank other than the drawee bank may be
following rules shall be observed in cleared through the PCHC in accordance
servicing NOW accounts: with the PCHC Clearing House Rules
a. Prior to or simultaneous with the and Regulations.1 Nothing in this Section
opening of a NOW account, the bank shall shall prevent direct settlement between
inform the depositor of its terms and the parties concerned.The provision of
conditions; Sec. X202 shall also apply for withdrawals
b. The bank shall be responsible for on NOW accounts.
the proper identification of its depositors; it (As amended by Circular Nos. 705 dated 29 December 2010
shall require, among other things, two (2) and 681 dated 08 February 2010)
specimen signatures and such other
pertinent information; Secs. X227 - X230 (Reserved)
c. Deposits shall be covered by
deposit slips in duplicate duly validated and D. TIME DEPOSITS
initialed by the teller receiving the deposit.
A copy of the deposit slip shall be furnished Sec. X231 Term of Time Deposits. Time
the depositor; deposits shall be issued for a specific period
d. NOW accounts shall be kept and of term.
maintained separately from the regular
savings deposits; Sec. X232 Special Time Deposits.
e. Blank NOW forms shall be Authority shall be automatically granted
prenumbered and shall be controlled as in to any accredited banking institution
the case of unissued blank checks; which may participate in the supervised
f. A bank statement shall be sent to credit program to accept special time
each depositor at the end of each month for deposits from the Agrarian Reform Fund
confirmation of balances; and Commission with interest lower than the
g. Banks must use the form prescribed rate allowed on time deposits accepted
by present rules for NOW accounts. from the general public. Such deposits
1
See schedule of revised clearing and settlement process shown as footnote of Sec. X202.

§§ X232 - X233.5
09.12.31
shall be exempt from the legal reserve The applicant bank shall submit a written
requirements, as an exception to the notice to the appropriate department of the
existing policies on the matter. SES of the actual date when the NCTDs are
actually issued to the public not later than
Sec. X233 Certificates of Time Deposit. ten (10) banking days from such issuance.
a. Negotiable Certificates of Time
Deposit (NCTDs) § X233.3 Minimum features.
(1) UBs/KBs may issue NCTDs without a. Form; denomination - NCTDs may
approval of the Bangko Sentral. be issued in bearer or other form denoting
(2) TBs/RBs/Coop Banks may issue negotiability and shall have a standard
NCTDs upon the prior approval of the format to be prescribed by the Bangko
Bangko Sentral. Sentral which shall be prenumbered serially
b. Non-Negotiable Certificates of Time and predenominated. The minimum
Deposit denomination shall be at the discretion of
Banks may issue long-term non- the issuing bank. No certificate payable to
negotiable tax-exempt certificates of time bearer shall contain words prohibiting its
deposit without approval of the Bangko negotiation.
Sentral. b. Term - The minimum maturity of the
certificates shall be 731 days.
§ X233.1 Prerequisites to issue c. Manner of issuance - The certificates
negotiable certificates of time deposits for shall be issued only upon receipt of funds
thrift banks/rural banks/cooperative banks. equivalent to their face value.
In addition to the Standard Pre-qualification d. Manner of printing - NCTDs shall
Requirements for the Grant of Banking be printed on security paper by the Security
Authorities enumerated in Appendix 5, a TB/ Plant Complex (SPC) of the Bangko Sentral.
RB/Coop Bank applying for authority to Orders for the printing of the desired
issue NCTDs shall also comply with the forms shall not exceed a total value
following requirements: equivalent to twenty percent (20%) of the
a. Applicant’s capital must be at least issuing bank’s capital accounts (based on
P150.0 million. For this purpose, capital shall the quarter immediately preceding the
have the same meaning as in Sec. X111; and request for printing) at any one time.
b. It has neither assessment due nor Additional orders for printing which shall
past due obligations with the PDIC. result in an excess over the prescribed
(As amended by Circular No. 674 dated 10 December 2009) benchmark shall require prior Bangko
Sentral approval.
§ X233.2 Requirements for issuing
negotiable certificates of time deposits. § X233.4 Insurance coverage. The
After a TB’s/RB’s/Coop Bank’s application NCTDs shall be insured with the PDIC.
to issue NCTDs has been approved, it may Banks issuing bearer certificates shall
actually issue the same subject to the imprint on the instrument the following:
following conditions: “For purposes of deposit insurance by
a. Submission of a certification signed the PDIC, the holder shall have his name
by the president/chairman of the board of registered in the books of the issuing bank.”
the bank stating that the requirements
enumerated under Subsec. X233.1 have been § X233.5 Desistance from issuing new
complied with up to the day before the negotiable certificates of time deposits.
NCTDs are actually issued to the public; and Unless authorized by the Bangko Sentral,
b. That it has complied with all other TBs/RBs/Coop Banks with outstanding
conditions that the Bangko Sentral may NCTDs shall immediately desist from
impose. issuing new NCTDs.

§§ X233.5 - X233.9
15.12.31
All outstanding NCTDs shall be valid and requirements under Item “(c)1”of this
negotiable up to their maturity dates and Subsection up to the time of the last offering
shall not be subject to renewal. of its approved and listed LTNCTDs.
c. Pre-qualification requirements
§ X233.6 Sanctions. If any part of the The issuing bank shall be held accountable
certification submitted by the bank as for ensuring the continuous compliance by its
required in these guidelines is found to be chosen participant-FIs with the qualification
false, the following sanctions shall be requirements prescribed by the Bangko Sentral.
imposed, without prejudice to the sanctions As such, the issuing bank shall make a
under Section 35 of R.A. No. 7653. careful and diligent evaluation of the parties
a. On the bank whom it shall engage to act as underwriter/
Suspension of its authority to issue arranger, registry bank and selling agent of
NCTDs for one (1) year. its LTNCTDs.
b. On the certifying officer The following qualification requirements
A fine of P5,000 per day from the time shall be strictly complied with prior to and
the certification was made up to the time on a continuing basis by the issuing bank
the certification was found to be false. and FIs engaged to act as underwriter/
arranger, registry bank and selling agent
§§ X233.7 - X233.8 (Reserved) while the LTNCTD of the issuing bank
remains outstanding.
§ X233.9 Long-term negotiable (1) Issuing bank
certificates of time deposit. The following A bank applying for authority to issue
guidelines shall govern the issuance of an LTNCTD shall comply with the following
longterm negotiable certificates of time requirements:
deposit (LTNCTDs) with a minimum (a) It has complied with the following
maturity of five (5) years: capital adequacy requirements:
a. Prior Bangko Sentral approval. No (i) Minimum capitalization as defined
LTNCTD shall be issued without the prior under Sec. X111; and
approval of the Bangko Sentral. (ii) Risk-based capital adequacy ratio
b. Application for authority of the under Sec. X115 within the sixty (60) days
issuing bank. An application for authority immediately preceding the date of
on each issue/issue program of LTNCTD application;
shall be filed with the appropriate (b) It has not incurred net weekly reserve
department of the SES. deficiencies within eight (8) weeks
The application shall be signed by the immediately preceding the date of application;
president/country manager (branch of a (c) It has generally complied with
foreign bank) of the bank. It shall be banking laws, rules and regulations, orders
accompanied by: (i) a certified true copy of or instructions of the Monetary Board and/
the resolution of the bank’s board of or Bangko Sentral Management in the last
directors authorizing the issuance of two (2) preceding examinations prior to the
LTNCTD indicating, among others, the date of application, more particularly:
issue size, offering period, purpose or (i) The ceilings on credit
intended use of proceeds thereof, registry accommodations to DOSRI;
bank, underwriter/arranger, selling agent(s); (ii) Liquidity floor requirements for
and (ii) a Letter of Undertaking (LOU) signed government deposits;
by the president/country manager that the (iii) Single borrower’s loan limit; and
issuing bank will ensure its continuous (iv) Investment in bank premises and
compliance with the prequalification other fixed assets;

§ X233.9
15.12.31
(d) It maintains adequate provisions for (bb) Deliver transactions within the
probable losses commensurate to the quality agreed trading period; and
of its asset portfolio but not lower than the (cc) Issue registry confirmations to
required valuation reserves as determined holders of LTNCTDs.
by the Bangko Sentral; (iii) It must have a CAMELS Composite
(e) It does not have float items Rating of at least “3” in the last regular
outstanding for more than sixty (60) calendar examination.
days in the “Due From/To Head Office/ (3) Underwriter/Arranger
Branches/Offices” accounts and the “Due
(a) It is either a UB or an IH: Provided,
From Bangko Sentral“ account exceeding
That if an offering is on a best-efforts basis,
one percent (1%) of the total resources as
of date of application; such arranger may also be a KB;
(f) It has no past due obligations with the (b) It must be a third party, such that:
Bangko Sentral or with any government FI; (i) it has no subsidiary/affiliate
(g) It has established a risk management relationship with the issuing bank; and
system appropriate to its operations (ii) it is not related in any manner that
characterized by clear delineation of would undermine the objective conduct of
responsibility for risk management, adequate due diligence.
risk measurement systems, appropriately (c) Underwriters must be well capitalized
structured risk limits, effective internal and must have adequate risk management as
controls and complete, timely and efficient evidenced by compliance with Items “c(1)(a),
risk reporting system; (d), (g) and (h)” as may be applicable.
(h) It has a CAMELS Composite Rating of (4) Selling agent
at least “3” in the last regular examination; and It must be an FI with dealership or
(i) It has neither unpaid assessment due brokering license.
nor past due obligations with the PDIC. d. Listing of LTNCTD 1 with an
(2) Registry bank accredited exchange 2. LTNCTDs duly
(a) It may be a UB, a KB, or such other
approved by the Monetary Board shall be
specialized entity that may be qualified by
issued and immediately listed on an
the Monetary Board;
accredited exchange: Provided, That banks
(b) In the case of a UB or a KB:
(i) It must be a third party: which opt to issue portions of the approved
(aa) with no subsidiary/affiliate amount in tranches shall immediately list
relationship with the issuing bank; and such tranche issuance: Provided further,
(bb) which is not related to the issuing That if within one (1) year from approval of
bank in any manner that would undermine the Monetary Board, the entire amount of
its independence. the approved LTNCTDs shall not have been
(ii) It must have adequate facilities and issued, the bank’s authority to issue the
the organization to do the following: unissued portion of the approved amount
(aa) Maintain the Electronic Registry shall be deemed revoked, and said unissued
Book (ERB); portion shall no longer be issued.
1
Approved applications and outstanding LTNCTDs as of 22 February 2014 shall not be covered by the new
requirements.
2
A bank shall be allowed to issue LTNCTDs subject to the condition that the bank shall submit a deed of
undertaking to the Bangko Sentral that all LTNCTDs issued after 22 February 2014 shall be applied for listing
on an accredited exchange within one (1) day after the LTNCTD platform commences operation.
The platform for the listing of the LTNCTDs will be available on 01 September 2014. In this regard, banks that
issued LTNCTDs after 22 February 2014 shall apply for listing by 02 September 2014.

§ X233.9
15.12.31
Banks which fail to list their LTNCTDs (c) Formulates the distribution/allocation
on an accredited exchange within the plan for the initial offering and ensures
prescribed period shall be subject to the proper and orderly distribution of the
sanctions under Item “(o)(1)” of this primary sale/issue of the LTNCTDs;
Subsection. (d) Disseminates information to
e. Additional requirements for the prospective depositors/ investors of LTNCTDs
issuance of LTNCTD. The following on the terms and conditions of the issue
additional requirements shall be submitted (including information of non-pretermination
to the appropriate department of the SES by the depositor prior to original maturity
within ten (10) calendar days after issuance and the liquidity mechanism in secondary
of the initial offering/tranche: trades) and the rights and obligations of the
(1) Written waiver of the secrecy of holder, issuer, selling agent, underwriter/
deposits on said LTNCTD by the issuing arranger and registry bank; and
bank, its subsidiaries, affiliates and wholly (e) When selling to its clients, it must
or majority-owned or -controlled entities of perform the functions/responsibilities of the
such subsidiaries and affiliates; selling agent under Items “e(3)(a) and (b)”.
(2) Information disclosure and the terms (3) Selling agent
and conditions of the LTNCTD issuance; (a) Verifies identity of each investor and
(3) Promotional materials; and applies other standards to combat money
(4) Specimen of the proposed registry laundering as required under Sec. X801; and
confirmation and purchase advice from (b) Issues the purchase advice for the
each selling agent which will evidence sale primary offering of the LTNCTDs.
of the LTNCTD. g. Change of underwriter/arranger,
The bank shall, likewise, submit within registry bank, selling agent(s).
ten (10) calendar days after issuance of the The issuing bank shall notify the
initial and subsequent tranches, a written appropriate department of the SES in writing
notice to the appropriate department of the of any change in the identity of its registry
SES of the actual date of initial/tranche offering. bank, underwriter/arranger and selling agent
f. Functions/responsibilities of the parties within ten (10) calendar days from date of
involved. The respective parties shall have, such change.
among others, the following functions/ Said written notice shall state the
responsibilities: (i) reasons for the change, (ii) identity of the
(1) Registry bank newly-designated FI(s), and (iii) effectivity of
(a) Generates and maintains the ERB; the engagement.
(b) Records any transfer of ownership; h. Prohibition on holdings of LTNCTDs.
(c) Issues and sends registry confirmation The issuing bank including its related
to holders; companies (subsidiaries and affiliates and
(d) Functions as paying agent for periodic wholly or majority-owned or -controlled
interest and principal payments; and entities of such subsidiaries and affiliates)
(e) Monitors compliance with the cannot be a holder of the LTNCTDs of the
prohibition on holdings of LTNCTD, as issuing bank.
prescribed under Item “h” hereof. The issuing bank shall provide the
(2) Underwriter/Arranger registry bank with an updated list of all
(a) Conducts due diligence on the related companies. This report shall be a
issuing bank and determines the valuation/ “Category B” report.
pricing of the primary issue; For purposes of this Subsection, an
(b) Prepares the prospectus/information affiliate is an entity, at least twenty percent
disclosure/updates for multi-tranche issues; (20%) but not exceeding fifty percent (50%)

§ X233.9
15.12.31
of the outstanding voting stock of which is, of the National Internal Revenue Code of
owned by the issuing bank. 1997, as amended and Bureau of Internal
i. Agreements between issuing bank and Revenue (BIR) regulations.
registry bank/selling agent(s). The The caveat shall apply if the issuing bank
agreements between the issuing bank and commits no pretermination. Otherwise, it
the registry bank /selling agents shall comply shall read as follows:
with the provisions of Sec. X162 on bank “This LTNCTD cannot be terminated by
service contracts. The issuing bank shall be the holder before (maturity date). However,
liable for any damages to investors/ it may be preterminated at the instance of
depositors caused by actions of said registry the Issuing Bank upon prior notice to the
bank, selling agent(s) contrary to the holder on record. Negotiations/transfers
agreements entered into. from one (1) holder to another do not
j. Minimum features constitute pretermination”
(1) Form; denomination - An LTNCTD For tax purposes, negotiations/transfers
shall be in scripless form with a third party from one (1) holder to another shall be
registry bank maintaining the ERB. To have subject to the pertinent provisions of the
legal effect, it shall comply with the provisions National Internal Revenue Code of 1997,
of R.A. No. 8792 (Electronic Commerce Act) as amended and Bureau of Internal Revenue
particularly on the existence of an assurance (BIR) regulations”; and
on the integrity, reliability and authenticity of (b) “All negotiations/transfers of this
the LTNCTD in electronic form. LTNCTDs LTNCTD prior to maturity must be coursed
shall be registered in the name of individuals through an accredited exchange”.
or corporations, negotiable and prenumbered (2) The selling agent shall issue a
serially. The minimum denomination shall be Purchase Advice to evidence initial purchase
at the discretion of the issuing bank. of LTNCTD with the original copy given to
(2) Currency - Denomination shall be the holder.
in Philippine pesos. (3) The registry bank shall issue a
(3) Term - The minimum maturity of the Registry Confirmation to evidence
LTNCTDs shall be five (5) years. ownership of the LTNCTD, with the original
(4) Primary Offering/Secondary Trading- copy given to the holder.
The initial offering shall be executed through l. Deposit insurance coverage. The
an underwriter or an arranger. Subsequent LTNCTDs shall be insured with the PDIC,
negotiations in secondary trading must be subject to applicable rules and regulations,
executed through an accredited exchange. among others, on maximum insurance
k. Purchase Advice and Registry coverage.
Confirmation m. Pre-termination by the issuer.
(1) The Purchase Advice and Registry LTNCTDs may be preterminated by the
Confirmation shall conspicuously contain issuing bank, subject to the following
the following caveat: conditions:
(a) “This LTNCTD cannot be (1) The Information Disclosure,
terminated by the holder nor the Issuing Purchase Advice and Registry Confirmation
Bank before (maturity date). However, shall include the information that the
negotiations/ transfers from one (1) holder LTNCTD may be preterminated by the
to another do not constitute issuing bank;
pretermination.” (2) 30- day prior notification must be
For tax purposes, negotiations/ given to the appropriate department of the
transfers from one (1) holder to another SES together with the justification for the
shall be subject to the pertinent provisions pre-termination;

§§ X233.9 - X233.11
15.12.31
(3) 30- day prior notification to holders (2) On the registry bank -
of record; Disqualification to be a registry bank for
(4) Notwithstanding any agreement to one (1) year and a monetary penalty of
the contrary, the issuer shall shoulder the P30,000 for each violation.
tax due on the interest income already (3) On the selling agents -
earned by the holders; and Disqualification to be appointed as selling
(5) The issuing bank’s reserve positions agent for one (1) year and a monetary penalty
shall be recomputed retroactively based on of P30,000 for each violation.
the applicable reserve rate(s) for regular (4) On the certifying officer - A fine of
time deposits during the affected periods. P5,000 per day from the time of required
If the recomputed amounts result in a disclosure up to the time disclosure was
reserve deficiency, the issuing bank shall made; or from the time misrepresentation
be fined with the corresponding monetary was made up to the time the information
penalties. The preceding monetary was corrected.
penalty, however, shall not be imposed if (5) On the responsible officer - A fine of
pretermination by the issuer is due to a P30,000 for participating or confirming in
change in law or regulation that will the non-disclosure or misrepresentation of
increase the cost of maintaining the information.
LTNCTDs. FIs not supervised by the Bangko Sentral
n. Non-pretermination by the holder. acting as selling agent of LTNCTDs and/or
Presentation of the LTNCTD to the issuing its concerned directors/officers that are
bank for payment before the maturity date is found to violate rules and regulations in the
not allowed. However, negotiation or transfer performance of their functions/
from one (1) holder to another shall not responsibilities shall be subject to the
constitute pretermination of the LTNCTD. provisions of Section 36 of R.A. No. 7653
For tax purposes, negotiations/ and shall, likewise, be referred to the SEC
transfers from one (1) holder to another for appropriate action.
shall be subject to the pertinent provisions p. Supervisory Enforcement Actions. The
of the National Internal Revenue Code of Bangko Sentral reserves the right to deploy
1997, as amended and Bureau of Internal its range of supervisory tools provided in
Revenue (BIR) regulations. Sec. X009 to ensure compliance with the
o. Sanctions. Without prejudice to the provisions of this Subsection.
other sanctions prescribed under Sections (As amended by Circular Nos. 890 dated 02 November 2015
36 and 37 of R.A. No. 7653 and the and 877 dated 22 May 2015, M-2014-034 dated 27 August 2014,
Circular No. 834 dated 26 May 2014, M-2014-023 dated 23 May
provisions of Section 16 of R.A. No. 8791, 2014, Circular Nos. 824 dated 30 January 2014, 822 dated
the following sanctions will be imposed 13 December 2013, 810 dated 30 August 2013, 674 dated
on Bangko Sentral-supervised FIs for 10 December 2009 and 585 dated 15 October 2007)
failure to comply with the provisions of
this Subsection and for non-disclosure or § X233.10 (Reserved)
misrepresentation of information:
(1) On the issuing bank - Suspension § X233.11 Long-term non-negotiable
of its authority to issue LTNCTDs, tax-exempt certificates of time deposit.
disqualification from future issuance of The issuance of long-term non-negotiable
LTNCTDs and a monetary penalty of tax-exempt certificates of time deposit shall
P30,000 for each violation. be governed by the following rules:

§§ X233.11 - X234.2
08.12.31
a. Minimum features § X234.1 Elements of quasi-banking.

(1) Form; denomination - The certificate The essential elements of quasi-banking are:
shall contain words denoting its non- a. Borrowing funds for the borrower’s
negotiability and shall be issued by banks own account;
only in the name of individuals with b. Twenty (20) or more lenders at any
denominations in increments of P1,000.00. one (1) time;
(2) Term - The minimum maturity of the c. Methods of borrowing are issuance,
certificate shall be five (5) years. endorsement, or acceptance of debt
(3) Manner of issuance - The certificate instruments of any kind, other than deposits,
shall be issued only upon receipt of funds such as acceptances, promissory notes,
equivalent to their face value. participations, certificates of assignments or
similar instruments with recourse, trust
(4) Manner of printing - The certificate
certificates, repurchase agreements, and
shall be printed on security paper.
such other instruments as the Monetary
(5) Pre-termination - In case of pre-
Board may determine; and
termination, the deposit shall be subject to
d. The purpose of which is (1) relending,
income tax as provided under Section
or (2) purchasing receivables or other
24(B)(1) of the Tax Reform Act of 1997 which
obligations.
states that “xxx a final tax shall be imposed
on the entire income and shall be deducted
and withheld by the depository bank from § X234.2 Definition of terms and
the proceeds of the long-term deposit or phrases. The following terms and phrases
investment certificate based on the shall be understood as follows:
remaining maturity thereof: a. Borrowing shall refer to all forms of
(a) Four (4) years to less than
obtaining or raising funds through any of the
five (5) years 5%
methods and for any of the purposes provided
(b) Three (3) years to less than
in Subsec. X234.1 whether the borrower’s
four (4) years 12%
liability thereby is treated as real or contingent.
(c) Less than three (3) years 20%
b. For the borrower’s own account shall
xxx”
refer to the assumption of liability in one’s
b. Insurance coverage. The deposits own capacity and not in representation, or
shall be insured with the PDIC, subject to as an agent or trustee, of another.
applicable rules and regulations, among c. Purchasing of receivables or other
others, on maximum insurance coverage. obligations shall refer to the acquisition of
c. Reserves against long-term non- claims collectible in money, including
negotiable certificates of time deposit. The interbank borrowings or borrowings
rate and form of required reserves on regular between FIs, or of acquisition of securities,
time deposit shall also apply to the required of any amount and maturity, from domestic
reserves on long-term non-negotiable tax- or foreign sources.
exempt certificates of time deposit. d. Relending shall refer to the extension
of loans by an institution with antecedent
E. DEPOSIT SUBSTITUTE OPERATIONS borrowing transactions.
(QUASI-BANKING FUNCTIONS) Relending shall be presumed, in the
absence of express stipulations, when the
Sec. X234 Scope of Quasi-Banking Functions. institution is regularly engaged in lending.
The following rules and regulations shall e. Regularly engaged in lending shall
govern the quasi-banking operations of banks. refer to the practice of extending loans,

§§ X234.2 - X234.3
08.12.31
advances, discounts or rediscounts as a any of the means listed in Subsec. X234.1

matter of business, as distinguished from hereof, for the limited purpose of financing
isolated lending transactions. their own needs or the needs of their agents
or dealers; and
§ X234.3 Transactions not considered b. The mere buying and selling without
quasi-banking. The following shall not recourse of instruments mentioned in
Subsec. X234.1: Provided, That:
constitute quasi-banking: (1) The institution buying and selling
a. Borrowing by commercial, industrial without recourse shall indicate in
and other non-financial companies through conspicuous print on its instrument the
(Next page is Part II - Page - 17)

§§ X234.3- X234.5
08.12.31
phrase without recourse, sans recourse or once the Monetary Board has granted the
words of similar import that will convey quasi-banking license.
the absence of liability or guarantee by said In addition to the Standard
institution; and Pre-qualification Requirements for the
(2) In the absence of the phrase “without Grant of Bank Authorities enumerated in
recourse”, “sans recourse” or words of Appendix 5, a TB securing Bangko Sentral
similar import, the instrument so issued, authority to engage in quasi-banking
endorsed or accepted, shall automatically functions must meet the following
be considered as falling within the purview requirements:
of these regulations: Provided, further, That a. The bank must have a networth or
any of the following practices or practices combined capital of at least P650.0 million
similar and/or tantamount thereto in computed in accordance with Sec. X111;
connection with a without recourse b. The bank is well capitalized with
transaction is hereby prohibited: risk-based capital adequacy ratio of not
(a) Issuance of postdated checks by a lower than twelve percent (12%) at the
financial intermediary, whether for its own time of filing the application;
account or as an agent of the debt c. The bank’s operation during the
instrument issuer, in payment of the debt preceding calendar year and for the period
instrument, sold, assigned or transferred immediately preceding the date of
without recourse; or application has been profitable;
(b) Issuance by a financial intermediary d. The bank has elected at least two
of any form of guaranty on sale transactions (2) independent directors and all its
or on negotiations or assignment of debt directors have attended the required
instruments without recourse; and seminar for directors of banks conducted
(c) Payment with its own funds by a or accredited by the Bangko Sentral;
financial intermediary which assigned, sold e. The bank has established a risk
or transferred the debt instrument without management system appropriate to its
recourse, unless the financial intermediary operations characterized by clear delineation
can show that the issuer has with the said of responsibility for risk management,
financial intermediary funds corresponding adequate risk measurement systems,
to the amount of the obligation. appropriately structured risk limits, effective
internal controls, and complete, timely and
§ X234.4 Pre-conditions for the efficient risk reporting system; and
exercise of quasi-banking functions. No f. The bank has a CAMELS Composite
bank shall engage in quasi-banking Rating of at least “3” in the last regular
functions without authority from the examination with management rating of not
Bangko Sentral: Provided, however, That lower than “3”.
banks authorized by the Bangko Sentral
to perform universal or commercial § X234.5 Certificate of Authority from
banking functions shall automatically the Bangko Sentral. A bank securing Bangko
have the authority to engage in quasi- Sentral’s Certificate of Authority to engage
banking functions: Provided, further, That in quasi-banking functions shall file an
the authority to obtain funds from the application with the appropriate department
public, which shall mean twenty (20) or of the SES. The application shall be signed
more persons under Section 8.2 of by the bank president or officer of equivalent
R.A. 8791, is not a condition but an rank and shall be accompanied by the
authorization for the bank or quasi-bank, following documents:

§§ X234.5 - X234.6
16.06.30
a. Certified true copy of the resolution of requirement may be substituted by a capital

the bank’s board of directors authorizing the build-up program for a period of not more
application; than five (5) years from 11 November 2004
b. A certification signed by the president and which must be approved by the
or the officer of equivalent rank that the Monetary Board. Such capital build-up
institution has complied with all conditions/ program shall be in equal annual or
prerequisites for the grant of authority to diminishing amounts and shall be
engage in quasi-banking functions; submitted to the appropriate department of
c. An information sheet; the SES within three (3) months from
d. Bio-data signed under oath, of the 11 November 2004.
members of the managerial staff who will TBs which fail to comply with the
undertake quasi-banking operations; required capitalization upon expiration of
e. Borrowing-investment program for said two (2) year period given them or those
one (1) year which should include at the which fail to comply with approved capital
minimum: build-up program shall liquidate their quasi-
(1) planned distribution of portfolios as banking operations within one (1) year and
to - shall be considered revoked/cancelled. The
(a) underwriting; license of a TB with authority to engage in
(b) commercial paper markets; quasi-banking functions but has not actually
(c) stocks and bonds; engaged in quasi-banking functions and has
(d) government securities; not complied with the above minimum
(e) receivables financing, discounting and capital requirements as of 11 November
factoring; 2004, shall automatically be revoked.
(f) leasing; and
(g) direct loans; § X234.6 Sale, discounting, assignment
(2) expected sources of funds to support or negotiation by banks of their credit
investment program classified as to - rights arising from claims against the
(a) maturity: short, medium and long- Bangko Sentral to clients. Pursuant to the
term; policy of the Bangko Sentral to promote
(b) interest rates; and investor protection and transparency in
(c) domestic or foreign sources whether securities transactions as important
institutional or personal. components of capital markets
TBs authorized to engage and are development, placements in the Term
actually performing quasi-banking Deposit Facility (TDF), the Overnight
functions but do not meet the new capital Deposit Facility (ODF) and Reverse
requirement are hereby given a period of Repurchase agreements with the Bangko
two (2) years reckoned from 11 November Sentral, shall not be subject of sale,
2004 within which to comply with the discounting, assignment or negotiation on
minimum capital requirement in Subsec. a with or without recourse basis.
X234.4 (a): Provided, That in case the TB Any violation of the provisions of this
has an approved capital build-up program Subsection shall be considered a less
under Subsec. X501.2, for its FDCU serious offense and shall subject the bank
license, the approved capital build-up and the director/s and/or officer/s concerned
program, may be considered compliance to the sanctions provided under
with this requirement: Provided, further, That Sec. X299.
in case, the TB has no approved capital (Circular No. 636 dated 17 December 2008, as amended by
build-up program, the minimum capital Circular No. 913 dated 02 June 2016)

§§ X235 - X235.3
08.12.31
Sec. X235 Deposit Substitute Instruments. be the maturity period or the word
Any deposit substitute transaction by a bank “demand”, if it is a demand instrument.
performing quasi-banking functions shall be c. The payee may be identified by his
limited to its own promissory notes, trust account/deposit account number in
repurchase agreements, and certificates of both negotiable and non-negotiable
assignment/participation with recourse. instruments.
d. Securities which are the subject of a
§ X235.1 Prohibition against use of repurchase agreement or a certificate of
acceptances, bills of exchange and trust assignment/participation with recourse,
certificates. Acceptances, bills of exchange, shall be particularly described on the face
and trust certificates shall not be used by of said instruments or on a separate
banks as evidence of deposit substitute instrument attached and specifically referred
liabilities in connection with their quasi- to therein and made an integral part thereof
banking functions. This prohibition shall not as to the maker, value, maturity, serial
apply to the acceptance or negotiation of number, and such other particulars as shall
bills of exchange in connection with trade clearly identify the securities.
transactions, or to the issuance of trust e. The instrument shall provide for the
certificates creating trust relationships. payment of liquidated damages, in addition
to stipulated interest, in case of default by
§ X235.2 Negotiation of promissory the maker or issuer, as well as attorney’s
notes. Negotiable promissory notes fees and costs of collection in case of suit.
acquired by banks in connection with their f. A conspicuous notice at the lower
quasi-banking functions shall not be center margin of the face of the instrument
negotiated by mere indorsements and/or that the transaction is not insured by the
delivery, if they do not conform with the PDIC shall be indicated.
minimum features prescribed under Subsec. g. The corporate name of the issuer shall
X235.3. If these notes do not contain the be printed at the upper center margin of the
features, their negotiation shall be covered instrument and directly below which shall
by any of the appropriate deposit substitute be a designation of the instrument, such as
instruments abovementioned. “Promissory Note” or “Repurchase
Agreement”.
§ X235.3 Minimum features. Deposit h. The words “duly authorized officer“
substitute instruments issued by entities shall be placed directly below the signature
performing quasi-banking functions shall of the person signing for the maker or issuer.
have the following minimum features: i. Each instrument shall be serially pre-
a. The present value and maturity value numbered.
and/or the principal amount and interest rate j. The copy delivered to the payee shall
and such other information as may be bear the word “Original” and the copies
necessary to enable the parties to determine retained by the issuer shall be identified as
the cost or yield of the borrowing or “Duplicate”, “File Copy” or words of similar
placement shall be specified. import.
b. The date of issuance shall be k. Only security paper with adequate
indicated at the upper right corner of the safeguards against alteration or falsification
instrument, and directly below which shall shall be used.

§§ X235.3 - X235.5
15.10.31
Borrowings of banks from the loans and central securities depository in accordance
discounts window of other banks or non- with the guidelines set forth in Appendix 68.
bank financial intermediaries shall be The securities custodian shall hold the
exempted from the documentation securities in the name of the borrower/
requirements prescribed in this Subsection: seller, but shall keep said securities
Provided, That the exemption from the segregated from the proprietary securities
documentation requirements prescribed in account of the borrower/seller if the
this Subsection shall not be construed or borrower/seller has an existing securities
interpreted as exempting said borrowings account with the custodian: Provided, That
from other regulations standardizing deposit a bank authorized by the Bangko Sentral to
substitute instruments and from other perform custodianship function may not be
Bangko Sentral regulations on deposit allowed to be custodian of securities issued
substitutes. or owned by said bank, its subsidiaries or
Deposit substitute instruments shall affiliates, or of securities in bearer form.
conform to the language prescribed by the The delivery shall be effected upon
Bangko Sentral. Any substantial deviation payment and shall be evidenced by a
there from or any additional stipulation securities delivery receipt duly signed by
therein shall be referred to the Bangko authorized officers of the custodian and
Sentral for prior approval. The size and delivered to both the lender/purchaser and
appearance of these instruments, shall not seller/borrower.
be similar to the size and appearance of Sanctions. Violation of any provision of
checks. Rubber stamping, typewriting or Item “a” shall be subject to the following
handwriting some provisions shall not be sanctions/penalties:
considered compliance with said (1) Monetary penalties
regulations. (Shown in Appendix 12 are the First offense - Fine of P10,000 a day for
samples of standardized instruments as each violation reckoned from the date the
evidence of deposit substitute liabilities.) violation was committed up to the date it
was corrected.
§ X235.4 Interbank loan transactions. Subsequent offenses - Fine of P20,000
Except for interbank borrowings which are a day for each violation reckoned from the
settled through the banks’ respective DDAs date the violation was committed up to the
with the Bangko Sentral via PhilPaSS, all date it was corrected.
interbank borrowings shall be evidenced by (2) Other sanctions
deposit substitute instruments containing the First offense - Reprimand for the directors/
minimum features prescribed in Subsec. officers responsible for the violation.
X235.3. Subsequent offense -
(As amended by Circular No. 703 dated 23 December 2010) (a) Suspension for ninety (90) days
without pay of directors/officers responsible
§ X235.5 Delivery of securities. for the violation;
a. Securities, warehouse receipts, (b) Suspension or revocation of the
quedans and other documents of title which accreditation to perform custodianship
are the subject of quasi-banking functions, function;
such as repurchase agreements,shall be (c) Suspension or revocation of the
delivered to a Bangko Sentral accredited authority to engage in quasi-banking
securities custodian or an SEC authorized function; and/or

§§ X235.5- X235.11
15.10.31
(d) Suspension or revocation of the (3) Suspension for 120 days without pay
authority to engage in trust and other of the directors/officers responsible for the
fiduciary business. violation.
b. The guidelines to implement the (As amended by Circular Nos. 873 dated 25 March 2015,
delivery by the seller of securities to the 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
buyer or to his designated securities 2006 and Circular No. 524 dated 31 March 2006)
custodian or central securities depository
are shown in Appendix 68. § X235.6 Other rules and regulations
The guidelines on the delivery of governing the issuance and treatment of
government securities to the investor’s deposit substitute instruments.
principal securities account with the a. If there is any stipulation that
Registry of Scripless Securities (RoSS) are in payment of the deposit substitute shall be
Appendix 68a. chargeable against a particular deposit
Sanctions. Without prejudice to the account, it shall further provide that the
penal and administrative sanctions provided liability of the maker or issuer of the
for under Sections 36 and 37, respectively instrument shall not be limited to the
of R.A. No. 7653 (The New Central Bank outstanding balance of said account.
Act), violation of any provision of the b. Any agreement allowing the issuer
guidelines in Appendix 68 shall be subject or maker to substitute the underlying
to the following sanctions/penalties securities shall further provide that the
depending on the gravity of the offense: actual substitution shall be with the prior
(a) First offense - written consent of the payee.
(1) Fine of up to P10,000 a day for the c. Automatic renewal upon maturity of
institution for each violation reckoned from the instrument may be effected only under
the date the violation was committed up to terms and conditions previously stipulated
the date it was corrected; and by the parties.
(2) Reprimand for the directors/officers d. Stipulations between the maker or
responsible for the violation. issuer and the payee which are embodied
(b) Second offense - in separate instruments shall be specifically
(1) Fine of up to P20,000 a day for referred to in the deposit substitute instruments
th e i n s t i t u t i o n f o r e a c h v i o l a t i o n and made an integral part thereof.
reckoned from the date the violation e. In the case of repurchase
was committed up to the date it was agreements and certificates of assignment/
corrected; and participation with recourse, the stipulation
(2) Suspension for ninety (90) days shall clearly state either (1) that the
without pay of directors/officers responsible underlying securities are being delivered to
for the violation. the buyer or assignee as collaterals or (2)
(c) Subsequent offenses - that the ownership thereof is being
(1) Fine of up to P30,000 a day for the transferred to the buyer or assignee.
institution for each violation from the date f. The regulations on interbank loan
the violation was committed up to the date transactions prescribed in Sec. X343 shall
it was corrected; also apply to interbank borrowings.
(2) Suspension or revocation of the (As amended by Circular No. 703 dated 23 December 2010)
authority to act as securities custodian and/
or registry; and §§ X235.7 - X235.11 (Reserved)

§§ X235.12
15.10.31
§ X235.12 Repurchase agreements not documented in accordance with existing

covering government securities, Bangko Sentral regulations and that the bank
commercial papers and other negotiable has strictly complied with the pertinent rules
and non-negotiable securities or of the SEC and the Bangko Sentral on the
instruments. The following regulations shall proper sale of securities to the public and
govern repurchase agreements covering performed the necessary representations and
government securities, commercial papers disclosures on the securities particularly the
and other negotiable and non-negotiable following:
securities or instruments of banks as well (a) Informed the clients that such
as sale on a without recourse basis of said securities are not deposits and as such,
securities by banks. do not benefit from any insurance
a. Proper recording and documentation otherwise applicable to deposits such as,
of repurchase agreements. but not limited to, R.A. No. 3591, as
Banks shall have a true and accurate amended, otherwise known as the
account, record or statement of their daily PDIC law;
transactions. As such, repurchase (b) Informed and explained to the
agreements covering government client all the basic features of the security
securities, commercial papers and other being sold on a without recourse basis, such
negotiable and non-negotiable securities as but not limited to:
or instruments must be properly (i) issuer and its financial conditions;
recorded and documented in accordance (ii) term and maturity date;
with existing Bangko Sentral regulations. (iii) applicable interest rate and its
The absence of proper documentation computation;
for repurchase agreements is tantamount (iv) tax features (whether taxable, tax
to willful omission of entries relevant to paid or tax-exempt);
any transaction, which shall be a ground (v) risk factors and investment
for the imposition of administrative considerations;
sanctions and the disqualification from (vi) liquidity feature of the instrument:
office of any director or officer responsible (aa) procedures for selling the security
therefor under existing laws and in the secondary market (e.g., OTC or
regulations. exchange);
b. Responsibilities of the chief (bb) authorized selling agents; and
executive officer (CEO) or officer of (cc) minimum selling lots.
equivalent rank. (vii) disposition of the security:
It shall be the responsibility of the CEO or (aa) registry (address and contact
the officer of equivalent rank in a bank to: numbers);
(1) Institute policies and procedures to (bb) functions of the registry; and
prevent undocumented or improperly (cc) pertinent registry rules and
documented repurchase agreements procedures.
covering government securities, commercial (viii) collecting and paying agent of the
papers and other negotiable and interest and principal; and
non-negotiable securities or instruments; (ix) other pertinent terms and
(2) Ascertain and ensure that the bank conditions of the security and if possible, a
did not enter into a repurchase agreement copy of the prospectus or information sheet
covering government securities, commercial of the security.
papers and other negotiable and non- (c) Informed the client that pursuant to
negotiable securities or instruments that are Subsecs. X235.5 and X238.1:

§§ X235.12 - X237
15.10.31
(i) Securities sold under repurchase (3) Suspension of access to Bangko

agreements shall be delivered in accordance Sentral rediscounting facilities;
with the guidelines set forth in (4) Suspension of lending or foreign
Appendix 68. exchange operations or authority to accept
(ii) Securities sold on a without recourse new deposits or make new investments;
basis are required to be delivered in (5) Revocation of quasi-banking license;
accordance with the guidelines set forth in (6) Revocation of authority to perform
Appendix 68. trust operations; and
(d) Clearly stated to the client that: (7) Suspension for 120 days without pay
(i) The bank does not guarantee the of the directors/ officers responsible for the
payment of the security sold on a “without violation.
recourse basis” and in the event of default (As amended by Circular Nos. 873 dated 25 March 2015 and
by the issuer, the sole credit risk shall be 870 dated 20 February 2015)
borne by the client; and
(ii) The bank is not performing any Sec. X236 Minimum Trading Lot and
advisory or fiduciary function. Minimum Term of Deposit Substitute.
(3) Report to the appropriate a. The minimum size of any single
department of the SES any undocumented deposit substitute transaction shall be
repurchase agreement within
P50,000.
seventy-two (72) hours from knowledge
No bank performing quasi-banking
of such transactions.
functions shall issue deposit substitute
c. Treatment as Deposit Substitutes.
instruments in the name of two (2) or more
All sales of government securities,
persons or accounts except those falling
commercial papers and other negotiable
under the following relationships in which
and non-negotiable securities or
cases, commingling may be allowed:
instruments that are not documented in
(a) husband and wife; (b) persons related to
accordance with existing Bangko Sentral
regulations shall be deemed to be deposit each other within the second degree of
substitutes subject to regular reserves. consanguinity; and (c) “in trust for” (ITF)
d. Sanctions. The Monetary Board may, arrangements.
at its evaluation and discretion, impose any (As amended by Circular No. 703 dated 23 December 2010)
or all of the following sanctions to a bank
or the director/s or officer/s found to be Sec. X237 Money Market Placements of
responsible for repurchase agreements Rural Banks. Banks shall not accept money
covering government securities, market placements from any RB unless the
commercial papers and other negotiable latter presents a certification under oath
and non-negotiable securities or stating: (a) that it has no overdue special
instruments that are not documented in time deposits; (b) that it has no past due
accordance with existing Bangko Sentral obligations with the Bangko Sentral or
regulations: other government financial institutions; (c)
(1) Fine of up to P30,000 a day to the the amount of its current obligations, if
concerned entity for each violation from the any, with said government financial
date the violation was committed up to the institutions; and (d) the amount of its total
date it was corrected; outstanding money market placements.
(2) Suspension of interbank clearing However, in no case shall such banks sell
privileges/immediate exclusion from clearing; receivables to RBs without recourse.

§§ X237.1 - X238
08.12.31
§ X237.1 Definition of terms. As used securities the servicing and repayment of

in this Section, the following terms shall which are guaranteed by the Republic of
have the following meanings: the Philippines.
a. Money market placements shall
include investments in debt instruments, § X237.3 Sanctions. Violations of the
including purchase of receivables with provisions of this Section shall be subject
recourse to the lending institution, except to the following sanctions/penalties:
purchase of government securities on an a. Monetary penalties
outright basis. First offense - Fines of P3,000 a day,
b. Government securities shall include reckoned from the date placement started
evidences of indebtedness of the Republic up to the date when said placement was
of the Philippines, the Bangko Sentral and withdrawn, for each violation shall be
other evidences of indebtedness or assessed on the bank.
obligations of government entities the Subsequent offenses - Fines of P5,000 a
servicing and repayment of which are fully day, reckoned from the date placement
guaranteed by the Republic of the started up to the date placement was
Philippines. withdrawn, for each violation shall be
c. Persistent violation shall mean the assessed on the bank.
violation of any of the provisions of these b. Other sanctions
rules by the director or officer concerned First offense - Reprimand for the
for four (4) or more times within a twelve directors/officers who approved the
(12)-month period from the date the first acceptance/placement with a warning that
offense was committed. subsequent violations will be subject to
more severe sanctions.
§ X237.2 Conditions required on Subsequent offenses -
accepted placements not covered by (1) Suspension for ninety (90) days
prohibition. Placements accepted which are without pay for directors/officers who
otherwise not covered by the above approved the placement.
prohibition must comply with the following (2) Suspension or revocation of the
conditions: authority to engage in quasi-banking
a. That total money market placements functions.
of an RB as stated in the certification,
including the placement being accepted by Sec. X238 Without Recourse Transactions.
the entity concerned, shall not exceed the No bank shall sell, discount, assign, or
RB’s combined capital accounts or net worth negotiate, in whole or in part, such as thru
less current obligations with the Bangko syndications, participations and other
Sentral or other government financial similar arrangements, any notes,
entities; receivables, loans, debt instruments and any
b. The maturity of the money market type of financial asset or claim, except
placement shall not exceed sixty (60) days; and government securities, or be a party in any
c. That placements shall be evidenced capacity in any of the above transactions,
in all cases by promissory notes of accepting on a without recourse basis unless such
entities/repurchase agreements and/or receivables, notes, loans, debt instruments
certificates of participation/assignment with and financial assets or claims are registered
recourse and that underlying instruments with the SEC. This prohibition includes
shall be certificates of indebtedness issued transactions between a bank and its trust
by the Bangko Sentral or other government department.

§§ X238 - X238.1
15.10.31
Unregistered commercial papers may authorized officer of the custodian/central

be sold, discounted, assigned, or negotiated securities depository and delivered to the
by banks to the following: purchaser.
a. other banks; Sanctions. Violation of any provisions of
b. QBs; Item “a” shall be subject to the following
c. IHs; sanctions/penalties:
d. insurance companies; (1) Monetary penalties
e. finance companies; First offense - Fine of P10,000 a day for
f. investment companies; each violation reckoned from the date the
g. pension or retirement plan maintained violation was committed up to the date it
by the government of the Philippines or any was corrected.
political subdivision thereof or managed by Subsequent offenses - Fine of P20,000 a
a bank or other persons authorized by the day for each violation reckoned from the
Bangko Sentral to engage in trust functions; date the violation was committed up to the
h. funds managed by another bank or date it was corrected.
other entities duly authorized to engage in (2) Other sanctions
trust or other fiduciary business; and First offense - Reprimand for the directors/
i. such other person as the SEC may by officers responsible for the violation.
rule determine as qualified buyers, on the Subsequent offense -
basis of such factors as financial (a) Suspension for ninety (90) days
sophistication, net worth, knowledge, and without pay of directors/officers responsible
experience in financial and business matters, for the violation;
or amount of assets under management. (b) Suspension or revocation of the
accreditation to perform custodianship
§ X238.1 Delivery of securities. function;
a. Securities sold on a without recourse (c) Suspension or revocation of the
basis allowed under Sec. X238 shall be authority to engage in quasi-banking
delivered directly to the purchaser or to the function; and/or
purchaser’s designated Bangko Sentral (d) Suspension or revocation of the
accredited securities custodian or SEC authority to engage in trust and other
authorized central securities depository in fiduciary business.
accordance with the guidelines set forth in b. The guidelines to implement the
Appendix 68. The securities custodian shall delivery by the seller of securities to the
hold the securities in the name of the buyer: buyer or to his designated securities
Provided, That a bank authorized by the custodian or central securities depository
Bangko Sentral to perform custodianship are shown in Appendix 68.
function or an SEC-authorized central The guidelines on the delivery of
securities depository may not be allowed government securities to the investor’s
to be custodian/depository of securities principal securities account with the RoSS
issued or sold by said custodian or central are in Appendix 68a.
securities depository, by entities belonging Sanctions. Violation of any provision of
to the same financial conglomerate or the guidelines in Appendix 68 shall be
banking group as that of the custodian or subject to the sanctions/penalties under
depository, or of securities in bearer form. Item “b” of Subsec. X235.5.
The delivery shall be effected upon (As amended by Circular Nos. 873 dated 25 March 2015,
714 dated 10 March 2011, M-2007-002 dated 23 January 2007,
payment and shall be evidenced by a M-2006-009 dated 06 July 2006 and M-2006-002 dated 05 June
securities delivery receipt duly signed by the 2006, Circular No. 524 dated 31 March 2006)

§§ X238.2 - X239.4
15.10.31
§ X238.2 Sanctions. Unless specific Rules on Registration of Long-Term

sanctions are prescribed under these rules, Commercial Papers promulgated by the SEC
any violation of the provisions of this Section (Appendix 13).
shall be subject to any or all of the following
sanctions: § X239.3 Notice to Bangko Sentral ng
a. Suspension of quasi-banking authority Pilipinas. Within three (3) days from
for a period of six (6) months; and approval by SEC of its bond issue, the bank
b. Monetary penalty of P500 per day per concerned shall notify the appropriate
transaction for each officer of the bank department of the SES of the approval
involved in any capacity in any transaction attaching thereto the documents required
violative of these regulations. by the SEC for the issuance and registration
of the bond issue.
§ X238.3 Securities custodianship
operations. § X239.4 Minimum features. Bonds
issued by banks shall have the following
Sec. X239 Issuance of Bonds. The following minimum features:
guidelines shall govern the issuance of a. Form; issue price; denomination -
bonds by banks with quasi-banking The trust indenture and the name of the
authority. indenture trustee shall be indicated on the
face of the bond certificate.
§ X239.1 Definition of terms. For The SEC-assigned bond registration
purposes of this Section, unless the context number and expiry date, if any, shall
clearly indicates otherwise, the following likewise be indicated, stamped on the face
shall have the meaning as indicated: of each bond certificate issued.
a. Government securities shall refer to Bonds may be issued at face value, at a
evidences of indebtedness of the Republic discount or at a premium. Minimum
of the Philippines or its instrumentalities, or denomination shall be P20,000.
of the Bangko Sentral, and must be freely b. Term - The minimum term of the
negotiable and regularly serviced. bonds shall be four (4) years. No optional
b. Net book value shall refer to the redemption before the fourth year shall be
acquisition cost of property or accounts plus allowed.
additions and improvements thereon less c. Interest; manner; form of payment -
valuation reserves, if any. The bonds shall not be subject to interest
c. Current market value shall refer to the rate ceilings prescribed by the Monetary
value of the property as established by a duly Board or Act No. 2655, as amended.
licensed and independent appraiser. d. Trust indenture; collaterals; sinking
fund - A trust indenture shall be executed
§ X239.2 Compliance with Securities between the issuer and a qualified trust
and Exchange Commission rules on corporation as trustee, which shall neither
registration of bond issues. All banks with be an affiliate nor a subsidiary of the issuer.
quasi-banking authority issuing or intending The following shall be deemed as
to issue bonds shall comply with the New eligible collateral and shall be maintained

§§ X239.4 - X240.1
08.12.31
at respective values indicated in relation to F. GOVERNMENT DEPOSITS

the face value of the bond issue:
Sec. X240 Statement of Policy. As a
(1) Government - Aggregate general policy, cash balances of the
securities current Government, its political subdivisions and
market value instrumentalities as well as of government-
of 100% owned or controlled corporations shall be
(2) Readily marketable - Aggregate
deposited with the Bangko Sentral, with
private securities current
listed in the big board market value
only minimum working balances to be
of stock exchanges of 150% held by government-owned banks and
(3) Real estate - Net book such other banks incorporated in the
value of 100% Philippines as the Monetary Board may
(4) Unmatured - Net book designate: Provided, That such banks may
receivables acquired value of 150% be authorized by the Monetary Board to
with recourse hold deposits of the political subdivisions
(5) Unmatured - Net book and instrumentalities of the Government
receivables acquired value of 200% beyond their minimum working balances
without recourse whenever such subdivisions and
instrumentalities have outstanding loans
Government and private securities, with said banks.
certificates of title and documents For purposes of this Section:
evidencing receivables offered as security a. The term government-owned or
shall be physically delivered to the indenture controlled corporations shall refer to
trustee. Substitution of collaterals shall be government-owned or-controlled
allowed: Provided, That in no case shall the corporations which are created by special
collateral fall below the herein required ratios. laws. It shall exclude government FIs such
The issuer may, at his option, provide as DBP, LBP and Al-Amanah Islamic
for the retirement at maturity of the bond Investment Bank of the Philippines,
issue through the sinking fund to be corporations which are created under the
deposited with and managed by the provisions of the Corporation Law (Act No.
indenture trustee. 1459, as amended) or the Corporation Code
e. Bond registry - The bonds shall be (BP Blg. 68) and private corporations which
fully registered as to principal and interest. are taken over by government-owned or-
The issuer, its trustee, agent or underwriter controlled corporations.
must maintain a bond registry duly approved b. Minimum working balances shall
by the SEC for recording initial and represent the minimum amounts necessary
subsequent transfers the names of to enable the government instrumentality/
transferees, date of transfer, purchase price political subdivision making the deposit to
and serial numbers of bonds transferred. transact business efficiently and effectively
as determined by the Department of
§ X239.5 Issuance of commercial Finance.
papers. The issuance of other forms of
commercial papers by banks with quasi- § X240.1 Prior Monetary Board
banking authority shall be subject to the approval. No private bank shall, without
new rules on registration of short-term and prior approval of the Monetary Board,
long-term commercial papers appended accept, as depository, any fund or money
hereto as Appendices 13 and 14. from the Government, its political
* No page 28

§§ X240.1 - X240.3
10.12.31
subdivisions and instrumentalities, and the nearest government bank or Bangko

government-owned or -controlled Sentral office is inaccessible by ordinary
corporations; nor shall a private bank transportation, or transporting/withdrawing
borrow any fund or money therefrom, the government deposits to and from the said
through the issuance or sale of its office is impractical or risky, the province,
acceptances, notes or other evidences of as well as cities and municipalities located
indebtedness. therein, may seek approval of the Monetary
Board to consider all their funds eligible for
§ X240.2 Banks which may accept deposits with a qualified private depository
government funds. bank within the province, city or
a. Banks, the majority of the capital of municipality, as the case may be.
which is owned by the Government, may d. Banks acting as official depository of
act as depository of funds of the government funds may accept demand,
Government, its political subdivisions and savings or time deposits.
instrumentalities, and government-owned e. The authority of a bank to accept
or-controlled corporations. government deposits does not obligate the
b. Private banks incorporated in the Government, its subdivisions and
Philippines may act as depository of instrumentalities and government-owned or-
government funds only with the prior controlled corporations to deposit with that
approval of the Bangko Sentral. Local bank. Thus, even if a TB or RB is authorized
government units may maintain depository by the Monetary Board to accept
accounts preferably in government banks government deposits, a municipality is not
and, in exceptional cases and with the prior obligated to deposit with that TB or RB.
approval of the Monetary Board, in the name Similarly, a bank which is authorized to
of their respective government units, in accept deposits of the Government or a
private banks located in or nearest to their government corporation because of
respective areas of jurisdiction but the outstanding loans granted by the bank
depository bank(s) must also seek the prior cannot demand as a matter of right that the
approval of the BSP: Provided, That a TB/ Government or government corporation
RB/Coop Bank may only act as official make deposits unless there is a stipulation
depository of government funds pursuant to in the loan agreement.
R.A. Nos. 7906, 7353 and 6938, as follows:
(1) a TB may only act as official § X240.3 Prerequisites for the grant of
depository of national agencies, and of authority to accept deposits from the
municipal, city or provincial funds in the Government and government entities. In
municipality, city or province where the TB addition to the Standard Pre-qualification
is located; Requirements for the Grant of Banking
(2) an RB may only act as official Authorities enumerated in Appendix 5,
depository of municipal, city or provincial private banks applying for authority to
funds in the municipality, city or province accept deposits from the Government, its
where the RB is located; and subdivisions and instrumentalities and
(3) a Coop Bank may accept deposits of government-owned or-controlled
all government departments, agencies and corporations and government banks
units of the national and local governments applying for authority to accept government
including government-owned or-controlled deposits in excess of minimum working
corporations. balances shall also comply with the
c. Where there is no government bank following conditions:
or Bangko Sentral office in the province and a. The applicant bank must have

§§ X240.3 - X240.5
13.12.31
complied with the minimum capital required c. In case of the National Government,
under Subsec. X111.1; its unincorporated branches, agencies and
b. It has neither unpaid assessment due instrumentalities, a written authority to open
nor past due obligations with the PDIC; and deposit accounts and/or deposit government
c. The bank’s CAMELS composite rating funds signed by the duly authorized official
in its latest examination is not lower than of the Department of Finance/Bureau of the
three (3) with Management component Treasury (DOF/BTr) and of the department,
score of not lower than three (3). bureau, agency, or office making the
(As amended by Circular Nos. 696 dated 29 October 2010, deposit.
674 dated 10 December 2009 and 526 dated 10 April 2006) The resolution or authority should state
the name and location of the depository
§ X240.4 Application for authority. An
bank, type and terms of the deposit, and
application for authority to accept
that the amount to be deposited represents
government deposits shall be signed by the
working balances.
president of the bank and shall be filed with (As amended by Circular No. 811 dated 13 September 2013)
the appropriate department of the SES. The
application shall be accompanied by a § X240.5 Limits on funds of the
certification by the bank president or Government and government entities that
executive vice-president that the bank has may be deposited with banks.
complied with all the requirements a. Funds of the Government, its
enumerated under Subsec. X240.3. subdivisions and instrumentalities and
Banks authorized to accept government government-owned or-controlled
funds as depository shall continuously corporation, deposited with banks
comply with the conditions enumerated authorized to receive deposits shall be
under Subsec. X240.3 even after the limited to the minimum working balance
authority to accept government deposits has of the depositor.
been granted and during the period while With prior Monetary Board approval,
the banks actually hold government deposits, government or private banks may be
otherwise, any violation may be a basis for authorized to accept amounts in excess of
the imposition of sanctions against the bank, minimum working balances if the
its directors and officers, or revocation of Government or government entity making
the authority to accept government deposits. the deposit has outstanding loan obligations
Deposits maintained by the to the depository bank but such amounts
Government, its subdivisions and shall not exceed the amount of its
instrumentalities and government -owned outstanding loan obligations to the
or -controlled corporations shall be depository bank. The amount of non-
supported by the following documents transferable and non-negotiable government
whenever applicable: securities with market or below market
a. A copy of the resolution of the interest rate at the time of issue, issued by
barangay, municipal or city council the National Government to the depository
(Sangguniang Bayan/Panglunsod) or the bank shall be considered as “outstanding
provincial board (Sangguniang loans” of the National Government to said
Panlalawigan) authorizing the deposit of bank within the meaning of Section 113 of
municipal, city or provincial funds; R.A. No. 7653.
b. A copy of the resolution of the board b. The aggregate amount of government
of directors of the government-owned or- funds which a private bank can hold at any
controlled corporations authorizing the given time shall not exceed 200% of the
deposit of funds of said corporations; or bank’s net worth.

§§ X240.5 - X240.7
17.03.31
c. Where any director, officer or a. The free portion of the “Due from
stockholder of a private bank, as defined Bangko Sentral - Local Currency” after
under Subsec. X326.1, is also an elective satisfying the legal and other reserve
or appointive official of a municipality, city requirements; and
or province, said bank is prohibited from b. Placement of banks in the TDF and
accepting deposits from said municipality, the ODF of the Bangko Sentral.
city or province unless it is the only bank For purposes of computing the fifty
existing therein: Provided, That this percent (50%) liquidity floor requirement on
provision shall not be construed as a grant of all government funds, covered banks shall
authority to such elective or appointive adopt a one (1)-week lag system, effective
public official to act as director or officer of 04 May 2001.
a private bank. Banks authorized to accept government
deposits shall specify in the prescribed
§ X240.6 Liquidity floor. Unless reports submitted to the SDC of the Bangko
otherwise prescribed by the Monetary Sentral the balance of government deposits
Board, authorized government depository subject to liquidity floor requirement and,
banks other than the Bangko Sentral, and if any, the corresponding GS earmarked for
authorized private banks shall, inclusive of subject purpose.
the required reserves against deposits and/ (As amended by Circular Nos. 946 dated 17 February 2017, 913
or deposit substitutes, maintain a fifty dated 02 June 2016, 566 dated 03 May 2007 and 509 dated
01 February 2006)
percent (50%) liquidity floor with respect
to deposits of, borrowings from, and all § X240.7 Exempt transactions. The
other liabilities to, the Government and following deposits of, borrowings from and/
government entities, until 31 December or liabilities to, the Government and
2017, in the form of transferable government government entities shall be exempt from
securities which represent direct obligations the liquidity floor:
of the National Government. Effective a. Obligations to the Bangko Sentral
01 January 2018, liquidity floor reserve arising from rediscounting facilities and sale
requirement shall be as follows: of government securities under repo
agreements made in connection with the
Required liquidity floor provisions of Sec. X269 and
UBs/KBs 0% Government deposits Subsec. X601.1;
and government deposit b. Special time deposits (STDs) and
substitutes shall
continue to be subject to
deposit substitutes under the special
the reserve requirements financing program of the Government and/
provided under or international FIs;
Sec. X253. c. Obligations to the Bangko Sentral
TBs/RBs and 50% Inclusive of the required
consisting of emergency advances, overdraft
Coop Banks reserves against deposits
and/or deposit substitutes facilities, and those arising from peso swap
differentials and supervision and
Eligible securities being used as such examination fees;
reserve shall not in any way be encumbered d. Marginal deposits on importations;
or be subject to any transaction without e. Due to the Treasurer of the
prior approval of the Bangko Sentral. Philippines (unclaimed deposit balances);
Also eligible for liquidity floor are the f. Funds held by participating financial
following: institutions (PFIs) under the GSIS Housing

§§ X240.7 - X240.9
16.06.30
Loan Programs: Provided, That the institutions with the Bangko Sentral shall
agreement between GSIS and the conduit be credited for the same amount. A copy of
banks specify that such funds may be held said report or notice of the SES shall be
by the conduit banks for a period of not more furnished each to the bank concerned and
than seven (7) calendar days prior to their the government institutions.
release to the borrower and prior to the b. The withdrawal of previously granted
remittance by the conduit banks of payment authority to accept government funds;
to the GSIS; c. Without prejudice to the sanctions
g. Deposits of the BIR and BOC; and under Section 35 of R.A. No. 7653, the
h. Any other form of deposits, following administrative sanctions shall be
borrowings and/or liabilities specifically imposed if any part of the certification as
authorized by law or exempted by the required in this Section is found to be false
Monetary Board. or misleading:
On the bank - Cancellation of the
§ X240.8 Reports. Banks shall submit authority to accept government deposits
to the appropriate department of the SES a if one has already been granted and/or
report of their government deposits from all disqualification to act as a government
sources in the aggregate in the prescribed depository for not more than one (1) year.
form. On the certifying officer - A fine of
P5,000 per day from the time the
§ X240.9 Sanctions. Any violation of this certification was found to be false, for
Section shall be a ground for the imposition each application filed with the Bangko
of the following sanctions: Sentral.
a. The deposit account with the Bangko d. Any bank with deficiency in the
Sentral of the bank concerned shall be required liquidity floor against deposits of,
debited by the Accounting Department of and/or borrowings from, the Government
the Bangko Sentral in the amount of the and government entities or with excess
unauthorized deposit or borrowing upon holdings of such deposits shall: (1) be
receipt of a report or notice from the denied the credit facilities of the Bangko
appropriate department of the SES and the Sentral; and (2) if the deficiency lasts for
deposit account of the government four (4) consecutive weeks, the bank shall be

§§ X240.9 - X243
08.12.31
prohibited from declaring cash dividends § X242.1 Time of payment of interest

and making new loans and investments, on time deposits/deposit substitutes.
except investments in government Interest or yield on time deposit/deposit
securities. The prohibition shall be lifted by substitute may be paid at maturity or upon
the Governor of the Bangko Sentral, upon withdrawal or in advance: Provided,
certification by the appropriate department however, That interest or yield paid in
of the SES that the bank has had no advance shall not exceed the interest for
deficiency in its liquidity floor and no excess one (1) year.
holdings of government deposits for at least
four (4) consecutive weeks. § X242.2 Treatment of matured time
deposits/deposit substitutes.
§§ X240.10 - X240.14 (Reserved) a. A time deposit not withdrawn or
renewed on its due date shall be treated as
§ X240.15 Acceptance by banks with a savings deposit and shall earn interest
internet banking facility of payment of fees from maturity to the date of actual
for account of government entities. withdrawal or renewal at a rate applicable
Domestic private banks with Bangko to savings deposits.
Sentral-approved internet banking facility b. A deposit substitute instrument not
are allowed to accept payment of fees/ withdrawn or renewed on its maturity
other charges of similar nature for the date shall from said date become payable
account of the departments, bureaus, on demand and shall earn an interest or
offices and agencies of the government as yield from maturity to actual withdrawal
well as all GOCCs: Provided, That the or renewal at a rate applicable to a deposit
funds so accepted/collected shall be substitute with a maturity of fifteen (15)
treated as deposit liabilities subject to days.
existing regulations on government Banks performing quasi-banking
deposits and shall not exceed the functions shall continue to consider matured
minimum working balance of the said and unwithdrawn deposit substitutes as such
government entities. and subject to reserves.
These banks are required to notify the
appropriate department of the SES that Sec. X243 Disclosure of Effective Rates of
supervises the bank, copy furnished the Interest. Banks are required to disclose to
Head of the Technical Working Group on depositors the following information on
E-Banking, SDC, of the names of the interest computation and payments:
government institutions that will interface a. Type/kind of deposit;
with their systems and any changes that may b. Nominal rate of interest and period
subsequently be made on the arrangements. covered;
c. Manner of interest payment,
Sec. X241 (Reserved) i.e., whether credited in advance or otherwise;
d. Basis of interest payment,
G. INTEREST i.e., whether based on average daily balance
compounded quarterly or otherwise;
Sec. X242 Interest on Deposits/Deposit e. Effective rate of interest expressed
Substitutes. Demand, savings, NOW as a simple annual rate, on the basis of
accounts, time deposits and deposit the information above given and
substitutes shall not be subject to interest indicating the formula used to arrive at the
ceilings. effective rate of interest; and

§§ X243 - X253.1
15.12.31
f. Illustration of basis of computing RBs/

interest on a hypothetical deposit account. UBs/KBs TBs Coop Banks
a. Demand
Copies of the abovementioned Deposits2 20% 8% 5%
information shall be made available to each b. NOW Accounts2 20% 8% 5%
and every depositor by attaching these c. Savings
Deposits2 20% 8% 3%
copies to savings deposit passbooks and d. Time Deposits,
time deposit certificates. Negotiable CTDs,
Long-Term Non-
Posters disclosing the above information Negotiable Tax
and aggregate deposit rates shall also be Exempt CTDs2 20% 8% 3%
displayed conspicuously within the bank e. Long-term
Negotiable certificate
premises. of Time Deposits
1. LTNCTDs under
Secs. X244 - X252 (Reserved) Circular No. 304 4% 4% 4%
2. LTNCTDs under
Circular No. 8241 7% 7% 7%
H. RESERVES AGAINST DEPOSIT f. Deposit
Substitute (DS)2 20% 8% NA
AND DEPOSIT SUBSTITUTE g. DS evidenced by
LIABILITIES repo agreement2 4% 4% NA
h. IBCL 0% 0% 0%
(Sec. X343)
Sec. X253 Accounts Subject to Reserves; i. Bonds2 6% 6% NA
Amounts Required. The following rules and j. Mortgage/CHM cert.2 NA 6% NA
regulations shall govern the reserves against k. Peso deposits
deposit and deposit substitute liabilities. lodged under Due
to foreign banks2 20% NA NA
l. Peso deposits
§ X253.1 Required reserves against
lodged under Due
deposit and deposit substitute liabilities.
to Head Office/
The rates of required reserves against deposit
Branches/Agencies
and deposit substitute liabilities in local Abroad (Philippine
currency of banks starting reserve week branch of a foreign
30 May 2014 shall be as follows: bank)2 20% NA NA
1
As of 22 February 2014 the required reserves for LTNCTD shall be increased from three percent (3%) to
six percent (6%). However, approved applications & outstanding LTNCTDs as of 22 February 2014 shall
not be covered by the new requirements.
2
For reserve week starting 11 April 2014, the required reserves for UBs/KBs and TBs shall be as follows:
UBs/KBs TBs UBs/KBs TBs

a. Demand Deposits 19% 7%
b. NOW Accounts 19% 7% g. Bonds 5% 5%
c. Savings Deposit 19% 7% h. Mortgage/CHM cert. NA 5%
d. Time Deposits, i. Peso deposits lodged
Negotiable CTDs, under Due to foreign Banks 19% NA
Long-Term Non-Negotiable j. Peso deposits lodged
Tax Exempt CTDs 19% 7% under Due to Head
e. Deposit Substitute (DS) 19% 7% Office/Branches/Agencies
f. DS evidenced by Abroad (Philippine Branch
repo agreements 3% 3% of a foreign bank) 19% NA

§§ X253.1 - 254
15.12.31
Item “g” refers to deposit substitutes January 2014, 753 dated 29 March 2012, 732 dated 03 August
evidenced by repo agreements covering 2011, 726 dated 27 June 2011 and 632 dated 19 November
government securities up to the amount 2008)
equivalent to the adjusted Tier 1 capital
of the bank: Provided, That such rate § X253.2 Liquidity reserves.
shall apply only to repo agreements, the (Deleted by Circular No. 753 dated 29 March 2012)
documentation of which conforms with,
Sec. X254 Composition of Reserves.
and were delivered to a BSP-accredited
a. Composition of required reserves.
third party custodian as required under
existing Bangko Sentral regulations. The required reserves shall be kept in the
Items “k” and “l” refer to peso deposits, form of deposits placed in banks’ demand
except those utilized as capital of foreign deposit accounts (DDAs) with the Bangko
banks (incuding Head Office/Branches/ Sentral.
Agencies abroad of local branches of b. Transitory provisions. Banks may
foreign banks) booked under the “Due to continue to utilize the following as eligible
Foreign Banks” and “Due to Head Office/ forms of compliance with the reserve
Branches/Agencies Abroad” accounts as requirement in accordance with the
provided under Subsec. X191.1, as following guidelines:
amended. i. Government securities. Government
(As amended by Circular Nos. 890 dated 02 November 2015, securities which are used as compliance
832 dated 27 May 2014, 830 dated 03 April 2014, 824 dated 30 with the regular and/or liquidity reserve

§§ X254 - X254.1
12.12.31
requirement as of 06 April 2012, shall The reserve eligibility of government

continue to be eligible as compliance with securities used as collateral in the reverse
the reserve requirement until they mature. repo operations of the Bangko Sentral shall
For purposes of this Section, be suspended during the term of the reverse
government securities which may form part repo agreement.
of the reserves against deposits/deposit The phrase non-reserve eligible shall be
substitute liabilities of banks shall refer to stamped on the face of the custodian receipt
bonds or other evidences of indebtedness being issued by the Bangko Sentral to buyer
representing direct obligations of the FIs.
Government of the Republic of the ii. Reserve deposit account (RDA)
Philippines: Provided, That such securities Deposit placements that are maintained by
shall have the following minimum features/ banks in the RDA with the Bangko Sentral,
conditions: which are used as compliance with the
(1) The securities must bear an interest liquidity reserve requirement as of 06 April
rate of not more than four percent (4%) per 2012, shall continue to be eligible as
annum, must be non-negotiable and shall compliance with the reserve requirement
carry Bangko Sentral support; until they mature.
(2) The amount, maturity date and rate All new deposits in the RDA shall be
of interest must be definite and stated in the given a maturity date of 04 April 2012.
certificate itself; and The RDA facility shall be discontinued
(3) The government securities may not and the Bangko Sentral shall no longer
be hypothecated or encumbered in any way accept new RDA placements from banks
or earmarked for any other purpose. effective 06 April 2012.
The government securities held as Outstanding placements in the RDA
reserves under Item “b.i” above shall be facility on 06 April 2012 shall be paid
valued at cost of acquisition and the bank interest at maturity based on existing
may freely alter its composition: Provided, regulations.
That any substitution or acquisition iii. Cash in vault (CIV). Banks’ existing
satisfies the eligibility requirements CIV shall be eligible as compliance with the
prescribed above: Provided, further, That reserve requirements until 06 April 2012.
the bank notifies the Bangko Sentral of any Henceforth, such mode of compliance shall
such change in the prescribed forms not no longer be allowed.
later than the reporting day following the The CIV component of available
change. reserves shall be based on the actual CIV
Only the buying/lending bank in a balance outstanding with a one (1) banking
resale agreement covering eligible day lag, for purposes of computing the
government securities may use such reserve position of the current day.
securities as reserves against deposits/ (As amended by Circular Nos. 753 and 752 dated 29 March
deposit substitutes. Conversely, the 2012, 551 dated 17 November 2006 and 539 dated 09 August
2006)
selling/borrowing bank in a repo
agreement covering eligible government § X254.1 Allowable drawings against
securities may not use such securities as reserves. Deposit with the Bangko Sentral
reserves against deposits/deposits to comply with reserve requirements are not
substitutes. regular current accounts. The use, therefore,

§§ X254.1 - X256
12.12.31
of Bangko Sentral checks for drawings b. STDs from the Agrarian Reform Fund
against reserve deposits shall be limited to Commission and special savings deposits
(a) settlement of obligations with the Bangko from farmer-borrowers; and
Sentral, and (b) withdrawals to meet cash c. Unclaimed balances of deposit
requirements. liabilities already reported to the Treasurer
of the Philippines in accordance with the
§ X254.2 Exclusion of uncleared checks Unclaimed Balances Act (Act No. 3936, as
and other cash items. COCIs which have amended) and transferred/reclassified from
not been cleared yet through the Clearing the deposit liability/other credit accounts to
Office should not be debited to the account the liability account “Due to the Treasurer
Due from the Bangko Sentral and should not of the Philippines”.
be considered as available reserves against Local banks may deduct from the
deposit/deposit substitute liabilities. Such amount of their gross demand deposits, the
items shall be debited to the COCIs account. total of their Due from Local Banks -
Only after the COCIs have been cleared Demand and Due from PNB - Clearing in
through the Clearing Office can the bank an amount not exceeding the total of their
debit the Due from the Bangko Sentral Demand Deposits-Banks and Due to Local
account for said items. Banks. As used herein, the term gross
demand deposits shall mean the sum of all
§ X254.3 Interest income on reserve individual deposits, including deposits
deposits. Deposits maintained by banks with made by other local banks, the Philippine
the Bangko Sentral in compliance with the Government, its political subdivisions and
reserve requirement shall no longer be paid instrumentalities, and GOCCs.
interest effective 06 April 2012.
(As amended by Circular No. 753 dated 29 March 2012) Sec. X256 Computation of Reserve
Position. The reserve position of any bank
§ X254.4 Book entry method for and the penalty on reserve deficiency shall
reserve securities. In the implementation of be computed based on a seven (7)-day
the book entry system for transactions in week, starting Friday and ending Thursday,
government securities eligible for reserves, including Saturdays, Sundays, public
transactions concerning reserve-eligible special/legal holidays, non-banking days or
securities shall be entered in the respective declared half-day holidays and days when
securities account of each bank with the there is no clearing: Provided, That with
Bangko Sentral and shall be evidenced by reference to public special/legal holidays,
securities account debit or credit advices to non-banking days, unexpected declared
be promptly furnished the institution/s non-banking days, declared half day
concerned. No certificate shall be issued for holidays and days when there is no clearing,
any purpose. Transactions with third parties the reserve position as calculated at the close
other than the Bangko Sentral shall not be of the business day immediately preceding
recognized. such public special/legal holidays, non-
banking days and unexpected declared non-
Sec. X255 Exemptions from Reserve banking days and declared half-day holidays
Requirements. The following shall be and days when there is no clearing, shall
exempt from reserve requirements: apply thereon. For this purpose, the principal
a. All collections credited to the special office in the Philippines and all other
account “Due to BSP - Internal Revenue banking offices located therein shall be
Account (Other Cities and Municipalities)”; treated as a single unit.

§§ X256 - X257
16.03.31
The guidelines on the computation of a in Subsec. X256.1, shall also be adopted in

banks’ reserve position during public sector the calculation of the two percent (2%)
holidays are shown in Appendix 84. statutory reserve requirements for repo
(As amended by M-2008-025 dated 13 August 2008) agreements covering government securities.
d. Deposit substitutes evidenced by
§ X256.1 Measurement of reserve repo agreements covering government
requirement. The required reserves in the securities in excess of the adjusted Tier 1
current period (reference reserve week) capital shall be treated as regular deposit
shall be computed based on the substitutes and shall be subject to the regular
corresponding levels of deposit and statutory and liquidity reserve requirements
deposit substitute liabilities of the prior under existing regulations.
week. (As amended by Circular Nos. 890 dated 02 November 2015
§§ X256.2 – X256.4 (Reserved)
Sec. X257 Reserve Deficiencies; Sanctions.
§ X256.5 Guidelines in calculating and Whenever the reserve position of any bank
reporting to the Bangko Sentral the computed in the manner specified in Sec.
required reserves on deposit substitutes X256 is below the required minimum, it
evidenced by repurchase agreements shall pay the Bangko Sentral one-tenth of
covering government securities. one percent (1/10 of 1%) per day on the
a. The SDC shall determine the amount of the deficiency or the prevailing
maximum allowable amount of repo ninety-one (91) day T-Bill rate plus three (3)
agreements covering government securities percentage points, whichever is higher:
that will qualify for the reduced statutory Provided, however, That a bank shall be
reserve requirements of two percent (2%). permitted to offset any reserve deficiency
It shall be based on the amount reported by occurring one (1) or more days of the week
banks in their weekly Consolidated Daily covered by the report against excess reserves
Report of Condition. The adjusted Tier 1 which it may hold on other days of the same
capital reported daily should approximate week, and shall be required to pay the
the quarterly adjusted Tier 1 capital as penalty only on the average daily net
submitted by banks in compliance with the deficiency during the week1.
risk-based CAR presented under applicable In case of abuse, a bank shall
and existing capital adequacy framework. automatically lose the privilege of
b. Any material differences that may offsetting reserve deficiency in the
be noted by the SDC between the daily aforesaid manner until such time that it
and the quarterly report shall be maintains its daily reserve position at the
considered as erroneous reporting and required minimum for at least two (2)
shall be subject to the penalties under consecutive weeks.
existing regulations. The SDC shall also As used in this Section, “abuse” in the
make a re-run of its computation of the privilege of offsetting reserve deficiencies
bank’s reserve position and in the event against excess reserves shall mean having
that the reserve position resulted to reserve deficiencies occurring four (4) or
reserve deficiency/ies, the corresponding more times during any given week for two
penalties on reserve deficiencies shall also (2) consecutive weeks, whether or not
apply. resulting in net weekly deficiencies.
c. The lagged system in the measurement (Circular No. 903 dated 29 February 2016, M-2015-039 dated 04
of a bank’s reserve requirement, as provided November 2015, Circular No. 890 dated 02 November 2015, M-
2015-035 dated 07 October 2015, M-2015-009 dated 28 January
1

§§ X257 - X260
16.03.31
2015, M-2015-005 dated 20 January 2015, M-2014-039 dated as long as it has not maintained credit
01 October 2014, M-2014-031 dated 08 August 2014, M-2014- balances with the Bangko Sentral for at
006 dated 12 February 2014, M-2013-050 dated 15 November
2013, M-2013-046 dated 30 October 2013, M-2013-045 dated least five (5) consecutive banking days. If
23 October 2013, M-2013-040 dated 03 September 2013, M- its clearing account is overdrawn for five
2013-001 dated 14 January 2013, M-2012-060 dated 27 December (5) consecutive banking days, it shall be
2012, M-2012-051 dated 09 November 2012, M-2012-044 dated prohibited from (a) making new loans or
24 August 2012, M-2012 042 dated 17 August 2012, M-2012-
001 dated 03 January 2012, M-2011-056 dated 10 November
investments, except investment in
2011, M-2011-055 dated 17 October 2011, M-2011-043 dated 12 government securities with Bangko Sentral
August 2011, M 2011-007 dated 04 February 2011, M-2010-039 support; (b) declaring cash dividends until
dated 03 November 2010, M-2010-007 dated 23 April 2010, M- it has maintained credit balances in its
2009-040 dated 30 October 2009, M-2009-037 dated 15 October
Bangko Sentral clearing account for at least
2009,M-2009-38 dated 08 October 2009, and M-2009-036 dated
07 October 2009) fifteen (15) consecutive banking days; and
(c) establishing branches. The denial from
§ X257.1 Chronic reserve deficiency; availment of credit facilities of the Bangko
penalties. In cases where the bank has Sentral shall continue for as long as the
chronic reserve deficiency in deposit/ bank has not maintained credit balances
deposit substitute liabilities, the bank shall with the Bangko Sentral for at least fifteen
be denied the credit facilities of the Bangko (15) consecutive banking days.
Sentral; and the Monetary Board may: For purposes of computing the total
(a) limit or prohibit the making of new available reserves against deposit/deposit
loans or investments by the bank; and substitute liabilities, the total amount of
(b) prohibit the declaration of cash overdrawing in the clearing account with
dividends. The board of directors of said the Bangko Sentral shall be deducted from
bank shall be notified of such chronic available reserves after the required
reserve deficiency and the penalties therefor, reserves against deposit/deposit substitute
and be required to immediately correct the liabilities shall have been satisfied.
reserve position of the bank. (As amended by Circular Nos. 705 dated 29 December 2010
As used in this Subsection, “chronic and 681 dated 08 February 2010)
reserve deficiency” shall mean having net
reserve deficiencies for two (2) consecutive § X257.3 Payment of penalties on
weeks. reserve deficiencies. Penalties if unpaid
within fifteen (15) days from receipt of the
§ X257.2 Failure to cover overdrawings assessment, shall be charged against the
with the Bangko Sentral. Any bank which demand deposit accounts of banks with the
incurs an overdrawing in its deposit Bangko Sentral: Provided, That where the
account with the Bangko Sentral shall fully bank’s credit balance is insufficient and it
cover said overdraft not later than the next fails to settle the assessment, the Monetary
clearing day including interest thereon Board may limit or prohibit the making of
equivalent to one-tenth of one percent new loans or investments by the bank.
(1/10 of 1%) per day or the prevailing
ninety-one (91) day T-Bill plus three (3) Sec. X258 Report on Compliance. Every
percentage points, whichever is higher. In bank shall make a weekly report to the
case a bank fails to cover its overdrawings, Bangko Sentral of its daily required and
it shall be excluded from clearing on such available reserves on deposit/deposit
day and it shall also be denied the credit substitute liabilities in the prescribed forms.
facilities of the Bangko Sentral. Such
exclusion from clearing shall continue for Secs. X259 - X260 (Reserved)

§§ X261 - X261.7
08.12.31
I. SUNDRY PROVISIONS § X261.3 Booking of cash deposits.

ON DEPOSIT OPERATIONS Cash deposits received after the selected
clearing cut-off time until the close of the
Sec. X261 Booking of Deposits and regular banking hours shall be booked as
Withdrawals. The following regulations deposits on the day of receipt.
shall govern the booking of deposits and
withdrawals of banks. § X261.4 Booking of non-cash deposits.
Deposits of checks including “on us” checks,
§ X261.1 Clearing cut-off time. As a manager’s/cashier’s/ treasurer’s checks
general rule, all deposits and withdrawals and demand drafts, which are drawn
during regular banking hours shall be against the depository bank and all its
credited or debited to deposit liability offices, as well as treasury warrants and
accounts on the date of receipt or payment postal money orders, received after the
thereof: Provided, however, That a bank may selected clearing cut-off time until the close
set a clearing cut-off time for its head office of the regular banking hours, may, at the
not earlier than two (2) hours before the start option of the bank, be booked as deposits
of clearing at the Bangko Sentral, and not on the day of receipt.
earlier than three and one-half (3-1/2) hours Other non-cash deposits received after
before the start of clearing for all its the selected clearing cut-off time shall be
branches, agencies and extension offices treated as contingent accounts on the day
doing business in the Philippines, after of receipt and shall be booked as deposits
which time, deposits received shall be the following banking day.
booked as hereinafter provided: Provided,
further, That banks which are located in § X261.5 Booking of deposits after
areas where there are no Bangko Sentral regular banking hours. Deposits, whether
regional/clearing arrangements may set a cash or non-cash, received after the close
clearing cut-off time not earlier than two (2) of the regular banking hours shall be treated
hours before the start of their local clearing as contingent accounts on the day of receipt
after which time, deposits received shall be and shall be booked as deposits the
booked likewise as hereinafter provided. following banking day.
§ X261.2 Definitions. As used in this § X261.6 Other records required. For

Section, the following terms shall have the record and control purposes, banks shall
following meanings: prepare a daily abstract of deposit
a. Regular banking hours shall refer to transactions treated as contingent accounts.
the banking hours reported to the Bangko
Sentral pursuant to Sec. X156, including the § X261.7 Notice required. Banks shall
extended banking hours reported for post at a conspicuous place near each
servicing deposits and withdrawals; and teller’s window a notice to depositors
b. Clearing cut-off time shall mean the indicating their selected clearing cut-off time
bank’s closing time for the acceptance of and a statement to the effect that non-cash
deposits in the form of checks, bills and items deposited after said cut-off time shall
other demand items for clearing on the day be treated as transactions for the next
of their receipt. banking day.

§§ X262 - X263.1
16.12.31
Sec. X262 Miscellaneous Rules on Deposits. Commission Memorandum Circular No. 40

Banks shall also be governed by the and Rule VII of Civil Service: Laws and Rules
following miscellaneous rules on deposits. for government banks shall apply in classifying
employee/personnel as casual, regular or
§ X262.1 Specimen signatures, probationary. Personnel with too lengthy
identification photos. All banking probationary status are employees who are
institutions are required to set a minimum allowed to work after a probationary period
of three (3) specimen signatures to be of six (6) months without being considered
simultaneously required from each of their a regular/permanent employee.
depositors and to update the specimen
signatures of their depositors every five (5) Sec. X263 (2016 - Service and maintenance
years or sooner, at the discretion of the bank. fees) Fees on Retail Bank Products/
Banks may, at their option, require their Services 1 . Pursuant to the consumer
depositors to submit ID photos together with protection principle of fair treatment, a
the specimen signatures. bank’s board of directors shall adopt a
policy on the imposition of any fee on its
§ X262.2 Insurance on deposits. All retail products/services. The policy shall cite
banks shall indicate the coverage of the the basis for the imposition of fees and
PDIC in each passbook, certificate of time rationalize the fee structure/amount.
deposit and/or cover of checkbook for (As amended by Circular No. 928 dated 24 October 2016 and
M-2011-030 dated 03 June 2011)
demand deposit/NOW accounts stating,
among other things, the maximum amount § X263.1 (2016 - Amendments to terms
of insurance. and conditions for the imposition of service
charges/fees) Fees on deposit accounts.
§ X262.3 Certification of compliance a. Maintenance Fee. Banks may impose
with Subsection 55.4 of R.A. No. 8791. maintenance fees on a deposit account,
Banks shall submit to the appropriate whether active or dormant, subject to the
supervising and examining department of the following conditions:
Bangko Sentral, through the Deputy (1) The required minimum monthly
Governor of SES, a statement within seven (7) average daily balance (ADB), as well as the
banking days after end of June and imposition and the rate/amount of
December, signed solely by the Vice- maintenance fee, are properly disclosed
President for Administration or Human among the terms and conditions of the
Resource or Personnel, or by any officer deposit;
assuming equivalent responsibility, certifying (2) The deposit account balance has fallen
their institution’s compliance with below the required minimum monthly ADB
Subsection 55.4 of R.A. No. 8791, which for at least two (2) consecutive months; and
prohibits banks from employing casual, (3) Banks must ensure that clients are
nonregular personnel or too lengthy notified of any change in the required
probationary personnel in the conduct of its minimum monthly ADB and amount of
business involving bank deposits. A format dormancy fee at least sixty (60) days prior
for the certification of compliance is shown to implementation.
in Appendix 49. b. Dormancy Fee. Banks may only
The definition contained in Articles 280- impose dormancy fee on a dormant deposit
281 of the Labor Code of the Philippines for account five (5) years after the last activity
private banks and Section 2 of the Civil Service therein: Provided, That:
1
Effective 25 April 2017.

§§ X263.1 - X264
17.03.31
(1) The balance falls below the Clients who do not agree with the new/
minimum monthly ADB, if any; revised terms and conditions have the right
(2) The monthly dormancy fee shall not to exit the contract without penalty:
exceed thirty pesos (P30.00); and Provided, That such right is exercised within
(3) The bank complied with the two (2) thirty (30) days from receipt of individual
notice requirement under Item numbers notice or thirty (30) days from issuance of
“7.b.(2)” and “7.b.(4)”, Appendix 112, prior public notice.
to the charging of dormancy fees. (Circular No. 928 dated 24 October 2016)
(As amended by Circular No. 928 dated 24 October 2016)
§ X263.5 Individual notifications.
§ X263.2 Fees on domestic remittance Individual notifications shall be sent to the
transactions. client’s last known postal address/e-mail
(Transferred to Section X906 pursuant to Circular No. 952 dated address/contact number either through
22 March 2017) postal or registered mail, courier delivery,
electronic mail, text messages, telephone
§ X263.3 Additional disclosure calls or other alternative modes of
requirements. Banks shall post fees/charges communication, as may be elected by the
in readable font size at the following places: client.
a. Automated Teller Machine (ATM) (Circular No. 928 dated 24 October 2016)
transaction fees at the ATM’s on-screen
messages; and § X263.6 Non-waiver by contractual
b. Fees and charges on all retail bank provisions. The provisions of Subsec. X263.4
products/services such as deposit, shall apply, notwithstanding any contrary
remittance and loan, on the bank’s official provisions in the terms and conditions.
website and at a conspicuous place within (Circular No. 928 dated 24 October 2016)
the premises of all banking units.
(Circular No. 928 dated 24 October 2016) Sec. X264 Unclaimed Balances. All
unclaimed balances, which include
§ X263.4 Amendments to terms and credits or deposits of money, bullion,
conditions of retail bank products and securities or other evidences of
services. Clients should be notified at least indebtedness of any kind, and interest
sixty (60) days prior to implementation of thereon already reported to the Treasurer
any amendments to the terms and of the Philippines in accordance with the
conditions of retail bank products and Unclaimed Balances Act (Act No. 3936,
services by public notice. Public notice may as amended) shall be transferred/
take the form of posting in public places, reclassified from the deposit liability/other
such as the bank’s official websites and/or credit accounts to the liability account,
at a conpicuous place within the premises “Due to the Treasurer of the Philippines,”
of all banking units. until they are deposited with or turned
Changes in deposit interest rate, over to the Treasurer of the Philippines
however, may be immediately effected after upon order of the court that the same have
the public notice. been escheated in favor of the Government
Complementary individual notices to a of the Republic of the Philippines and as
client shall be sent if the amendments such, the unclaimed deposit liabilities
pertain to or will result to fees to be paid or shall no longer be covered by reserves
charged on the account of the client. required of deposit liabilities.

§§ X265 - X266.2
17.03.31
Sec. X265 Acceptance, Encashment or a. The bank shall exercise due diligence
Negotiation of Checks Drawn in Favor of to assure itself that prudent security
Commissioner/Collector of Customs. All measures are observed by the service
checks payable to the Commissioner/ provider, and that customer risk of loss shall
Collector of Customs shall be accepted for be covered by insurance;
deposit only to the account of the b. The customer executes a written
Commissioner/Collector of Customs. Banks authorization for the cash/check pick-up
where the Commissioner/Collector of and/or cash delivery and accepts that no
Customs has no account shall not encash, deposit relationship exists with the bank for
accept nor negotiate checks payable to the the cash/checks in transit;
Commissioner/Collector of Customs. c. Customer deposit accounts shall be
Any attempt to defraud the government credited or debited when the cash/checks
or the bank through the irregular or picked up or cash delivered are turned over
unauthorized encashment or deposit of to the bank by the service provider and
these checks to accounts other than that of vice-versa consistent with procedures for
the Commissioner/Collector of Customs transactions made by clients within bank
shall be reported immediately by the head premises; and
of the banking office to the BOC, copy d. The bank shall ensure due diligence
furnished the Bangko Sentral. and compliance with applicable rules,
regulations and policies on anti-money
Sec. X266 Cash Pick-up/Cash Delivery laundering, consumer protection, bank
Services; cash agents. Subject to approval secrecy, and customer data confidentiality.
by the Deputy Governor, SES, a bank may The board of directors shall adopt
accredit third party service providers, which clearly-defined written policies, procedures
may be authorized by customers to perform and controls for cash/check pick-up/cash
cash/check pick-up and/or cash delivery delivery services, including, but not limited
services on their behalf, or contract third to, the criteria for determining to whom the
party entities as cash agents to accept and service will be made available, and the
disburse cash on the bank’s behalf in order terms and conditions for such services.
to promote operational efficiency, more (As amended by Circular No. 940 dated 20 January 2017)
expanded service delivery channels, and
greater convenience of banking customers. § X266.2 Use of cash agents. A bank
Once given such approval, a bank may may contract third party entities as cash
continuously undertake these activities unless agents subject to existing rules on
otherwise ordered by the Bangko Sentral. outsourcing: Provided, That the following
(As amended by Circular No. 940 dated 20 January 2017) conditions are complied with:
a. The bank shall have an electronic
§ X266.1 Cash pick-up/Cash delivery banking solution to implement its cash agent
services. operations and comply with the
A bank may accredit third party service requirements of Part Seven, on the
provider/s, which may be authorized by Guidelines on Electronic Banking Services
customers to pick-up cash/checks for and Operations. The bank shall deploy to
deposit and/or deliver proceeds from cash its cash agents a device through which its
withdrawal and/or cash exchange, subject customers can perform secure online,
to the following conditions: real-time deposit and withdrawal

§§ X266.2 - X267
17.03.31
transactions for his/her own bank account, cash agents on bank-related services. The
fund transfers and bills payment (self-service bank shall exercise due diligence to ensure
transactions). its cash agents comply with applicable rules,
b. Cash agents shall be allowed to regulations, and policies on anti-money
accept and disburse cash on bank’s behalf laundering, consumer protection, bank
in connection with the following self-service secrecy and customer data
transactions of customers: confidentiality.
(1) Deposit and withdrawal transactions The board of directors of the bank shall
performed by the customer on his bank adopt clearly-defined written policies,
account; procedures and controls for its cash agent
(2) Fund transfers performed by the operations, including but not limited to cash
customer; agent selection and due diligence, and
(3) Bills payment; and customer care arrangements.
(4) Payments due to government Upon receipt of notice of Bangko
institutions, e.g., members’ contributions to Sentral approval to contract cash agents, the
the Social Security System and premiums bank shall inform the Bangko Sentral of the
payable to the Philippine Health Insurance target launch date of such service, which
Corporation. shall be within six (6) months from the date
In addition to the above, cash agents are of said approval.
also allowed to perform the following for (Circular No. 940 dated 20 January 2017)
the bank:
(1) Perform Know-Your-Customer and Sec. 1266 (Reserved)
other related processes in accordance with
existing regulations; Sec. 2266 (Reserved)
(2) Collect and forward applications for
Sec. 3266 Qualifying Criteria Before a
opening a savings account;
Rural/Cooperative Bank Engages in Deposit
(3) Accept and forward loan application
Pick-up Services.
documents; and (Deleted by Circular No. 940 dated 20 January 2017)
(4) Market, sell and service insurance
products in accordance with existing Sec. X267 Automated Teller Machines.
regulations. a. Off-site ATMs. Banks may establish
c. The bank assumes full responsibility off-site ATMs, subject to the following
and liability for all acts and omissions of its conditions:

§§ X267 - X268.2
13.12.31
(1) Banks shall submit a report to the total credit score under the Credit
appropriate department of the SES on ATMs Information System (CRIS). The scoring
which they establish; system under the CRIS shall consider the
(2) The off-site ATMs shall be installed only following factors:
in centers of activity like shopping centers, a. Management and risk management
supermarkets, hospitals, university campuses: system;
Provided, That adequate internal control and (1) Management; and
security measures shall be adopted and (2) Risk management system;
submitted to the Bangko Sentral; and b. Financial indicators;
(3) Only banks which have shown (1) Capital adequacy;
general compliance with laws, rules and (2) Asset quality;
regulations shall be allowed to open off-site (3) Profitability; and
ATMs. (4) Liquidity;
b. Mobile ATMs. Banks may also c. Credit experience;
establish mobile ATMs, subject to the (1) Compliance with the terms and
following conditions: conditions of the loan and other Bangko
(1) The mobile ATMs should be Sentral regulations; and
allowed to visit only centers of activity as (2) Credit experience with other FIs.
mentioned in Item “a(2)” above; The CRIS guidelines shall be reviewed on
(2) The bank shall secure insurance a regular basis by a Credit Committee created
coverage or adopt a self-insurance scheme under MB Resolution No. 832 dated 02 July
to protect itself against losses of whatever 2008, to maximize its effectiveness in managing
nature in its mobile ATM operations; and the credit risk of the Bangko Sentral.
(3) The bank shall notify the appropriate (Circular No. 515 dated 06 March 2006 as amended by Circular
department of the SES of the actual date a No. 630 dated 11 November 2008)
mobile ATM becomes operational and when
§ X268.2 Application Procedures.
no longer in operation.
Banks applying for a rediscounting line shall
submit their application in the prescribed
J. BORROWINGS FROM THE form (RL Form No. 1) to the Department of
BANGKO SENTRAL Loans and Credit (DLC), Bangko Sentral-
Manila, together with the following
Sec. X268 Rediscounting Line. The following documents:
guidelines shall govern the operations of the a. Board resolution duly signed by the
BSP’s rediscounting line by banking board of directors of the applicant bank,
institutions. authorizing the bank to apply for a
Coop Banks shall be given the same rediscounting line with the Bangko Sentral and
privileges and incentives granted to RBs, designating the officer/s of the bank to sign
TBs, UBs and KBs to rediscount notes with and endorse documents pertaining
the Bangko Sentral, the Land Bank of the thereto, together with their specimen
Philippines, and other government banks. signature/s;
(Circular No. 515 dated 06 March 2006 as amended by Circular b. Articles of incorporation (for new
No. 682 dated 15 February 2010) applicants only) and amendments, if any;
c. Organizational chart (for new
§ X268.1 Credit Information System. applicants only);
The rediscounting availments of all eligible d. List of board of directors and principal
banks shall be drawn against their officers (top three (3) executive officers) and
rediscounting line which is based on their their education/training and work

§§ X268.2 - X268.3
15.12.31
experience; five percent (5%) based on latest available

e. Annual report/AFS for the report of the SDC.
immediately preceding year; and Banks applying for the microfinance
f. For banks applying for microfinance facility shall also comply with the following
facility, a copy of the Manual of Operations requirements based on the latest available
pertaining to microfinance operations. report of the SES:
(Circular No. 515 dated 06 March 2006, as amended by Circular a. At least one (1) year track record in
Nos. 806 dated 15 August 2013, 684 dated 15 March 2010, 648 microfinance;
dated 02 March 2009 and 630 dated 11 November 2008) b. At least 500 active microfinance
borrowers;
§ X268.3 Approval/Renewal of the line. c. A portfolio at risk ratio (PAR) of not
The approval/renewal of rediscounting line more than five percent (5%);
shall be subject to the bank’s full d. The ratio of total collections
compliance with the following (excluding prepayments) during the
requirements: preceding 12-month period to total
a. Minimum capital prescribed under collectibles (past due microfinance loans
Subsecs. X111.1 and X111.2 based on the beginning, plus matured loans/principal
latest available report of the SDC; amortizations due for the period) should not
b. CAR as required under applicable be less than ninety-five percent (95%); and
and existing capital adequacy framework, e. Officers and staff responsible for
based on the latest available report of the microcredit operations shall have
SDC except those with capital build-up completed: (1) a training course on
program approved by the Monetary microfinance; and (2) at least one (1) year
Board; experience in microlending activities.
c. Required reserves against deposit The approval, disapproval, extension,
liabilities/deposit substitutes for two (2) amendment, cancellation, suspension and
consecutive weeks based on the latest restoration of the rediscounting line shall be
available report of the SDC; delegated to a Credit Committee composed
d. NPL ratio lower or equal to the of the Assistant Governor/Managing
industry average adjusted upward by two Director (MD) of the Monetary Operations
percent (2%) based on the latest available Sub-Sector, MD of the Regional Monetary
report of the SDC, or the allowable NPL Affairs Sub-Sector, and the Director of the
ratio approved by the Monetary Board; DLC.
e. Positive DDA balance with the Banks with approved rediscounting line
Bangko Sentral as of date of application; shall, thereafter, submit the following:
f. No past due obligations or collateral a. Rediscounting line agreement (RL
deficiencies on account of matured notes/ Form No. 3); and
unremitted collections/missing collaterals or b. For new applicant rural/cooperative
ineligible papers with the Bangko Sentral banks with designated custodian bank, a
as of date of application; tripartite depository agreement (RL Form No.
g. A CAMELS composite rating of “3” 2) by and among the applicant bank,
or higher based on the latest general designated depository bank (duly concurred
examination of the appropriate department by its Head Office) and the DLC.
of the SES; and For newly merged or consolidated
h. The ratio of past due direct and banks, a temporary line not exceeding fifty
indirect loans to DOSRI to the aggregate past percent (50%) of its adjusted net worth as
due loans should not be more than of latest date may be granted for a period of

§§ X268.3 - X268.10
15.12.31
180 days while awaiting the required which ranges from fifty percent (50%) to
reports/data from the appropriate 200% of adjusted networth.
department of the SES, renewable for (Circular No. 515 dated 06 March 2006, as amended by Circular
another 180 days or until such time that the No. 630 dated 11 November 2008)
required reports/data are made available,
whichever comes earlier, subject to the § X268.5 Term of the line. The term of
following conditions1: the line shall be for one (1) year unless
a. Compliance with the requirements sooner cancelled, suspended, amended or
extended by the Credit Committee. The line
cited under Items “e” and “f”, and other
is renewable annually upon submission of
guidelines issued by the DLC; and
application one (1) month before the expiry
b. One (1) of the merging or of said line. Should there be special
consolidating banks has CAMELS composite circumstances or information from the SES
rating of at least “3” and minimum CAR of that may adversely affect the credit
ten percent (10%) based on the latest worthiness of a bank in the intervening
available SDC data. period, the rediscounting line of the bank
(Circular No. 515 dated 06 March 2006, as amended by Circular concerned will be reviewed immediately
Nos. 890 dated 02 November 2015, 827 dated 28 February
and acted upon accordingly.
2014, 806 dated 15 August 2013, 776 dated 07 December
2012,684 dated 15 March 2010, 648 dated 02 March 2009 and (Circular No. 515 dated 06 March 2006, as amended by Circular
630 dated 11 November 2008) No. 630 dated 11 November 2008)
§ X268.4 Amount of line. The amount §§ X268.6 - X268.9 (Reserved)

of rediscounting line shall be based on the
total credit score obtained by the applicant § X268.10 Constitutional prohibition.
bank computed under the CRIS guidelines (Deleted by Circular No. 354 dated 04 October 2002)
1
These conditions shall not limit the Monetary Board from granting rediscounting line incentives to merged/
consolidated banks pursuant to Subsec. X108.3.

§§ X269 - X269.2
17.06.30
Sec. X269 Rediscounting Availments. Banks c. Past due loans;

may avail of the rediscounting facility under d. Unsecured loans;
a unified rediscounting window. They shall e. Personal consumption loans;
enroll in the Electronic Rediscounting f. Loans to NBFIs; and
System (eRS) by executing and submitting g. Loans funded from other borrowings,
to the Department of Loans and Credit e.g., government FIs or multi-lateral
a notarized Electronic Rediscounting System agencies.
Participation Agreement before availing of Credit instruments offered as collateral
the rediscounting facility of the Bangko shall be subject to the eligibility requirements
Sentral. provided under Section 82 of R.A. No. 7653.
(Circular No. 515 dated 06 March 2006, as amended by Circular a. Commercial credits - Bills,
Nos. 964 dated 27 June 2017, 806 dated 15 August 2013 and acceptances, promissory notes (PNs) and
630 dated 11 November 2008)
other credit instruments with maturities of
§ X269.1 Eligibility requirements at the not more than 180 days from the date of
time of availment. Banks availing of the their rediscount, discount or acquisition by
Bangko Sentral rediscounting facility must the Bangko Sentral and resulting from
have at the time of availment: transactions related to:
a. A positive DDA balance; (1) the importation, exportation,
b. No past due obligations; purchase or sale of readily saleable goods
c. No collateral deficiencies on account and products, or their transportation within
of matured notes, unremitted collections, the Philippines; or
missing collaterals or ineligible papers; and (2) the storing of non-perishable goods
d. No chronic reserve deficiency in and products which are duly insured and
deposit/deposit substitute liabilities deposited, under conditions assuring their
immediately preceding the loan drawdown/ preservation, in authorized bonded
availment. warehouses or in other places approved by
For purposes of determining compliance the Monetary Board.
with the reserve requirement, a bank will Credit instruments acquired under
be considered non-compliant with the commercial credits shall be secured either by:
reserve requirement for the reference week
Type of Collateral Collateral Value
when its actual net reserve position for said (1) Duly notarized Shall equal or
reference week cannot be determined due assignment of export exceed the
to delayed submission or non-submission or domestic letters of outstanding balance
credit, confirmed of the credit
of the relevant reserve report. purchase order sales instrument
(Circular No. 515 dated 06 March 2006, as amended by Circular contract, quedans
Nos. 861 dated 01 December 2014 and 630 dated (2) Trust Receipts Shall equal or
11 November 2008) exceed the
outstanding balance
of the credit
§ X269.2 Eligible papers and collaterals. instrument
The Bangko Sentral shall accept credit (3) Duly registered 70% of the
instruments covering all economic activities mortgage on real appraised value
property shall equal or
except the following: exceed the
a. Interbank loans; outstanding
b. Extended/Restructured loans; balance of the PN
1
By 15 November 2023, all banks shall access only RW I.
2
From 15 November 2013, TBs are given a sunset period of five (5) years (i.e., until 15 November 2018) to
access RW II, while RBs and Coop Banks are given ten (10) years (i.e., until 15 November 2023)

§ X269.2
13.12.31
Type of Collateral Collateral Value microfinance, housing, services, agricultural

(4) Credit guarantees/ Shall equal or loans with long gestation period and other
sureties issued by exceed the
the lGLF, the Small outstanding eligible economic activities with maturity
Business Corporation balance of the PN of not more than ten (10) years from date
(SBC) and the national
government
of their rediscount, discount or
(5) Credit guarantees/ Shall equal or acquisition of the Bangko Sentral.
sureties issued by exceed 80% of Dollar-term loans to finance capital
the Credit Surety the outstanding
Fund (CSF) jointly balance of the PN expenditures (plant expansion/
established by modernization) by exporters are also
cooperatives and considered eligible papers for
local government
units rediscounting under the EDYRF provided
(6) Marketable debt Current market they are booked in the regular banking units.
instruments issued by the value shall equal Credit instruments acquired under
NG and all its or exceed the
instrumentalities, including outstanding balance
other credit shall be secured by:
Type of Collateral Collateral Value
Republic of the Philippines of the PN
(1) Duly registered 70% of the appraised
US$ denominated bonds or mortgage on real value shall equal or
ROPs property exceed the
outstanding balance
The outstanding National Food of the PN
(2) Duly notarized Shall equal or
Authority papers that a bank can rediscount assignment of exceed the
shall not exceed the rediscounting bank’s receivables from outstanding
service contract balance of the PN
SBL [twenty-five percent (25%) of its net (3) Credit guarantees/ Shall equal or
worth] or P3.0 billion, whichever is lower. sureties issued by the exceed the
Dollar-denominated trust receipts IGLF, the SBC and the outstanding
national government balance of the PN
covering importation of goods and raw (4) Credit guarantees Shall equal or
materials are also considered eligible papers sureties issued by the exceed 80% of
CSF jointly established the outstanding
for rediscounting under the Exporters’ Dollar by cooperatives and balance of the PN
and Yen Rediscount Facility (EDYRF). LGUs
b. Production credits - Bills, (5) Marketable debt Current market
instruments issued by value shall equal
acceptances, PNs and other credit the NG and all its or exceed the
instruments having maturities of not more instrumentalities, outstanding balance
than 360 days from the date of their including Republic of the PN
rediscount, discount or acquisition by the of the Philippines
US$ denominated
Bangko Sentral and resulting from
bonds or ROPs
transactions related to the production or
processing of agricultural, animal, mineral, For housing loans, the lien or mortgage
industrial and other products. shall cover the property being financed.
Credit instruments acquired under An Original Certificate of Title issued
production credits shall be secured by a duly by virtue of Free Patent, covering
registered mortgage on real property, agricultural lands, may be accepted as
seventy percent (70%) of the appraised value underlying collateral for loans offered for
of which equals or exceeds the outstanding rediscounting with the Bangko Sentral after
balance of the PN. the expiry of the prescription period of five
c. Other credits - Special credit years from date of the approval of the order
instruments not otherwise rediscountable to issue the patent. The five (5)-year
under the immediately preceding Items “a” restriction is not applicable for residential
and “b” such as, but not limited to, lands acquired under free patent as provided

§§ X269.2 - X269.4
13.12.31
under Section 9 of R.A No. 10023. plus interest and other charges that may fall
A Land Title, with P.D. No. 1271 1 due, to answer for the payment of the
annotation, may be accepted as underlying obligations in the event that the petition for
collateral for loans offered for rediscounting cancellation is denied or the notation is not
with the Bangko Sentral subject to the cancelled on or before the maturity of the
following conditions: loan.
1. The land titles submitted specify that (Circular No. 515 dated 06 March 2006, as amended by Circular
the original registration date was on or Nos. 807 and 806 both dated 15 August 2013, M-2011-036 dated
05 July 2011, M-2011-017 dated 18 March 2011, Circular Nos.
before 31 July 1973; and 648 dated 02 March 2009 and 630 dated 11 November 2008)
2. The lands covered by titles are not
within any government, public or § X269.3 Loan availment procedures.
quasi-public reservation, forest, military or Banks availing of the rediscounting facility
otherwise, as certified by appropriate shall submit their loan applications
government agencies. electronically to the Bangko Sentral using
Unsecured loans may be accepted for their eRS registered computers.
rediscounting provided they are: Upon receipt of the confirmation of loan
a. Microfinance loans; or approval:
b. Loans secured by a duly registered a. Banks shall execute the PNs with
mortgage on real property of the bank, Trust Receipt Agreement and Deed of
seventy percent (70%) of the appraised value Assignment (PNTRADA) in favor of the
of which equals or exceeds the outstanding Bangko Sentral (RL Form No. 7 for peso and
balance of the unsecured PN and other RL Form No. 8 for dollar and yen), signed
collaterals acceptable to the Bangko Sentral, by the authorized officer/s of the bank.
e.g., marketable debt instruments issued by b. Banks authorized to hold-in trust the
the NG and all its instrumentalities, rediscounted credit instruments and
including Republic of the Philippines US$ underlying collaterals shall segregate and
denominated bonds or ROPs. keep the same together with the PNTRADA
For real estate properties covered by at a secured place within their premises
Section 7 of R.A. No. 26 offered as under the custody of the accountable officer.
collateral, the following conditions must be
c. Banks with custodianship agreements
met:
shall deposit with their respective
1. The two (2)-year period from date of
depositary/custodian bank the rediscounted
entry of the notation has already expired;
credit instruments, underlying collaterals
2. The bank has already filed the petition
and the PNTRADA not later than the next
with the court for the cancellation thereof;
banking day from date of loan grant, receipt
and
of which shall be acknowledged by the
3. The bank shall submit prior to the
depositary bank in the List of Rediscounted
release of the loan a surety bond issued by
Loans.
an insurance/surety company which is (Circular No. 515 dated 06 March 2006, as amended by Circular
acceptable to the Bangko Sentral and is not No. 630 dated 11 November 2008)
affiliated with the bank or its subsidiaries,
or their stockholder, directors or officers, § X269.4 Loan value. The loan value of
equivalent to the loan value of the property all eligible papers shall be eighty percent (80%)
1
An act nullifying decrees of registration and certificates of title covering lands within the Baguio Townsite
Reservation issued in Civil Reservation Case No. 1, GLRO Record No. 211 pursuant to R.A. No. 931, as
amended, but considering as valid certain titles of such lands that are alienable and disposable under certain
conditions and for other purposes.

§§ X269.4 - X269.7
17.06.30
of the outstanding balance of the borrower’s Based on the 90-day London Inter-bank
credit instrument but not higher than Offered Rate (LIBOR) plus 200 bps plus term
seventy percent (70%) of the appraised value premia for longer maturities, as follows:
of the underlying collateral. Term Premium
1-90 days 90-day LIBOR + 200 bps
(Circular No. 515 dated 06 March 2006, as amended by Circular 91-180 days 90-day LIBOR + 200 bps + 6.25 bps
Nos. 684 dated 15 March 2010, 648 dated 02 March 2009 and 181-360 days 90-day LIBOR + 200 bps + 12.50 bps
630 dated 11 November 2008) The lending rates of banks on their
rediscounted papers shall not be subject to
§ X269.5 Maturities. The maturities of any ceiling but the spreads of the banks on
Bangko Sentral rediscounts are, as follows: these papers shall be closely monitored by
Type of Credit Maturity Date the Bangko Sentral to ensure that these are
a. Commercial Credits 180 days from date of
(1) Export Packing rediscount but shall not go
consistent with the prevailing market rates.
(2) Trading beyond the maturity date of Past due Bangko Sentral loans and
(3) Transport the credit instrument unpaid matured notes shall be levied
(4) Quedan
(5) Export Bills (EBs)
liquidated damages equivalent to
At Sight Fifteen (15) days from date of five percent (5%) per annum1.
purchase (Circular No. 515 dated 06 March 2006 , as amended by Circular
Usance EB Term of draft but not to No. 964 dated 27 June 2017, Circular Nos. 948 dated 01 March
exceed sixty (60) days from 2017, 916 dated 08 July 2016, 903 dated 29 February 2016, M-
shipment date 2015-039 dated 04 November 2015, Circular No. 890 dated
02 November 2015, M-2015-035 dated 07 October 2015, M-
b. Production Credits 180 days from date of 2015-009 dated 28 January 2015, M-2015-005 dated 20 January
rediscount but shall not go 2015, M-2014-039 dated 01 October 2014, M-2014-031 dated
beyond the maturity date of 08 August 2014, M-2014-006 dated 12 February 2014, Circular
the promissory note (PN). Nos. 807 and 806 both dated 15 August 2013, M-2013-
Renewable, not to exceed 050 dated 15 November 2013, M-2013-046 dated 30
exceed 180 days. October 2013, M-2013-045 dated 23 October 2013,
c. Other Credits 180 days from date of M-2013-040 dated 03 September 2013, M-2013-001 dated 14
rediscount but shall not go January 2013, M-2011-056 dated 10 November 2011,
beyond the maturity date of M-2011-055 dated 17 October 2011, M-2011-043 dated 12 August
the PN (renewable depending 2011, M-2011-007 dated 04 February 2011, M-2010-039 dated 03
on the type of credit). November 2010, M-2010-007 dated 23 April 2010, Circular No. 679
dated 01 February 2010, M-2009-040 dated 30 October 2009,
(Circular No. 515 dated 06 March 2006, as amended by Circular M-2009-037 dated 15 October 2009, M-2009-38 dated 08 October
Nos. 964 dated 27 June 2017, 806 dated 15 August 2013 and 2009, and M-2009-036 dated 07 October 2009, Circular Nos.648
630 dated 11 November 2008) dated 02 March 2009 and 630 dated 11 November 2008)
X269.6 Rediscount/Lending rates and § X269.7 Release of proceeds. The

liquidated damages. The rediscount rates for proceeds of the rediscounting availment
peso, dollar and yen loans shall be, as shall be released, as follows:
follows: a. Peso rediscounts - automatically
a. Peso Rediscounts credited to the borrowing bank’s DDA or
Rediscount Rediscount Rates its depository bank’s DDA with the Bangko
Maturities
Bangko Sentral overnight
Sentral on the same day for loan application
(O/N) lending rate plus term submitted to the Bangko Sentral before 4:30
premium: pm during banking days.
1-90 days Bangko Sentral O/N lending b. Dollar/Yen rediscounts - released
rate + 0.0625
91-180 days Bangko Sentral O/N lending through the Treasury Department, Bangko
rate +0.1250 Sentral, for credit to the designated foreign
correspondent bank of the borrowing bank,
b. Dollar/Yen Rediscounts as follows:
1

§§ X269.7- X269.8
16.03.31
(1) Same banking day credit for dollar payment date or the maturity date of the loan
loan application submitted to the Bangko corresponding to the remittance instruction
Sentral before 11:00 am, during banking to its designated correspondent bank. The
days; and payment shall cover total collections or
(2) Following banking day credit for yen payment of maturing loans plus interest due
loan application submitted to the Bangko thereon. In case of short payment, the bank’s
Sentral before 11:00 am, during banking days. DDA with the Bangko Sentral shall
(Circular No. 515 dated 06 March 2006, as amended by Circular automatically be debited for the peso
No. 630 dated 11 November 2008) equivalent of the shortage.
If the foreign currency denominated
§ X269.8 Repayments/ Remittance of loans are not settled on maturity date, the
collections/ arrearages1 . The following shall borrowing bank’s DDA with the Bangko
govern repayments, remittance of Sentral shall be debited automatically for the
collections, and arrearages: peso equivalent of the matured obligation
a. Repayments - plus accrued interest due thereon. The
(1) Peso rediscounts foreign exchange (FX) rate at the time of the
(a) The loan value of the rediscounted loan repayment shall not be lower than the
credit instruments or the amortization plus FX rate at the time of loan availment and
interest due thereon shall automatically be any FX loss arising from default or
debited against the borrower bank’s DDA repayment shall be for the account of the
with the Bangko Sentral at maturity/ borrower and not for the Bangko Sentral.
amortization due date. b. Remittance of collections -
(b) For microfinance loans, the DDA of (1) Total collections received by the
the borrower bank shall automatically be borrowing bank before the maturity date of
debited on the amortization due date for the the rediscounted credit instruments shall be
loan value of the amortization plus interest remitted not later than five (5) banking days
following the date of receipt of collections
due thereon. For loans with daily, weekly
to the following:
or semi-monthly amortizations, the
Peso Rediscounts - Bangko Sentral
borrower bank’s DDA shall automatically
Dollar Rediscounts - Federal Reserve Bank of
be debited on the last amortization due date
New York for the
of said month for the total loan value of the
account of Bangko
amortizations for the month plus interest
Sentral
due thereon.
Yen Rediscounts - Bank of Tokyo for the
(c) The loan value of unremitted
account of Bangko Sentral
collections and of the rediscounted credit (i) Total collections shall refer to the loan
instruments and/or underlying collaterals value of the principal amount collected from
found to be missing, ineligible or with rediscounted credit instruments plus
exceptions not corrected within fifteen (15) accrued interest due on the outstanding
days from receipt of notice plus interest due balance of subject credit instruments.
thereon shall automatically be debited (ii) For banks with Bangko Sentral loans
against the borrowers bank’s DDA with the under past due status, total collections shall
Bangko Sentral. include all collections on principal, interest
(2) Dollar/Yen rediscounts and penalty.
Dollar and yen loans shall be repaid in (iii) In the case of negotiated EBs, the
the same currency under which they were receipt by the borrowing bank of payment
released. For this purpose, the bank shall from its correspondent bank either through
submit online to the Bangko Sentral its actual remittance or credit advice; or
payment instruction one (1) day before the through book entries made by the
1

§§ X269.8 - X269.11
16.03.31
borrowing bank charging its correspondent on determining whether there is a “high”,

bank before receipt of advice shall constitute “moderate” or “low” probability of default
receipt of collection. on the settlement of the banks’
(2) The bank shall ensure that adequate rediscounting obligations with the Bangko
records are maintained in its Head Office Sentral.
on the collections made by the branches. (Circular No. 515 dated 06 March 2006,as amended by Circular
c. Arrearages. The Bangko Sentral shall Nos. 806 dated 15 August 2013 and 630 dated 11 November
2008)
undertake all necessary collection measures
allowed by law, such as foreclosure § X269.11 Penalties/sanctions. The
proceedings against banks with past due following penalties and sanctions shall be
loans. imposed on the erring bank and/or the
(Circular No. 515 dated 06 March 2006, Circular No. 903 dated
29 February 2016, M-2015-039 dated 04 November 2015, Circular bank’s authorized/certifying officers.
No. 890 dated 02 November 2015, M-2015-035 dated 07 a. For serious offense
October 2015, M-2015-009 dated 28 January 2015, M-2015-005 Aggregate Amount/
dated 20 January 2015, M-2014-039 dated 01 October 2014, M- Penalty Range Minimum Maximum
2014-031 dated 08 August 2014, M-2014-006 dated 12 P50K or less P83 P250
February 2014, Circular No. 807 dated 15 August 2013, M- Above P50K
2013-050 dated 15 November 2013, M-2013-046 dated 30 to 100K 250 750
October 2013, M-2013-045 dated 23 October 2013, M-2013-040 Above P100K
dated 03 September 2013, M- 2013-001 dated 14 January 2013, M- to P500K 1,000 3,000
2011-056 dated 10 November 2011, M-2011-055 dated 17 Above P500K
October 2011, M-2011-043 dated 12 August 2011, M-2011-007 to 1M 2,500 7,500
dated 04 February 2011, M-2010-39 dated 03 November 2010, Above P1M 5,000 15,000
M-2010-007 dated 23 April 2010, M-2009-040 dated 30 October
2009, M-2009-37 dated 15 October 2009, M-2009-38 dated 08
October 2009, and M-2009-036 dated 07 October 2009, Circular
b. For less serious offense
Nos. 648 dated 02 March 2009 and Circular No. 630 dated 11 P50K or less P63 P188
November 2008) Above P50K
to 100K 188 563
Above P100K
§ X269.9 Prohibited transactions. The
to P500K 750 2,250
following shall not be allowed without prior Above P500K
approval of the Bangko Sentral: to 1M 1,875 5,625
a. Substitution of rediscounted credit Above P1M 3,750 11,250
instruments and underlying collateral real
properties on outstanding loans with the c. Minor offense
P50K or less P42 P125
Bangko Sentral;
Above P50K
b. Renewal of rediscounted credit to 100K 125 375
instruments without remitting payment Above P100K
while the loan released against the to P500K 500 1,500
rediscounted credit instrument is still Above P500K
to 1M 1,250 3,750
outstanding with the Bangko Sentral; and Above P1M 2,500 7,500
c. Acceptance of properties as payment
(dacion en pago). The following definition of terms shall
(Circular No. 515 dated 06 March 2006 as amended by Circular
apply:
(1) Offense shall refer to a violation that
connotes infraction of the terms and
§ X269.10 Monitoring and credit
conditions of the loans granted by the
examination of borrowing banks. The DLC
shall conduct an off-site analysis of the Bangko Sentral and of the applicable laws,
Bangko Sentral’s credit exposure to rules and regulations, Bangko Sentral credit
borrowing banks and a risk-based on-site policies and non-compliance with the
credit examination that will focus primarily Bangko Sentral/Monetary Board directives.

§ X269.11
08.12.31
(2) Serious offense – This refers to acts aggregate amount of the following under the
or omissions constituting violation of the current examination:
terms and conditions of the loans granted (a) Under serious offense:
to the bank and of the applicable laws, rules Total loan value of the following:
and regulations that constitute unsafe and (i) Rediscounted ineligible papers with
unsound banking practices; and the serious offense, fictitious loans or spurious
misrepresentation of facts and warranties loan documents as determined by the
committed by the bank/ individual(s) that Bangko Sentral or Office of Special
influenced the approval and amount of the Investigation;
rediscounting loan/line granted, such as: (ii) Undeposited vital loan documents
(a) Rediscounting of ineligible papers, and underlying collaterals as of examination
fictitious borrowers/loans/titles or date; and
submission of spurious documents; (iii) Collections on principal of
(b) Absence of or failure to execute vital rediscounted loans which were not remitted
loan documents; to the Bangko Sentral within the prescribed
(c) Failure or delay in the deposit of period of five (5) banking days from date of
rediscounted loan documents with the receipt of collections.
custodian bank, except those caused by (b) Under less serious offense:
fortuitous events; and Total loan value of rediscounted
(d) Failure to remit to the Bangko Sentral ineligible papers with less serious offense
collections on principal of the rediscounted as determined by the Bangko Sentral.
loans within the prescribed period of five (c) Under minor offense:
(5) banking days from date of actual receipt Total loan value of rediscounted
of collections except collections from ineligible papers with minor offense as
microfinance loans. determined by the Bangko Sentral.
(3) Less serious offense – This refers to (6) Minimum penalty – refers to the
acts or omissions constituting violation of range of penalties to be imposed if the
the terms and conditions of the loans mitigating factor(s) outweighs the
granted to the bank and of the applicable aggravating circumstances, to wit:
laws, rules and regulations that constitute (a) The act or omission is not intentional
unsafe and unsound banking practices but or the bank acted in “good faith” when the
not falling under the serious offense error, deficiency, violation or the absence/
category; however, the deficiencies noted lack of the required action were committed.
should be addressed immediately to mitigate (b) The bank is willing to take immediate
the credit risk of the Bangko Sentral. action or has started to rectify the
(4) Minor offense – This includes acts deficiencies/violations noted or undertakes
or omissions which are procedural in to correct the deficiencies within fifteen (15)
nature, not intentional, may not result in any days from receipt of notice.
loss or damage to or any significant increase (c) The bank has voluntarily disclosed
in the risk of the creditor Bangko Sentral the offense/violation committed before it is
and can be resolved immediately during the discovered by the Bangko Sentral or has
normal course of business. For purposes of remitted to the Bangko Sentral the total
classifying the nature of the offense, this amount due plus accrued interest.
includes all other acts or omissions which (7) Maximum penalty – refers to the
cannot be classified under serious or less
range of penalties to be imposed if the
serious offenses.
aggravating circumstances outweigh the
(5) Aggregate amount - shall refer to the
mitigating factor(s), to wit:

§§ X269.11 - X269.12
08.12.31
(a) The act or omission carries with it Bangko Sentral and/or administrative and
the intention to commit or cover up a criminal sanctions that may be charged
violation or to defraud the Bangko Sentral. against its culpable officers.
(b) Commission or omission of a specific (Circular No. 515 dated 06 March 2006 as amended by Circular
offense corrected in the past but found
repeated in another transaction in § X269.12 Interlocking directorship/
subsequent examination. officership. Banks owned or managed by
(c) Additional interest charges on unpaid the same owners, stockholders, directors,
penalty. officers or family/business group may also
An additional interest of twelve percent be suspended from availment of the
(12%) per annum shall be assessed on rediscounting facility by the Credit
nonpayment of the penalties, from date of Committee once the rediscounting line of
demand until full settlement thereof. any of the banks belonging to the same group
The foregoing monetary penalties shall is suspended, until such time that the
be without prejudice to the cancellation of suspension of the erring bank is lifted.
the bank’s rediscounting line with the (Circular No. 515 dated 06 March 2006 as amended by Circular
Part II - Page 52b Manual of Regulations for Banks

§§ X270 - X272.1
08.12.31
Sec. X270 Repurchase Agreements with § X271.3 Limit. Availment by any bank
the Bangko Sentral. Repo agreements with under this facility shall not exceed ten
the BSP shall be governed by Sec. X601. percent (10%) of its net worth, as defined
under Sec. X111 as of the end of the quarter
Sec. X271 Bangko Sentral Liquidity preceding the date of application. In the
Window. The following guidelines shall case of branches of foreign banks, the quota
govern the grant by the BSP of credit shall be ten percent (10%) of the assigned
accommodations through a liquidity capital as of the date of application.
window to banks. Additionally, a bank or a branch of a foreign
bank may avail itself of this facility to the
§ X271.1 Nature of liquidity window. extent equivalent to a further five percent
The window shall meet the liquidity needs (5%) of its net worth, as defined under
of the financial system under normal Sec. X111 or assigned capital, as the case
conditions and shall be distinct from may be, as of the end of the quarter
overdrafts and emergency advances. preceding the date of availment. Any
availment of the liquidity window shall
§ X271.2 Terms of credit. fall within the unavailed basic rediscount
a. Interest rate. The rate of interest ceiling of the bank or the branch of a
chargeable on availments under the foreign bank as the case may be.
liquidity window shall be the rate
equivalent to the reference rate for ninety Sec. X272 Emergency Loans or Advances
(90) days determined and announced by to Banking Institutions. The emergency
the BSP for floating rate loans, plus or loan or advance to banking institutions is
minus a rate to be determined by the BSP governed by the provisions of Sections 84
on the basis of the prevailing monetary to 88 of R.A. No. 7653, otherwise known
situation. as The New Central Bank Act. The
The additional or discount rate following guidelines shall govern the BSP’s
established for any given time shall be made emergency loans and advances.
public by the BSP and applied uniformly to (Circular No. 517 dated 06 March 2006)
all borrowers during that period.
The additional rate to be imposed over § X272.1 Nature of emergency loans
and above the reference rate shall not be or advances. An emergency loan or
less than two (2) percentage points, with advance is a credit facility that is intended
the applicable additional rate to be to assist a bank experiencing serious
determined by the BSP on the basis of the liquidity problems arising from causes not
prevailing monetary situation. attributable to, or beyond the control of,
b. Security. Any paper, irrespective the bank management. The grant of such
of maturity, eligible under Section 82 of facility is discretionary upon the
R.A. No. 7653. Monetary Board, and is intended only as
c. Loan values. The loan values of the a temporary remedial measure to help a
paper offered as collateral should be eighty solvent bank overcome serious liquidity
percent (80%) of the amount still due problems. As provided under Sections 84
outstanding on the paper offered as to 88 of R.A. No. 7653, no emergency
collateral. loan or advance may be granted except
d. Repayment period. The term of the on a fully secured basis and the Monetary
credit accommodation shall not exceed Board may prescribe additional
seven (7) days. conditions, which the borrowing banks

§§ X272.1 - X272.3
08.12.31
must satisfy in order to have access to the § X272.3 Allowable amount of

credit facility of the BSP. emergency loan or advance. The
(Circular No. 517 dated 06 March 2006) maximum amount of an emergency loan
or advance shall be limited to the amount
§ X272.2 When an emergency loan or needed by the applicant bank to overcome
advance may be availed of. An emergency the emergency or financial predicament
loan or advance may be granted: but not to exceed the sum of fifty percent
a. In periods of national and/or local (50%) of its total deposits and deposit
emergency or of imminent financial panic substitutes as of the last banking day of the
which directly threaten monetary and month preceding the date of emergency
banking stability, i.e., situations involving loan application: Provided, That, in no case
bank runs, massive movements by depositors shall such maximum amount exceed the
of their funds from certain banks to other loan values of the collaterals submitted, as
banks, bank holidays and voluntary cessation determined by the BSP.
of business, or when there are movements The amount approved by the Monetary
which endanger the economy, or when the Board shall be released in tranches. The first
international stability of the peso is threatened, tranche shall not exceed twenty-five percent
or when there is an exchange crisis. (25%) of the total deposits and deposit
b. During normal periods for the substitutes of the bank as of the last banking
purpose of assisting a bank in a precarious day of the month preceding the date of
financial condition or under serious financial emergency loan application and shall be
pressures brought about by unforeseen released only after the submission of the
events or events which though foreseeable, collaterals and required documents under
cannot be prevented by the bank concerned. Subsecs. X272.4 and X272.5: Provided,
Provided, That there is a concurrent however, That upon request of the applicant
vote of at least five (5) members of the bank, the Monetary Board may authorize a
Monetary Board and the latter has first tranche in an amount greater than twenty-
ascertained that the bank is not insolvent: five percent (25%) of the bank’s total deposits
Provided, further, That banks with positive and deposit substitutes if the circumstances
CAR of not more than six percent (6%) surrounding the emergency or financial
based on adjusted books of accounts shall predicament warrant the release of such
submit a Business Improvement Plan (BIP) greater amount and the same is adequately
acceptable to the BSP within six (6) months secured by first class collaterals.
from date of advice by the appropriate Except as provided in Subsec.
department of the SES. For this purpose, X272.7(d) hereof, the proceeds of the
the appropriate department of the SES shall emergency loan or advance shall be
warn the concerned banks that failure to utilized exclusively to service net
submit the required BIP in accordance with withdrawals of deposits and deposit
the criteria of the appropriate department substitutes, i.e., amount of the bank’s total
of the SES shall disqualify the bank from withdrawals less total deposits.
access to the BSP’s emergency loan facility. The principal amount of the emergency
Banks with zero to negative CAR should loan or advance shall not exceed the
have an existing BSP-approved difference between the highest level of the
rehabilitation plan and on track with the bank’s deposit and deposit substitutes of
Plan to be eligible to avail itself of the immediately preceding thirty (30)-day
emergency loan. period from date of emergency loan
(Circular No. 517 dated 06 March 2006) application and the current level of deposits

§§ X272.3 - X272.4
08.12.31
and deposit substitutes as determined by loan or advance under Subsec. X272.2, the
the appropriate department of the SES. appropriate department of the SES shall
(Circular No. 517 dated 06 March 2006) prepare a memorandum to the Monetary
Board stating among others, the following:
§ X272.4 Application procedures. a. Validation of the eligibility of
Banks applying for an emergency loan applicant bank.
or advance shall submit an application b. Financial condition of applicant bank.
(EL Form No. 1) with the appropriate c. Volume of deposits and expected
department of the SES, copy furnished the withdrawals of deposits.
DLC. During normal periods, the d. Amount and terms of the loan.
applicant-bank shall state the reasons for e. Whenever applicable, circumstances
the proposed loan availment and other that warrant the grant of the first tranche
details showing the precarious financial greater than twenty-five percent (25%) of
condition or the serious financial pressures the total deposits and deposit substitutes
being experienced by the bank. as provided by law.
The bank shall submit together with the The applicant bank shall submit to the
application, the following documents: DLC, prior to the release of the first tranche,
a. Certified Statement of Condition the following documents together with the
(under oath) as of the last banking day of copy of the application:
the month preceding the date of a. Listing of assets that are good and
emergency loan application. available for collateral purposes as certified
b. A duly notarized secretary’s by the bank’s duly appointed external
certificate (EL Form No. 2) together with a auditor (EL Form No. 3).
resolution of the board of directors of the bank: b. Listing of collaterals in the
(1) Authorizing the availment by the prescribed formats (EL Form Nos. 4/4a/
bank of an emergency loan or advance 4b) as well as a 3.5” diskette containing
from the BSP. the database, (in MS Excel format),
(2) Signifying the bank’s commitment together with the documents of title and/
to comply with the guidelines set forth or evidences of ownership of the
herein and the terms and conditions that collaterals offered including the following
may be imposed by the Monetary Board. documents:
(3) Designating the chairman and the (1) Appraisal reports of not more than
president or in their absence, any of the next one (1) year conducted by an independent
two (2) highest officers, as duly authorized appraiser acceptable to the BSP in
signatories for the emergency loan or accordance with BSP’s terms of reference.
advance application, promissory notes, and (2) Latest tax declarations.
all undertakings. Designated authorized (3) Current tax receipts, tax clearances
officers not lower than senior vice president, and other documents needed for
or equivalent position, may be authorized to registration of mortgages and deeds of
execute all accessory documents for the assignment.
emergency loan or advance. (4) Current insurance policies covering
(4) Authorizing the Bangko Sentral to improvements and official receipts of
evaluate other assets of the bank certified premium payments.
by its auditors to be good and available (5) Department of Agrarian Reform
for collateral purposes should the grant (DAR) certification that agricultural
of subsequent tranches be applied for. properties offered as collaterals are not
After determining the eligibility of the covered by the Comprehensive Agrarian
applicant bank to avail of the emergency Reform Program (CARP).

§ X272.4
08.12.31
(6) Current original promissory notes commitment by the directors, principal

of bank’s borrowers duly endorsed in favor officers with the equivalent rank of
of the BSP. vice-president and up, all the controlling
(7) Special power of attorney or stockholders, and every person or group
stockholder’s resolution, when appropriate. of persons and their respective spouses,
c. Notarized Deed of Undertaking whose stockholdings are sufficient to elect
executed by the above-mentioned officers at least one (1) director not to withdraw any
of the bank to: (1) register with the Registry portion of their deposits and deposit
of Deeds all the covering legal documents substitutes as of date of release of the first
before loan release at the expense of the tranche while the emergency loan remains
bank and that, in the event the BSP agrees outstanding. In the event of a compelling
to release the proceeds of the loan before reason to withdraw, payment of the
said documents are registered, the same emergency loan or advance in an amount
shall be registered by the bank at its own equivalent to the deposits to be withdrawn
expense; and (2) submit the documents shall be made (EL Form No. 7).
needed to complete the requirements of f. Notarized Surety Agreement
the tranche not later than fifteen (15) days executed by the controlling stockholders
from release of the emergency loan or and every person or group of persons
advance. (EL Form No. 5). whose stockholdings are sufficient to elect
In case of failure by the bank to register at least one (1) director obligating
the covering legal documents within fifteen themselves jointly and severally with the
(15) days from date of release of loan bank to pay promptly on maturity, or when
proceeds, the BSP shall register said due, the Bangko Sentral, its successors
documents for the account of the applicant or assigns, all promissory notes covering
bank, and all costs and expenses shall, at the emergency loan or advance.
the option of BSP, be deducted from any (The Government, its subdivisions,
subsequent availments of the bank or from instrumentalities and agencies, and
its DDA or be added to its liability account government entities are exempted from
with the BSP. this requirement.) (EL Form No. 8)
d. Notarized Joint and Several g. Notarized Deed of Negative
Undertaking executed by all the Pledge executed by the controlling
controlling stockholders [owning more stockholders and every person or group of
than fifty percent (50%) of the voting stocks] persons whose stockholdings are sufficient
of the bank and every person or a group of to elect at least one (1) director, together
persons whose stockholdings are sufficient with their respective certificates of stock.
to elect at least one (1) director to (The Government, its subdivisions,
indemnify and hold harmless from suit the instrumentalities and agencies, and
BSP, its Monetary Board members, government entities are exempted from this
Governor, officers and personnel, and the requirement.) (EL Form No. 9).
conservator whose appointment the h. Certification under oath executed
Monetary Board may find necessary at any by the chairman and president of the
time. The Department of Finance or bank that the bank or any of its
stockholder of record will sign the joint and stockholders does not fall within the
several undertaking if the government is a prohibition under Section 16, Article XI
stockholder (EL Form No. 6). of the Constitution (EL Form No. 10).
e. Notarized Deed of Undertaking Prior to the release of the subsequent
with waiver of secrecy of deposits and tranches, the bank shall submit to DLC the

§§ X272.4 - X272.6
08.12.31
documents of title and/or evidences of in Favor of the BSP (EL Form No. 11/11a),
ownership of the collaterals, together with Notarized Deed of Real Estate Mortgage
the other documents referred to in Item “b” (EL Form No. 12-Bank Assets/12a-Stockholder/
of the immediately preceding paragraph of Third Party Assets), Notarized Deed of Pledge
this Subsection for the amount being applied (EL Form No.13- Individual/Corporation/13a-
for release and, where necessary, such other Stockholders’/Third Party Assets), Notarized
acceptable security which, in the judgment Deed of Assignment of Mortgages (EL Form
of the Monetary Board, would be adequate No. 14), Hold-out on Foreign Currency
to supplement the assets tendered to Deposits with BSP (EL Form No. 15) and
collateralize the subsequent tranche. Joint Affidavit executed by the bank’s
Banks availing of emergency loan or chairman and president and the Individual
advance may decline to submit either item Mortgagor (EL Form No. 16- Individual) or
“f” or “g” or both, but the loan values the Corporate-Mortgagor’s chairman and
specified in Items “b” and “d” of Subsec. president (EL Form 16a- Corporation).
X272.6 shall be reduced. (Circular No. 517 dated 06 March 2006)
§ X272.6 Acceptable collaterals and
§ X272.5 Other documentary their corresponding loan values. All
requirements. Before release of any availments of the emergency loan or
emergency loan or advance, the applicant advance shall be secured by first class
bank shall, aside from the documentary collaterals, i.e., assets and securities which
requirements already mentioned above, have relatively stable and clearly definable
submit such other requirements/ value and/or greater liquidity and free from
documentation as may be required by the lien and encumbrances, to the extent of
DLC, e.g., duly Notarized Promissory Note their applicable loan values, as follows:
ACCEPTABLE COLLATERALS With Surety With Surety With No Surety

Agreement Pledge Negative Agreement
and but no Pledge but and no
Negative Negative no Surety Negative
Pledge Pledge Agreement Pledge
a. Government securities - based on the current market 80% 80% 80% 80%
value of the securities
b. Unencumbered real estate properties in the name of
the bank
1. Initial rate - based on the appraised value (AV) of the
land and insured improvements 40% 35% 30% 25%
2. Final rate - based on the AV of the land and insured 70% 65% 60% 55%
improvements determined by a licensed and
independent appraiser acceptable to the BSP in
accordance with BSP's terms of reference
c. Hold-outs on foreign currency deposits with the BSP 80% 80% 80% 80%
- based on current market value
d. Mortgage credits (with remaining maturities of not
more than 360 days)
1. Initial rate - based on the AV of the property securing 40% of AV or 35% of AV or 30% of AV or 25% of AV or
the loan evidenced by negotiable instruments or the 50% of the 40% of the 40% of the 40% of the
outstanding balance of such loan whichever is lower outstanding outstanding outstanding outstanding
balance balance balance balance
2. Final rate - based on the AV of the property securing 70% of AV or 65% of AV or 60% of AV or 55% of AV or
the loan evidenced by negotiable instruments as 80% of the 75% of the 70% of the 65% of the
determined by a licensed and independent appraiser outstanding outstanding outstanding outstanding
acceptable to the BSP in accordance with BSP's terms balance balance balance balance
of reference or the outstanding balanceof such loan
whichever is lower.
e. Commercial papers ("AAA") 80% 80% 80% 80%

§§ X272.6 - X272.7
08.12.31
Assets of stockholders and of other third parties, the latter acceptable only in instances
provided under the last paragraph of Subsec. X272.8, are acceptable as collaterals for
emergency loan with corresponding loan values, as follows:
ACCEPTABLE COLLATERALS With Surety With Surety With No Surety

Agreement Pledge Negative Agreement
and but no Pledge but and no
Negative Negative no Surety Negative
Pledge Pledge Agreement Pledge
I. Asset of stockholders to secure new loan releases if the
bank has no available first class collaterals:
a. Unencumbered real estate
1. Initial rate - based on the AV of the land and insured 35% 30% 25% 20%
improvements
b. Government Securities 80% 80% 80% 80%
c. Commercial papers ("AAA") 80% 80% 80% 80%
II. Assets of other third parties to cover deficiency arising
from unpaid interest and liquidated damages, reduction
in loan value of existing colaterals and conversion of
overdrafts into emergency loan:
a. Unencumbered real estate
1. Initial rate - based on the AV of the land and 30% 25% 20% 15%
insured improvements
b. Government securities 80% 80% 80% 80%
c. Commercial papers ("AAA") 80% 80% 80% 80%
Other types of assets may be a. The grant of emergency loan or

acceptable as collateral for emergency loan advance shall bear the concurrent vote of
as the Monetary Board may approve. at least five (5) members of the Monetary
The initial valuation rate shall apply in Board.
case the appraisal reports of independent b. The emergency loan or advance
appraiser acceptable to the BSP for real shall have a ninety (90)-day availability
estate collaterals are not available or not period from date of Monetary Board
in accordance with BSP’s terms of reference approval, non-renewable, non-extensible.
or the collaterals themselves are with Request for extension or renewal shall be
rectifiable minor deficiencies as treated as new loan application to be
determined by DLC, but will be adjusted evaluated by the appropriate department
upon compliance with the foregoing of the SES if qualified under Subsec.
requirements. X272.2.
All collateralization expenses, such as c. The amount approved by the
registration fees, documentary stamps, etc., Monetary Board may be disbursed in one
shall be borne by the applicant bank. (1) or more releases as dictated by the
(Circular No. 517 dated 06 March 2006) needs of the bank and availability of first
class collateral.
§ X272.7 Manner and conditions of d. The proceeds of the emergency
release. The manner and conditions of loan or advance shall be applied first to
release of emergency loan or advance shall the advance interest, and then to any
be as follows: outstanding overdrawings that may have

§§ X272.7 - X272.10
08.12.31
been incurred by the bank in its demand shall be photographed as well as recorded
deposit with the BSP. in video tape.
e. The bank shall submit to the DLC (Circular No. 517 dated 06 March 2006)
a board resolution confirming every receipt
of proceeds of emergency loan or § X272.9 General terms and
advance. Likewise, the bank shall submit conditions. A bank with an outstanding
a board resolution confirming the emergency loan or advance shall comply
undertakings executed by the officers with the following conditions:
under Subsec. X272.4. a. The bank shall not, without the
(Circular No. 517 dated 06 March 2006) prior authorization of the Monetary Board,
expand its outstanding loans or
§ X272.8 Interest rates, liquidated investments as of the date of application
damages, and penalties. The interest rate for emergency loan, except for investment
that shall be charged on emergency loan in government securities.
or advance shall be based on the BSP b. The bank shall not declare cash
lending rate plus two percent (2%) per dividends.
annum. Interest shall be collected in c. The bank shall not grant new
advance from the borrowing bank. loans to DOSRI or to affiliates and
An additional five percent (5%) per subsidiaries.
annum shall be imposed as liquidated d. The bank shall accept the BSP
damages on the past due emergency loan designated Comptroller to be assisted by
or advance. examiners recommended by the
A penalty of one-tenth of one percent appropriate department of the SES and the
(1/10th of 1%) per day of delay on DLC to monitor the operations of the bank
unremitted/delayed remittance of under the Terms of Reference as
collections received by the bank from determined by the Monetary Board.
promissory notes covering the assigned e. The bank shall not be allowed to
mortgage credits or the proceeds of sale avail of the BSP rediscounting facility.
from assigned/mortgaged real estate f. The bank shall comply with any
properties commencing on the day other terms and conditions that may be
following the deadline prescribed in imposed by the Monetary Board.
Subsec. X272.11 shall be imposed on the (Circular No. 517 dated 06 March 2006)
erring bank.
Any shortfall in collateral due to unpaid § X272.10 Maturity/Conditions for
accrued interest, liquidated damages, renewals. The term of any emergency loan
reduction in loan value of existing or advance shall not exceed 180 days
collaterals and conversion of overdraft into including renewals.
emergency loan may be covered by third Any request for renewal of an
party assets after the assets of the bank emergency loan or advance shall be
have been exhausted. treated as a new loan and shall be
A Joint Affidavit (EL Form No. 16/ considered only upon the bank’s
16a) between the bank’s chairman and compliance with the following:
president and the corporate-mortgagor’s a. All the requirements of the
chairman and president or the individual previous tranche/s;
mortgagor to be signed and notarized in b. Remittance of collections/proceeds
the BSP shall be submitted in support of of sales under Subsec. X272.11;
the mortgage documents. The signing c. Payment of advance interest;

§§ X272.10 - X272.12
08.12.31
d. Submission of a duly notarized The bank shall ensure that adequate

promissory note in favor of the Bangko records on the collections and sale made
Sentral; and by the branches are maintained in its Head
e. Other requirements that may be Office.
imposed by the Monetary Board on the c. Increases in the deposit level of the
borrowing bank. borrowing bank equivalent to the recovery
The Director of the DLC shall approve of the net withdrawal of deposits, shall be
the renewal of an emergency loan or remitted to the BSP or debited against the
advance. bank’s demand deposit account in payment
(Circular No. 517 dated 06 March 2006) of the emergency loan or advance, net of
refund of interest.
§ X272.11 Remittance of collections/ d. The loan value of the collaterals of
repayments/arrearages. The following the emergency loan or advance, i.e.,
shall govern remittance of collections, sale mortgaged credits and properties,
proceeds, repayments and arrearages: discovered by the BSP falling short of its
a. Total collections received on loan criteria of first class collaterals, shall be
accounts assigned to the BSP shall be held debited against the bank’s DDA with the
in trust for, and remitted to the BSP not BSP, net of refund of interest.
later than five (5) banking days following e. The BSP shall undertake all
the date of receipt in payment of the bank’s necessary collection measures allowed by
outstanding emergency loan or advance, law, such as foreclosure proceedings
net of refund of interests, if any. against banks, whether operating or
b. Proceeds from the sale of closed, with past due loans.
properties assigned/mortgaged to the In the event the bank fails to comply
BSP shall be held in trust for, and with any of the foregoing, the DLC shall
remitted to the BSP not later than five (5) notify, copy furnished the bank, the
banking days following the date of borrowers of the assignment of their
receipt in payment of the bank’s outstanding loans to the BSP and advise
outstanding emergency loan or advance, them to remit payment directly to the BSP
net of refund of interests, if any. (EL Form 17).
For banks with emergency loan or (Circular No. 517 dated 06 March 2006)
advance under current status, “total
collections” and “proceeds from the sale” § X272.12 Default. The following shall
shall pertain to the loan value of the constitute events of default which shall
mortgaged credits and properties. render the emergency loan or advance due
For banks with emergency loan or and demandable and shall be sufficient
advance under past due status: cause for the BSP to stop further releases
(1) Total collections shall pertain to of funds, without prejudice to any action
total collections from the mortgaged the BSP may decide to take in accordance
credits, i.e. principal plus interest and with R.A. No. 7653:
penalty. a. Insolvency or bankruptcy of the
(2) Proceeds from the sale shall pertain bank.
to net proceeds from the sale of assigned/ b. Appointment of a receiver for the
mortgaged properties or the total BSP bank.
claims pertaining to the sold properties, c. The bank’s property and business
i.e., loan value plus interest and penalty, is taken possession of or its business
whichever is higher. suspended or closed by the lawfully

§§ X272.12 - X275
08.12.31
authorized governmental agency or c. Loan values. The loan value of

authority. paper offered as collateral shall be eighty
d. Violation of any of the terms and percent (80%) of the amount still due and
conditions of all loan and collateral outstanding on the paper offered as
documents. collateral.
e. Non-compliance with the d. Repayment period. The term of the
undertakings executed by the borrowing credit accommodation may not exceed
bank. ninety (90) days and shall be non-
(Circular No. 517 dated 06 March 2006) renewable.
Sec. X273 Facility to Committed Credit § X273.4 Ceiling. If availment of this

Line Issuers. The following guidelines shall credit facility is outside the other rediscount
govern the grant by the BSP of special ceiling of the bank, it shall be limited to
credit accommodations to banks which the extent of fifteen percent (15%) of the
establish committed credit line in favor of net worth of the bank.
corporations proposing to issue
commercial paper. Sec. X274 (Reserved)
§ X273.1 Nature of special credit Sec. 1274 (Reserved)

accommodations. The BSP may extend a
loan to any bank which on its own or as a Sec. 2274 Countryside Financial
member of a group of banks, provides a Institutions Enhancement Program
committed credit line facility to a (CFIEP) for Thrift Banks. The CFIEP shall
corporation proposing to issue commercial be implemented under the terms of
paper. reference indicated in Appendix 16.
§ X273.2 Conditions to access. A bank Sec. 3274 Countryside Financial

applying for a loan pursuant to the Institutions Enhancement Program for
provisions of this Section shall submit to Rural and Cooperative Banks. The CFIEP
the BSP documents showing that it has shall be implemented under the terms of
extended a committed credit line to a reference indicated in Appendix 16.
commercial paper issuer and that such
issuer has availed itself of said credit line. Sec. X275 Recording and Reporting of
Borrowings. The bank’s liability for papers
§ X273.3 Terms of credit. discounted and/or rediscounted “with
a. Interest rate. The rate of interest recourse” with the BSP and/or other
chargeable on the availment of this credit financial institutions shall be recorded and
facility shall be that which is equivalent to shown as “Bills Payable” in all reports
eighty percent (80%) of the total of interest submitted to the BSP.
and fees received by the bank from the The loans and discounts, bills
issuer, net of provision for gross receipts purchased, acceptances and other accounts
tax paid by the bank on such income. affected by such discounting and/or
b. Security. The promissory note rediscounting transactions shall remain as
executed by the commercial paper issuer part of the bank’s loan portfolio. A footnote
in favor of the bank for the amount drawn in the financial statement shall indicate the
against the committed credit line shall be outstanding balances of the discounted and/
the security for this credit facility. or rediscounted loans.

§§ X276 - 3277.1
08.12.31
Sec. X276 Rediscounting Window for Low- (4) The BSP will automatically debit
Cost Housing as Defined by the Housing the demand deposit account of the UB/KB
and Urban Development Coordinating upon maturity of the rediscounting loan.
Council (HUDCC). The rules and (5) The chief executive officer of the
regulations governing the rediscounting of bank or his equivalent must certify that the
housing loan papers of qualified banks rediscounted commercial paper is still
under the low-cost housing program of the outstanding as of the time of assignment.
HUDCC are shown in Appendix 40. (6) The UBs/KBs shall comply with the
documentary requirements of the DLC.
Sec. X277 (Reserved) c. Duration
Qualified UBs/KBs may avail of this
Sec. 1277 Rediscounting Window facility until December 2000.
Available to All Universal and
Commercial Banks for the Purpose of Sec. 2277 Rediscounting Window
Providing Liquidity Assistance to Available to TBs for the Purpose of
Investment Houses. The following Providing Liquidity Assistance to Support
implementing guidelines shall govern the and Promote Microfinance Programs. TBs
new rediscount window available to all availing of rediscounting facility for purposes
UBs and KBs under Section 82(c) of R.A. of providing liquidity assistance to support
No. 7653, for the purpose of providing and promote microfinance programs shall
liquidity assistance to IH: comply with the guidelines under Sec.
a. Criteria for eligibility 3277, except for the requirement of a
(1) Eligible papers custodian bank under Subsec. 3277.4a(6).
Promissory note of the UB/KB
executed in favor of the BSP and secured Sec. 3277 Rediscounting Window
by a Deed of Pledge or Assignment of Available to Rural and Cooperative Banks
unencumbered/unhypothecated for the Purpose of Providing Liquidity
commercial papers with a rating of triple Assistance to Support and Promote
“A” and double “A”. Microfinance Programs. The following
(2) Loan limit guidelines shall govern the rediscounting
Availments against this facility shall be facility available to RBs and Coop Banks
charged against the rediscount ceiling of for the purpose of providing liquidity
the borrowing bank (100% of net worth) as assistance to support and promote
of the end of the quarter immediately microfinance programs.
preceding the date of application.
b. Terms and conditions § 3277.1 Eligibility requirements.
(1) The loan shall be assessed an a. Eligible borrowers . RBs and Coop
annual interest rate equivalent to one Banks with at least one (1) year track record
percent (1%) below the weighted average in microfinance and at least 500 active
of the ninety-one (91)-day Treasury Bill rate borrowers, ratio of past due microfinance
for the last auction of the immediately loans to total outstanding microfinance
preceding month. loans of not more than five percent (5%)
(2) The loan shall have a term of 180 as of end of the month preceding loan
days from date of availment. application and collection ratio of not less
(3) The loan value shall be ninety than ninety-five percent (95%) based on
percent (90%) of the face value of the ratio of total collections (excluding
commercial paper. prepayments) during the preceding twelve

§§ 3277.1 - 3277.2
08.12.31
(12)-month period to the sum of past due experience of one (1) year and have
microfinance loans at the beginning of said completed a training course in
period and amount of matured loans microlending activities.
including principal amortizations during f. Prescribed financial ratios and
the same twelve (12) - month period. regulations. Applicant bank must comply
b. Eligible papers. Promissory Note with the following financial ratios and
(PN) of the RB or Coop Bank executed in regulations:
favor of the BSP and secured by duly (1) Minimum capital prescribed under
endorsed PN of microcredit borrowers. Subsec. X111.1;
c. Manual of operations. Written (2) Risk-based capital ratio of not less
policies on microfinance operations must than ten percent (10%);
be set forth and documented in a policy (3) Reserves against deposit liabilities
manual duly approved by the bank’s board prescribed under existing regulations;
of directors. The manual should include the (4) Ratio of past due direct and indirect
following minimum features: loans to DOSRI to the bank’s aggregate past
(1) Scope of microfinance activities due loans of not more than ten percent
and the types of services or products offered (10%);
to clients; (5) Loans-to-deposits ratio of at least
(2) Authorities and responsibilities of: seventy-five percent (75%);
(a) Board of directors; (6) Reports required to be submitted
(b) Management; to the various departments and/or offices
(c) Chief executive officer or its of the BSP;
equivalent; (7) CAMELS rating of “3” or better; and
(d) Credit officers; and (8) Ratio of past due loans to total loan
(e) Other officers involved in the portfolio of not more than the industry
microfinance operations; average for RBs as of the preceding quarter.
(3) Policies and procedures covering
microfinance program/project; § 3277. 2 Microcredit line.
(4) Client evaluation process which a. Application for MCR Line shall be
should involve at least: client orientation, filed with the DLC, BSP at its head office
pre-application, credit investigation, and in Manila or the appropriate BSP Regional
loan application process; Loans and Credit Unit (BSPRLCU). The
(5) Loan processing, documentation term of the MCR line shall not exceed one
and release of proceeds; (1) year from the date it is granted. The line
(6) Accounts monitoring system; may be renewed for another year upon
(7) Accounts delinquency management; submission of an application at least two
(8) Management Information System; (2) months before expiry, subject to full
(9) Accounting policies, systems and compliance with the prescribed eligibility
procedures; and requirements and the credit review by the
(10) Internal controls and audit policies, DLC.
systems and procedures. b. Total availments against the facility,
d. A copy of System of Reviewing which shall be charged against the
Asset Accounts and Setting Up of Adequate approved MCR line, shall form part of the
Valuation Reserves submitted. total authorized rediscount ceiling of the
e. Staff training and experience. Key borrowing bank. The rediscount ceiling for
officers and staff responsible for microcredit microfinance shall be equivalent to one
operations must have a minimum hundred percent (100%) of the bank’s net

§§ 3277.2 - 3277.4
08.12.31
worth, net of valuation reserves and other within Metro Manila and not later than four
capital adjustments as recommended by (4) banking days following the date of
the appropriate department of the SES as receipt of collections by the Head Office/
of the last regular examination of the bank. branches located outside Metro Manila as
c. The proceeds of availment or provided under Subsec. 3277.5.
drawdown against the approved MCR line g. A penalty of five percent (5%) per
shall be credited to the account of the RB annum shall be imposed on matured and
or Coop Bank maintained with the unpaid bank PNs in favor of the BSP.
depository bank or with BSP. The RB or Full compliance at all times with the
Coop Bank shall be notified in writing/ eligibility requirements as prescribed
electronically of the credit of such account under Subsec. 3277.1.
on the same banking day that the proceeds
are released. § 3277.4 Documentary requirements.
a. Application for MCR Line. RBs or
§ 3277. 3 Terms and conditions. Coop Banks applying for an MCR line shall
a. The loan value shall be equivalent submit a letter of application to DLC or the
to eighty percent (80%) of the outstanding appropriate BSPRLCU accompanied by the
balance of the microfinance borrower’s PN. following documents:
b. The RB or Coop Bank’s loan from (1) Certificate of the Secretary (original)
the BSP shall have a term of not more than and copy of the resolution duly signed by
360 days. The maturity date of the the board of directors of the applicant bank,
microfinance borrower’s PN shall in no authorizing the bank to apply for an MCR
case be beyond the maturity date of the line with the BSP and designating the
RB or Coop Bank’s PN. officer authorized under Subsec. 3277.3(e)
c. The loan shall be assessed an to endorse the PNs and sign all papers
annual interest rate equivalent to the 91- pertaining to the rediscounting line in the
day Treasury Bill rate for the last auction prescribed format.
date of the preceding month. (2) Certification of the applicant bank
d. The demand deposit account of the that it has complied with the financial and
RB or Coop Bank will be automatically regulatory ratios, conditions, and reportorial
debited at the maturity date of the BSP loan requirements prescribed under the
for the full amount due excluding collections eligibility requirements for rediscounting
from microfinance borrowers which were as provided under Subsec. 3277.1.
credited to the Special Savings Account of (3) Consolidated Financial Statements.
the BSP with the borrowing bank. Statement of Condition as of the end of the
e. Any responsible officer who is month immediately preceding the date of
holding a position that is not lower than application together with the
manager or equivalent rank must, upon corresponding Statement of Income and
approval by the bank’s Board, endorse the Expenses covering the results of
rediscounted PNs and certify that the same operations for the last three (3) years.
are still outstanding as of the time of (4) Report on required and available
application. reserves covering the past two (2)
f. Collections made on amortizations consecutive weeks immediately
due and maturing PNs shall be remitted to preceding the date of application.
the DLC not later than two (2) banking days (5) Rediscounting Line Agreement
following the date of receipt of collections executed by the CEO of the RB or Coop
by the Head Office/branches located Bank.

§§ 3277.4 - 3277.8
08.12.31
(6) Notarized custodian agreement demand deposit account with BSP. Check
executed among the CEO of the RB or payments and demand drafts shall be given
Coop Bank, the third party custodian and value when cleared.
the BSP.
b. Availment of MCR Line. For § 3277.6 Reports required. A monthly
availment of MCR line, the RB or Coop report on microfinance transactions shall
Bank shall submit the following be submitted to DLC or the appropriate
documents: BSPRLCU within the deadline set in
(1) Application for MCR Line Appendix 6.
Availment - original and one (1) copy in
prescribed form duly accomplished and § 3277.7 Accounts verification. The
signed by the CEO of the applicant bank; microcredit accounts rediscounted shall be
(2) Rediscount Schedule (RS); and subject to verification and confirmation by
(3) Notarized PNs in favor of the BSP - authorized DLC or the appropriate
original and two (2) copies. BSPRLCU representatives to determine
their eligibility and acceptability for
§ 3277.5 Remittance of collections/ rediscounting.
payments/repayments. Collections made
on amortizations due and maturing PNs § 3277.8 Sanctions. Any misrepresentation
shall be remitted to the DLC not later and/or violation of the provisions of this
than two (2) banking days following the Section shall subject the RB or Coop Bank
date of receipt of collections by the Head and/or the erring directors/officers to any
Office/branches located within Metro of the following sanctions:
Manila and not later than four (4) banking a. Erring RB or Coop Bank
days following the date of receipt of (1) Fines in amounts as may be
collections by the Head Office/branches determined by the Monetary Board to be
located outside Metro Manila. As an appropriate, but in no case to exceed Thirty
alternative, collections may be deposited thousand pesos (P30,000) a day for each
in a Special Savings Deposit Account violation;
(SSDA) which shall be maintained by the (2) Suspension of rediscounting
BSP with the borrower-bank and remitted privileges or access to BSP credit facilities;
to DLC or the appropriate BSPRLCU on and/or
the last banking day of every month. The (3) Reduction of rediscounting line.
SSDA shall earn interest of one percent b. Erring directors/officers
(1%) lower than the 91-day Treasury Bill For violation of any of the provisions
rate for the last auction date of the of this Section the following shall be
preceding month. imposed against the directors and
On due date of the PN, the RB or Coop officers of the bank:
Bank shall remit to the BSP the unpaid (1) 1st offense - a warning that a
balance of such PN: Provided, That any repetition of the same or similar offense
amount credited to the SSDA shall be shall subject the erring director/officer to
applied as payment of the PN in favor of monetary penalties and/or sanctions;
BSP. The remittance shall be reported (2) 2nd offense - a fine of P500 per day
under DLC Form No. 5. The remittance to for each violation from the time the
BSP shall be in the form of cash, demand violation was committed up to the time it
draft, manager’s check or based on is corrected without prejudice, however,
authority issued by the bank to debit its to the imposition of higher penalties; and

§§ 3277.8 - X284
10.12.31
(3) 3rd and subsequent offenses - a fine a. STDs and deposit substitutes of
of P5,000 per day from the time the violation specialized government banks and private
was committed up to the time it is corrected banks arising from their lending operations
without prejudice, however, to the under the special financing programs of the
imposition of higher penalties. Government and/or international FIs; and
If any of the documentary requirements b. Funds held by participating financial
submitted by the bank as required under institutions (PFIs) under the GSIS Housing
Subsec. 3277.4 is found to be false, a fine Loan Programs: Provided, That the
of P5,000 per day, from the time the agreement between the GSIS and the
certification was made up to the time the conduit banks specify that such funds may
certification was found to be false, shall be be held by the conduit banks for a period
imposed against the certifying officer. of not more than seven (7) calendar days
prior to their release to the borrower and
Sec. X278 Enhanced Intraday Liquidity prior to the remittance by the conduit
Facility. The ILF is a smoothening banks of payments to the GSIS.
mechanism which is available to eligible c. Borrowings by accredited FIs under
participant banks in the Philippine the Wholesale Lending Program for SMEs
Payments and Settlements System of the SBGFC.
(PhilPaSS) to support their liquidity
requirements and avoid payment gridlocks Sec. X282 Borrowings from Trust
in PhilPaSS. The revised features of the Departments or Investment Houses
enhanced intraday liquidity facility are in Funds borrowed by banks from trust
Appendix 21-B. departments or managed funds of banks or
(As superseded by the MOA between the BSP, BTr, BAP and IHs are not considered as interbank
Money Market Association of the Philippines dated 25 March borrowings and therefore are subject to the:
2008) a. Reserve requirement on deposit
substitutes; and
Secs. X279 - X280 (Reserved) b. Minimum trading lot rule.
(As amended by Circular No. 703 dated 23 December 2010)
K. OTHER BORROWINGS
Sec. X281 Borrowings from the
Government. Except as may be authorized Sec. 1283 (Reserved)
by existing statutes, no private bank shall,
whether or not performing quasi-banking Sec. 2283 Mortgage/CHM Certificates of
functions, borrow any fund or money from Thrift Banks. With prior approval of the
the Government and government entities, Monetary Board, TBs may issue and deal
through the issuance or sale of its in mortgage and CHM certificates. The
acceptances, notes or other evidences of rules and regulations governing the
debt. issuance of said certificates is shown in
Appendix 17.
§ X281.1 Exemption from reserve
requirement. The following borrowings Sec. 3283 (Reserved)
shall not be subject to the reserve
requirements: Sec. X284 (Reserved)

§§ 1284 - X299
08.12.31
Sec. 1284 (Reserved) the RBs to BSP, which are entered in

their books as “Bills Payable-BSP,” do
Sec. 2284 (Reserved) not presently fall under the category
of deposit substitutes.
Sec. 3284 Borrowings of Rural Banks/
Cooperative Banks. RBs and Coop Banks Secs. X285 - X298 (Reserved)
may rediscount papers with any bank.
The obligations of RBs arising from Sec. X299 General Provision on
availments of rediscounting facilities and Sanctions. Any violation of the provisions
other borrowings from the BSP, will be of this Part shall be subject to Sections 36
considered as deposit substitutes. and 37 of R.A. No. 7653.
However, with the qualification in the Tax The guidelines for the imposition of
Code of 1997 that the term public means monetary penalty for violations/offenses
borrowing from twenty (20) or more with sanctions falling under Section 37
individual or corporate lenders at any one of R.A. No. 7653 on banks, their directors
(1) time, it is clear that the obligations of and/or officers are shown in Appendix 67.

§§ X301 - X301.6
15.12.31
PART THREE
LOANS, INVESTMENTS AND SPECIAL CREDITS
Section X301 Lending Policies. interdependence, which shall consider,

(Deleted by Circular No. 855 dated 29 October 2014) among others, significant dealings or
transactions of one or more counterpart(y/
§ X301.1 (Reserved) ies) that impact the financial capacity or
ability to repay the obligations of the other
§ 1301.1 Rules and regulations to govern counterpart(y/ies).
the development and implementation of In cases where the criteria do not
banks’ internal credit risk rating systems. automatically imply an economic
(Deleted by Circular No. 855 dated 29 October 2014) dependence that results in two (2) or more
counterparties being connected, the FI shall
§ 2301.1 (Reserved) provide evidence to Bangko Sentral that a
counterparty which is economically
§ 3301.1 (Reserved) connected to another, still can pay its
liabilities even if the latter’s financial
§§ X301.2 - X301.5 (Reserved) condition weakens.
b. Scope of application. Large exposures
§ X301.6 Large exposures and credit of FIs and their subsidiaries and affiliates to
risk concentrations. third parties across the relevant regulatory
a. Definition. “Large exposures” shall consolidation group shall be aggregated and
refer to exposures to counterparty or a group compared with the group’s qualifying capital.
of connected counterparties equal or c. Exclusions. Loans, other credit
greater than five percent (5%) of the FI’s accommodations and guarantees that are
qualifying capital as defined under excluded from the single borrower’s limit
applicable and existing capital adequacy (SBL) under Sec. X303 and Subsec. X303.4
framework. as well as intraday and end-of-day
“Connected counterparties” refer to a interbank exposures arising from interbank
group of counterparties that are connected payment and settlement processes shall be
through (a) direct or indirect control of one excluded from large exposures.
of the counterparties over the other(s) or d. Notification requirements. An FI
(b) economic interdependencies, and must must immediately inform the Bangko
be treated as a single counterparty. Control Sentral when it has concerns that its large
shall be determined in accordance with exposures or credit risk concentrations
Subsec. X303.1(g). have the potential to impact materially
“Economic Interdependence” refers to a upon its capital adequacy, along with
situation where counterparties are reliant proposed measures to address these
on each other, such that if one of the concerns.
counterparties experiences financial e. Reporting. FI’s records on
problems in repaying its obligations, the monitoring of large exposures shall be
creditworthiness of the other(s) would also made available to the Bangko Sentral
likely deteriorate. FIs shall define in their examiners for verification at any given time.
credit policy criteria in determining When warranted, the Bangko Sentral may
connectedness based on economic impose additional reporting requirements
Manual of Regulations for Banks Part III - Page 1

§§ X301.6 - X303
16.03.31
on the FI in relation to its large exposures total credit commitment of the bank to or
and credit risk concentrations. on behalf of the borrower.
f. Sanction. Any failure or delay in b. The total amount of loans, credit
complying with the requirements under accommodations and guarantees prescribed
Items “d” and “e” of this Subsection shall be in the first paragraph may be increased for
subject to penalty applicable to those each of the following circumstances:
involving major reports. 1. By an additional ten percent (10%)
(As amended by Circular Nos. 890 dated 02 November 2015, of the net worth of such bank: Provided,
855 dated 29 October 2014 and 827 dated 28 February 2014) That the additional liabilities are adequately
secured by trust receipts, shipping
Sec. X302 Loan Portfolio and Other Risk
documents, warehouse receipts or other
Assets Review System.
similar documents transferring or securing
title covering readily marketable, non-
§ X302.1 Provisions for losses; booking. perishable goods which must be fully
(Deleted by Circular No. 855 dated 29 October 2014) covered by insurance;
2. By an additional twenty-five percent
§ X302.2 Sanctions. (25%) of the net worth of such bank:
Provided, That the additional loans, credit
§ X302.3 Regulatory relief for banks accommodations and guarantees are for the
under rehabilitation program approved by purpose of undertaking infrastructure and/
the Bangko Sentral. Banks may be allowed or development projects under the Public-
to charge their outstanding unbooked Private Partnership (PPP) Program of the
allowance for probable losses directly to government duly certified by the Secretary
retained earnings, on one-time basis, subject of Socio-Economic Planning: Provided,
to the following conditions: further, That the total exposures of the bank
a. That this is in connection with a to any borrower pertaining to such
comprehensive rehabilitation program infrastructure and/or development projects
approved by the Bangko Sentral; and under the PPP Program shall not exceed
b. The effects thereof, if these had been twenty-five percent (25%) of the net worth
charged to profit and loss, shall be fully of such bank: Provided, furthermore, That
disclosed in the audited financial the additional twenty-five percent (25%)
statements, annual reports and published shall only be allowed for a period of six (6)
statement of condition. years from 28 December 2010: Provided,
(Circular No. 763 dated 03 August 2012) finally, That the credit risk concentration
arising from total exposures to all borrowers
A. LOANS IN GENERAL pertaining to such infrastructure and/or
development projects under the PPP
Sec. X303 Credit Exposure Limits to a Program shall be considered by the bank in
Single Borrower. its internal assessment of capital adequacy
a. Consistent with national interest, the relative to its overall risk profile and
total amount of loans, credit operating environment. Said loans, credit
accommodations and guarantees that may accommodations and guarantees based on
be extended by a bank to any person, the contracted amount as of the end of the
partnership, association, corporation or six (6)-year period shall not be increased but
other entity shall at no time exceed twenty may be reduced and once reduced, said
five percent (25%) of the net worth of such exposures shall not be increased thereafter;
bank. The basis for determining compliance and
with the single borrower’s limit (SBL) is the 3. By an additional fifteen percent (15%)
Part III - Page 2 Manual of Regulations for Banks

§ X303
16.03.31
of the net worth of such bank: Provided, or acceptor of paper discounted with or sold
That the additional loans, credit to such bank and the liability of a general
accommodations and guarantees are granted endorser, drawer or guarantor who obtains
to finance oil importation of oil companies, a loan or other credit accommodation from
which are not affiliates of the lending bank, or discounts paper with or sells papers to
engaged in energy and power generation: such bank; (2) in the case of an individual
Provided, further, That the oil companies who owns or controls a majority interest in
qualify under the credit underwriting a corporation, partnership, association or
standards of the lending bank and the any other entity, the liabilities of said entities
lending bank shall comply with Subsec. to such bank; (3) in the case of a corporation,
X301.6 on the guidelines in managing large all liabilities to such bank of all subsidiaries
exposures and credit risk concentration: in which such corporation owns or controls
Provided, furthermore, That the credit risk a majority interest; and (4) in the case of a
concentration arising from total exposures partnership, association or other entity, the
to all oil companies shall be considered by liabilities of the members thereof to such
the bank in its internal assessment of capital bank.
adequacy relative to its overall risk profile d. Even if a parent corporation,
and operating environment and shall be partnership, association, entity or an
incorporated in the Internal Capital individual who owns or controls a majority
Adequacy Assessment Process (ICAAP) interest in such entities has no liability to
document required to be submitted under the bank, the liabilities of subsidiary
Sec. X117: Provided, finally, That the corporations or members of the partnership,
additional fifteen percent (15%) shall only association, entity or such individual shall
be allowed for a period of three (3) years be combined under certain circumstances,
from 03 March 2011 or, until 03 March including but not limited to any of the
2014. Said additional loans, credit following situations: (1) the parent
accommodations and guarantees corporation, partnership, association, entity
outstanding as of the end of the three or individual guarantees the repayment of
(3)- year period and in excess of twenty five the liabilities; (2) the liabilities were incurred
percent (25%) of the lending bank’s net for the accommodation of the parent
worth shall not be increased but shall be corporation or another subsidiary or of the
reduced and once reduced, said exposures partnership or association or entity or such
shall not be increased thereafter. individual; or (3) the subsidiaries though
4. By an additional twenty-five percent separate entities operate merely as
(25%) of the net worth of such bank: departments or divisions of a single entity.
Provided, That the additional loans, credit e. For purposes of this Section, loans,
accommodations and guarantees are granted other credit accommodations and
to entities, which act as value chain guarantees shall exclude: (1) loans and other
aggregators of the lending banks’ clients, credit accommodations secured by
and/or economically-linked entities that are obligations of the Bangko Sentral or of the
also actors/players in the value chain: Philippine Government; (2) loans and other
Provided, further, That the additional twenty- credit accommodations fully guaranteed by
five percent (25%) will apply only to non- the government as to the payment of
DOSRI/RPT loans; Provided, finally, That principal and interest; (3) loans and other
such additional twenty-five percent (25%) credit accommodations secured by U.S.
shall only be for a period of three (3) years, Treasury Notes and other securities issued
subject to review after said period. by central governments and central banks
c. The above prescribed ceilings shall of foreign countries with the highest credit
include: (1) the direct liability of the maker quality given by any two (2) internationally

§ X303
16.03.31
accepted rating agencies; (4) loans and other the transactions.

credit accommodations to the extent covered Deposits of RBs/Coop Banks with
by the hold-out on or assignment of, government-owned or controlled financial
deposits maintained in the lending bank and institutions like the LBP and the DBP shall
held in the Philippines; (5) loans, credit not be covered by the SBL imposed under
accommodations and acceptances under R.A. No. 8791.
letters of credit to the extent covered by In municipalities and cities where
margin deposits; and (6) other loans or credit there are no government banks, the
accommodations which the Monetary Board deposits of RBs/Coop Banks in private
may from time to time specify as non-risk banks in said areas shall not be subject to
items. the SBL imposed under R.A. No. 8791.
f. The wholesale lending activities of Deposits in private banks located in
government banks to participating financial municipalities/cities where there are
institutions (PFIs) for relending to end-user government banks shall be subject to the
borrowers shall at no time exceed a separate limits as prescribed in the second
limit of thirty-five percent (35%) of net worth, paragraph above.
subject to the following guidelines: (1) it The outstanding balance of the demand
shall apply only to loans granted to PFIs on deposit account in a private depository bank
a wholesale basis for on-lending to end-user being used by the TBs/RBs/Coop Banks with
borrowers; (2) it shall apply only to loan authority to accept/create demand or current
programs funded by multilateral, deposits, to fund checks cleared through
international or local development agencies, the said private depository bank shall also
organizations or institutions especially be exempt from the SBL imposed under R.A.
designed for wholesale lending activities of No. 8791 even if there is a government-
government banks; (3) the end-user owned or controlled financial institution in
borrowers of the PFIs shall be subject to the the area.
twenty-five percent (25%) SBL, not the h. Loans, credit accommodations and
increased ceiling of thirty-five percent
guarantees to any person, partnership,
(35%); and (4) government banks shall
association, corporation or other entity or
observe appropriate criteria for accrediting
group of companies in excess of the
PFIs and for the grant/renewal of credit lines
applicable SBL arising from acquisition,
to accredited PFIs.
merger or consolidation of borrower-
g. Loans and other credit
corporations, which loans, credit
accommodations and usual guarantees by
accommodations and guarantees were
a bank to any non-bank entity, whether
granted prior to and are outstanding as of
locally or abroad, shall be subject to the
date of acquisition, merger or consolidation
limits as herein prescribed.
of borrower-corporations shall not be
Loans and other credit accommodations
increased, but shall be reduced and once
as well as deposits and usual guarantees by
a bank to any other bank, whether locally reduced, shall not be increased beyond the
or abroad, shall be subject to the limits as applicable SBL.
herein prescribed or P100.0 million, It is expected that FIs would generally
whichever is higher: Provided, That the observe a lower internal single borrower’s
lending bank shall exercise proper due limit than the prescribed limit of twenty-five
diligence in selecting a depository bank and percent (25%) as a matter of sound practice.
(As amended by Circular Nos. 908 dated 14 March 2016, 855
shall formulate appropriate policies to dated 29 October 2014, 803 dated 05 July 2013, 779 dated
address the corresponding risks involved in 9 January 2013, 734 dated 16 August 2011, 712 dated 9 February
2011 and 700 dated 06 December 2010)

§ X303.1
15.12.31
§ X303.1 Definition of terms. For or less of the voting power of an enterprise

purposes of this Section, the following when there is:
definitions shall apply: (1) Power over more than one-half of
a. Total credit commitment shall include the voting rights by virtue of an agreement
outstanding loans and other credit with other investors; or
accommodations, deferred letters of credit (2) Power to govern the financial and
less margin deposits, and guarantees. Except operating policies of the enterprise under a
as specifically provided, total credit statute or an agreement; or
commitment shall be reckoned on credit (3) Power to appoint or remove the
risk-weighted basis consistent with existing majority members of the board of directors
regulations. or equivalent governing body; or
b. Loans shall refer to all the accounts (4) Power to cast the majority votes at
under the loan portfolio of a bank as meetings of the board of directors or
enumerated in the Manual of Accounts for equivalent governing body; or
Banks. (5) Any other arrangement similar to any
c. Other credit accommodations shall of the above.
refer to credit and specific market risk h. Subsidiary shall refer to a corporation
exposures of banks arising from or firm more than fifty percent (50%) of the
accommodations other than loans such as outstanding voting stock of which is directly
receivables (sales contract receivables, or indirectly owned, controlled or held with
accounts receivables and other receivables), power to vote by its parent corporation.
and debt securities booked as investments. i. Credit risk transfer shall refer to any
d. Bank guarantee. A bank guarantee is arrangement that allows the bank to transfer
an irrevocable commitment of a bank the credit risk associated with its loan or
binding itself to pay a sum of money in the other credit accommodation to a third party.
event of non-performance of a contract by j. Readily marketable goods shall mean
a third party. The guarantee is a commitment articles of commerce, agriculture or industry
separate and distinct from the principal debt of such uses as to make them the subject of
or contract. constant dealings in ready markets with such
e. Net worth shall mean the total of the frequent quotations as to make their prices
unimpaired paid-in capital including paid- easily and definitely ascertainable, or which
in surplus, retained earnings and undivided lend themselves easily to disposal by sale
profit, net of unbooked valuation reserves at any time to pay the obligations secured
and other adjustments as may be required by the said goods.
by the Bangko Sentral. k. Bill of exchange drawn in good faith
f. Qualifying capital shall mean capital against actually existing values shall mean
under applicable and existing capital one (1) which is drawn by a seller on the
adequacy framework. purchaser for the purchase price of
g. The term “control of majority interest” commodities sold. A bill of exchange,
shall be synonymous to “controlling whether drawn against goods for exports or
interest” and exists when the parent owns against goods to be sold locally, which is
directly or indirectly through subsidiaries discounted or purchased by a bank is a bill
more than one half of the voting power of drawn against existing values only when it
an enterprise unless, in exceptional is accompanied by shipping documents,
circumstance, it can be clearly demonstrated warehouse receipts or other papers,
that such ownership does not constitute securing title to the goods sold. However,
control. Control of majority interest may also bills of exchange drawn in good faith against
exist even when the parent owns one-half actually existing values as defined in this

§§ X303.1 - X303.4
17.09.30
paragraph, which are past due or the rediscount, but shall be considered as still
maturities of which have been extended, existing and shall be included in determining
shall be considered as additional loans the SBL until such papers are paid by the
authorized under the second paragraph of borrowers.
this section and shall be subject to the ten
percent (10%) limitation provided therein. § X303.3 Credit risk transfer. Subject
l. Commercial or business paper actually to prior approval of the Bangko Sentral,
owned by the person negotiating the same loans and other credit accommodations
shall mean a paper arising from an actual covered by a legally effective credit risk
business transaction. A trade acceptance or transfer arrangement such as guarantee,
promissory note actually owned by the letter of indemnity, standby letter of credit
or credit derivative, may be excluded from
person negotiating the same is a commercial
the total credit commitment of the bank to a
or a business paper. However, if a bill is
borrower in reckoning compliance with the
drawn against an agent or fictitious drawee,
SBL.
or if a promissory note is executed by an
agent or fictitious drawee, neither is a § X303.4 Exclusions from loan limit.
commercial nor a business paper. a. The discount of bills of exchange
Commercial or business papers actually drawn in good faith against actually existing
owned and discounted by the person values, and the discount of commercial or
negotiating the same, which are past due or business paper which are actually owned
the maturity of which have been extended, by the person, company, corporation or
shall be considered as money borrowed and association negotiating the same;
shall be subject to the limitation of twenty- b. Credit accommodations to finance
five percent (25%) provided in the first the importation of rice and corn to the extent
paragraph of this Section: Provided, That of 100% of the net worth of the bank
commercial or business papers purchased concerned shall be excluded in determining
by banks from SMEs which became past due the SBL prescribed herein, subject to the
or the maturities of which have been following conditions:
extended, shall be considered additional (1) The importation shall be made in
loan by the bank to the purchaser of goods pursuance of a national policy duly
or services from the SME and shall be enunciated by the National Government;
entitled to an increased SBL equivalent to (2) The importation shall have been
ten percent (10%) of the net worth of the approved by the National Economic
concerned bank if the purchasers are Development Authority (NEDA);
companies with credit ratings of at least (3) The letter of credit shall specify that
“AA-” or equivalent from a Bangko Sentral- importation shall be made with certification
from the National Food Authority (NFA),
recognized rating agency.
or the consular establishment of the
Philippine government at the source of any
such establishment of the Philippine
government at the source of any such
§ X303.2 Rediscounted papers included shipment to the effect that the commodity
in loan limit. The liabilities to the bank of being imported is either rice or corn; and
borrowers whose papers were rediscounted (4) The related bills of lading shall
by banks with the Bangko Sentral shall not be specify in addition to the name of the
deemed as having been extinguished by the importer concerned, that the NFA shall be

§ X303.4
17.09.30
the consignee of the shipment; to protect securities lenders’ risk exposures.

c. The portion of loans and other credit j. Short-term exposures of banks to
accommodations covered by the guarantee of settlement banks arising from payment
IGLF; transactions pertaining to fund transfer
d. The total liabilities of a commercial services, check clearing, foreign exchange
paper issuer for commercial paper held by trades, security trades, security custody
a UB acting as a firm underwriter of said services, and other short-term payment
commercial paper shall not be counted in transactions: Provided, That for the purpose
determining compliance with the SBL of this Subsection, an exposure is
within a period of ninety (90) calendar days considered short-term if it does not extend
from the issuance of the commercial paper1: longer than five (5) banking days after the
Provided, That in no case shall such placement of funds into the clearing and
liabilities exceed five percent (5%) of the settlement account: Provided, further, That
net worth of the UB beyond normal the following conditions are met:
applicable SBL; (1) The payment transactions giving rise
e. The portion of loans and other credit to short-term exposures are carried out
accommodations covered by guarantees of through a clearing and settlement account
international/regional institutions/ maintained with a designated local
multilateral FIs where the Philippine settlement bank, or a foreign settlement
bank. A designated settlement bank is a bank
Government is a member/shareholder, such
that is recognized or assigned by a
as the IFC and the ADB;
consortium of banks and/or other financial
f. Loans and other credit
institutions or by an appropriate body to
accommodations or portion thereof,
accept funds from members of the
specifically provided for with valuation
consortium particularly for settlement of
reserve: Provided, That the bank has no
transactions among members.
unbooked valuation reserves;
(2) Banks shall enter into a formal
g. Loans and other credit agreement with the settlement bank,
accommodations as a result of an stipulating among other terms and
underwriting or sub-underwriting conditions that the account is opened and
agreement of debt securities outstanding for maintained exclusively for short-term
a period not exceeding thirty (30) calendar settlement transactions as described in this
days. Said other credit accommodations Subsection, and said account is not subject
shall include, among others, inventories of to a minimum balance requirement.
debt securities such as, but not limited to, (3) The clearing and settlement bank
bonds and notes purchased by the UB out shall keep the funds received from client
of its underwriting commitments1; banks separate from its own funds. The
h. Loans granted to foreign embassies. client banks shall also segregate their
These loans are considered as loans to their clearing and settlement accounts from any
respective central governments and as such of their other bank accounts.
shall be considered non-risk; and (4) Banks shall adopt an internal control
i. Foreign securities lending under mechanism appropriate to the said payment
Sec. X531 and other domestic securities transactions.
lending programs duly recognized by the (As amended by Circular Nos. 965 dated 05 July 2017, 784
Bangko Sentral containing safeguards dated 25 January 2013, 578 dated 17 August 2007 and 550
dated 17 November 2006)
consistent with best international practices,
1
It shall cover all new underwritten debt and equity securities issued from 15 February 2013.

§§ X303.5 - X303.8
15.12.30
§ X303.5 Sanctions. Violations of the §§ X303.6 – X303.7 (Reserved)

provisions of this Section shall be subject
to the following: § X303.8 Limit for wholesale lending
a. Monetary penalties - Fines of one- activities of government banks. There
tenth of one percent (1/10 of 1%) of the shall be a separate SBL of thirty-five
excess over the ceiling but not to exceed percent (35%) of unimpaired capital and
P30,000.00 a day for each SBL violation surplus for the wholesale lending activities
shall be assessed on the bank to be reckoned of government banks to PFIs for relending
from the date the excess started up to the to end-user borrowers, subject to the
date when such excess was eliminated: following guidelines:
Provided, That a maximum fine of P500.00 a. Government banks’ SBL of thirty-five
a day for each violation shall be imposed percent (35%) of unimpaired capital and
against banks with total resources of less surplus shall apply only to loans granted to
than P50.0 million at the time of granting of PFIs on a wholesale basis for on-lending to
loan/credit accommodation. end-user borrowers;
b. Other sanctions b. The thirty-five percent (35%) SBL
First offense – Reprimand for the shall apply only to loan programs funded
directors/officers who approved the credit by multilateral, international or local
availment which resulted in the excess with developmental agencies, organizations
a warning that subsequent violations will or institutions specially designed for
be subject to more severe sanctions. wholesale lending activities of government
Subsequent offenses – banks;
(1) Fine of P1,000.00 for directors/ c. The end-user borrowers of the PFIs
officers who approved the credit availment shall be subject to the twenty-five percent
which resulted in the excess. (25%) SBL, not to the increased ceiling of
(2) Suspension of the bank’s branching thirty-five percent (35%); and
privileges and access to Bangko Sentral d. Government banks shall observe
rediscounting facilities until the excess is the minimum criteria for accrediting
eliminated. PFIs and for the grant/renewal of credit
(3) Other penalties as the Monetary lines to accredited PFIs as set forth in
Board may impose depending on the gravity Appendix 41.
of the offense.
(As amended by Circular 890 dated 02 November 2015)
(Next page is Part III page 11)

(No pages 9 to 10)

§§ X304 - X304.4
14.12.31
Sec. X304 Grant of Loans and Other Credit (2) Those whose income has been
Accommodations. In addition to the subjected to final withholding tax;
principles and standards provided under (3) Senior citizens not required to file a
Section X178, the following regulations return pursuant to R.A. No. 7432, as
shall be observed in the grant of loans and amended by R.A. No. 9257, in relation to
other credit accommodations. the provisions of the National Internal
(As amended by Circular No. 855 dated 29 October 2014) Revenue Code (NIRC) or the Tax Reform
Act of 1997; and
§X304.1 Additional requirements. FIs (4) An individual who is exempt from
shall require submission and maintain on income tax pursuant to the provisions of the
file updated ITRs of the borrower, and his NIRC and other laws, general or special; and
co-maker, if applicable, duly stamped as f. Loans to borrowers, whose only
received by the BIR together with supporting source of income is compensation and the
financial statements, as applicable. FIs shall corresponding taxes on which has been
likewise require borrowers to execute a withheld at source: Provided, That the
waiver of confidentiality of client borrowers submitted, in lieu of the ITR, a
information and/or an authority of the FI to copy of their Employer’s Certificate of
conduct random verification with the BIR Compensation Payment/Tax Withheld (BIR
in order to establish authenticity of these Form 2316) or their payslips for at least three
documents. (3) months immediately preceding the date
Should the document(s) submitted of loan application.
prove to be incorrect in any material detail, g. Loans and other credit
the FI may terminate any loan or other credit accommodations not exceeding P3.0
accommodation granted on the basis of said million; or
document(s) and shall have the right to h. Loans to start up enterprise
demand immediate repayment or borrowers during the first three (3) years
liquidation of the obligation. of their operations or banking
The required submission of such relationship.
documents shall not cover the following (As amended by Circular Nos. 855 dated 29 October 2014,
credit exposures: 746 dated 03 February 2012, 694 dated 14 October 2010,
a. Microfinance loans as defined under 622 dated 16 September 2008, 607 dated 30 April 2008 and
Subsec. X361.1 (a); 549 dated 09 October 2006)
b. Loans to registered Barangay Micro-
§ X304.2 Purpose of loans and other
Business Enterprises (BMBEs); credit accommodations.
c. Interbank loans; (Deleted by Circular No. 855 dated 29 October 2014)
d. Loans secured by hold-outs on or
assignment of deposits or other assets § X304.3 Prohibited use of loan
considered non-risk by the Monetary Board; proceeds. Banks are prohibited from
e. Loans to individuals who are not requiring their borrowers to acquire shares
required to file ITRs under BIR regulations, of stock of the lending bank out of the loan
as follows: or other credit accommodation proceeds
(1) Individuals whose gross from the same bank.
compensation income does not exceed their
total personal and additional exemptions, § X304.4 Signatories. Banks shall
or whose compensation income derived require that loans and other credit
from one (1) employer does not exceed accommodations be made under the
P60,000 and the income tax on which has signature of the principal borrower and, in
been correctly withheld; the case of unsecured loans and other credit

§§ X304.4 - X304.11
15.12.31
accommodations to an individual borrower, § X304.10 Minimum required

at least one (1) co-maker, except that a co- disclosure1. Banks shall provide a table of
maker is not required when the principal the applicable fees, penalties and interest
borrower has the financial capacity and a rates on loan transactions, including the
good track record of paying his obligations. period covered by and the manner of and
(As amended by Circular No. 622 dated 16 September 2008) reason for the imposition of such penalties,
fees and interests; fees and applicable
§ X304.5 - X304.8 (Reserved) conversion reference rates for third currency
transactions, in plain sight and language,
§ X304.9 Policies on loans to non- on materials for marketing loans, such as
immigrants and embassy officials. Banks are brochures, flyers, primers and advertising
allowed to extend peso loans to the materials, on loan application forms, and
following: on billing statements: Provided, That these
a. Non-immigrants holding visas issued disclosures of the fees, charges and interest
under Secs. 9(d) and 9(g) of the Immigration rates in the terms and conditions of the loan
Act of 1940, Special Investor’s Resident Visa agreement: Provided further, That such table
(SIRV) and visas issued by the Philippine of fees, penalties and interest rates shall be
Economic Zone Authority: Provided, That printed in plain language and in bold black
such loans shall be limited to peso letters against a light or white background,
consumer loans including credit cards, auto and using the minimum Arial 12 theme font
loans and appliance loans, but excluding and size, or its equivalent in readability, and
real estate or housing loans: Provided, on the first page, if the applicable document
further, That the lending bank institutes has more than one (1) page.
measures to mitigate credit risk such as (Circular No. 702 dated 15 December 2010, as amended by
requiring the submission of a Comfort Letter Circular No. 890 dated 02 November 2015)
from the visa holder’s employer, limiting the
term of the loan to the period of the visa’s § X304.11 Unfair collection practices.
Banks, collection agencies, counsels and
validity, submission of SIRV identification
other agents may resort to all reasonable
card, as well as subjecting the visa holder
and legally permissible means to collect
to the usual credit processes/requirements;
amounts due them under the loan agreement:
and
Provided, That in the exercise of their rights
b. Embassy officials [foreign diplomats
and performance of duties, they must
and career consular officials and employees observe good faith and reasonable conduct
who are physically residing in the and refrain from engaging in unscrupulous
Philippines for a term of one (1) year or or untoward acts. Without limiting the
more]: Provided, That such loans shall be general application of the foregoing, the
limited to consumer loans, including credit following conduct is a violation of this
cards, auto loans, appliance loans and others Subsection:
that may henceforth be allowed by the a. the use or threat of violence or other
Monetary Board: Provided, further, That the criminal means to harm the physical person,
lending bank institutes measures to mitigate reputation, or property of any person;
credit risk such as requiring the submission b. the use of obscenities, insults, or
of a Comfort Letter from the Embassy profane language which amount to a
employing said officials. criminal act or offense under applicable
(M-2007-021 dated 15 August 2007) laws;
1
Banks were given a period of 120 days from 06 January 2011 or up to 06 May 2011 to fully implement
the disclosure requirements.

§§ X304.11 - X304.12
10.12.31
c. disclosure of the names of borrowers and procedures to ensure that personnel

who allegedly refuse to pay debts, except handling the collection of accounts, whether
as allowed under Subsec. X304.12; these are in-house collectors, or third-party
d. threat to take any action that cannot collection agents, shall disclose his/her full
legally be taken; name/true identity to the borrower.
e. communicating or threat to (As amended by Circular No. 702 dated 15 December 2010)
communicate to any person credit information
which is known to be false, including failure § X304.12 Confidentiality of
to communicate that a debt is being disputed; information. Banks shall keep strictly
f. any false representation or deceptive confidential the data on the borrower or
means to collect or attempt to collect any consumer, except under the following
debt or to obtain information concerning a circumstances:
borrower; and a. disclosure of information is with the
g. making contact at unreasonable/ consent of the borrower or consumer;
inconvenient times or hours which shall be b. release, submission or exchange of
defined as contact before 6:00 A.M. or after customer information with other financial
10:00 P.M., unless the account is past due institutions, credit information bureaus,
for more than sixty (60) days or the borrower lenders, their subsidiaries and affiliates;
has given express permission or said times c. upon orders of court of competent
are the only reasonable or convenient jurisdiction or any government office or
opportunities for contact. agency authorized by law, or under such
Banks shall inform their borrowers in conditions as may be prescribed by the
writing of the endorsement of the collection Monetary Board;
of their account to a collection agency/ d. disclosure to collection agencies,
agent, or the endorsement of their account counsels and other agents of the bank to
from one collection agency/agent to another, enforce its rights against the borrower;
at least seven (7) days prior to the actual e. disclosure to third party service
endorsement. The notification shall include providers solely for the purpose of
the full name of the collection agency and assisting or rendering services to the bank
its contact details: Provided, That the in the administration of its lending
required notification in writing shall be business; and
included in the terms and conditions of the f. disclosure to third parties such as
loan agreement. Banks shall adopt policies insurance companies, solely for the purpose
(Next Page is Part III - Page 15)

* No page 14

§§ X304.12 - X305.3
13.12.31
of insuring the bank from borrower default goods or credits may stipulate that the rate
or other credit loss, and the borrower from of interest agreed upon may be increased in
fraud or unauthorized charges. the event that the applicable maximum rate
(Circular No. 702 dated 15 December 2010) of interest is increased by the Monetary
Board: Provided, That such stipulation shall
§§ X304.13 - X304.14 (Reserved) be valid only if there is also a stipulation in
the agreement that the rate of interest agreed
§ X304.15 Sanctions.Violations of the upon shall be reduced in the event that the
provisions of Subsecs. X304.10 to X304.12 applicable maximum rate of interest is
shall be subject to any or all of the reduced by law or by the Monetary Board:
following sanctions depending upon their Provided, further, That the adjustment in the
severity: rate of interest agreed upon shall take effect
a. First offense. Reprimand for the on or after the effectivity of the increase or
directors/officers responsible for the decrease in the maximum rate of interest.
violation;
b. Second offense. Disqualification of § X305.3 Floating rates of interest. The
the bank concerned from the credit facilities rate of interest on a floating rate loan during
of the Bangko Sentral except as may be each interest period shall be stated on the
allowed under Section 84 of R. A. No. 7653; basis of Manila Reference Rates (MRRs),
c. Subsequent offense/s: T-Bill Rates or other market based reference
i. Prohibition on the bank concerned rates plus a margin as may be agreed upon
from the extension of additional credit by the parties.
accommodation against personal security; The MRRs for various interest periods
and shall be determined and announced by the
ii. Penalties and sanctions provided Bangko Sentral every week and shall be
under Sections 36 and 37 of R. A. No. 7653. based on the weighted average of the
(Circular No. 702 dated 15 December 2010) interest rates paid during the immediately
preceding week by the ten (10) KBs with
Sec. X305 Interest and Other Charges. The the highest combined levels of outstanding
rate of interest, including commissions, deposit substitutes and time deposits, on
premiums, fees and other charges, on any promissory notes issued and time deposits
loan, or forbearance of any money, goods received by such banks, of P100,000 and
or credits regardless of maturity and over per transaction account, with maturities
whether secured or unsecured shall not be corresponding to the interest periods for
subject to any regulatory ceiling. which such MRRs are being determined.
Such rates and the composition of the
§ X305.1 Rate of interest in the absence sample KBs shall be reviewed and
of stipulation. The rate of interest for the determined at the beginning of every
loan or forbearance of any money, goods calendar semester on the basis of the banks’
or credits and the rate allowed in judgments, combined levels of outstanding deposit
in the absence of expressed contract as to substitutes and time deposits as of 31 May
such rate of interest, shall be six percent (6%) or 30 November, as the case may be.
per annum. The rate of interest on floating rate loans
(As amended by Circular No. 799 dated 21 June 2013) existing and outstanding as of
23 December 1995 shall continue to be
§ X305.2 Escalation clause; when determined on the basis of the MRRs
allowable. Parties to an agreement obtained in accordance with the provisions
pertaining to a loan or forbearance of money, of the rules existing as of 01 January 1989:

§§ X305.3 - X306
17.03.31
Provided, however, That the parties to such Towards this end, all loan-related
existing floating rate loan agreements are documents shall show repayment schedules
not precluded from amending or modifying in a manner consistent with this provision.
their loan agreements by adopting a floating Marketing materials and presentations shall
rate of interest determined on the basis of likewise be consistent with this provision.
the TBR or other market based reference To enhance loan transaction
rates. transparency, Effective Interest Rate (EIR)
Where the loan agreement provides for calculation models illustrative of common
a floating interest rate, the interest period, loan features are presented in Appendix 91
which shall be such period of time for for guidance. It is understood, however, that
which the rate of interest is fixed, shall be an EIR calculation model, founded on
such period as may be agreed upon by the established principles of discounted cash
parties. flow analysis, for a loan should be based
For the purpose of computing the MRRs, on the actual features thereof. A bank shall
banks shall accomplish the report forms, be solely responsible for the propriety and
RS Form 2D and Form 2E (BSP 5-17-34A). accuracy of its EIR calculation model.
However, for purposes of determining
§ X305.4 Accrual of interest earned on compliance with this Section, the Bangko
loans. Accrual of interest earned on loans Sentral’s determination of the
shall only be allowed if the loans and other reasonableness and accuracy of an EIR
credit accommodations are current and calculation model prevails.
performing (i.e., no condition of financial (Circular No. 730 dated 20 July 2011 and M-2011-040 dated
difficulties or inability to meet financial 28 July 2011)
obligations as they mature). However,
interest income on past due loans arising Sec. X306 Past Due Accounts and Non-
from discount amortization (not from the Performing Loans. 1 The following
contractual interest of the accounts) shall regulations shall guide BSFIs in determining
be accrued in accordance with PAS 39. their past due accounts and non-performing
Accrued interest receivable shall be loans.
Definition of terms. For purposes of this
classified in accordance with their
Section, the following definitions shall
respective loan accounts and provided with
apply:
Allowance for Uncollected Interest on Loans.
a. Restructured loans shall refer to loans
and other credit accommodations the
original contractual terms and conditions
§ X305.5 Method of computing
of which have been modified in accordance
interest. Banks may only charge interest with a formal restructuring agreement that
based on the outstanding balance of a loan sets forth a revised schedule of payments
at the beginning of an interest period. for the purpose of lessening the financial
For a loan where principal is payable difficulty of the borrower and maximizing
in installments, interest per installment collection and realizable economic value
period shall be calculated based on the on an obligation within a reasonable period
outstanding balance of the loan at the of time. The modification may include, but
beginning of each installment period. is not limited to, change in principal due,
1
Effective from 10 February 2017 up to 31 December 2017, BSFIs shall make the necessary revisions in their
management information and reporting systems relating to past due and non-performing loans. Effective
01 January 2018, past due and NPLs shall be mandatorily reported in accordance with the requirements of this
Section.

§§ X306 - X306.2
17.03.31
maturity, interest rate and other charges, obligors or borrowers to catch up on their
collateral, or other terms and conditions. late payment without being considered as
b. Items in litigation shall refer to loans past due: Provided, That any cure period
or other credit accommodations for which policy shall be based on verifiable collection
cases, such as collection or foreclosure, experience and reasonable judgment that
have been filed in court or sheriff’s office, support tolerance of occasional payment
as the case may be. The loan or other credit delays: Provided, further, That the
accommodation shall remain in this account observance of a cure period policy shall not
during the pendency of the proceedings, preclude the timely adverse classification of
until full payment, restructuring of the an account that has developed material
obligation, foreclosure of the collateral, or credit weakness/es, and that BSFIs shall
such other disposition is made as would regularly review the reasonableness of its
cause such proceedings to cease. cure period policy. For microfinance and
(Circular Nos. 941 dated 20 January 2017, 903 dated 29 February other small loans that feature high frequency
2016, M-2015-039 dated 04 November 2015, Circular 890 payments, the cure period allowable by
dated 02 November 2015, M-2015-035 dated 07 October policy shall not exceed ten (10) days.
2015, M-2015-009 dated 28 January 2015, M-2015-005 dated 20 (Circular No. 409 dated 14 October 2009, as amended by Circular
January 2015, M-2014-039 dated 01 October 2014, M-2014- Nos. 941 dated 20 January 2017, 855 dated 29 October 2014
031 dated 08 August 2014, M-2014-006 dated 12 and 607 dated 30 April 2008)
February 2014, M-2013-050 dated 15 November 2013, M-
2013-046 dated 30 October 2013, M-2013-045 dated 23
October 2013, M-2013-042 dated 25 September 2013, M- § X306.2 (2016 – Demand loans)
2013-040 dated 03 September 2013, M-2013-001 dated 14 Accounts considered non-performing.
January 2013, M-2012-060 dated 27 December 2012, M- Loans, investments, receivables, or any
2012-051 dated 09 November 2012, M-2012-044 dated 24
financial asset shall be considered
August 2012, M-2012- 042 dated 17 August 2012, M–2012–001
dated 03 January 2012 M-2011-056 dated 10 November 2011, non-performing, even without any missed
M-2011-055 dated 17 October 2011, M-2011-043 dated 12 August contractual payments, when it is considered
2011, M-2011-007 dated 04 February 2011, M-2010-039 dated 03 impaired under existing accounting
November 2010, M-2010-007 dated 23 April 2010, M-2009-040 standards1, classified as doubtful or loss, in
dated 30 October 2009, M- 2009-037 dated 15 October
2009, M-2009-038 dated 08 October 2009 and M-2009-036
litigation, and/or there is evidence that full
dated 07 October 2009) repayment of principal and interest is
unlikely without foreclosure of collateral,
§ X306.1 Accounts considered past due. if any. All other loans, even if not
As a general rule, loans, investments, considered impaired, shall be considered
receivables, or any financial asset, including non-performing if any principal and/or
restructured loans, shall be considered past interest are unpaid for more than ninety (90)
due when any principal and/or interest or days from contractual due date, or accrued
installment due, or portions thereof, are not interests for more than ninety (90) days have
paid at their contractual due date, in which been capitalized, refinanced, or delayed by
case, the total outstanding balance thereof agreement.
shall be considered as past due. However, Microfinance and other small loans with
BSFIs may provide a cure period on a credit similar credit characteristics shall be
product-specific basis, not to exceed considered non-performing after contractual
thirty (30) days within which to allow the due date or after it has become past due.
1
Applicable accounting standard is PAS 39 until 31 December 2017 and International Financial Reporting
Standards (IFRS) 9 starting 01 January 2018. A financial asset or a group of financial assets is impaired when
there is objective evidence that its recoverable value is less than its carrying amount, as a result of one or more
loss events that occurred after the initial recognition of the asset and that the loss event (or events) has an impact
on the estimated future cash flows of the financial asset or group of financial assets that can be reliably
estimated. It may not be possible to identify a single, discrete event that caused the impairment. Rather, the
combined effect of several events may have caused the impairment.

§§ X306.2 - X307
17.03.31
Restructured loans shall be considered performing similar functions, shall submit

non-performing. However, if prior to monthly reports to these bureaus or
restructuring, the loans were categorized as organizations on the full payment or
performing, such classification shall be settlement of the previously reported
retained. accounts within five (5) banking days from
Non-performing loans, investments, the end of the month when such full
receivables, or any financial asset (and/or payment was received. For this purpose, it
any replacement loan) shall remain shall be the responsibility of the reporting
classified as such until (a) there is sufficient banks to ensure that their disclosure of any
evidence to support that full collection information about their borrowers/clients is
of principal and interests is probable with the consent of borrowers/clients
and payments of interest and/or principal concerned.
are received for at least six (6) months; or (Circular No. 589 dated 18 December 2007)
(b) written-off.
Sec. X307 “Truth in Lending Act”
(Circular No. 941 dated 20 January 2017)
Disclosure Requirement. Banks are
required to strictly adhere to the
§ X306.3 Renewals/extensions.
(Deleted by Circular No. 855 dated 29 October 2014) provisions of R.A. No. 3765, otherwise
known as the “Truth in Lending Act”, and
§ X306.4 Restructured loans. shall make the true and effective cost of
(Deleted by Circular No. 855 dated 29 October 2014) borrowing an integral part of every loan
contract.
§ X306.5 Write-off of loans, other The following regulations shall apply
credit accommodations, advances and to all banks engaged in the following
other assets as bad debts. types of credit transactions:
(Deleted by Circular No. 855 dated 29 October 2014) a. Any loan, mortgage, deed of trust,
§ X306.6 Writing-off microfinance advance and discount;
loans as bad debts. b. Any conditional sales contract, any
(Deleted by Circular No. 855 dated 29 October 2014) contract to sell, or sale or contract of sale
of property or services, either for present
§ X306.7 Updating of information or future delivery, under which part or all
provided to credit information bureaus. of the price is payable subsequent to the
Banks which have provided adverse making of such sale or contract;
information, such as the past due or c. Any rental-purchase contract;
litigation status of loan accounts, to credit d. Any contract or arrangement for the
information bureaus, or any organization hire, bailment, or leasing of property;

§§ X307 - X307.1
11.12.31
e. Any option, demand, lien, pledge, or transaction, net of finance charges collected
other claim against, or for delivery of, at the time the credit is extended (if any).
property or money; c. Down Payment represents the
f. Any purchase, or other acquisition of, amount paid by the debtor at the time of the
or any credit upon security of any obligation transaction in partial payment for the
or claim arising out of any of the foregoing; property or service purchased.
and d. Trade-in represents the value of an
g. Any transaction or series of asset agreed upon by the bank and debtor,
transactions having a similar purpose or given at the time of the transaction in partial
effect. payment for the property or service
The following categories of credit purchased.
transactions are outside the scope of these e. Non-finance charges correspond to
regulations: the amounts advanced by the bank for items
(1) Credit transactions which do not normally associated with the ownership of
involve the payment of any finance charge the property or of the availment of the
by the debtor; and service purchased which are not incident
(2) Credit transactions in which the to the extension of credit. For example, in
debtor is the one specifying a definite and the case of the purchase of an automobile
fixed set of credit terms such as bank on credit, the creditor may advance the
deposits, insurance contracts, sale of bonds, insurance premium as well as the
etc. registration fee for the account of the debtor.
f. Amounts to be financed consist of the
§ X307.1 Definition of terms. cash price plus non-finance charges less the
a. Person means any individual, amount of the down payment and value of
partnership, corporation, association or other the trade-in.
organized group of persons, or the legal g. Finance charge includes interest, fees,
successor or representative of the foregoing, service charges, discounts, and such other
and includes the Philippine Government or charges incident to the extension of credit.
any agency thereof or any other government, h. Simple annual rate is the uniform
or any of its political subdivisions, or any percentage which represents the ratio
agency of the foregoing. between the finance charge and the amount
b. Cash price or delivered price, in case to be financed under the assumption that
of trade transactions, is the amount of money the loan is payable in one (1) year with single
which would constitute full payment upon payment upon maturity and there are no
delivery of property (except money) or service upfront deductions to principal.
purchased at the bank’s place of business. In For loans with terms different from the
the case of financial transactions, cash price above assumptions, the EIR shall be
represents the amount of money received by calculated and disclosed to the borrower as
the debtor upon consummation of the credit the relevant true cost of the loan

(No page 20)

§§ X307.1 - X308
12.12.31
comparable to the concept of simple annual department of the SES.

rate.
For loans with contractual interest rates § X307.4 Posters. Banks shall post in
stated on monthly basis, the effective conspicuous places in their principal place
interest rate may be expressed as a monthly of business and branches, the information
rate. as contained in the revised format of
In accordance with the Philippine disclosure statement in Appendix 19. The
Accounting Standards (PAS) definition, posters shall include an explicit notification
EIR is the rate that exactly discounts that the disclosure statement is a required
estimated future cash flows through the attachment to the loan contract and the
life of the loan to the net amount of the customer has a right to demand a copy of
loan proceeds. For consistency, such disclosure.
methodology and standards for (As amended by Circular No. 730 dated 20 July 2011)
discounted cash flow models shall be
prescribed to be used for the purpose. § X307.5 Sanctions and penal
(As amended by Circular No. 730 dated 20 July 2011) provisions. Non-compliance with any of the
provisions of this Section shall be
§ X307.2 Information to be disclosed. regarded at least as a less serious offense,
As a general rule, loan terms shall be depending on the severity of non-disclosure,
disclosed to all types of borrower. For small number of loans and amount involved in
business/retail/consumer credit, the the violation. In addition to sanctions
following are the minimum information to under R.A. No. 3765, the following
be disclosed (sample form in Appendix 19): sanctions may be imposed:
a.The total amount to be financed; a. First offense. Reprimand on the erring
b.The finance charges expressed in officer/s;
terms of pesos and centavos; b. Second offense. Reprimand on the
c. The net proceeds of the loan; and entire board of directors; and
d.The percentage that the finance c. Subsequent offense/s:
charge bears to the total amount to be i. Suspension of the erring officer/s and/
financed expressed as a simple annual or entire board of directors; and
rate or an EIR as described in Item “h” of ii. Restriction on lending activities.
Subsec. X307.1. EIR may also be quoted as This is without prejudice to other
a monthly rate in parallel with the quotation penalties and sanctions provided under
of the contractual rate. Sections 36 and 37 of R.A. No. 7653.
(Circular No. 754 dated 17 April 2012)
Banks are required to furnish each
borrower a copy of the disclosure statement,
Sec. X308 Amortization on Loans and
prior to the consummation of the
Other Credit Accommodations. The
transaction.
(As amended by Circular No. 730 dated 20 July 2011)
amortization schedule of bank loans and
other credit accommodations shall be
§ X307.3 Inspection of contracts adapted to the nature of the operations to
covering credit transactions. Banks shall be financed.
keep in their offices or places of business In case of loans and other credit
copies of contracts which involve the accommodations with maturities of more
extension of credit by the bank and the than five (5) years, provisions must be
payment of finance charges therefor. Such made for periodic amortization payments,
copies shall be available for inspection or but such payments must be made at least
examination by the appropriate annually: Provided, however, That when

§§ X308 - X311.4
17.03.31
the borrowed funds are to be used for methodology used is sound, and: Provided
purposes which do not initially produce further, That in the case of real estate
revenues adequate for regular collateral, the maximum collateral value
amortization payments, the bank may shall be sixty percent (60%) of its value as
permit the initial amortization payment to appraised by an appraiser acceptable to the
be deferred until such time as said Bangko Sentral.
revenues are sufficient for such purpose, A loan may also be considered as
but in no case shall the initial amortization secured to the extent covered by a third
date be later than five (5) years from the party financial guarantee or surety
date on which the loan or other credit arrangement where the credit enhancement
accommodation is granted: Provided, provider is itself considered to be of high
further, That in the case of agriculture and credit quality (credit rating of at least AA or
fisheries projects with long gestation equivalent) or is considered to be such by
periods, the initial amortization payment the Bangko Sentral.
may be deferred for a longer period based Finally, a loan may be secured by a
on the economic life of the project as combination of acceptable collateral and
provided under Section 24 of R.A. No. 8435 guarantee arrangements as defined above,
and implemented under Sec. X349. provided such arrangements are
independent of one another for credit
Sec. X309 Non-Performing Loans. enhancement purposes.
(Deleted by Circular No. 941 dated 20 January 2017) (As amended by Circular No. 855 dated 29 October 2014)
§ X309.1 Accounts considered § X311.1 Loans secured by junior

non-performing; definitions. mortgage on real estate.
(Deleted by Circular No. 941 dated 20 January 2017) (Deleted by Circular No. 855 dated 29 October 2014)
§ X309.2 - X309.3 (Reserved) § X311.2 (Reserved)
§ X309.4 Reporting requirement. § 1311.2 (Reserved)

§ X309.5 Reportorial requirement.
(Deleted by Circular No. 941 dated 20 January 2017) § 3311.2 Eligible real estate collaterals
on rural/cooperative bank loans.
Sec. X310 (Reserved) (Deleted by Circular No. 855 dated 29 October 2014)
B. SECURED LOANS § X311.3 Insurance on real estate

improvements.
Sec. X311 Secured Loans and Other Credit (Deleted by Circular No. 855 dated 29 October 2014)
Accommodations. A loan may be
considered secured by collateral to the § X311.4 Participation in foreclosure
extent the estimated value of net proceeds proceedings. Foreign banks which are
at disposition of such collateral can be used authorized to do banking business in the
without legal impediment to settle the Philippines through any of the modes of
principal and accrued interest of such loan: entry under Subsec. X105.1 shall be
Provided, That such collateral must have an allowed to bid and take part in foreclosure
established market and the valuation sales of real property mortgaged to them,

§ X311.4
14.12.31
as well as to avail of enforcement and bidder, it shall, during the said five-year
other proceedings, and accordingly take period, transfer its rights to a qualified
possession of the mortgaged property, Philippine national, without prejudice to
for a period not exceeding five (5) years a borrower’s rights under applicable laws.
from actual possession which excludes Should the bank fail to transfer such
the redemption period, as defined property within the five-year period, it
under Subsec. X311.5, unless actual shall be penalized one half (1/2) of one
possession was acquired earlier: percent (1%) per annum of the price at
Provided, That in no event shall title to which the property was foreclosed until it
the property be transferred to such foreign is able to transfer the property to a qualified
bank. Philippine national.
In case said bank is the winning To enable the Bangko Sentral to

§§ X311.4 - 3311.4
14.12.31
determine compliance with the foregoing, and executions of judgment thereon

the foreign bank shall maintain, and make involving real properties levied upon by a
readily available for inspection, information sheriff shall be exempt from the publications
pertaining to individual mortgaged in newspapers now required by law where
properties foreclosed. the total amount of loan, excluding interests
This provision does not limit the right due and unpaid, does not exceed P100,000
of the mortgagee-bank to own condominium or such amount as the Monetary Board may
units as provided under existing laws. prescribe as may be warranted by prevailing
(Circular No. 858 dated 21 November 2014) economic conditions. It shall be sufficient
publication in such cases if the notices of
§ 1311.4 (Reserved) foreclosure and execution of judgment are
posted in the most conspicuous area of the
§ 2311.4 Foreclosure by thrift banks. municipal building, the municipal public
The foreclosure of mortgages covering market, the RB, the barangay hall, and the
loans granted by TBs and executions of barangay public market, if any, where the
judgment thereon involving real properties land mortgaged is situated during the period
levied upon by a sheriff shall be exempt from of sixty (60) days immediately preceding the
the publications in newspapers now public auction of execution of judgment.
required by law where the total amount of Proof of publication as required herein
loan, excluding interests due and unpaid, shall be accomplished by an affidavit of the
does not exceed P100,000 or such amount sheriff or officer conducting the foreclosure
as the Monetary Board may prescribe as may sale or execution of judgment and shall be
be warranted by prevailing economic attached with the records of the case:
conditions and by the nature of service of Provided, That when a homestead or free
customers served by each category of the patent is foreclosed, the homesteader or free
TB. It shall be sufficient publication in such patent holder, as well as his heirs shall have
cases if the notices of foreclosure and the right to redeem the same within one (1)
execution of judgment are posted in the year from the date of foreclosure in the case
conspicuous area of the TB’s premises, of land not covered by a Torrens Title or
municipal building, municipal public one (1) year from the date of the registration
market, the barangay hall, and the barangay of the foreclosure in the case of land covered
public market, if there be any, where the by a Torrens Title. Provided, further, That
land mortgaged is situated within a period in any case, borrowers, especially those
of sixty (60) days immediately preceding the who are mere tenants, need only to secure
public auction of execution of judgment. their loans with the produce corresponding
Proof of publication as required herein shall to their share.
be accomplished by an affidavit of the sheriff In the case of Coop Banks, the
or officer conducting the foreclosure sale or foreclosure of mortgages and execution of
execution of judgment and shall be attached judgment thereon involving real properties
with the records of the case. levied upon by a sheriff shall be exempt from
A TB shall be allowed to foreclose lands the publications in newspaper now required
mortgaged to it: Provided, That said lands by law where the total amount of loan,
shall be covered under R.A. No. 6657. excluding interests due and unpaid, does
not exceed P250,000 or such amount as the
§ 3311.4 Foreclosure by rural/ Bangko Sentral may prescribe as may be
cooperative banks. The foreclosure of warranted by prevailing economic
mortgages covering loans granted by RBs conditions and by the nature and character

§§ 3311.4 - X311.5
14.12.31
of the Coop Banks. It shall be sufficient borrower’s right under applicable laws.
publication in such cases if the notices of Should said unqualified RB fail to transfer
foreclosure and execution of judgment are such property within the five (5) year period,
posted in conspicuous areas in the bank’s it shall be penalized at one-half (1/2) of one
premises, municipal hall, the municipal percent (1%) per annum of the price at
public market, the barangay hall and the which the property was foreclosed until the
barangay public market, if any, where the property is transferred to a qualified
property mortgaged is situated during the Philippine national.
period of sixty (60) days immediately To enable the Bangko Sentral to
preceding the public auction or execution determine compliance with the foregoing,
of judgment. Proof of publication as RBs not qualified to acquire or hold land in
required herein shall be accomplished by the Philippines shall maintain, and make
an affidavit of the sheriff or officer readily available for inspection, information
conducting the foreclosure sale or execution pertaining to individual mortgaged properties
of judgment and shall be attached to the foreclosed.
records of the case. Transitory provisions. An RB
An RB/Coop Bank shall be allowed to established and operating prior to the
foreclose lands mortgaged to it including effectivity of R.A. No. 10574, and which is
lands covered by R.A. No. 6657 (The considered as an RB not qualified to acquire
Comprehensive Agrarian Reform Law of or hold land in the Philippines starting
1988), as amended: Provided, That said 13 September 2013, shall:
lands shall be subject to the retention limits a. submit to the appropriate
provided under R.A. No. 6657: Provided, department of the SES a divestment plan for
further, That a rural bank’s power to the disposal of its title/interest in all land
foreclose lands mortgaged to it shall be properties held by it; and
subject to the limitations in the succeeding b. transfer for a period of five (5) years
paragraph. existing owned or acquired properties to
RBs which are not qualified to acquire qualified Philippine nationals; Provided, That
or hold land in the Philippines pursuant to upon the expiry of the said five (5)-year period,
existing laws shall be allowed to bid and RBs not qualified to acquire or hold land in
take part in foreclosure sales of real property the Philippines which fail to transfer their
mortgaged to them, as well as to avail of properties to qualified Philippine nationals
enforcement and other proceedings, and shall be subject to the penalties under
accordingly to take possession of the Subsec. 3311.4.
mortgaged property, for a period not (As amended by Circular Nos. 858 dated 21 November 2014,
exceeding five (5) years from actual 809 dated 23 August 2013 and 682 dated 15 February 2010)
possession which excludes the redemption
period, as defined under Subsec. X311.5, § X311.5 Redemption of foreclosed real
unless actual possession was acquired estate mortgage. In the event of foreclosure,
earlier: Provided, That in no event shall title whether judicially or extrajudicially, of any
to the property be transferred to such RB. mortgage on real estate, the mortgagor or
In case the RB, which is not qualified debtor shall have the right within one (1)
to acquire or hold land in the Philippines, year after the sale of the real estate, to
is the winning bidder, it shall, during the redeem the property by paying the amount
said five (5) year period, transfer its rights due under the mortgage deed, with interest
to a qualified Philippine national as defined thereon at the rate specified in the mortgage,
under existing laws without prejudice to a and all costs and expenses incurred by the
Manual of Regulations for Banks Part III - Page 24a

§§ X311.5 - X313
14.12.31
bank or institution from the sale and foreclosure sale with the applicable Register
custody of said property less the income of Deeds which in no case shall be more
derived therefrom. However, the than three (3) months after foreclosure,
purchaser at the auction sale concerned whichever is earlier.
shall have the right to enter upon and take
possession of such property immediately Sec. X312 Loans and Other Credit
after the date of the confirmation of the Accommodations Secured by Chattels
auction sale and administer the same in and Intangible Properties.
accordance with the law. (Deleted by Circular No. 855 dated 29 October 2014)
Juridical persons whose property is
being sold pursuant to an extra-judicial Sec. X313 Loans and Other Credit
foreclosure, shall have the right to redeem Accommodations Secured by Personal
the property in accordance with this Properties.
provision until, but not after, the (Deleted by Circular No. 855 dated 29 October 2014)
registration of the certificate of
Part III - Page 24b Manual of Regulations for Banks

§§ X314 - X320.1
14.12.31
Sec. X314 Increased Loan Values and and services, cash advances, annual
Terms of Loans for Home Building. membership/renewal fees as well as interest,
(Deleted by Circular No. 855 dated 29 October 2014) penalties, insurance fees, processing/service
fees and other charges.
Sec. X315 Loans Secured by Certificates c. Minimum amount due or minimum
of Time Deposit. payment required. Means the minimum
amount that the credit cardholder needs to
Secs. X316 - X318 (Reserved) pay on or before the payment due date for
a particular billing period/cycle as defined
C. UNSECURED LOANS under the terms and conditions or reminders
stated in the statement of account billing
Sec. X319 Loans Against Personal Security statement which may include: (1) total
(Deleted by Circular No. 855 dated 29 October 2014) outstanding balance multiplied by the
required payment percentage or a fixed
§ X319.1 General guidelines. amount whichever is higher; (2) any amount
(Deleted by Circular No. 622 dated 16 September 2008) which is part of any fixed monthly
installment that is charged to the card;
§ X319.2 Proof of financial capacity of (3) any amount in excess of the credit line;
borrower. and (4) all past due amounts, if any.
(Deleted by Circular No. 622 dated 16 September 2008)
d. Default or delinquency. Shall mean
§ X319.3 Signatories. non-payment of, or payment of any amount
(Deleted by Circular No. 622 dated 16 September 2008) less than, the “Minimum Amount Due” or
“Minimum Payment Required” within two
Sec. X320 Credit Card Operations; General (2) cycle dates, in which case, the “Total
Policy. The Bangko Sentral shall foster the Amount Due” for the particular billing
development of consumer credit through period as reflected in the monthly statement
innovative products such as credit cards of account may be considered in default or
under conditions of fair and sound delinquent.
consumer credit practices. The Bangko e. Acceleration clause. Shall mean any
Sentral likewise encourages competition provision in the contract between the bank
and transparency to ensure more efficient and the cardholder that gives the bank the
delivery of services and fair dealings with right to demand the obligation in full in case
customers. of default or non-payment of any amount
Towards this end, the following rules due or for whatever valid reason.
and regulations shall govern the credit card f. Subsidiary refers to a corporation or
operations of banks and subsidiary/affiliate firm more than fifty percent (50%) of the
credit card companies, aligned with global outstanding voting stock of which is directly
best practices. or indirectly owned, controlled or held with
the power to vote by a bank or other FI.
§ X320.1 Definition of terms. g. Affiliate refers to an entity linked
a. Credit card. Means any card, plate, directly or indirectly to a bank or other FI
coupon book or other credit device existing through any one or a combination of any of
for the purpose of obtaining money, the following:
property, labor or services on credit. (1) Ownership, control or power to vote,
b. Credit card receivables. Represents whether by permanent or temporary proxy
the total outstanding balance of credit or voting trust, or other similar contracts,
cardholders arising from purchases of goods by a bank or other financial institution of at

§§ X320.1 - X320.2
14.12.31
least ten percent (10%) or more of the k. Credit card business activity report -
outstanding voting stock of the entity, or report which contains the quantitative data
vice-versa; on credit card industry.
(2) Interlocking directorship or l. Credit card issuer- refers to a bank or
officership, except in cases involving a corporation that offers the use of its credit
independent directors as defined under card.
existing regulations; m. Pre-approved credit cards are
(3) Common stockholders owning at unsolicited credit cards issued by credit card
least ten percent (10%) of the outstanding issuers to consumers who have not applied
voting stock of each FI and the entity; or for such credit cards. Acts described under
(4) Management contract or any Appendix 103 and other similar acts are
arrangement granting power to the bank or deemed tantamount to the act of issuing pre-
other FI to direct or cause the direction of approved credit cards, notwithstanding any
management and policies of the entity, or contrary stipulations in the contract.
vice-versa. n. Application is a documented request
h. Simple annual rate is the uniform of the credit card applicant to a credit card
percentage which represents the ratio issuer for the availment of a credit card. The
between the finance charge and the amount intention and consent for the availment of
to be financed under the assumption that the credit card must be clear and explicit.
the loan is payable in one (1) year with single (As amended by Circular Nos. 845 dated 15 August 2014,
812 dated 23 September 2013 and 754 dated 17 April 2012)
payment upon maturity and there are no
upfront deductions to principal. § X320.2 Risk management system. To
For loans with terms different from the safeguard their interests, banks and
above assumptions, the effective annual subsidiary/affiliate credit card companies
interest rate shall be calculated and disclosed are required to establish an appropriate
to the borrower as the relevant true cost of system for managing risk exposures from
the loan comparable to the concept of credit card operations which shall be
simple annual rate. documented in a complete and concise
For loans with contractual interest rates manner. The risk management system shall
stated on monthly basis, the effective interest cover the organizational set-up, records and
rate may be expressed as a monthly rate. reports, accounting, policies and procedures
In accordance with the PAS definition, and internal control.
effective interest rate is the rate that exactly Written policies, procedures and
discounts estimated future cash flows internal control guidelines shall be
through the life of the loan to the net amount established on the following aspects of credit
of loan proceeds. For consistency, card operations:
methodology and standards for discounted a. Requirements for application;
cash flow models shall be prescribed to be b. Solicitation and application
used for the purpose. processing;
i. Credit card acquirer- refers to the c. Determination and approval of credit
institution that accepts and facilitates the limits;
processing of the credit card transaction d. Issuance, distribution and activation
which is initially accepted by the merchant. of cards;
j. Credit cardholder- refers to a person e. Supplementary or extension cards;
who owns and benefits from the use of a f. Cash advances;
credit card. g. Billing and payments;

§§ X320.2 - X320.4
14.12.31
h. Deferred payment program or special itemized, which are paid or to be paid by

installment plans; the cardholder in connection with the
i. Collection of past due accounts; transaction but which are not incident to
j. Handling of accounts for write-off; the extension of credit;
k. Suspension, cancellation and c. the percentage that the finance charge
withdrawal or termination of card; bears to the total amount to be financed
l. Renewal of cards, upgrade or expressed as a simple annual rate or an
downgrade of credit limit; annual effective interest rate, as described
m. Lost or stolen cards and their in Item “h” of Subsec. X320.1. EIR may also
replacement; be quoted as a monthly rate in parallel with
n. Accounts of DOSRI and employees; the quotation of the contractual rate;
o. Disposition of errors and/or d. for installment loans, the number of
questions about the billing statement/ installments, amount and due dates or
statement of account and other customers’ periods of payment schedules to repay the
complaints; and indebtedness;
p. Dealings with marketing agents/ e. the default, late payment/penalty fees
collection agents. or similar delinquency-related charges
(As amended by Circular No. 702 dated 15 December 2010) payable in the event of late payments;
f. the conditions under which interest
§ X320.3 Minimum requirements. may be imposed, including the time period,
Banks and their subsidiary or affiliate credit within which any credit extended may be
cards companies shall not issue pre- repaid without interest;
approved credit cards as provided under g. the method of determining the balance
Appendix 103, notwithstanding any upon which interest and/or delinquency
contrary stipulations in the contract. charges may be imposed;
(As amended by Circular Nos.845 dated 15 August 2014 and
702 dated 15 December 2010) h. the method of determining the amount
of interest and/or delinquency charges,
§ X320.4 Information to be disclosed. including any minimum or fixed amount
Banks or their subsidiaries/affiliate credit imposed as interest and/or delinquency
card companies shall disclose to each charge;
person to whom the credit card privilege is i. where one (1) or more periodic rates
extended in the agreement, contract or any may be used to compute interest, each such
equivalent document governing the issuance rate, the range of balances to which it is
or use of the credit card or any amendment applicable, and the corresponding simple
thereto or in such other statement furnished annual rate; and
the cardholder from time to time, prior to j. for transactions made in foreign
the imposition of the charges and to the currencies and/or outside the Philippines,
extent applicable, the following for dual currency accounts (peso and dollar
information: billings), as well as payments made by credit
a. the finance charges, individually cardholders in any currency other than the
itemized, which are paid or to be paid by billing currency: the application of
the cardholder; payments; the manner of conversion from
b. non-finance charges, individually the transaction currency and payment
(No page 28)

(Next page is Part III - page 29)

§§ X320.4 - X320.8
17.03.31
currency to Philippine pesos or billing and using the minimum Arial 12 theme font
currency; definition or general description and size, or its equivalent in readability, and
of verifiable blended exchange conversion on the first page, if applicable document has
rates (e.g., MASTERCARD and/or VISA more than one page.
International rates on the day the item was Transitory provisions. Banks and their
processed/posted to the billing statement, subsidiary or affiliate credit card companies
plus mark-up, if any) including conversion shall be given a period of 120 days from
06 January 2011 to fully implement the
commission; and/or other currency
required disclosure requirements.
conversion charges and costs arising from (As amended by Circular No. 754 dated 17 April 2012 and
the purchase by the card company of foreign Circular No. 702 dated 15 December 2010)
currency to settle the customer’s transactions
shall also be disclosed. § X320.5 Interest accrual on past due
Banks and their subsidiary or affiliate loans.
credit card companies shall also provide the (Deleted by Circular No. 941 dated 20 January 2017)
following information to their cardholders:
1. A table of the applicable fees, § X320.6 Method of computing interest.
penalties and interest rates on credit card Banks and/or subsidiaries/affiliate credit
transactions, including the period covered card companies shall only charge interest
based on the outstanding balance of a loan
by and the manner of and reason for the
at the beginning of an interest period.
imposition of such penalties, fees and For a loan where the principal is payable
interests; fees and applicable conversion in installments, interest per installment
reference rates for third currency period shall be calculated based on the
transactions, in plain sight and language, on outstanding balance of the loan at the
materials for marketing credit cards, such beginning of each installment period.
as brochures, flyers, primers and advertising Towards this end, all loan-related
materials, on credit card application forms, documents shall show repayment schedules
and on credit card billing statements: in a manner consistent with this provision.
Provided, That these disclosures are in Marketing materials and presentations shall
addition to the full disclosure of the fees, likewise be consistent with this provision.
charges and interest rates in the terms and (As amended by Circular No. 754 dated 17April 2012)
conditions of the credit card agreement
found elsewhere on the application form § X320.7 (2011- X320.6) Finance
and billing statement; and charges. The amount of finance charges in
connection with any credit card transaction
2. A reminder to the cardholder in the
charged to the cardholder includes interest,
monthly billing statement, or its equivalent
fees, service charges, discounts, and such
document, that payment of only the other charges incident to the extension of
minimum amount due or any amount less credit.
than the total amount due for the billing (As amended by Circular No. 754 dated 17 April 2012)
cycle/period, would mean the imposition
of interest and/or other charges: § X320.8 (2011- X320.7) Deferral
Provided, That such table of fees, penalties charges. The bank and the cardholder may,
and interest rates and reminder shall be prior to the consummation of the
printed in plain language and in bold black transaction, agree in writing to a deferral of
letters against a light or white background, all or part of one (1) or more unpaid

Part III - Page 29
§§ X320.8 - X320.13
12.12.31
installments and the bank may collect a d. disclosure to collection agencies,

deferral charge which shall not exceed the counsels and other agents of the bank or
rate previously disclosed pursuant to the card company to enforce its rights against
provisions on disclosure. the cardholder;
(As amended by Circular No. 754 dated 17 April 2012) e. disclosure to third party service
providers solely for the purpose of assisting
§ X320.9 (2011- X320.8) Late payment/ or rendering services to the bank or card
penalty fees. No late payment or penalty company in the administration of its credit
fee shall be collected from cardholders card business; and
unless the collection thereof is fully f. disclosure to third parties such as
disclosed in the contract between the issuer insurance companies, solely for the purpose
and the cardholder: Provided, That late of insuring the bank from cardholder default
payment or penalty fees shall be based on or other credit loss, and the cardholder from
the unpaid minimum amount due or a fraud or unauthorized charges.
prescribed minimum fixed amount: (As amended by Circular No. 754 dated 17 April 2012)
Provided, further, That said late payment or
penalty fees may be based on the total § X320.11 (2011- X320.10) Suspension,
outstanding balance of the credit card termination of effectivity and reactivation.
obligation, including amounts payable Banks or their subsidiary/affiliate credit card
under installment term or deferred payment companies shall formulate criteria or
schemes, if the contract between the issuer parameters for suspension, revocation and
and the cardholder contains an reactivation of the right to use the card and
“acceleration clause” and the total shall include in their contract with
outstanding balance of the credit card is cardholders a provision authorizing the
classified and reported as past due. issuer to suspend or terminate its effectivity, if
(As amended by Circular No. 754 dated 17 April 2012) circumstances warrant.
(As amended by Circular No. 754 dated 17 April 2012)
§ X320.10 (2011-X320.9) Confidentiality
of information. Banks and subsidiary § X320.12 (2011- X320.11) Inspection
affiliate credit card companies shall keep of records covering credit card
strictly confidential the data on the transactions. Banks or their subsidiary/
cardholder or consumer, except under the affiliate credit card companies shall make
following circumstances: available for inspection or examination by
a. disclosure of information is with the the appropriate department of the SES
consent of the cardholder or consumer; complete and accurate files on card
b. release, submission or exchange of applicant/cardholder to support the
customer information with other financial consideration for approval of the application
institutions, credit information bureaus, and determination of the credit limit which
credit card issuers, their subsidiaries and shall be in accordance with the verified debt
affiliates; repayment ability and/or net worth of the
c. upon orders of court of competent card applicant/cardholder.
jurisdiction or any government office or (As amended by Circular No. 754 dated 17 April 2012)
agency authorized by law, or under such
conditions as may be prescribed by the § X320.13 (2011- X320.12) Offsets. For
Monetary Board; purposes of transparency and adequate

Part III - Page 30
§§ X320.13 - X320.15
12.12.31
disclosure, the credit card issuer shall billing error or apply against the credit limit
inform/notify the credit cardholder in the of the cardholder the amount indicated to
agreement, contract or any equivalent be in error.
document governing the issuance or use of (As amended by Circular No. 754 dated 17 April 2012)
the credit card that, pursuant to the
provisions of Articles 1278 to 1290 of the § X320.15 (2011-X320.14) Unfair
New Civil Code of the Philippines, as collection practices. Banks, subsidiary/
amended, the use of his credit card will affiliate credit card companies, collection
subject his deposit/s with the bank to offset agencies, counsels and other agents may
against any amount/s due and payable on resort to all reasonable and legally
his credit card which have not been paid in permissible means to collect amounts due
accordance with the terms of the agreement/ them under the credit card agreement:
contract. Provided, That in the exercise of their rights
(As amended by Circular No. 754 dated 17 April 2012) and performance of duties, they must
observe good faith and reasonable conduct
§ X320.14 (2011- X320.13) Handling of and refrain from engaging in unscrupulous
complaints. Banks or subsidiary affiliate credit or untoward acts. Without limiting the
card companies shall give cardholders at least general application of the foregoing, the
twenty (20) calendar days from statement following conduct is a violation of this
date to examine charges posted in his/her Subsection:
statement of account and inform the bank/ a. the use or threat of violence or other
subsidiary credit card companies in writing criminal means to harm the physical person,
of any billing error or discrepancy. Within reputation, or property of any person;
ten (10) calendar days from receipt of such b. the use of obscenities, insults, or profane
written notice, the bank/subsidiary credit language which amount to a criminal act or
card company shall send a written offense under applicable laws;
acknowledgment to the cardholder unless c. disclosure of the names of credit
the action required is taken within such ten cardholders who allegedly refuse to pay debts,
(10)-day period. except as allowed under Subsec. X320.9;
Not later than two (2) billing cycles or d. threat to take any action that cannot
two (2) months which in no case shall legally be taken;
exceed ninety (90) days after receipt of the e. communicating or threat to
notice and prior to taking any action to communicate to any person credit information
collect the contested amount, or any part which is known to be false, including failure
thereof, banks/subsidiary credit card to communicate that a debt is being disputed;
companies shall make appropriate f. any false representation or deceptive
corrections in their records and/or send a means to collect or attempt to collect any
written explanation or clarification to the debt or to obtain information concerning a
cardholder after conducting an cardholder; and
investigation. Nothing in this Subsection g. making contact at unreasonable/
shall be construed to prohibit any action by inconvenient times or hours which shall be
the bank/subsidiary credit card company to defined as contact before 6:00 A.M. or after
collect any amount which has not been 10:00 P.M., unless the account is past due for
indicated by the cardholder to contain a more than sixty (60) days or the cardholder

§§ X320.15 - X320.17
13.12.31
has given express permission or said times are R.A. No. 3765, the following sanctions
the only reasonable or convenient may be imposed:
opportunities for contact. a. First offense. Reprimand on the
Banks and their subsidiary/affiliate erring officer/s;
credit card companies shall inform their b. Second offense. Reprimand on the
cardholder in writing of the endorsement entire board of directors; and
of the collection of their account to a c. Subsequent offense/s:
collection agency/agent, or the endorsement i. Suspension of the erring officer/s
of their account from one (1) collection
and/or entire board of directors; and
agency/agent to another, at least seven (7)
ii. Restriction on lending activities.
days prior to the actual endorsement. The
notification shall include the full name of This is without prejudice to other
the collection agency and its contact details: penalties and sanctions provided under
Provided, That the required notification in Sections 36 and 37 of R.A. No. 7653.
(As amended by Circular Nos. 754 dated 17 April 2012 and 702
writing shall be included in the terms and
dated 15 December 2010)
conditions of the credit card agreement.
Banks and their subsidiary/affiliate credit § X320.17 Submission of credit card
card companies shall adopt policies and business activity report. For purposes of
procedures to ensure that personnel
transparency and availability of data on
handling the collection of accounts, whether
credit card operations and in the light of
these are in-house collectors, or third-party
collection agents, shall disclose his/her full ensuring consumer protection, as well as
name/true identity to the cardholder. managing risks involved in credit
(As amended by Circular No. 754 dated 17 April 2012) transactions, banks including their
subsidiaries and affiliates, shall submit a
§ X320.16 (2011- X320.15) Sanctions monthly quantitative report to Bangko
and penal provisions. Violations of the Sentral covering the following data on credit
provisions of Subsecs. X320.1, X320.5, and card issuers/acquirers, cardholders, credit
X320.7 to X320.14 shall be subject to any card complaints, and usage location:
or all of the following sanctions depending
upon their severity: Credit Card Unit of
a. Disqualification of the bank Issuance Expression
concerned from the credit facilities of the I. Cards-in-force per Number
Bangko Sentral except as may be allowed network/brand
II.Cards-in-force per card Number
under Section 84 of R.A. No. 7653; type
b. Prohibition of the bank concerned from III. Approved credit card Number
the extension of additional credit applications
accommodation against personal security; and IV. Cards issued by status Number
c. Penalties and sanctions provided V. Cards issued per credit Peso amount
under Sections 36 and 37 of R.A. No. 7653. limit
VI. Billings per mode of Peso amount
Non-compliance with the provisions of transactions
Subsecs. X320.2 to X320.4, and X320.6 and VII. Billings per network/ Peso amount
X320.15 shall be regarded at least as a brand
less serious offense, depending on the VIII. Billed fees/charges Peso amount
IX. Gross payment Peso amount
severity of non-disclosure, number of X. Receivables Peso amount
loans and amount involved in the XI. Rates/charges per Peso amount/
violation. In addition to sanctions under cardholder percentage

§§ X320.17 - X321.2
16.03.31
Cardholder Profile salary, pension or other fixed compensation,

I.Cardholder Number where repayment would come from such
information (age,
occupation, gender, civil status,
future cash flows, either through salary
educational attainment, deductions, debits from the borrower’s
geographic location) deposit account, mobile payments, pay-
II. Cardholder by type of Number through collections, over-the-counter
payment payments or other type of payment
Complaints
arrangement agreed upon by the borrower
I. Cardholder issues Number and lender.
II. Complaint/request resolution Number b. Transactions covered. Salary-based
III. External service provider Number general-purpose consumption loans may
include credit accommodations for
Usage Location
I.Incoming Peso amount
education, hospitalization, emergency,
II. Outgoing Peso amount travel, household and other personal
consumption needs.
c. Exclusions. Credit cards, motor
(As amended by Circular Nos. 812 dated 23 September 2013,
vehicles and other personal loans which are
754 dated 17 April 2012 and 702 dated 15 December 2010)
covered by other existing applicable
Sec. X321 Policies on Salary-Based General- regulations are excluded from the coverage
Purpose Consumption Loans1. Statement of of this Section.
policy. The Bangko Sentral recognizes the d. Report. For the purpose of reporting
helpful role of salary-based, consumer in the Financial Reporting Package, financial
lending schemes in allowing an individual assistance under an approved fringe benefit
borrower to manage his/her cash flows program should be reported/classified
provided these are granted under sound according to the purpose of the financial
credit standards and fair consumer assistance (e.g., housing/real estate, motor
vehicle, salary-based general-purpose
practices. The Bangko Sentral likewise
consumption, etc.)
encourages competition and transparency
to promote efficient and innovative delivery No. 886 dated 08 September 2015)
of financial services and fair dealing with
customers. § X321.2 Credit granting.
Nos. 903 dated 29 February 2016 and 886 dated 08 September
a. Policies of financial institutions (Fls)
2015) shall be consistent with best practices and
sound credit processes prescribed under
§ X321.1 Definition; Transactions Bangko Sentral regulations, including a
covered; Exclusions; Report. comprehensive assessment of the
a. Definition. Salary-based general- borrower’s creditworthiness, and shall not
purpose consumption loans. Refer to be reliant on mere formula such as those
unsecured loans for a broad range of automatically granted based on certain
consumption purposes, granted to multiples of monthly salary or other regular
individuals mainly on the basis of regular compensation.
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.
Manual of Regulations for Banks Part III - Page 30c

§§ X321.2 - X326
16.06.30
b. Individual borrowing capacity should D. RESTRUCTURED LOANS

be prudently assessed considering
reasonable estimates of total personal and Sec. X322 Restructured Loans; General
household indebtedness as well as Policy.
disposable income available for family and
personal needs after considering debt
§ X322.1 Definition; when to
servicing.
consider performing/non-performing.
c. Original loan term shall not exceed (Deleted by Circular No. 855 dated 29 October 2014)
three (3) years but may have longer maturity
in meritorious cases provided that in no § X322.2 Procedural requirements.
case shall maturity exceed five (5) years; (Deleted by Circular No. 855 dated 29 October 2014)
No loan renewal shall be granted
without re-assessing borrowing capacity § X322.3 Restructured loans
and establishing continuing creditworthiness. considered past due.
Further, no loan renewal shall be allowed (Deleted by Circular No. 855 dated 29 October 2014)
without payment of accrued interest
receivable and substantial reduction in § X322.4 Classification.
principal.
d. ln the case of loan “takeout” from
another Fl, the Fl taking out the loan(s)
should ensure that the loan from the
E. LOANS AND OTHER CREDIT
originating Fl has been fully settled. Fls are
ACCOMMODATIONS TO DIRECTORS,
expected to institute adequate controls over
OFFICERS, STOCKHOLDERS AND
loan “takeout” such as: (a) directly releasing
THEIR RELATED INTERESTS/
the loan proceeds to the Fls where the loan
SUBSIDIARIES/AFFILIATES
will be taken out; and (b) obtaining a copy
of the official receipt evidencing full
Sec. X326 Policy Statement. The Bangko
settlement of account from the originating Sentral recognizes that transactions of its
Fl, among others. supervised financial institutions (BSFIs) with
(Circular No. 886 dated 08 September 2015)
related parties, which include dealings with
directors, officers, stockholders, and their
§ X321.3 Consumer protection. Fls are related interests (DOSRI), subsidiaries, and
required to strictly adhere to Bangko Sentral affiliates, may be both productive and
regulations on Financial Consumer prudent. The Bangko Sentral also recognizes
Protection as prescribed under Part Ten the need to provide BSFIs with flexibility
entitled Consumer Protection. with respect to lending to DOSRI,
(Circular No. 886 dated 08 September 2015) subsidiaries, and affiliates premised on the
overarching principle that the transactions
§ X321.4 Sanctions. The Monetary shall at all times be kept above board and
Board may, at its evaluation and discretion, conducted on an arm’s length basis, and that
impose sanctions on an Fl and/or its Board, BSFIs have adopted robust internal policies
directors and officers, proportionate to the and procedures in handling related party
gravity/seriousness of the offense in cases transactions that are compliant with the
of persistent non-observance of the minimum requirements of law and
provisions contained herein. regulations.
(Circular No. 886 dated 08 September 2015) (Circular No. 914 dated 23 June 2016)
(Next page is Part III - page 31)
Part III - Page 30d Manual of Regulations for Banks

§ X326.1
17.09.30
§ X326.1 Definitions. For purposes of or relative within the first degree of

these regulations, the following definitions consanguinity or affinity, or relative by legal
shall apply: adoption, is a general partner;
a. Directors shall refer to bank directors (3) Co-owner with the director, officer,
as defined in Subsec. X141.1f. stockholder or his spouse or relative within
b. Officers shall refer to bank officers as the first degree of consanguinity or affinity,
defined in Subsec. X141.1j. or relative by legal adoption, of the property
c. Stockholder shall refer to any stockholder or interest or right mortgaged, pledged or
of record in the books of the bank, acting assigned to secure the loans or other credit
personally, or through an attorney-in-fact; or accommodations, except when the
any other person duly authorized by him or mortgage, pledge or assignment covers only
through a trustee designated pursuant to a proxy said co-owner’s undivided interest;
or voting trust or other similar contracts, whose (4) Corporation, association or firm of
stockholdings in the lending bank, individual which any or a group of directors, officers,
and/or collectively with the stockholdings of: stockholders of the lending bank and/or
(i) his spouse and/or relative within the their spouses or relatives within the first
first degree by consanguinity or affinity or degree of consanguinity or affinity, or
legal adoption; (ii) a partnership in which relative by legal adoption, hold or own at
the stockholder and/or the spouse and/or least twenty percent (20%) of the subscribed
any of the aforementioned relatives is a capital of such corporation, or of the equity
general partner; and (iii) corporation, of such association or firm;
association or firm of which the stockholder (5) Corporation, association or firm
and/or his spouse and/or the wholly or majority-owned or controlled by
aforementioned relatives own more than fifty any related entity or a group of related
percent (50%) of the total subscribed capital entities mentioned in Items “e(2)” and “e(4)”
stock of such corporation, association or of this Section;
firm, amount to one percent (1%) or more (6) Corporation, association or firm
of the total subscribed capital stock of the which owns or controls directly or indirectly
bank. whether singly or as part of a group of
d. Substantial stockholder shall mean a related interest at least twenty percent (20%)
person, or group of persons whether natural of the subscribed capital of a substantial
or juridical, owning such number of shares stockholder of the lending bank or which
that will allow such person or group to elect controls majority interest of the bank
at least one (1) member of the board of pursuant to Subsec. X303.1;
directors of a bank or who is directly or (7) Corporation, association or firm
indirectly the registered or beneficial owner which has an existing management contract
of more than ten percent (10%) of any class or any similar arrangement with the parent
of its equity security. of the lending bank; and
e. Related interest shall refer to any of (8) Non-governmental organizations
the following: (NGOs)/foundations that are engaged in
(1) Spouse or relative within the first retail microfinance operations which are
degree of consanguinity or affinity, or incorporated by any of the stockholders
relative by legal adoption, of a director, and/or directors and/or officers of related
officer or stockholder of the bank; banks.
(2) Partnership of which a director, The general principles and standards
officer, or stockholder of a bank or his spouse that will govern the business relationships

§ X326.1
17.09.30
between banks and their related NGOs/ i. Book value of the paid-in capital
foundations engaged in retail microfinance contribution shall mean the proportional
are found in Appendix 27. amount of the bank’s total capital accounts
f. Subsidiary shall refer to a corporation (net of such unbooked valuation reserves
or firm more than fifty percent (50%) of the and other capital adjustments as may be
outstanding voting stock of which is directly required by the Bangko Sentral) as the
or indirectly owned, controlled or held with corresponding paid-in capital contribution
power to vote by its parent corporation. of each of the bank’s directors, officers,
g. Affiliate shall refer to an entity linked stockholders and their related interests
directly or indirectly to a bank by means of: bear to the total paid-in capital of the
(1) Ownership, control as defined under bank: Provided, That as a basis for
Subsec. X141.1d, or power to vote of at least determining the individual ceiling referred
twenty percent (20%) of the outstanding to in Sec. X330, the corresponding book
voting stock of the borrowing entity, or vice value of the shares of stock of said
versa; directors, officers, stockholders and their
(2) Interlocking directorship or related interests which are the subject of
officership, where the concerned director pledge, assignment or any other
or officer owns; controls, as defined under encumbrance shall be deducted
Subsec. X141.1d; or has the power to vote therefrom.
of at least twenty percent (20%) of the j. Net worth shall mean the total of
outstanding voting stock of the borrowing the unimpaired paid-in capital including
entity; paid-in surplus, retained earnings and
(3) Common stockholders owning at undivided profit, net of valuation reserves
least ten percent (10%) of the outstanding and other adjustments as may be required
voting stock of the bank and at least twenty by the Bangko Sentral.
percent (20%) of the outstanding voting k. Total loan portfolio shall refer to
stock of the borrowing entity; the sum of all loan accounts outstanding,
(4) Management contract or any gross of valuation reserves, as reflected
arrangement granting power to the bank to in the bank’s consolidated statement of
direct or cause the direction of management condition, excluding outstanding loans
and policies of the borrowing entity; or financed by special/specific funds from the
(5) Permanent proxy or voting trusts in government FIs.
favor of the bank constituting at least twenty l. Secured loan, borrowing or other
percent (20%) of the outstanding voting credit accommodation shall refer to any
stock of the borrowing entity, or vice versa. loan, or credit accommodation or portion
In cases where the borrowing entity is thereof referred to in Sec. X327 which is
linked to the lending bank both as DOSRI secured by physical collateral, financial
and as a subsidiary or affiliate, the DOSRI guarantee, or other instruments, that are
rules shall apply: enforceable, realizable, and marketable and
h. Unencumbered deposits shall refer meets the standards prescribed under
to savings, time and demand deposits, which Subsec. X178.7 and Sec. X311.
are not subject to an assignment or m. Unsecured loan, borrowing or other
hold-out agreement or any other encumbrance. credit accommodation shall refer to any

§§ X326.1 - X327
17.09.30
loan, or other credit accommodation or a. Any advance by means of an

portion thereof referred in Sec. X327 which is incidental or temporary overdraft, cash item,
not secured in accordance with Item “l” above. “vale”, etc.;
(Circular No. 423 dated 15 March 2004, as amended by Circular b. Any advance of unearned salary or
Nos. 969 dated 22 August 2017, 945 dated 06 February 2017, other unearned compensation for periods
914 dated 23 June 2016, M-2012-016 dated 27 March 2012,
Circular No. 725 dated 16 June 2011, M-2011-33 dated 15 June in excess of thirty (30) days;
2011 and Circular No. 695 dated 22 October 2010) c. Any advance by means of DAUDs;
d. Outstanding availments under an
Sec. X327 Transactions Covered. The terms established credit line;
loans, other credit accommodations and e. Drawings against an existing letter
guarantees as used herein shall refer to of credit;
transactions of the bank which involve the f. The acquisition of any note, draft,
grant of any loan, advance or other credit bill of exchange or other evidence of
accommodation in any form whatsoever, indebtedness upon which the bank’s
whether renewal, extension or increase, and DOSRIs may be liable as makers, drawers,
shall include: acceptors, endorsers, guarantors or sureties;
(No pages 34 to 35)


§§ X327 - X328.1
08.12.31
g. Indirect lending such as loans or Provided, That the transaction shall

other credit accommodations granted by automatically be subject to the ceilings as
another financial intermediary to said herein provided once the DOSRI who is a
DOSRIs from funds of the bank invested in party to the transaction becomes directly
the other institution’s trust or other liable to the bank;
department when there is a clear d. Transactions with a foreign bank
relationship between the transactions; which has stockholdings in the local bank
h. The increase of an existing where the foreign bank acts as guarantor
indebtedness, as well as additional through the issuance of letters of credit or
availments under a credit line or additional assignment of a deposit in a currency eligible
drawings against a letter of credit; as part of the international reserves and held
i. The sale of assets, such as shares of in a bank in the Philippines to secure other
stock, on credit; and credit accommodations granted to another
j. Any other transactions as a result person or entity: Provided, That the foreign
of which the bank’s DOSRIs become bank stockholder shall automatically be
subject to the ceilings as herein provided in
obligated or may become obligated to
the event that its contingent liability as
the lending bank, by any means guarantor becomes a real liability; and
whatsoever to pay money or its e. Interbank call loan transactions.
equivalent.
§ X328.1 Applicability to credit card
Sec. X328 Transactions Not Covered. The operations. The credit card operations of
terms loans, other credit accommodations banks shall not be subject to these
and guarantees as used herein shall not refer regulations where the credit cardholders are
to the following: bank’s DOSRI: Provided, That (a) the
a. Advances against accrued privilege of becoming a credit cardholder
compensation, or for the purpose of is open to all qualified persons on the basis
providing payment of authorized travel, of selective criteria which are applied by
legitimate expenses or other transactions for the bank to all applicants thereof; and (b)
the account of the bank or for utilization of the bank’s DOSRIs reimburse/pay the bank
maternity and other leave credits; for the billed amount in full on or before
b. The increase in the amount of the payment due date in the billing or
outstanding credit accommodations as a statement of account, as set by the bank for
result of additional charges or advances all other qualified credit card holders on
made by the bank to protect its interest such availments made for the same period on their
as taxes, insurance, etc.; credit cards. However, the transaction shall
c. The discount of bills of exchange be subject to applicable DOSRI regulations
drawn in good faith against actually if the bank’s DOSRIs:
existing values, and the discount of a. fail to reimburse/pay the bank within
commercial or business paper actually the period mentioned herein; or
owned by the person negotiating the same, b. on the outset, opt for deferred
including, but not limited to, the payment scheme, and the availment is
acquisition by a domestic bank of export booked by the bank.
bills from any of its DOSRI which are For purposes of this Section,
drawn in accordance with the terms and stockholders and related interests refer to
conditions of the covering letters of credit: individual credit card holders.

§§ X328.2 - X329
16.06.30
§§ X328.2 - X328.4 (Reserved) shall be subject to the aggregate limits for

related party transactions.
§ X328.5 Loans, other credit b. Exclusions from the ceilings. Loans, other
accommodations and guarantees granted credit accommodations and guarantees
to subsidiaries and/or affiliates. secured by assets considered as non-risk
a. Ceilings. The total outstanding loans, under existing Bangko Sentral regulations as
other credit accommodations and well as interbank call loans shall be
guarantees to each of the bank’s subsidiaries excluded in determining compliance with
and affiliates shall not exceed ten percent the ceilings prescribed under Item “a” above.
(10%) of the net worth of the lending bank: c. Procedural requirements. The
Provided, That the unsecured loans, other following provisions shall apply if a bank
credit accommodations and guarantees to grants a loan, other credit accommodation
each of said subsidiaries and affiliates shall or guarantee to any of its subsidiaries and
not exceed five percent (5%) of such net affiliates.
worth: Provided, further, That the total (1) Approval of the board, when to
outstanding loans, other credit obtain. Except with prior written approval
accommodations and guarantees to all of the majority of all the members of the
subsidiaries and affiliates shall not exceed board of directors, no loan, other credit
twenty percent (20%) of the net worth of accommodation and guarantee shall be
the lending bank: Provided, finally, That granted to a subsidiary or affiliate.
these subsidiaries and affiliates are not (2) Approval by the board, how
related interest of any of the director, officer, manifested. The approval shall be manifested
and/or stockholder of the lending bank. in a resolution passed by the board of
Loans, other credit accommodations directors during a meeting and made of record.
and guarantees granted by a bank to its (3) Determination of majority of all the
members of the board of directors. The
subsidiaries and affiliates engaged in, or for
determination of the majority of all the
the purpose of undertaking infrastructure,
members of the board of directors shall be
energy and power generation, and other
based on the total number of directors of
priority programs and projects, including
the bank as provided in its articles of
those under the Public-Private Partnership incorporation and by-laws.
(PPP) Program of the government, consistent (4) Contents of the resolution. The
with the Philippine Development Plan/ resolution of the board of directors shall
Public Investment Program of the National contain the following information:
Government, duly certified as such by the (a) Name of the subsidiary or affiliate;
Secretary of Socio-Economic Planning, shall (b) Nature of the loan or other credit
be subject to a separate individual limit of accommodation or guarantee, purpose,
twenty-five percent (25%) of the net worth amount, credit basis for such loan or other
of the lending bank: Provided, That the credit accommodation or guarantee, security
unsecured portion thereof shall not exceed and appraisal thereof, maturity, interest rate,
twelve and one-half percent (12.5%) of such schedule of repayment and other terms;
net worth: Provided, further, That these (c) Date of resolution;
subsidiaries and affiliates are not related (d) Names of the directors who
interest of any of the director, officer, and/ participated in the deliberation of the
or stockholder of the lending bank: meeting; and
Provided, finally, That the total outstanding (e) Names in print and signatures of the
loans, other credit accommodations and directors approving the resolution: Provided,
guarantees to all subsidiaries and affiliates That in instances where a director who

§§ X328.5 - X329
16.06.30
participated in the board meeting and who Sec. X329 Direct or Indirect Borrowings.
approved such resolution failed to sign, the Loans, other credit accommodations and
corporate secretary may issue a certification guarantees to DOSRI shall be considered
to this effect indicating the reason for the direct or indirect borrowings in accordance
failure of the said director to sign the resolution. with the following criteria:
(5) Transmittal of copy of board a. Direct borrowing. If the director,
approval; contents thereof. A copy of the officer or stockholder of the lending bank is
written approval of the board of directors, a party to any of the transactions
as herein required, shall be submitted to the enumerated in Sec. X327 for himself, or as
appropriate department of the SES within the representative or agent of others, or if
twenty (20) banking days from the date of he acts as a guarantor, endorser or surety
approval. The copy may be a duplicate of for loans from the bank, or if the
the original, or a reproduction copy showing loan or other credit accommodation to
clearly the signatures of the approving another party is secured by a property
directors: Provided, That if a reproduction interest or right of the director, officer or
copy is to be submitted, it shall be duly stockholder.
certified by the corporate secretary that it is a b. Indirect borrowing. If in any of the
reproduction of the original written approval. transactions in Sec. X327 the borrower,
(Circular No. 560 dated 31 January 2007, as amended by Circular guarantor, endorser or surety is a related
Nos. 914 dated 23 June 2016 and 654 dated 12 May 2009)

§ X329 - X330.1
13.12.31
interest as defined in Item “e”, Subsec. (4) Debt securities issued by the U.S.
X326.1. government;
Other cases of direct/indirect (5) Debt securities issued by central
borrowing shall be resolved on a case-to- governments, central banks of foreign
case basis. countries and multilateral financial
It shall be the responsibility of the institutions such as International Finance
bank concerned to ascertain whether the Corporation, Asian Development Bank and
borrower, guarantor, endorser or surety World Bank, with the highest credit quality
is related or connected with the bank or given by any two (2) internationally accepted
with any of the directors, officers or rating agencies; and
stockholders of the bank in any of the (6) Deposits of clients of related non-
capacities mentioned in Item “e” of governmental organizations (NGOs)/
Subsec. X326.1. foundations, that are engaged in retail
In determining indirect borrowings, as microfinance operations, and are
enumerated above, only those cases maintained with the related lending bank
involving living relatives shall be and held in the Philippines: Provided, That
considered. all of the following conditions are met:
(i) existing regulations on the opening
Sec. X330 Individual Ceilings. The total of deposit accounts and other deposit
outstanding loans, other credit transactions shall apply except when
accommodations and guarantees to each of specifically stated otherwise;
the bank’s DOSRI shall be limited to an (ii) depositors shall issue waivers of
amount equivalent to their respective confidentiality of their deposits and enter
unencumbered deposits and book value of hold-out agreements with the lending bank;
their paid-in capital contribution in the bank: (iii) interest rates on such deposits shall
Provided, however, That unsecured loans, not be more than those of similar type of
other credit accommodations and deposit accounts;
guarantees to each of the bank’s DOSRI shall (iv) collected but undeposited capital
not exceed thirty percent (30%) of their build-up funds from clients shall be recorded
respective total loans, other credit in a temporary liability account in the books
accommodations and guarantees. of related NGOs/foundations and shall be
deposited with the related bank not later
§ X330.1 Exclusions from individual than fifteen (15) calendar days from date of
ceiling. The following loans, other credit collection;
accommodations and guarantees shall be (v) total loans, other credit
excluded in determining compliance with accommodations and guarantees granted to
the individual ceiling. the related NGO/foundation shall not
a. Loans, other credit exceed, at any time, the total deposits
accommodations and guarantees secured by owned by its clients; and
assets considered as non-risk by the (vi) That the NGO/foundation shall
Monetary Board; consider as payments to the clients’
Assets considered as non-risk shall refer obligations any deposits used by the
to the following: lending bank to settle any unpaid
(1) Cash; obligation(s) of the NGO/foundation.
(2) Debt securities issued by the Bangko b. Loans, other credit accommodations
Sentral or the Philippine government; and advances to officers in the form of
(3) Deposits maintained in the lending fringe benefits granted in accordance with
bank and held in the Philippines; existing regulations; and

§§ X330.1 - X331
16.06.30
c. Loans, other credit accommodations was created specifically to finance and/or

and guarantees extended by a Coop Bank operate physical assets;
to its cooperative shareholders. b. The borrowing entity has little or no
The general principles and standards that other material assets or activities, and
will govern the business relationships between therefore little or no independent capacity
banks and their related NGOs/foundations to repay the obligation, apart from the
engaged in retail microfinance are found in income that it receives from the asset(s)
Appendix 27. being financed;
d. The portion of loans and other credit c. The terms of the obligation give the
accommodations covered by guarantees of lender a substantial degree of control over
international/regional institutions/multilateral the asset(s) and the income that it generates;
financial institutions where the Philippine and
Government is a member/shareholder, such d. As a result of the preceding factors,
as the International Finance Corporation and the primary source of repayment of the
the Asian Development Bank. obligation is the income generated by the
(As amended by Circular Nos. 785 dated 25 January 2013 and asset(s) being financed, rather than the
725 dated 16 June 2011 and M-2011-033 dated 15 June 2011)
independent capacity of a broader
§ X330.2 Exclusions from the thirty commercial enterprise.
(Circular No. 914 dated 23 June 2016)
percent (30%) unsecured individual ceiling
for project finance.
Sec. X331 Aggregate Ceiling; Ceiling on
Loans, other credit accommodations, Unsecured Loans, Other Credit
and guarantees granted by a bank to its Accommodations and Guarantees.
DOSRI for the purpose of project finance, Except with the prior approval of the Monetary
shall be exempted from the thirty percent Board, the total outstanding loans, other credit
(30%) unsecured individual ceiling during accommodations and guarantees to DOSRI
the project gestation phase1: Provided, That: shall not exceed fifteen percent (15%) of the
the lending bank shall ensure that standard total loan portfolio of the bank or 100% of net
prudential controls in project finance loans worth whichever is lower: Provided, That in
designed to safeguard creditors’ interests are no case shall the total unsecured loans, other
in place, which may include pledge of the credit accommodations and guarantees to said
borrower’s shares, assignment of the DOSRI exceed thirty percent (30%) of the
borrower’s assets, assignment of all aggregate ceiling or the outstanding loans,
revenues and cash waterfall accounts, and other credit accommodations and guarantees,
assignment of project documents. whichever is lower. For the purpose of
For this purpose, “project finance” is determining compliance with the ceiling on
defined as a method of funding in which unsecured loans, other credit
the lender looks primarily to the revenues accommodations and guarantees, banks shall
generated by a single project, both as a be allowed to average their ceiling on
source of repayment and as security for the unsecured loans, other credit
exposure. It possesses all the following accommodations and guarantees every week.
characteristics either in legal form or In evaluating requests for extension of
economic substance: loans in excess of the aggregate ceiling, the
a. The exposure is typically to an entity Bangko Sentral shall consider the credit
(often a special purpose entity or SPE) which standing of the borrower, viability of the
1
This refers to the pre-operational phase of the project that does not yet generate cash flows.

§§ X331 - X334
13.12.31
projects financed by such other credit c. Credit accommodations to

accommodations in relation to national government-owned or controlled
objectives, collateral or security and other corporations, in cases where a director,
pertinent considerations. officer or stockholder of the lending bank is
a representative of the government in the
Sec. X332 Exclusions from Aggregate borrowing corporation and does not hold
Ceiling. The following loans, other credit any proprietary interest in such corporation:
accommodations and guarantees shall be Provided, That other rules on loans to
excluded in determining compliance with DOSRI, such as procedural and reportorial
the aggregate ceiling: requirements under Secs. X334 and X335
a. Credit accommodations or portions are followed.
thereof to the extent secured by assets d. Exclusions from individual ceiling
considered as non-risk by the Monetary mentioned under Items “(b)”, “(c)” and “(d)”
of Subsec. X330.1.
Board;
(As amended by Circular 785 dated 25 January 2013)
b. Credit accommodations to a
corporate stockholder which meets all the Sec. X333 Applicability to Branches and
following conditions: Subsidiaries of Foreign Banks. The
(1) The corporation is a non-financial individual and aggregate ceilings as well as
institution; ceilings on unsecured credit
(2) Its shares are listed and traded in accommodations prescribed herein shall
the domestic stock exchanges; and also apply to branches and subsidiaries of
(3) No person or group of persons foreign banks in the Philippines.
related within the first degree of
consanguinity or affinity holds/owns more Sec. X334 Procedural Requirements. The
than twenty percent (20%) of the subscribed following provisions shall apply if the bank’s
capital of the corporation. DOSRI are parties to, or act as representatives

§§ X334 - X336
16.06.30
or agents of others in, any of the transactions effect indicating the reason for the failure
enumerated under Sec. X327: of the said director to sign the resolution.
a. Approval of the board, when to e. Transmittal of copy of board
obtain. Except with prior written approval approval; contents thereof. A copy of the
of the majority of the directors, excluding written approval of the board of directors,
the director concerned, no loan, other as herein required, shall be submitted to
credit accommodation and guarantee shall the appropriate department of the SES
be granted nor shall any of the within twenty (20) banking days from the
transactions enumerated under Sec. X327 date of approval. The copy may be a
be entered into. duplicate of the original, or a reproduction
b. Approval by the board, how copy showing clearly the signatures of the
manifested. The approval shall be approving directors: Provided, That if a
manifested in a resolution passed by the reproduction copy is to be submitted, it
board of directors during a meeting and shall contain on its face or reverse side a
made of record. signed certification by the secretary that
c. Determination of majority of the it is a reproduction of the original written
directors. The determination of the majority approval: Provided, further, That such
of the directors, excluding the director written approval shall not be required for
concerned, shall be based on the total loans, other credit accommodations
number of directors of the bank as provided and advances granted to officers
in its articles of incorporation and by-laws. under a fringe benefit plan approved by
d. Contents of the resolution. The the Bangko Sentral.
resolution of the board of directors shall
contain the following information: Sec. X335 Reportorial Requirements. Each
(1) Name of the director or officer bank shall maintain a record of loans, other
concerned and his involvement as regards credit accommodations and guarantees
the credit accommodation, such as covered by these regulations in a manner and
principal, endorser, spouse of borrower, form that will facilitate verification of such
etc.; transactions by Bangko Sentral examiners.
(2) Nature of the loan or other credit The appropriate department of the SES
accommodation, purpose, amount, credit may require banks to furnish such data or
basis for such loan or other credit information as may be necessary for
accommodation, security and appraisal purposes of implementing the provisions of
thereof, maturity, interest rate, schedule of the foregoing rules.
repayment and other terms of the loan or
other credit accommodation; Sec. X336 (2015 - Sanctions) Supervisory
(3) Date of resolution; Enforcement Actions. The Bangko Sentral
(4) Names of the directors who reserves the right to deploy its range of
participated in the deliberations of the supervisory tools to promote adherence to
meeting; and the requirements set forth in the foregoing
(5) Names in print and signatures of rules and bring about timely corrective
the directors approving the resolution: actions and compliance with Bangko
Provided, That in instances where a Sentral directives. The Bangko Sentral
director who participated in the board considers abuses in credit to related parties
meeting and who approved such (including credit to DOSRI, subsidiaries,
resolution failed to sign, the corporate and affiliates) as serious offenses and shall
secretary may issue a certification to this be dealt with severely. In this regard, “abuse”

§§ X336 - 1338.2
17.09.30
shall be interpreted to include extending (1) The lending bank; and

credit to related parties without adopting (2) Each of the directors voting for
appropriate internal policies. the approval of the loan, other credit
For this purpose, the Bangko Sentral may accommodation or guarantee in excess of any
among others, issue directives or sanctions of the ceilings prescribed in Subsec. X328.5.
on the Bank and responsible persons, which (Circular No. 914 dated 23 June 2016)
may include restrictions or prohibitions of
lending to related parties or from certain Sec. X337 Waiver of Secrecy of Deposit.
authorities/activities, restrictions or Any director, officer or stockholder who,
prohibitions on dividend declarations; and together with his related interest, contracts
warning reprimand, suspension, removal a loan or any form of financial
and disqualification of concerned bank accommodation from:
directors, officers, and/or employees. In a. his bank; or
addition, the Bangko Sentral may apply the b. from a bank
borrowing director/officer/stockholder’s (1) which is a subsidiary of a bank
share in the bank’s profit sharing program holding company of which both his bank
against the excess of credit extended over and the lending bank are subsidiaries; or
any of the prescribed DOSRI ceilings. (2) in which a controlling proportion of
In case of imposition of monetary the shares is owned by the same interest
sanction for violations of the foregoing that owns a controlling proportion of the
provisions, the penalty shall be computed shares of his bank, in excess of five percent
as follows: (5%) of the capital and surplus of the bank,
(a) Loans to DOSRI or in the maximum amount permitted by
For the duration of each violation, law, whichever is lower, shall be required
imposition of a fine of one-tenth of one by the lending bank to waive the secrecy of
percent (1/10 of 1%) of the excess over the his deposits of whatever nature in all banks
ceilings per day but not to exceed P30,000 in the Philippines. Any information obtained
a day on the following: from an examination of his deposits
(1) The lending bank; shall be held strictly confidential and may
(2) The director, officer or stockholder be used by the examiners only in
whose borrowing exceeds his individual connection with their supervisory and
ceiling; and examination responsibility or by the
(3) Each of the directors voting for the Bangko Sentral in an appropriate legal
approval of the loan or other credit action it has initiated involving the deposit
accommodation in excess of any of the account.
ceilings prescribed in Secs. X330 and X331.
The penalty for exceeding the individual Sec. X338 Financial Assistance to Officers
ceiling, aggregate ceiling and ceiling on and Employees.
unsecured loans shall be computed on the (Deleted by Circular No. 969 dated 22 August 2017)
average amount of loans in excess of said
ceilings during the same week. § X338.1 Mechanics.
(a) Loans to subsidiaries and affiliates (Deleted by Circular No. 969 dated 22 August 2017)
For the duration of each violation,
imposition of a fine of one tenth (1/10) of § X338.2 (Reserved)
one percent (1%) of the excess over the
ceilings per day but not to exceed P30,000 § 1338.2 Funding by foreign banks.
a day on the following: (Deleted by Circular No. 969 dated 22 August 2017)

§§ 2338.2 - X339
17.09.30
§ 2338.2 (Reserved) extended, renewed or restructured,

whichever comes later.
§ 3338.2 (Reserved) b. Unsecured outstanding loans, other
credit accommodations and guarantees, as
§ X338.3 Other conditions/limitations. well as availments of previously approved
(Deleted by Circular No. 969 dated 22 August 2017) loans and committed credit lines not
considered as DOSRI accounts prior to 10
Sec. X339 Transitory Provisions.
a. The sanctions contained under Sec. April 2004, shall not be deducted from
X336 shall not apply to outstanding loans, capital accounts for a period of up to 09
other credit accommodations and April 2007 or until such time that said loans,
guarantees, as well as availments of other credit accommodations and
previously approved loans and committed guarantees become past due, or are
credit lines not considered as DOSRI extended, renewed or restructured,
accounts prior to 10 April 2004, for a period whichever comes later.
of up to 09 April 2007 or until said loans, c. Banks shall, however, disclose the
other credit accommodations and following information in their financial
guarantees become past due, or are statements, annual report and the reports

(No Page 44)

§§ X339 - X340
16.06.30
being submitted to Bangko Sentral: a. Loans, other credit accommodations,

(1) DOSRI; and/or guarantees to the Republic of the
(i) Loans, other credit accommodations Philippines and/or its agencies/departments/
and guarantees classified as DOSRI accounts bureaus shall be considered: (1) non-risk;
under regulations existing prior to 10 April and (2) not subject to any ceiling;
2004; and Investments in GPNs shall be
(ii) New DOSRI loans, other credit excluded by government financial institutions
accommodations and guarantees granted in determining compliance with DOSRI
starting 10 April 2004. ceilings;
(2) Non-DOSRI prior to 10 April 2004 b. Loans, other credit accommodations,
Loans, other credit accommodations and and/or guarantees to: (1) GOCCs; and
guarantees, as well as availments of (2) corporations where the Republic of the
previously approved loans and committed Philippines, its agencies/departments/
credit lines not considered DOSRI accounts bureaus, and/or GOCCs own at least twenty
prior to 10 April 2004 but are allowed a percent (20%) of the subscribed capital stock
transition period as provided above. shall be considered indirect borrowings of
(As amended by Circular No. 532 dated 19 May 2006) the Republic of the Philippines and shall
form part of the individual ceiling as well
§§ X339.1 - X339.3 (Reserved) as the aggregate ceiling: Provided, That the
following loans, other credit
§ X339.4 Reportorial requirements. accommodations, and/or guarantees to
Financing plans and amendments thereto GOCCs and corporations where the
shall be submitted to Bangko Sentral within Republic of the Philippines, its agencies/
thirty (30) calendar days from approval departments/bureaus, and/or GOCCs own
thereof by the bank’s board of directors. The at least twenty percent (20%) of the
appropriate department of the SES may subscribed capital stock, shall be excluded
require the banks concerned to submit a from the thirty percent (30%) ceiling on
regular report monitoring the various unsecured loans under Secs. X330 and
transactions under the bank’s financing plans X331:
for officers/ employees. (1) Loans, other credit accommodations,
All banks providing financial assistance to and/or guarantees for the purpose of
bank officers/employees shall submit a undertaking infrastructure and other priority
report on “Availments of Financial programs and projects consistent with the
Assistance to Officers and Employees” to the Philippine Development Plan/Public
Bangko Sentral within fifteen (15) banking Investment Program of the National
days after end of reference semester. Government, duly certified as such by the
Secretary of Socio-Economic Planning;
Sec. X340 Applicability of DOSRI Rules and (2) Loans, other credit accommodations,
Regulations to Government Borrowings in and/or guarantees granted to PFIs in the
Government-Owned or - Controlled lending programs of the government
Banks. The provisions of Secs. X326 to X337 wherein the funds borrowed are intended
shall also apply to loans, other credit for relending to other PFIs or end-user
accommodations, and/or guarantees borrowers; and
granted to the National Government or (3) Loans, other credit accommodations,
Republic of the Philippines, its political and/or guarantees granted for the purpose
subdivisions and instrumentalities as well of providing (i) wholesale and retail loans
as GOCCs, subject to the following to the agricultural sector and micro, small
clarifications: and medium enterprises (MSMEs); and/or

§§ X340 - X341.1
16.06.30
(ii) rediscounting and guarantee facilities for h. A director of the lending institution
loans granted to the said sector or enterprises; shall be excluded in the deliberation as
c. Loans, other credit accommodations, well as in the determination of majority of
and/or guarantees granted to state the directors in cases of loans, other credit
universities and colleges (SUCs) shall be accommodations, and guarantees to the
excluded from the thirty percent (30%) borrowing government entity other than
ceiling on unsecured loans under the Republic of the Philippines, its
Secs. X330 and X331. agencies, departments or bureaus where
d. In view of the fiscal autonomy said director is also a director, officer or
granted under R.A. No. 7653 and the stockholder under existing DOSRI
independence prescribed under the regulations.
Constitution, the Bangko Sentral shall be (Circular No. 514 dated 06 March 2006 as amended by Circular
considered an independent entity, hence, not No. 914 dated 23 June 2016, M-2011-020 dated 30 March 2011,
Circular Nos. 635 dated 10 November 2008, 616 dated 30 July
a related interest of the Republic of the 2008, 580 dated 09 September 2007, and 547 dated 21
Philippines and/or its agencies/departments/ September 2006)
bureaus. Loans, other credit
accommodations and guarantees of the F. MANDATORY CREDITS
Bangko Sentral shall be considered: (1) non-risk;
and (2) not subject to any ceiling; Sec. X341 Agriculture and Agrarian Reform
e. LGUs shall be considered separate Credit. Pursuant to R.A. No. 10000, The
from the Republic of the Philippines, other Agri- Agra Reform Credit Act of 2009, the
government entities, and from one another following guidelines shall govern the grant
due to the full autonomy in the exercise of of agrarian reform credit by banks,
their proprietary functions and in the government or private.
management of their economic enterprises (As amended by Circular No. 736 dated 20 July 2011)
granted to them under the Local
Government Code of the Philippines, § X341.1 Definition of terms. For
subject to certain limitations provided by purposes of this Section, the following
law, hence, not a related interest of the definitions shall apply:
Republic of the Philippines and/or its a. Accredited rural financial institutions
agencies/departments/bureaus; (FIs) shall refer to FIs like RBs, Coop Banks,
f. Local Water Districts (LWDs), farmer’s cooperatives and farmer’s
although GOCCs, shall be considered separate cooperative insurance or mutual benefit
from the Republic of the Philippines, other associations whose portfolios are
government entities, and from one another substantially agri-agra related and have been
due to their fiscal independence from the certified as such either by the Bangko
national government, hence, not a related Sentral, in the case of banks, or by the DA,
interest of the Republic of the Philippines or by an agency duly-authorized by the DA,
and/or its agencies/department/bureaus, for in the case of NBFIs.
purposes of these regulations; b. Agrarian reform beneficiaries shall
g. A director who acts as a government refer to farmers who were granted lands
representative in the lending institution shall under P.D. No. 27 or the “Emancipation of
not be excluded in the deliberation as well Tenants from the Bondage of the Soil,
as in the determination of majority of the Transferring to Them the Ownership of the
directors in cases of loans, other credit Land They Till and Providing the Instruments
accommodations, and guarantees to the and Mechanism Therefor”, R.A. No. 6657
Republic of the Philippines and/or its or the “Comprehensive Agrarian Reform
agencies/departments/bureaus; and Law” and R.A. No. 9700 or the

§ X341.1
16.03.31
“Comprehensive Agrarian Reform Extension (v) acquisition of lands authorized under

with Reforms” and regular farmworkers who the Agrarian Reform Code of the Philippines
are landless, irrespective of tenurial and its amendments;
arrangement, who benefited from the (vi) construction, acquisition and repair
redistribution of lands, regardless of crops of facilities for production, processing,
or fruits produced, to include the totality of storage, and marketing and such other
factors and support services designed to lift facilities in support of agriculture and
the economic status of the beneficiaries and fisheries;
all other alternative arrangements to the (vii) efficient and effective merchandising
physical distribution of lands, such as of agricultural and fishery commodities
production or profit-sharing, labor stored and/or processed by the facilities
administration, and the distribution of shares aforecited in domestic and foreign
of stock under the stock distribution option commerce;
scheme, which will allow beneficiaries to (viii) agricultural value chain financing
receive a just share of the fruits of the lands availed by actor(s)/player(s) who are
they work, which farmers and farmworkers considered as qualified borrowers under
shall be endorsed by the nearest office of Subsec. X341.2; and
the DAR. (ix) other activities identified in
The term shall, likewise, include Section 23 of R.A. No. 8435, otherwise
registered agrarian reform beneficiaries’ known as the “Agriculture and Fisheries
cooperatives/associations/other farm groups Modernization Act of 1997”, as follows:
respectively endorsed as comprising of (a) Agriculture and fisheries production
agrarian reform beneficiaries by the nearest including processing of fisheries and
office of the DAR. agri-based products and farm inputs;
c. Agrarian reform credit shall refer to (b) Acquisition of work animals, farm
loans granted to agrarian reform and fishery equipment and machinery,
beneficiaries for agricultural and agrarian (c) Acquisition of seeds, fertilizer,
reform purposes. poultry, livestock, feeds and other similar
d. Agricultural credit shall refer to loans items;
granted to borrowers for agricultural (d) Procurement of agriculture and
purposes. fisheries products for storage, trading,
e. Agricultural lessee shall refer to any processing and distribution;
person who, with or without help from his/ (e) Acquisition of water pumps and
her immediate farm household, cultivates installation of tube wells for irrigation;
the land owned by another for a certain price
(f) Construction, acquisition and repair
in money, in produce or in both.
of facilities for production, processing,
f. Agriculture and agrarian reform credit
storage, transportation, communication,
shall refer to loans granted for the following
marketing and such other facilities in
activities and purposes:
support of agriculture and fisheries;
(i) agricultural production;
(g) Working capital for agriculture and
(ii) promotion of agribusiness and
fisheries graduates to enable them to engage
exports;
in agriculture and fisheries-related economic
(iii) acquisition of work animals, farm
and fishery equipment and machinery; activities;
(iv) acquisition of seeds, fertilizers, (h) Agribusiness activities which support
poultry, livestock, feeds and other similar soil and water conservation and
items; ecology-enhancing activities;

§ X341.1
16.03.31
(i) Privately-funded and LGU-funded who has not obtained a substantially

irrigation systems that are designed to equivalent and regular farm employment.
protect the watershed; n. Farmer’s cooperatives shall refer to
(j) Working capital for long-gestating organizations composed primarily of small
projects; and agricultural producers, farmers,
(k) Credit guarantees on uncollateralized farmworkers, or other agrarian reform
loans to farmers and fisherfolk. beneficiaries who voluntarily organize
g. Agro-industry Modernization Credit themselves for the purpose of pooling land,
and Financing Program (AMCFP) refers to manpower, technological, financial or other
the umbrella credit/financing program of the economic resources, and operate on the
government for the agriculture and fisheries principle of one (1) member, one (1) vote.
sector created under R. A. No. 8435. A juridical person may be a member of a
h. Amortizing owners shall refer to cooperative, with the same rights and
landowners who still amortize payment for duties as a natural person.
the land to a private individual or to the State. o. Farmer’s and fisherfolk’s
i. B S P - a c c r e d i t e d r u r a l f i n a n c i a l organizations or associations shall refer to
institutions (Fls) shall refer to banks that are farmer’s and fisherfolk’s cooperatives,
accredited by the Bangko Sentral in associations or corporations duly registered
accordance with criteria set forth in Subsec. with appropriate government agencies and
X341.8. which are composed primarily of small
j. Compact farmers shall refer to those agricultural producers, farmers,
farmers with adjoining farms operating as a farmworkers, agrarian reform beneficiaries
single unit under one management, farm
or fisherfolk who voluntarily join together
plan and budget.
to form business enterprises or non-business
k. Farm to market road shall refer to
organizations which they themselves own,
roads linking the agriculture and fisheries
control and patronize.
production sites, coastal landing points and
p. Fisherfolk shall refer to people
post-harvest facilities to the market and
directly or personally and physically
arterial roads and highways.
l. Farmer shall refer to a natural person engaged in taking and/or culturing and
whose primary livelihood is cultivation of processing, fishery and/or aquatic resources.
land or the production of agricultural crops, q. Fisheries shall refer to all activities
agroforest products, livestock and/or relating to the act or business of fishing,
fisheries, either by himself/herself, or culturing, preserving, processing,
primarily with the assistance of his/her marketing, developing, conserving and
immediate farm household, whether the managing aquatic resources and the fishery
land is owned by him/her or by another areas, including the privilege to fish or take
person under a leasehold or share tenancy aquatic resource thereof.
agreement or arrangement with the owner r. Fishworker shall refer to a person
thereof. whether or not regularly employed in
m. Farmworker shall refer to a natural commercial fishing and related industries,
person who renders service for value as an whose income is either from wages, profit
employee or laborer in an agricultural sharing or stratified sharing basis, including
enterprise or farm regardless of whether his/ those working in fishpens, fish corral/traps,
her compensation is paid on a daily, weekly, fishponds, prawn farms, sea farms, salt
monthly or “pakyaw” basis. The term beds, fish ports, fishing boat or trawlers, or
includes an individual whose work has fish processing and/or packing plants, but
ceased as a consequence of, or in excluding administrators, security guards
connection with, a pending agrarian dispute and overseers.

§§ X341.1 - X341.3
16.03.31
s. Loanable funds shall refer to total infrastructure and transportation facilities

funds generated from 20 April 2010, the supporting post-harvest activities.
computation of which is described in x. Public infrastructure shall refer to
Subsec. X341.6. facilities including, but not limited to,
t. National Food Authority, otherwise market buildings, slaughterhouses, holding
known as the NFA, shall refer to the pens, warehouses, market information
government entity created through P.D. centers, connecting roads, transport and
No. 4 dated 26 September 1972. It is communication, processing plants, ice
currently vested with the function of plants and cold storage facilities, grain
ensuring food security and stability of price dryers, warehouses, grain silos and cold
and supply of staple grain-rice through storage used by the farmers and fisherfolk
procurement of paddy from individual in the production, processing, storage,
bonafide farmers and their organizations, transportation, communication, marketing
buffer stocking, processing activities, of their produce and such other facilities in
dispersal of paddy and milled rice to support of agriculture and fisheries.
strategic locations, distribution of the staple y. Settlers shall refer to persons who
grain to various marketing outlets at range from the forest-clearing pioneers,
appropriate times of the year and other including indigenous people, with a,
similar activities. As used in these rules, its subsistence economy to the better equipped
role shall be limited to the issuance of and more experienced farmers.
warehouse receipts, which may be used as z. Tenant farmer shall refer to one (1)
collateral for bank loans and loans who cultivates another’s land under a
under the AMCFP value chain financing sharing leasehold agreement.
facility. (As amended by Circular Nos. 908 dated 14 March 2016 and
736 dated 20 July 2011)
As a government non-financial agency,
the NFA can not and will not perform any
§ X341.2 Qualified borrowers.
lending function consistent with the
Qualified borrowers for agriculture and
provisions of R.A. No. 8435.
agrarian reform credit shall refer to farmers,
u. Owner-cultivators shall refer to
fisherfolk, agrarian reform beneficiaries,
natural persons who own lands by
settlers, agricultural lessees, amortizing
purchase, inheritance, or land distribution
owners, farmworkers, fishworkers,
by the State. Owner-cultivators can operate
owner-cultivators, compact farmers, tenant
the farm themselves, supervise wage labor
farmers, as well as farmer’s and fisherfolk’s
or delegate operations to farmers.
cooperatives, organizations and associations
v. Post-harvest activities shall refer to
in good standing, regardless of
threshing, drying, milling, grading, storing,
capitalization, based on the feasibility of the
and handling of produce and such other
project and their paying capacity, their
activities of a similar nature such as
estimated production, and/or securities they
stripping, winnowing, chipping and
can provide as well as such assets as may
washing.
be acquired by them from the proceeds of
w. Post-harvest facilities shall refer to
the loan.
threshers, moisture meters, dryers, (As amended by Circular No. 736 dated 20 July 2011)
weighing scales, milling equipment, fish
ports, fish landings, ice plants and cold § X341.3 Required allocation for
storage facilities, processing plants, agriculture and agrarian reform credit.
warehouses, buying stations, market Banks shall set aside at least twenty-five

§§ X341.3 - X341.5
11.12.31
percent (25%) of their total loanable funds recourse” basis from other banks and Fls.
for agriculture and agrarian reform credit in b. Ten percent (10%) mandatory
general, of which at least ten percent (10%) agrarian reform credit allocation through
of the total loanable funds shall be made the following modes of compliance that
available for agrarian reform beneficiaries. are undertaken after 20 April 2010:
Excess compliance in the ten percent (1) Actual extension of loans to agrarian
(10%) agrarian reform credit may be used reform beneficiaries (gross of allowance
to offset a deficiency, if any, in the fifteen for probable losses), for purposes of
percent (15%) other agricultural credit, in financing agriculture and agrarian reform
general, but not vice versa. activities under Item no. “f” of Subsec. X341.1,
(As amended by Circular No. 736 dated 20 July 2011) other than (a) loans rediscounted with
UBs/KBs, or (b) loans to the extent funded
§ X341.4 Direct compliance. Total by proceeds from bonds, in the case of
loanable funds as computed under DBP/LBP, and/or SDAs and/or wholesale
Subsec. X341.6 shall be made available by lending of other banks, in the case of
banks for agriculture and agrarian reform credit. BSP- accredited rural Fls listed under Item
a. Twenty five percent (25%) mandatory nos. “a(1)(a)” to “a(1)(c)” above, or
agriculture and agrarian reform credit (2) Purchase of eligible loans listed in
allocation through the following modes of Item no. “b(1)” above on a “without
compliance that are undertaken after recourse” basis from other banks and Fls.
20 April 2010: (As amended by Circular No. 736 dated 20 July 2011)
(1) Actual extension of loans to qualified
§ X341.5 Allowable alternative
borrowers (gross of allowance for probable
compliance. The following alternative
losses), for purposes of financing agriculture
modes of compliance to the mandatory
and agrarian reform activities under Item
agriculture and agrarian reform credit shall
no.“f” of Subsec. X341.1, other than (1) loans
be allowed:
rediscounted with UBs/KBs, or (2) loans to
a. Twenty five percent (25%) mandatory
the extent funded by proceeds from any of
agriculture and agrarian reform credit
the following: (1) Eligible securities (gross of allowance
(a) Bond issues for the exclusive purpose for probable losses but net of unamortized
of on-lending to the agriculture and agrarian premium or discount) that are issued after
reform sector that have been expressly 20 April 2010:
declared as eligible by the DA, or by an (a) Investment in bonds issued by the
agency duly authorized by the DA, in the DBP and the LBP that have been expressly
case of the DBP/LBP, declared as eligible by the DA, or by an
(b) SDAs maintained for the exclusive agency duly-authorized by the DA, the
purpose of on-lending to the agriculture and proceeds of which shall be used exclusively
agrarian reform sector, in the case of for on-lending to the agriculture and
BSP-accredited rural Fls, or agrarian reform sector;
(c) Wholesale lending of other banks for (b) Investments in other debt securities
the exclusive purpose of on-lending to the that have been declared as eligible by the
agriculture, fisheries and agrarian reform DA, or by an agency duly-authorized by
sector, in the case of BSP-accredited rural the DA, the proceeds of which shall be used
Fls, or to finance activities identified under
(2) Purchase of eligible loans listed in Section 23 of R.A. No. 8435, as defined under
Item no. “(1)” above on a “without Item no. “f(ix)” of Subsec. X341.1; or

§§ X341.5
11.12.31
(c) Paid subscription of shares of stock (d) Actual extension of loans intended
in the following institutions, subject to for the construction and upgrading of
existing rules and regulations governing infrastructure, including, but not limited to,
equity investments of banks: farm-to-market roads, as well as the
(i) Accredited rural Fls (preferred shares provision of post harvest facilities and other
only); public infrastructure as defined under
(ii) Quedan and Rural Credit Guarantee Subsec. X341.1, for the benefit of the
Corporation (Quedancor); or agriculture and agrarian reform sector;
(iii) Philippine Crop Insurance (e) Actual extension of loans to
Corporation (PCIC). borrowers for purposes of financing
The eligibility of securities under activities identified under Section 23 of R.A
Item “a(1)” shall be subject to the following No. 8435, as defined under Item no. “f(ix)”
conditions: of Subsec. X341.1;
(i) Such securities shall neither be (f) Extension of loans to:
hypothecated, encumbered, earmarked for (i) NFA-registered warehousemen/
any other purposes, sold/lent in repurchase millers/wholesalers for purposes of
agreement/securities lending transactions, financing activities identified under Section
used as additional collateral in repurchase 23 of R.A. No. 8435, as defined under Item
agreements, nor used as collateral by the no. “f(ix)” of Subsec. X341.1; or
borrowing bank in securities borrowing (ii) The NFA: Provided, That the NFA
transactions; shall not use the proceeds of said loans for
(ii) Such securities shall be segregated relending; or
from the bank’s investment portfolio; and (g) Purchase of eligible loans listed
(iii) The securities under ltem under Item nos. “a(2)(b)” to “a(2)(f)” on a
nos. “a(1)(a)” to “a(1)(c)” above shall not be “without recourse” basis from other banks
funded by proceeds from the issuance of and Fls:
bonds under Item no. “a(1)(a)”, in the case Provided, That the loans under Item
of DBP/LBP, and/or SDAs under Item no. nos. “a(2)(d)” to “a(2)(g)” are not rediscounted
”a(2)(a)” and/or wholesale lending of other with UBs/KBs: Provided, further, That the
banks under Item no. “a(2)(b)”, in the case activities identified under Item nos. “a(2)(a)”
of BSP-accredited rural Fls. to “a(2)(g)” shall not be funded by proceeds
(2) Loans and other credit (gross of from the issuance of bonds under Item no.
allowance for probable losses) that are “a(1)(a)”, in the case of DBP/LBP, and/or the
granted after 20 April 2010: acceptance of SDAs under Item no. “a(2)(a)”
(a) Investments in SDAs of BSP-accredited and/or wholesale lending of other banks
rural Fls, the proceeds of which under Item no. “a(2)(b)”, in the case of
shall be used exclusively for on-lending to BSP-accredited rural Fls.
the agriculture and agrarian reform sector; b. Ten percent (10%) mandatory
(b) Wholesale lending granted to agrarian reform credit
accredited rural Fls for the exclusive purpose (1) Eligible securities (gross of allowance
of on-lending to the agriculture and agrarian for probable losses but net of unamortized
reform sector; premium or discount) that are issued after
(c) Rediscounting facility granted by 20 April 2010:
UBs/KBs to other banks covering eligible (a) Investments in bonds issued by the
agricultural and agrarian reform credits, DBP and the LBP that have been expressly
including loans covered by guarantees of declared as eligible by the DA, or by an
the Quedancor or the PCIC; agency duly-authorized by the DA, upon due

§§ X341.3 - X341.5
11.12.31
consultation and timely coordination with Provided, That the loans under Item
DAR, the proceeds of which shall be used nos. “b(2)(d)” to “b(2)(e)”, are not rediscounted
exclusively for on-lending to agrarian reform with UBs/KBs: Provided, further, That the
beneficiaries; or activities identified under Item nos. “b(2)(a)”
(b) Investment in other debt securities to “ b(2)(e)” shall not be funded by proceeds
that have been declared as eligible by the from the issuance of bonds under Item no.
DA, or by an agency duly-authorized by the “b(1)(a)”, in the case of DBP/LBP, and/or
DA, upon due consultation and timely the acceptance of SDAs under Item
coordination with DAR, the proceeds of no. “b(2)(a)” and/or wholesale lending of
which shall be used to finance activities other banks under Item no. “b(2)(b)”, in the
identified under Sec. 23 of R.A No. 8435, case of BSP-accredited rural Fls.
as defined under Item no. “f(ix)” of For purposes of implementing the
Subsec. X341.1: Provided, That said provisions of this Section, the DA, or its
activities shall generally benefit agrarian duly-authorized agency, shall furnish the
reform beneficiaries.
Bangko Sentral with information on the debt
The eligibility of securities under Item
securities eligible as alternative compliance
no. “b(1)” shall be subject to the same
with the mandatory agri-agra credit.
conditions required for securities under Item (As amended by Circular Nos. 736 dated 20 July 2011, 678
no. “a(1)”. dated 06 January 2010 and M-2008-015 dated 19 March 2008)
(2) Loans and other credits (gross of
allowance for probable losses) that are § X341.6 Computation of loanable
granted after 20 April 2010: funds. Loanable funds shall be computed,
(a) Investments in SDAs of BSP-accredited as follows:
rural Fls, the proceeds of which shall be used a. The net increase from 20 April 2010
exclusively for on-lending to agrarian reform to date of the report of the individual
beneficiaries; accounts booked under the Regular Banking
(b) Wholesale lending granted to Unit which represent the following:
accredited rural Fls for the exclusive
(1) Total peso deposit (demand, savings,
purpose of on-lending to agrarian reform
now, time and negotiable CTD accounts)
beneficiaries;
excluding:
(c) Rediscounting facility granted by
(a) Deposits of banks,
UBs/KBs to other banks covering eligible
(b) Deposits of the National
agrarian reform credits, including loans
covered by guarantees of the Qued Government, including its political
ancor or the PCIC; subdivisions and instrumentalities, such as,
(d) Actual extension of loans to but not limited to, the BIR, BOC, and LGUs,
borrowers, for purposes of financing and
activities identified under Section 23 of R.A (c) Deposits of government-owned
No. 8435, as defined under Item no. “f(ix)” and-controlled corporations,
of Subsec. X341.1: Provided, That said (2) Bills payable excluding:
activities shall generally benefit agrarian (a) Borrowings from the Bangko Sentral
reform beneficiaries; or in the form of the following:
(e) Purchase of eligible loans listed (i) rediscounting,
under Item nos. “b(2)(b)” to “b(2)(d)” on a (ii) emergency advances,
“without recourse” basis from other banks (iii) availment of overdraft facilities, or
and Fls: (iv) other obligations,

§§ X341.6 - X341.7
11.12.31
(b) Interbank loans payable, (1) Debt and equity securities

(c) Other deposit substitutes, in the acquired in settlement of loans, net,
form of the following: (2) Sales contract receivable, net,
(i) Repurchase agreements with the (3) Accrued interest income from
BSP, financial assets, net,
(ii) Repurchase agreements with (4) Equity investment in subsidiaries,
banks, associates and joint ventures, net,
(iii) Certificates of assignment/ (5) Bank premises, furniture, fixture
participation with recourse with banks, and equipment, net,
(iv) Securities lending and borrowing (6) Real and other properties acquired
agreements with banks, and (ROPA), net,
(v) Other deposit substitutes with (7) Non-current assets held for sale, net,
banks, (8) Goodwill, net,
(d) Proceeds from special on-lending (9) Other intangible assets, net,
programs to the agriculture and agrarian (10) Deferred tax assets,
reform sector, including SDAs issued by (11) Other assets, net,
BSP-accredited rural Fls, the proceeds of (12) Required reserves against a week
which shall be exclusively used for ago level of the following accounts:
on-lending to the agriculture and agrarian (a) deposits liabilities,
reform sector, (b) deposits substitutes,
(e) Proceeds from special on-lending (c) trust and other fiduciary accounts-
programs, other than for agriculture and others (TOFA), and
agrarian reform, including Time (d) others, and
Certificates of Deposit-Special (13)Security deposit for the faithful
Financing, and performance of trust duties,
(f) Other deposit substitutes in the c. Less/(Add) provisions for liquidity
form of emergency advances from the equivalent to fifteen percent (15%) of the
PDIC, and net increase/(decrease) from 20 April 2010
(3) Bonds payable, net of unamortized in total peso deposit liabilities as defined
premium or discount, other than bond under Item no. “a(1)” of this Subsection.
issuances of the DBP and LBP, the (As amended by Circular No. 736 dated 20 July 2011)
proceeds of which shall be used
exclusively for on-lending to the § X341.7 Computation of total equity.
agriculture and agrarian reform sector, The computation of total equity for
purposes of computing total loanable
(4) Unsecured subordinated debt, net
funds under Subsec. X341.6 shall be,
of unamortized premium or discount,
as follows:
(5) Redeemable preferred shares, net Total Equity under
of unamortized premium or discount, RBU xxx
(6) Total equity accounts, as provided Less:
under Subsec. X341.7, (1)Retained Earnings -
Reserves
b. Less/(Add) the net increase/ (a) Trust Business xxx
(decrease) from 20 April 2010 to date of (b) Self-Insurance xxx
the report of the following accounts (c) Contingencies, and xxx
booked under the Regular Banking Unit (d) Others xxx (xxx)
(2) Other Comprehensive
(RBU):
Income

§§ X341.7 - X341.8
11.12.31
(a) Net Unrealized Gains/Losses xxx equivalent, that the bank shall comply with
on Available for Sale Financial the regulations, directives and instructions
Assets
(b) Gains/Losses on Fair Value xxx of the BSP; and
Adjustment of Hedging (2) A notarized certification, signed by
Instruments the president and compliance officer or
(c) Cumulative Foreign xxx equivalent, that the bank’s loan portfolio
Currency Translation
(d) Others xxx (xxx)
is substantially agri-agra related.
Total Equity, net of exclusions xxx b. Qualification requirements. A
certificate of accreditation will be issued
In the case of foreign bank branches, the by the appropriate supervising department
total equity for purposes of computing total of the SES to the rural Fl should the rural Fl
loanable funds under Subsec. X341.6 shall satisfy the following criteria based on the
be, as follows: last four (4) quarters prior to application:
Total Equity, exclusive of Due (1) Total loan portfolio is greater than
From/To Head Office/Branches its total investments; and
Agencies Abroad, under RBU xxx
Less: (2) Average credit exposure to agri-
(1)Retained Earnings - agra is greater than any exposure to the
Reserves other economic sectors as reported in
(a) Trust Business xxx Schedule 11.d of the FRP.
(b) Self-Insurance xxx
(c) Contingencies, and xxx
c. Certificate of accreditation. The
(d) Others. xxx (xxx) certificate of accreditation issued to the
(2) Other Comprehensive qualified rural Fl will include an
Income accreditation reference number specific to
(a) Net Unrealized Gains/ xxx the rural Fl, the date of accreditation and a
Losses on Available for Sale
Financial Assets statement that the rural Fl has satisfied the
(b) Gains/Losses on Fair Value xxx above criteria and has sworn to comply
Adjustments Of Hedging with the regulations, directives and
Instruments instructions of the BSP.
(c) Cumulative Foreign xxx
Currency Translation
(1) The rural Fl, once accredited and
(d) Others xxx (xxx) issued with the certificate of accreditation,
(3) Due from Head Office/ (xxx) is required to comply with the following:
Branches/ Agencies Abroad (a) Provide the lending bank with a copy
Add: Due to Head Office/ of the certificate of accreditation with the
Branches/ Agencies Abroad xxx
Total Equity, net of exclusions xxx relevant accompanying details (i.e.,
accreditation reference number and date
(Circular No. 736 dated 20 July 2011) of accreditation); and
(b) Submit on an annual basis to the
§ X341.8 Accreditation of banks as appropriate department of the SES a
rural financial institutions. notarized certification, signed by its
a. Application for accreditation. A rural president and compliance officer or
Fl applying for accreditation shall submit equivalent, that its loan portfolio remains
to the appropriate department of the SES a substantially agri-agra related. Such
letter stating its intent to apply for such notarized certification for annual
accreditation together with the following submission by the rural Fl shall be
information/documents: reckoned from the original date of
(1) A notarized undertaking, signed by accreditation and should be received by
the president and compliance officer or the appropriate department of the SES

§§ X341.8 - X341.12
11.12.31
within ten (10) banking days before the lapse regulations applicable both to the lead
of one (1) year. Non-compliance with the bank and other participating bank(s).
required submission of the annual Accordingly, the booking of loans shall only
certification will serve as basis for the be for the amount of actual participation of
Bangko Sentral to revoke accreditation of each syndicate bank concerned.
the rural Fl. Memorandum entries, references or
(2) The lending bank, as part of its notations shall be made for the other
disclosure to the Bangko Sentral, is required participating bank(s).
to include the following in its Agri-Agra (As amended by Circular No. 736 dated 20 July 2011)
report in compliance with the reportorial
requirements of the Bangko Sentral: § X341.10 Interest and other charges.
(a) Name of rural Fl/s and corresponding Interest, service fees and other charges shall
aggregate amount of exposure to each rural be governed by existing rules and
Fl; and regulations.
(As amended by Circular No. 736 dated 20 July 2011)
(b) For each rural Fl in Item “C(2)(a)”,
the accreditation reference number date of § X341.11 Submission of reports. A
accreditation. quarterly report on the compliance with the
(3) The exposure of the lending bank to mandated credit allocation for agri-agra
the rural Fl shall be eligible for purposes of credit under R.A. No. 10000, which shall
determining compliance with the be considered a Category A-3 report, shall
mandatory agri-agra credit allocation for as be submitted to the Supervisory Data
long as the rural Fl remains accredited with Center (SDC) of the SES within fifteen (15)
the Bangko Sentral. banking days from the end of the reference
d. Purpose of accreditation. The quarter.
accreditation is solely for the purpose of Banks shall submit the revised
ascertaining that the portfolio of the rural Fl reportorial starting with the reporting period
is substantially agri-agra related pursuant to ending 31 December 2011.
R.A. No. 10000 and should not serve as an (M-2011-064 dated 15 December 2011, Circular No. 736 dated
endorsement by the Bangko Sentral on the 20 July 2011)
soundness of the rural Fl. The accreditation
is not intended to take the place of the § X341.12 Consolidated compliance.
conduct of due diligence and prudent credit The compliance with agri-agra mandatory
underwriting standards required from the allocation of funds under R.A. No. 10000
lending bank in determining the credit shall be allowed on a groupwide basis
worthiness of the rural Fl. (i.e., consolidation of parent/foreign bank
(As amended by Circular No. 736 dated 20 July 2011) branch and subsidiary bank/s) so that
excess compliance of any bank in the
§ X341.9 Syndicated type of group can be used as compliance for any
agrarian reform credit/agricultural deficient bank in the group: Provided,
credit. Banks may grant a syndicated That the subsidiary bank/s is/are at least
type of loan for agrarian reform credit/ directly or indirectly majority owned by
agricultural credit in general, either the parent bank and/or head office, in the
between or among themselves. The case of foreign bank branches: Provided,
mechanics, including the recording of further, That the parent bank/foreign bank
such syndicated type of loan transactions, branch shall be held responsible for the
shall follow existing practices and compliance of the group.

§§ X341.12 - X341.15
17.06.30
The consolidated report shall be unsubmitted reports on compliance with

submitted by the parent bank/foreign bank the mandated credit allocation for agri-agra
branch in the prescribed form and shall be credit under R.A. No. 10000 in accordance
supported by the individual reports of the with the provisions of Subsec. X184.3:
parent bank/foreign bank branch within the Provided, That a bank which fails to submit
group and subsidiary bank/s duly signed by its agri-agra quarter-end report up to the
each bank’s authorized signatory. submission deadline of the succeeding
(As amended by Circular No. 736 dated 20 July 2011) quarter-end report, shall be subject to the
monetary penalties applicable to less serious
§§ X341.13 – X341.14 (Reserved) offenses for willful delay in the submission
of the agri-agra report under Appendix 67,
§ X341.15 Sanctions. The following which shall be reckoned on a daily basis
sanctions shall be applicable for any from the day following the due date of
violation of this Section: submission of the report until the report is
a. Penalties/sanctions applicable to filed with the Bangko Sentral.
banks: (c) For false/misleading statements
(1) Monetary fines A bank which has been found to have
( a ) F o r n o n - c o m p l i a n c e /under- made a false or misleading statement in its
compliance required report on compliance with the
Annual penalty of one-half of mandated credit allocation for agri-agra
one percent (0.5%) of amount of credit shall be subject to the monetary
non-compliance/undercompliance shall penalties applicable to less serious offenses
b e c o m p u t e d o n a quarterly basis for willful making of a false or misleading
following this formula: statement under Appendix 67, which shall
Penalty = 0.00125 x amount of non- be reckoned on a daily basis from the day
compliance/under-compliance as of the end following the due date of submission of the
of the reference quarter affected report until an amended report has
Amount of non-compliance/ been submitted to the Bangko Sentral.
under-compliance = (2) Non-monetary fines
(i) ten percent (10%) of total loanable In addition to the above daily monetary
funds less reported amount of compliance fines, any or all of the administrative
with the mandatory agrarian reform credit, sanctions, as provided under Section 37 of
plus R.A. No. 7653, may be imposed upon
(ii) fifteen percent (15%) of total loanable any bank for willful delay or refusal to
funds less reported amount of compliance submit reports or willful making of a false
with the mandatory other agricultural credit or misleading statement to the Bangko
in general: Sentral, without prejudice to criminal
Provided, That excess compliance in the sanctions against culpable persons
ten percent (10%) agrarian reform credit may provided under Sections 34, 35 and 36 of
be used to offset a deficiency, if any, in the R.A. No. 7653.
fifteen percent (15%) other agricultural credit, b. Penalties/sanctions applicable to
in general, but not vice versa. directors/officers concerned of the bank
(b) For erroneous/delayed/erroneous Directors/officers of a bank which
and delayed/unsubmitted reports have been found to have willfully falsely
A bank shall be subject to the fines for certified/submitted misleading statements
erroneous/delayed/erroneous and delayed/ and/or willfully violated any of the

§§ X341.15 - X342.1
17.06.30
provisions of this Section shall be subject § X342.1 Definition of terms. For

to the monetary penalties provided under purposes of this Section, the following
Appendix 67 applicable to less serious definitions shall apply:
offenses and/or the other administrative a. Lending institutions shall refer to all
sanctions under Section 37 of R.A. banks, namely: UBs, KBs, TBs and RBs/
No. 7653. Coop Banks, including government-owned
The imposition of the above sanctions banks.
is without prejudice to the filing of b. Total loan portfolio shall include all
appropriate criminal charges against loans and receivables, other than those
culpable persons as provided under Section booked in the FCDU/EFCDU as defined
35 of R.A. No. 7653 for the willful making in the Manual of Accounts section of the
of a false/misleading statement. FRP under Subsec. X191.2 (gross of
c. Disposition of penalties collected allowance for credit losses) excluding the
Ninety percent (90%) of the total following:
penalties collected on non-compliance/ (1) Interbank loans receivable, other
under-compliance with the mandatory than (a) wholesale lending of a bank to
agri-agra credit under Item no. “a(1)(a)” conduit banks/QBs for on-lending to
above shall be remitted by the Bangko MSMEs, and (b) rediscounting facility
Sentral to the Agricultural Guarantee Fund granted to another bank for loans to
Pool (AGFP) and the PCIC, in accordance MSMEs;
with the following percentage allocation: (2) Wholesale lending of a bank to
conduit non-bank FIs without quasi-banking
Recipient Percent Allocation authority, other than those for on-lending
AGFP 50% to MSMEs;
PCIC 50% (3) Loans granted under special
financing programs, other than those for
The percentage allocation may be MSMEs;
amended by the Secretary of DA in (4) Loans granted to MSMEs, other
consultation with the Agricultural Credit than to BMBEs, to the extent funded by
Policy Council (ACPC), PCIC and the wholesale lending of, or rediscounted with,
Secretary of DAR, according to the needs another bank;
of the agri-agra sector. (5) Agrarian reform credits/other
The remaining, ten percent (10%) of the agricultural loans granted under R.A.
total penalties collected on non-compliance/ No. 10000, other than those eligible for
under-compliance with the mandatory compliance with the mandatory allocation
agri-agra credit under Item no. “(1)a” shall of credit for MSMEs; and
be retained by the Bangko Sentral to cover (6) Loans and receivables arising
its administrative expenses. from repo agreements, certificates of
(As amended by Circular Nos. 963 dated 27 June 2017, 736
assignment/participation with recourse and
dated 20 July 2011 and 585 dated 15 October 2007)
securities lending and borrowing
Sec. X342 Mandatory Allocation of Credit transactions.
Resources to Micro, Small and Medium c. MSMEs shall refer to any business
Enterprises. The following rules shall activity within the major sectors of the
govern the mandatory allocation of credit economy, namely: industry, trade, services,
resources to Micro, Small and Medium including the practice of one’s profession,
Enterprises (MSMEs). the operation of tourism-related
establishments, and agri-business, which for
Manual of Regulations for Banks Part III - Page 52e

§ X342.1
14.12.31
this purpose refers to any business activity office, plant and equipment are situated,
involving the manufacturing, processing, must have a value falling under the
and/or production of agricultural produce, following categories:
whether single proprietorship, cooperative,
partnership or corporation: Micro : not more than P 3,000,000
Small : more than P 3,000,000 to P 15,000,000
(1) whose total assets, inclusive of those Medium : more than P 15,000,000 to P 100,000,000
arising from loans but exclusive of the land
on which the particular business entity’s and
(Next Page is Part III- Page 53)
Part III - Page 52f Manual of Regulations for Banks

§§ X342.1 - X342.3
14.12.31
(2) duly registered with the appropriate a. For MSEs

agencies as presently provided by law except (1) Actual extension of loans to eligible
in the case of microenterprises as defined MSEs, other than to BMBEs which are
above. covered in Item “c(3)” hereof: Provided,
(As amended by Circular Nos.858 dated 21 November 2014 and however, That loans granted to MSEs other
625 dated 14 October 2008) than BMBEs, to the extent funded by
wholesale lending of, or rediscounted with,
§ X342.2 Period covered; prescribed another bank shall not be eligible as
portions of loan portfolio to be allocated compliance with the mandatory credit
Banks shall for a period of ten (10) years allocation; or
from 17 June 2008 to 16 June 2018, allocate (2) Loans granted to export, import, and
at least eight percent (8%) for micro and domestic micro and small scale traders,
small enterprises (MSEs) and at least two other than to BMBEs which are covered in
percent (2%) for medium enterprises (MEs) Item “c(3)” hereof: Provided, however, That
of their total loan portfolio based on their loans granted to MSEs other than BMBEs,
balance sheet as of the end of previous to the extent funded by wholesale lending
quarter, and make it available for MSME of, or rediscounted with another bank shall
credit. not be eligible as compliance with the
Banks may be allowed to report mandatory credit allocation; or
compliance on a groupwide (3) Purchase of eligible MSE loans listed
(i.e., consolidation of parent and subsidiary in Items “(1)” and “(2)” above on a “without
bank/s) basis so that excess compliance of recourse” basis from other banks
any bank in the group can be used as and FIs; or
compliance for any deficient bank in the (4) Purchase/discount on a “with or
group: Provided, That the subsidiary bank/s without recourse” basis of MSE receivables,
is/are at least majority owned by the parent other than BMBE receivables which are
bank: Provided, further, That the parent bank covered in Item “c(3)” hereof; or
shall be held responsible for the compliance (5) Wholesale lending or rediscounting
of the group. facility granted to PFIs for on-lending to
The consolidated report shall be MSEs, other than to BMBEs which are
submitted by the parent bank in the covered in Item “c(3)” hereof; or
prescribed form and shall be supported by (6) Wholesale lending or rediscounting
the individual reports of the bank and its facility granted to PFIs for on-lending to
subsidiaries duly signed by each bank’s export, import, and domestic micro and
authorized signatory. small scale traders, other than to BMBEs
For purposes of determining compliance which are covered in Item “c(3)”
with the mandated allocation of credit hereof; or
resources to MSMEs, only eligible credit (7) Commercial letters of credit
exposures as enumerated in Subsec. X342.3, outstanding, net of margin deposits, issued
other than those booked in the FCDU/ for the account of MSEs.
EFCDU shall be considered. b. For MEs
(As amended by Circular No. 625 dated 14 October 2008) (1) Actual extension of loans to eligible
MEs: Provided, however, That loans granted
§ X342.3 Eligible credit exposures. to MEs to the extent funded by wholesale
Funds set aside in accordance with the lending of, or rediscounted with, another
foregoing requirement shall be made bank shall not be eligible as compliance
available for any of the following: with the mandatory credit allocation; or

§§ X342.3 - X342.7
08.12.31
(2) Loans granted to export, import, and § X342.5 Rights/remedies available to

domestic medium scale traders: lending institutions not qualified to
Provided, however, That loans granted to acquire or hold lands of public domain.
MEs to the extent funded by wholesale Lending institutions which are not qualified
lending of, or rediscounted with, another to acquire or hold lands of the public domain
bank shall not be eligible as compliance in the Philippines shall be permitted to bid
with the mandatory credit allocation; or and take part in sales of mortgaged real
(3) Purchase of eligible ME loans listed property in case of judicial or extra-judicial
in Items “(1)” and “(2)” above on a “without foreclosure, as well as avail of receivership,
recourse” basis from other banks enforcement and other proceedings, solely
and FIs; or upon default of a borrower, and for a period
(4) Purchase/discount on a “with or not exceeding five (5) years from actual
without recourse” basis of ME possession: Provided, That in no event shall
receivables; or title to the property be transferred to such
(5) Wholesale lending or rediscounting lending institution. If the lending institution
facility granted to PFIs for on-lending to MEs; is the winning bidder, it may, during said
or five (5) year period, transfer its rights to a
(6) Wholesale lending or rediscounting qualified Philippine national, without
facility granted to PFIs for on-lending to prejudice to a borrower’s rights under
export, import, and domestic medium scale applicable laws.
traders; or (As amended by Circular No. 625 dated 14 October 2008)
(7) Commercial letters of credit
outstanding, net of margin deposits, issued § X342.6 Submission of reports. Banks
for the account of MEs. shall submit reports on compliance with the
c. Alternative compliance for either or mandatory credit allocation on a quarterly
both MSEs or/and MEs basis within fifteen (15) banking days from
(1) Paid subscription/purchase of liability the end of reference quarter to SDC of the
instruments as may be offered by the SB Bangko Sentral. Said report shall be
Corporation; or considered Category A-3 report. It shall
(2) Paid subscription of preferred shares become effective starting with the reporting
of stock of the SB Corporation; or period ending 31 December 2008.
(3) Loans from whatever sources granted Banks shall maintain appropriate
to BMBEs as provided under Subsec. records/details of the reported loans to
X365.5. MSMEs and shall make these available to
(As amended by Circular Nos. 625 dated 14 October 2008 and Bangko Sentral.
570 dated 24 May 2007) (As amended by Circular No. 625 dated 14 October 2008)
§ X342.4 Ineligible credit instruments. § X342.7 Sanctions. The following

The purchase of government notes, administrative sanctions shall be imposed
securities and negotiable instruments other on banks:
than the instruments offered by SB a. For non-compliance/under
Corporation, and the granting of loans to compliance with the prescribed portions of
MSMEs, other than to BMBEs, to the extent loan portfolio to be allocated to MSEs and MEs:
funded by wholesale lending of, or (1) For zero compliance for both MSEs
rediscounted with, another bank shall not and MEs – P500,000;
be deemed compliance with the foregoing (2) For under compliance:
requirement. (a) For MSEs – percentage of
(As amended by Circular No. 625 dated 14 October 2008) undercompliance multiplied by P400,000

§§ X342.7 - X343.2
10.12.31
(b) For MEs – percentage of under- G. SPECIAL TYPES OF LOANS

compliance multiplied by P100,000
to be computed as of end of each quarter. Sec. X343 Interbank Loans. Interbank loan
(3) For willful making of a false or transactions shall include, among other
misleading statement to the BSP - P500,000 things, (a) interbank call loan (IBCL)
per quarter-end report without prejudice transactions; (b) interbank term loan
to the sanctions under Section 35 of transactions; (c) borrowings evidenced by
R.A. No. 7653. deposit substitute instruments; and
The imposition of the fines in Items (d) purchases of receivables with recourse:
“(1)” to “(2)” shall be without prejudice to Provided, however, That only IBCL
the other administrative sanctions under transactions which are settled through the
Section 37 of R.A. No. 7653. banks’ respective DDAs with the BSP via
(b) For non-submission/delayed PhilPaSS shall be subject to the reserve
submission of reports on compliance with requirement prescribed for IBCL in Subsec.
both the prescribed portions of loan X253.1: Provided, further, That funds
portfolio to be allocated to MSEs and MEs, borrowed by banks from trust departments
respectively: of banks or IHs shall be excluded from the
(1) UBs/KBs - P1,200 herein definition of interbank loan
(2) TBs - 600 transactions.
(3) RBs/Coop Banks - 180 (As amended by Circular Nos. 703 dated 23 December 2010
per calendar day of delay. and 689 dated 16 June 2010)
(As amended by Circular No. 625 dated 14 October 2008 and
§ X343.1 Systems and procedures for
interbank call loan transactions. IBCL
§ X342.8 Disposition of penalties transactions of banks shall be governed
collected. Ninety percent (90%) of by the Agreement for the PhilPaSS
penalties collected under Subsec. X342.7 executed on 12 December 2002
above shall be remitted by the BSP to the between the BSP and the Bankers
MSME Development Council Fund, while Association of the Philippines (BAP)/
the remaining ten percent (10%) shall be Chamber of Thrift Banks (CTB)/Rural
retained by the BSP to cover its Bankers Association of the Philippines
administrative expenses. (RBAP) and any subsequent
amendments thereto.
(As superseded by the agreement between the BSP and
BAP/CTB/RBAP dated 12 December 2002)
§§ X342.9 - X342.14 (Reserved)
§ X342.15 Accreditation guidelines for § X343.2 Accounting procedures.

Rural and Thrift Banks under the SME a. Both lending and borrowing
Unified Lending Opportunities for National banks shall immediately pass the
Growth (SULONG). Without prejudice to corresponding entries in their books.
the refinements as may be suggested by b. I B C L t r a n s a c t i o n s s h a l l b e
DTI and DOF, the Twelve (12)-Point recorded by the lending bank as
Accreditation Guidelines for RBs and TBs, Interbank Call Loans Receivable and by
and the lending features of short and long the borrowing bank as Bills Payable
term loans for direct or retail lending by Interbank - Call Loans.
participating government FIs under the c. B a n k s s h a l l r e c o n c i l e t h e i r
SULONG, are shown in Appendix 55. demand deposit accounts with the BSP

§§ X343.2 - X344.2
10.12.31
against monthly statements of account determined that:

to be furnished by the BSP Financial (1) The resources of the RB are
Accounting Department, Comptrollership inadequate to meet the legitimate credit
Sub-Sector. needs of the locality wherein the RB is
(As amended by Circular No. 689 dated 16 June 2010) established;
(2) There is dearth of private capital
§ X343.3 Settlement procedures for in said locality; and
interbank loan transactions. Interbank (3) I t i s n o t p o s s i b l e f o r t h e
loan transactions (call and term) among stockholders of the RB to increase the
banks shall be settled gross with finality paid-up capital thereof.
subject to the availability of balances in The appropriate department or office
the deposit reserves maintained by of the BSP may prescribe and require
banks in the BSP in accordance with the the submission by the RB of papers and
provisions of the Agreement for the documents necessary for such
PhilPaSS executed on 12 December determination.
2002 between the BSP and the BAP/ b. Qualifications for loan. In order
CTB/RBAP and any subsequent to qualify for the financial assistance
amendments thereto. under said provision of law, the RB
(As superseded by the agreement between the BSP and the shall first meet the following
BAP/CTB/RBAP dated 12 December 2002) requirements:
(1) Its capital-to-risk assets ratio
Sec. X344 Loans to Thrift/Rural/ during the last six (6) months immediately
Cooperative Banks preceding the loan application should be
at least ten percent (10%);
§ X344.1 Loans under Section 12 of (2) Its past due loans are not more
R.A. No. 7353, Section 10 of R.A. No. 7906 than twenty-five percent (25%);
and Article 102, R.A. No. 6038, as amended (3) It has no deficiency in allowance
by RA. No. 9520. Banks may rediscount for probable losses on loans and other
papers of TBs/RBs/Coop Banks. Banks shall risk assets;
specify the nature of papers acceptable for (4) I t m u s t n o t h a v e i n c u r r e d
rediscounting as well as the rediscount rate. deficiency in its reserves against deposit
(As amended by Circular No. 682 dated 15 February liabilities for the last six (6) months
2010) preceding the filing of the application;
(5) It must have been operating
§ X344.2 Loans under Section 14 of R.A. profitably for the last three (3) years;
No. 7353. T h e f o l l o w i n g a r e t h e (6) Its arrearages with the BSP or
guidelines in the grant by the LBP, DBP other government FIs, if any, are being
or any government-owned or controlled liquidated through an approved plan of
bank or FI of a loan to an RB under payment, the conditions of which are
Section 14 of R.A. No. 7353. being complied with; and
a. Issuance of certification. Subject to (7) It is operating substantially in
the qualifications of the RBs prescribed in accordance with applicable laws and BSP
Item “b” hereof, the Monetary Board shall rules and regulations.
issue the certification required under c. Extension of loan. The LBP, the DBP
Section 14 of R.A. No. 7353, which shall or any government-owned or controlled
be final, after the Monetary Board has bank or FI shall, within sixty (60) days from

§§ X344.2 - X348.2
12.12.31
issuance by the Monetary Board of the reimburse the bank on the same condition
certification, and subject to their loan and as the bank has paid.
investment policies, extend to an RB a loan (As amended by Circular No. 536 dated 18 July 2006)
or loans from time to time, repayable in
ten (10) years, with concessional rates of § X347.2 Ceiling.
interest, against security/ies which the (Deleted by Circular No. 773 dated 13 November 2012)
stockholder or stockholders of the RB may
offer. § X347.3 Reports.
(Deleted by Circular No. 773 dated 13 November 2012)
Sec. X348 Committed Credit Line for
Sec. X347 Standby Letters of Credit. The Commercial Paper Issues. The following
following shall govern the issuance of guidelines shall govern committed credit
standby letters of credit. line agreements as a prerequisite for
corporations proposing to issue
§ X347.1 Domestic standby letters of commercial paper, pursuant to the New
credit. Domestic standby letters of credit Rules on the Registration of Short-Term
may be issued or used in transactions Commercial Papers (Appendix 14).
other than those involving movement of
goods under the following guidelines: § X348.1 Who may grant line facility.
a. The bank’s obligation to pay shall A bank with a net worth of at least P1.0
be either unconditional (as against billion as defined in Sec. X111, may
presentation of a clean draft) or provide a committed credit line facility to
conditional only upon the presentation of a commercial paper issuer.
documents and not upon actual existence The bank shall exercise proper caution
or non-existence of facts, i.e., the bank in ascertaining that the party, in whose
must not be called upon to determine favor the credit line shall be granted, is
disputed questions of facts or law; capable of fulfilling his commitments to
b. The bank’s obligation shall be the bank under the credit line agreement.
limited to a fixed maximum amount; A bank or a group of banks may enter
c. The bank’s obligation shall have into a committed credit line agreement
an expressed expiration date; with any corporation proposing to issue
d. The standby letters of credit commercial paper. Where a group of
accommodation shall not violate any law banks is involved, a lead bank shall be
or existing Bangko Sentral directives, rules designated from among themselves.
and regulations, such as the SBL and
DOSRI ceilings; § X348.2 Ceilings. The aggregate
e. The party who opened the standby commitments under committed credit line
letters of credit or the ultimate borrower agreements entered into by each bank
shall not have any past due obligation with pursuant to this Section shall not exceed
the issuing bank for the ninety (90)-day an amount equivalent to thirty percent
period preceding the date of issuance of (30%) of its net worth, reckoned as of the
the letter of credit; and date of execution of the latest agreement:
f. The party who opened the letter Provided, That in no case shall a bank
of credit (borrower or principal obligor) extend commitments to a single issuer for
must have an unqualified obligation to more than twenty-five percent (25%) of its

§§ X348.2 - X348.5
13.12.31
net worth exclusive of other exposures to resolution shall also provide for the
the said issuer. designation of the alternate signatories
who shall likewise be a member of the
§ X348.3 Terms; conditions; board of directors and a senior financial
restrictions. The committed credit line officer of the corporation;
agreement shall incorporate the following f. That the extent of the commitment
terms, conditions and restrictions: of each participant in a group of banks
a. That the credit line agreement is under a credit line agreement shall be
executed pursuant to the provisions of this stipulated in the agreement; and
Section; g. That the commitment of the bank
b. That the bank or banks are under the credit line agreement shall be a
committed to make available to the issuer net risk to the bank and the practice of
funds equivalent to at least twenty percent requiring the commercial paper issuer to
(20%) of the aggregate of the commercial maintain a compensating deposit with the
paper issued and outstanding at any time; bank shall be prohibited.
c. That the commitment of the bank
or banks shall be firm and irrevocable and § X348.4 Reports to the Bangko
effective for as long as the issues under a Sentral. The bank or the lead bank, as the
particular permit are outstanding, subject case may be, shall report to the Bangko
to renewal by the bank; Sentral:
d. That availments pursuant to the a. All commitments entered into with
credit line agreement shall be for the commercial paper issuers within ten (10)
exclusive purpose of meeting obligations banking days after the issuer shall have
arising from commercial paper issues in been authorized by the SEC; and
accordance with the provisions of the b. Any availment under the
Rules on Registration of Commercial committed credit line agreement within
Papers, which availments shall be three (3) banking days from date of
honored not earlier than three (3) banking drawdown.
days prior to the date of payment of
obligation arising from outstanding § X348.5 Loan limit. The liabilities of a
commercial paper; commercial paper issuer to a bank arising
e. That the request to avail of the from the availment by the issuer of the credit
credit line agreement shall be addressed line agreement shall not be counted in
to the bank or to the lead bank acting for determining compliance by the bank with
a group of banks, which request shall be the SBL for a period of ninety (90) calendar
duly signed by a member of the board of days from each availment of the credit line1:
directors and a senior ranking officer of Provided, That in no case shall they exceed
the commercial paper issuer duly five percent (5%) of the net worth of the
authorized for the purpose through an bank beyond the normal applicable SBL.
appropriate board resolution, which (As amended by Circular No. 784 dated 25 January 2013)
1
This shall cover all new underwritten debt and equity securities issued from 15 February 2013.

§§ X349 - X350.1
16.03.31
Sec. X349 Agriculture and Fisheries Projects § X349.5 Non-performing loans. The
with Long Gestation Periods. Pursuant to rule on non-performing loans under Sec. X309
Section 24 of R.A. No. 8435 (Agriculture and shall apply except that the reckoning date
Fisheries Modernization Act of 1997), shall be the grace period and not the original
agriculture and fisheries projects with long maturity of the loan.
gestation periods shall be entitled to longer
grace periods in repaying the loan based on Sec. X350 Agricultural Value Chain
the economic life of the project. For purposes Financing Framework; Statement of Policy.
of this Section, the following definitions and The Bangko Sentral supports the promotion
guidelines shall govern the grant of loans for of agricultural value chain financing as an
long-gestating agriculture and fisheries effective and organized approach to channel
projects. financing to the agriculture and fisheries
sectors and promote financial inclusion. By
§ X349.1 Definition of terms. encouraging the linking of various actors/
a. Gestation period shall refer to the players in an agricultural value chain, credit
span of time from the commencement of risk of participating smallholder farmers/
the project to the time that it is fisherfolks can be reduced. As a result, this
economically productive and producing type of financing would facilitate and allow
revenues; and small farmers/fisherfolks to have, if not more,
b. Grace period under this Section access to credit. This is expected to further
shall refer to the period that the initial improve productivity in the agriculture and
amortization payment on the loan is fisheries sectors and at the same time uplift
deferred. All payments, however, must be the lives of these marginalized farmers/
made on or before the maturity of the loan. fisherfolks.
The provisions covering the agricultural
§ X349.2 Grace period. Banks are value chain financing framework shall be
allowed to extend loans/guarantees with a implemented in consonance with Sec. X178.
grace period of up to seven (7) years to (Circular No. 908 dated 14 March 2016)
viable long-gestating agriculture and
fisheries projects. § X350.1 Definition of terms. For
Suggested gestation and grace periods purposes of this Section, the following
for some of the long-gestating projects are definitions shall apply:
in Appendix 36. a. Value chain - refers to a set of actors/
players, e.g., producers (farmers/fisherfolks),
§ X349.3 Responsibility of lending traders, suppliers, processors, aggregators,
banks. Lending banks shall institute the who conduct linked sequence of value-
necessary safeguards and precautions to adding activities involved in bringing a
ascertain the viability of the projects financed product from its raw material stage to the
and the capability of the borrower in final consumers;
fulfilling his commitments. b. Value chain finance - refers to the
financial flows to those actors/players from
§ X349.4 Past due loans. The rule on both within the value chain and financial
past due accounts under Sec.X306 shall flows to those actors/players from the outside
apply except that the reckoning date shall as a result of their being linked within a value
be the grace period and not the original chain;
maturity of the loan. c. Agricultural value chain analysis -

§§ X350.1 - X350.2
16.03.31
refers to the assessment of actors/players, e.g., companies against accounts receivable or

from input suppliers to producers to confirmed orders to producers. Receivables
processors and to traders, their interests and financing takes into account the strength of
the factors influencing the performance of a the buyer’s purchases and repayment
particular value chain, e.g., palay, corn, history;
livestock, marine products, as a whole, as (2) Factoring - a financial transaction
opposed to only examining targeted sections whereby a business sell its accounts
of the chain; it also includes understanding receivable or contracts of sales of goods at
the nature of the chain, identifying the a discount to an appropriate BSFI, called a
weakest and strongest links along the chain factor, who pays the business minus a factor
and the business models shown in Appendix discount and collects the receivables when
115; and due; and
d. Value chain aggregator - refers to any (3) Warehouse receipts - farmers and
value chain actor/player or any entity outside other value chain enterprises receive a
the value chain which initiates the receipt from a certified warehouse that can
formalization and/or organization of a value be used as collateral to access a loan from
chain and/or which offers services that aim an appropriate BSFI against the security of
to strengthen existing value chains. goods in an independently controlled
(Circular No. 908 dated 14 March 2016) warehouse.
c. Loan disbursement. Loan releases may
§ X350.2 Features of agricultural value take the following forms depending on the
chain financing program. Consistent with role that the borrower takes in the value
existing provisions on sound credit risk chain and the risks to be addressed by the
management practices, the Bangko Sentral BSFI:
hereby recognizes agricultural value chain (1) Cash disbursements - the most
financing programs that have the following common practice which may be completed
features: in one transaction or in installments;
a. Agricultural value chain policy and (2) Loan proceeds transfer to suppliers -
procedures. The BSFI shall put in place under this scheme the BSFI prefers to deal
adequate policies and procedures which with the supplier directly to control loan
cover the identification of value chains, utilization and, therefore, prefers to transfer
comprehensive value chain analysis, and the the loan proceeds straight to the supplier
design of appropriate financial products and upon full acceptance of the buyer
services, among others; (borrower). In case the supplier is a related
b. Types of credit products. BSFIs can party, the BSFI shall ensure that the terms
design and/or offer appropriate financial and conditions of the loan are not less
products either to a specific actor/player or favorable to the borrower than those offered
to various actors/players of the value chain by other lenders; and
model simultaneously. In addition to the (3) Anchor firm (institutional buyer)
traditional loans and discounts that BSFIs are triggered loan release - loan releases to the
currently offering, the following products borrower will be endorsed by the anchor
and financial services may also be made firm to ensure the adoption of the technology
available to agricultural value chain actors/ protocol required by the buyer (anchor firm).
players: This would optimize productivity by the
(1) Trade-receivables finance - a BSFI farmer-borrower and the technology
advances working capital to agribusiness adopted conforms with the requirements of
(supplier, processor, marketing and export) the buyer; thus, reduce rejects on the

§§ X350.2 - X361
16.03.31
deliveries of the produce. pertaining to DOSRI loans and/or

d. Disaster contingency mechanism. In related-party transactions; and
light of the vulnerability of the agriculture (2) The BSFI, if necessary, may initiate
and fisheries sectors which could result to the formulation of formal agreement(s) with
significant credit losses to financial qualified value chain actors/players to
institutions, if not managed well, the BSFI protect the interests of all parties involved.
may put in place a disaster contingency (Circular No. 908 dated 14 March 2016)
mechanism that anticipates such events and
§ X350.3 Regulatory incentives.
provides response mechanisms to mitigate
To encourage BSFIs to engage in
the impact of such inherent risks. The disaster
agricultural value chain financing, the
contingency mechanism can provide timely
following incentives shall apply; provided,
relief to a borrower to facilitate recovery.
Subsec. X350.2 is complied with:
This mechanism shall be adequately
a. Loans granted to agricultural value
documented with clear policies and
chain actor(s)/player(s), who are qualified
guidelines.
borrowers under Subsec. X341.2 shall be
Provided such built-in contingency considered as either direct or allowable
mechanism is prudently designed, its alternative compliance to the mandatory
activation shall not automatically trigger agriculture and agrarian reform credit
adverse loan classification and past due loan allocation; and
recognition so as to manage credit losses to b. Increase in SBL for an additional
the BSFI and minimize burden on the client. twenty-five percent (25%) for loans, other
Any new financing granted under such credit accommodations and guarantees
schemes will also not be adversely granted to entities, which act as value chain
classified. However, such credit should be aggregators of the lending banks’ clients,
closely monitored and appropriate and/or economically-linked entities that are
corrective measure should be taken once it also actors/players in the value chain:
becomes clear that recoverability is Provided, That the additional twenty-five
impaired. percent (25%) will apply only to
e. Other features. The following activities non-director/s, officer/s, stockholder/s, and
may also be allowed: related interest/s (DOSRI)/related party
(1) Director/s, officer/s and/or transaction (RPT) loans: Provided, further,
stockholder/s of BSFIs engaged in That such increase in the SBL for an
agricultural value chain financing may own additional twenty-five percent (25%) shall
and/or control: (i) private entities that would only be for a period of three (3) years starting
act as aggregators to facilitate the formation 02 April 20161, subject to review after said
of value chains, and (ii) economically-linked period.
entities that are also actors/players in the (Circular No. 908 dated 14 March 2016)
value chain: Provided, That all transactions
with such entities shall be in the ordinary Secs. X351 - X360 (Reserved)
course of business and not undertaken on
more favorable economic terms to such Sec. X361 Microfinance Loans. Pursuant to
related parties than similar transactions with Sections 40, 43 and 44 of R.A. No. 8791
non-related parties under similar the following rules, regulations and
circumstances. These transactions shall standards shall govern microfinancing
comply and adhere to existing regulations operations of banks.
1
Effectivity date of Circular No. 908 dated 14 March 2016.

§§ X361 - X361.4
17.03.31
In the implementation of this Section, c. Interest on such microfinancing

banks should be guided by the Notes on loans shall be reasonable and just as may
Microfinance in Appendix 45. be determined by management to be
(As amended by Circular Nos. 841 dated 04 July 2014, consistent with its credit policies.
782 dated 21 January 2013,744 dated 28 December 2011,694 The interest rate shall not be lower than the
dated 14 October 2010 and 607 dated 30 April 2008)
prevailing market rates to enable the lending
§ X361.1 Definition. institution to recover the financial and
a. Microfinance loans refer to the operational costs incidental to this type of
amortized cost of loans granted under the microfinance lending.
bank’s microfinance loan products that meet d. Interest accrued and/or booked shall
the general features provided under be reversed and no accrual of interest shall
Appendix 45, Item “e”. be allowed after the microfinance loan has
b. (Deleted by Circular No. 941 dated become past due as defined in
20 January 2017) Subsec. X306.1(h).
c. (Deleted by Circular No. 941 dated
20 January 2017) § X361.3 Credit information
d. Refinanced loans are loans that have exemption. In cases of microfinancing loans
been disbursed to enable repayment of prior which meet the criteria in Subsec X361.2, a
loans that would not have been paid in bank may not require from its credit
accordance with the original installment applicants, a statement of assets and
schedule. Loans granted within a week or liabilities, and of their income and
less from the date an original loan with more expenditures and such information as may
than thirty percent (30%) of the original be prescribed by law or by rules and
principal still outstanding had been paid in regulations of the Monetary Board to enable
advance shall be considered as refinanced the bank to properly evaluate the credit
loans. Refinanced loans shall be classified application which includes the
and reported as restructured loans. corresponding financial statements
(Circular No. 272 dated 30 January 2001, as amended by Circular submitted for taxation purposes to the
Nos. 941 dated 20 January 2017, 836 dated 13 June 2014, 694 BIR, as prescribed under Section 40 of
dated 14 October 2010, 607 dated 30 April 2008, and 409 dated R.A. No. 8791.
14 October 2003)
§ X361.4 Exemptions from rules on
§ X361.2 Loan limit; amortization;
unsecured loans. In view of the unique
interest.
characteristics of microfinance loans,
a. The maximum principal amount of
microfinance loans shall not exceed i.e., small unsecured and based on cash flow
P150,000. This is equivalent to the of borrowers, these loans may be exempted
maximum capitalization of a from rules and regulations which may be
microenterprise under R.A. No. 8425. issued by the Monetary Board with respect
b. The schedule of loan amortization to unsecured loans under Section 41 of the
shall take into consideration the projected General Banking Law of 2000: Provided,
cash flow of the borrowers which is That the bank has:
adopted into the terms and conditions a. well-defined standards, credit policies
formulated. Hence, microfinance loans may and procedures for microfinance loans
be amortized on a daily, weekly, bi-monthly which are in conformity with microfinance
or monthly basis, depending on the cash international best practices;
flow conditions of the borrowers. b. specific measures to be undertaken

§ X361.4
17.03.31
to ensure collection such as close (1) An adequate loan tracking system

supervision of borrowers’ projects and that allows daily monitoring of the status of
operations; and loan releases, collection and arrearages, any
c. Loan Portfolio and Other Risk restructuring or refinancing; and
Assets Review System required under (2) A regular monitoring of past due
Subsec. X178.16 which would serve as: loans and portfolio at risk.
(As amended by Circular No. 945 dated 06 February 2017)
(Next page is Part III - Page 61)

§ X361.5
14.12.31
§ X361.5 Housing microfinance loan. sustainable microfinance programs,

The Bangko Sentral adopts a holistic including acceptable portfolio-at-risk
approach in addressing social and economic (PAR) levels as evaluated against
objectives through microfinance. prevailing Bangko Sentral standards.
Microfinance has been confined to mean (b) The bank must have an appropriate
financing for microenterprises or small housing microfinance product manual
livelihood activities. It has been proven, where the product will be included in the
however, that clients of microfinance also bank’s microfinance manual as one of the
need a wide range of financial services types of services or products offered to
including housing finance. Further, it is prospective clients. Loan/account officers
typical that some microfinance clients also must be trained about the housing
use their access to credit for their homes. microfinance product and that the details
Housing microfinance involves the of the program can be communicated
application of microfinance principles and clearly to the clients.
methodologies to the provision of housing (c) Appropriate verification of the
finance and consists mainly of loans to following prudential requirements:
existing clients of microfinance institutions (i) latest CAMELS rating of at least “3“
and other poor and low-income households. and a management score of at least “3”;
With adequate and appropriate risk (ii) CAR of not lower than 12%;
management measures, the product will (iii) no major supervisory concerns as
enable institutions to appropriately service to warrant initiation of Prompt Corrective
the housing needs of those who are unable Action (PCA) under existing regulations;
to access traditional housing finance. The (iv) no arrearages in microfinance
provision of housing microfinance is also borrowings; and
seen as a way to improve the living d) Appropriate certification of the bank’s
conditions of the enterprising poor and the commitment to implement the housing
low-income households which will microfinance product following the
contribute to better health, productivity and guidelines set forth in the submitted manual.
quality of life. (2) Basic product characteristics. The
Housing as a shelter is a necessity. As a housing microfinance product shall have
sector, it spurs economic activity and creates the following basic characteristics:
employment through the multiplier effects Subject Particulars
Purpose ·House construction
generated in the downstream industries by ·House and/or lot acquisition
the procurement of construction materials. ·Lot acquisition should be for
housing/business
It is therefore important to support this ·Home improvement/repairs
sector. Eligibility ·Existing microfinance clients
The following rules and regulations shall ·New clients who will normally
be eligible for microfinance
govern the granting of housing microfinance loans based on banks’ policies
products: ·Borrowers who have qualified
(1) Minimum criteria to determine for the Credit Surety Fund credit
enhancement program provided
bank’s capacity to grant housing they qualify with the banks policies
microfinance – Banks planning to grant Loan Amount ·Up to P300,000 for house
construction and/or lot acquisition
housing microfinance loans shall ensure (must show tenure security)
that the following requirements are ·Up to P150,000 for home
complied with: improvement/repairs
·incremental loan amounts to
(a) The bank must have a track record support incremental building
of at least two (2) years in implementing

§ X361.5
14.12.31
Subject Particulars microfinance manual;

Loan Value ·Up to ninety percent (90%) of
the appraised value in case of REM (e) Additional risk cover may be availed
·Acceptable valuation in cases of from government guarantee program;
usufruct, leases, etc. (f) A lien or mortgage covering the house
·Capacity to pay based on household
cash flow analysis and/or lot financed by the loan shall be
Payment ·Frequent amortization executed by the borrower in favor of the
·With savings component
·Loan payments should not
lending bank; and
exceed a reasonable percentage of (g) Mortgage redemption insurance shall
clients income as determined by be required to cover against death or
cash flow analysis and capacity to
pay determined through a permanent disability.
clear credit process (4) Regulatory treatment. The housing
Terms ·Up to fifteen (15) years for microfinance product will be considered as
house construction and house
and/or lot acquisition subject to a microfinance loan and will have the
banks’ credit policies following incentives in addition to existing
·Up to 5 years for home
improvement/repairs
incentives available for microfinance loans:
(a) The loans shall have an assigned risk-
The product must share the weight of fifty percent (50%) when not
characteristics of the microfinance loan as guaranteed and zero percent (0%) when
described under this Section and Appendix guaranteed by the HGC.
45 except for the following: (b) For housing microfinance loans
(a) The maximum loan amount may be secured by REM, a ninety percent (90%) loan
P300,000. valuation may be allowed for loans with a
(b) The loans have longer terms with a government guarantee component.
maximum of five (5) years for home (c) Secure tenure instruments such as
improvement/repairs and fifteen (15) years freehold, usufruct, leasehold and right to
for house construction and house/lot occupy and/or build shall be recognized as
acquisition. collateral/collateral substitute subject to
(c) For house construction and house/ approved loan valuations (Appendix 81).
lot acquisition loans, secure tenure Banks that will offer housing
instruments will be used as collateral. (See microfinance shall also comply with the
Appendix 81) following:
(3) Appropriate risk management. Due (1) The bank must maintain a subcontrol
to a risk profile that may be different from ledger for the housing microfinance product.
the typical microfinance loan, the following (2) The housing microfinance loans shall
risk management elements must be not exceed thirty percent (30%) of the total
highlighted and embedded in the product: loan portfolio.
(a) Clients ability to repay based on cash (3) Recording of PAR and the provisioning
flow analysis and affordability especially the requirements shall be strictly in accordance
new clients; with applicable Bangko Sentral regulations.
(b) Opening of a savings account shall (5) Notarized certificate of compliance.
be required for clients with no existing The bank president or officer or equivalent
savings account; rank and the compliance officer shall submit
(c) Secure tenure instruments as a notarized certificate of compliance, attesting
collateral/collateral substitutes for loans over that the bank meets the minimum prudential
P150,000; requirements and that the housing
(d) Adequate loan monitoring, microfinance loan complies with the
collection, control, provisioning which is prescribed product characteristics/features.
also to be included in the banks’ housing (Appendix 102)

§§ X361.5 - X361.7
14.12.31
The notarized certificate shall be the foregoing sanctions shall be without

submitted within fifteen (15) banking days prejudice to the imposition of other
from the date of meeting of the board of administrative sanctions, as provided in
directors approving the housing other regulations in this Manual.
microfinance loan product. (Circular No. 736 dated 20 July 2011, M-2008-015 dated 19
(6) Sanctions. March 2008, as amended by Circular Nos. 825 dated 07 February
2014, 817 dated 06 November 2013 and 678 dated 06 January
(a) In case the submitted certificate of 2010)
compliance is found later, during on-site
examination, to be erroneous and/or untrue, § X361.6 (Reserved)
the bank may be sanctioned under Sec. 37
of R.A. No. 7653 for willful making of a § X361.7 Micro-agri loans.
false or misleading statement. Statement of policy. The Bangko Sentral
(b) In addition to the above-mentioned adopts a holistic approach in addressing social
penalty, subject bank is not allowed to grant and economic objectives through
any new housing microfinance loan and its microfinance. Microfinance utilizes an
transaction shall be limited only to the innovative technology and methodology that
collection of outstanding microfinance has proven successful in providing the
housing loan receivables. This prohibition appropriate financing for microentrepreneurs
shall remain until bank’s compliance with who were previously underserved by the
the prescribed regulations are verified to be formal financial system. Through the years, it
in order by the appropriate department/ has been evident that the microfinance
group of the SES. technology and methodology can be
(c) Banks, with certificates of appropriately utilized to deliver other types of
compliance, found to be in order shall financial services in a sound, prudent and
continue to comply with the prescribed sustainable manner, including credit for small
prudential requirements. If found later on farming activities.
that the bank is non-compliant with any or A. Minimum criteria to determine
all of the requirements, it shall be given one bank’s capacity to grant micro-agri loans.
examination-cycle to correct any deficiency. Banks planning to grant micro-agri loans
If the bank remains non-compliant after the shall ensure that the following requirements
lapse of one examination-cycle, the granting are complied:
of housing microfinance loan shall be 1. To ensure that the banks have the
deemed suspended effective on the day after financial capacity, managerial and technical
the corrective period has expired. While the capabilities to offer micro-agri loans; the
suspension is in effect, the bank’s following prudential requirements must be
transactions shall be limited to the complied at all times:
collections of outstanding housing a) CAMELS rating of at least “3” and a
microfinance loan receivables. ‘Management’ score of at least “3”;
For the purpose of this provision, b) CAR of not lower than twelve percent
one (1) examination-cycle is defined as the (12%);
period commencing from the date the bank c) no major supervisory concerns as to
is formally informed of the findings/ warrant initiation of prompt corrective
exceptions of the last general examination action under existing regulations; and
up to the date of the exit conference of the d) no arrearages on microfinance
immediately succeeding general borrowings (bills payable) from Bangko
examination. Sentral or other creditors.
(d) Other sanctions. The imposition of Banks authorized to offer a micro-agri

§§ X361.7
13.12.31
loan product shall continually comply with Subject Particulars

the above-mentioned prudential Eligibility - Multiple income generation
activities (farm and off-farm)
requirements. Banks found to be non- - Farm activities at least 2 years
compliant with any or all of the requirements in operation
shall be given one (1) examination cycle to - Existing borrowers with good
correct non-compliance with any or all of track record based on banks’
the prudential requirements, provided the policies
Loan Amount - Up to P150,000
bank submits a viable plan to rectify
- Loans to start small and increase
pertinent non-compliance. If the bank incrementally based on banks’
remains non-compliant after the lapse of policies
one (1) examination cycle, its authority to Loan Value - Capacity to pay based on
offer micro-agri loan shall be deemed household cash flow analysis
suspended effective on the day after the Payment - Frequent amortization (weekly,
semi-monthly, monthly)
corrective period has expired. While the - Lump sum payment may be
suspension is in effect, bank’s micro-agri considered an option of up to 40%
loan transactions shall be limited to of loan amount
collections of outstanding receivables. Security - Like microfinance loans, collateral
For the purpose of this Subsection, one substitutes may be required
(1) examination-cycle is defined as the period
commencing from the date of the exit C. Appropriate risk management.
conference of the last general examination up Micro-agri loans shall be subject to the same
to the date of the exit conference of the risk management mechanisms required for
immediately succeeding general examination. microfinance loans including, but not
2. The bank must have a track record limited to the following:
of at least two (2) years in implementing 1. Clients’ ability to repay based on cash
sustainable microfinance programs, including flow analysis and affordability especially the
acceptable portfolio-at-risk (PAR) levels as new clients. The prospective client must
evaluated against prevailing Bangko Sentral have other sources of income sufficient for
standards; and the periodic payment of the loan while the
3. The bank must have well-defined loan project is not yet generating income,
policies covering the micro-agri loan evaluated through household cash flow
product to be included in the bank’s analysis;
microfinance manual as one of the types of 2. Adequate management information
services or products to be granted to and loan tracking systems, loan monitoring,
prospective clients. Loan/account officers collection, control, provisioning consistent
must be trained about the micro-agri loan with existing Bangko Sentral regulations;
product and that the details of the program 3. The loan product is included in the
can be communicated clearly to the clients. banks’ microfinance manual as one (1) of
B. Basic product characteristics. The the types of services or products offered to
micro-agri loan product shall have the prospective clients; and
criteria/characteristics of a microfinance 4. The micro-agri loans must have a
loan as provided in existing regulations in subcontrol ledger.
addition to the following product D. Other micro-agri products. No
characteristics: provision in the micro-agri product
inconsistent with this Subsection shall be
Subject Particulars
Purpose/Term - Short term purposes only (up to
allowed except upon prior Bangko Sentral
12 months) whether it is for farm approval. The Bangko Sentral shall allow
activities, agri-business, agri-related deviation from the provisions of this
fixed assets, among others Subsection provided appropriate risk

§§ X361.7 - 3361.8
15.12.31
management system compensates for the lapse of one (1) examination cycle, the
additional risks involved. granting of micro-agri loan shall be
E. Regulatory treatment. The micro-agri deemed suspended effective on the day
loan product will be considered as after the exit conference, during which the
microfinance loan and will have the same management shall be informed of its
regulatory treatment as provided by existing failure to make proper corrective actions
microfinance regulations. within the prescribed period. While the
F. Reportorial requirement. Notarized suspension is in effect, the bank’s
certificate of compliance. The bank transactions shall be limited to the
president or officer of equivalent rank and collections of outstanding micro-agri loan
the compliance officer shall submit a receivables.
notarized certificate of compliance, For the purpose of this provision, one
attesting that the bank meets the minimum examination-cycle is defined as the period
prudential requirements and that the commencing from the date the bank is
micro-agri loan complies with the formally informed of the findings/exceptions
prescribed product characteristics/ of the last general examination up to the date
features. (Appendix 102) of the exit conference of the immediately
The notarized certificate shall be succeeding general examination.
submitted within fifteen (15) banking days 4. Other sanctions. The imposition of
from the date of meeting of the board of the foregoing sanctions shall be without
directors approving the micro-agri loan prejudice to the imposition of other
product. administrative sanctions, as provided in
G. Sanctions. In case of non-compliance, other regulations in this Manual.
the bank shall be subject to the following: (Circular No. 680 dated 03 February 2010, as amended by
Circular Nos. 817 dated 06 November 2013 and 748 dated
1. In case the submitted certificate of 13 February 2012)
compliance is found later, during on-site
examination, to be erroneous and/or untrue, § X361.8 (Reserved)
the bank may be sanctioned under Sec. 37
of R.A. No. 7653 for willful making of a § 1361.8 (Reserved)
false or misleading statement.
2. In addition to the above-mentioned § 2361.8 Marketing, sale and servicing
penalty, subject bank shall not be allowed of microinsurance products by thrift
to grant any new micro-agri loan and its banks. A TB including its authorized branch/es,
transaction shall be limited only to the extension office/s and OBOs shall comply
collection of outstanding micro-agri loan with Sec. 2172 for the presentation,
receivables. This prohibition shall remain marketing and sale of microinsurance
until bank’s compliance with the prescribed products.
regulations are verified to be in order by (Circular No. 683 dated 23 February 2010, as amended by
the appropriate department/group of the
SES.
§ 3361.8 Marketing, sale and servicing
3. Banks, with certificates of
of microinsurance products by rural and
compliance, found to be in order shall
cooperative banks. An RB/Coop bank
continue to comply with the prescribed
including its authorized branch/es, extension
prudential requirements. If found later on
office/s and OBOs shall comply with
that the bank is non-compliant with any or
Sec. 3172 for the presentation, marketing
all of the requirements, it shall be given one
and sale of microinsurance products.
examination cycle to correct any deficiency (Circular No. 683 dated 23 February 2010, as amended by
If the bank remains non-compliant after the Circular No. 890 dated 02 November 2015)

§§ X361.9 - X365.2
17.06.30
§ X361.9 Required Reports. Banks, with c. Penalties and sanctions provided

retail microfinance operations, shall be under Sections 36 and 37 of R.A. No. 7653.
required to submit the “Report on
Microfinance Products” on a monthly basis, Secs. X362 - X364 (Reserved)
and the “Income Statement on Retail
Microfinance Operations” on a quarterly Sec. X365 Loans to Barangay Micro
basis. Both reports shall be submitted Business Enterprises. The following are the
within fifteen (15) banking days after the end rules and regulations to implement
of the reference month and quarter, Section 9 and the second paragraph of
respectively. Section 13 of R.A. No. 9178, otherwise
Banks with no microfinance operations, known as the “Barangay Micro Business
either retail or wholesale, are expected to Enterprises (BMBEs) Act of 2002”.
fill up only Item “3.1.B”, “Other
Microenterprises Loans”, under “Additional § X365.1 Credit delivery. The LBP, the
Information” of the “ Report on Microfinance DBP, the SBGFC, and the Peoples Credit
Products”. On the other hand, banks and Finance Corporation (PCFC) shall set
engaged solely in wholesale microfinance up a special credit window that will service
operations are expected to fill up only the financing needs of duly registered
Item “2”, “Wholesale Microfinance BMBEs consistent with Bangko Sentral
Operations”, and its related sub-accounts policies, rules and regulations. Said special
under “Additional Information” of the
credit window shall service the credit needs
‘Report on Microfinance Products”. These
of BMBEs either through retail or wholesale
banks, however, are required to submit the
lending, or both, as the concerned FIs may
quarterly “Income Statement on Retail
deem consistent with their corporate
Microfinance Operations”, indicating that
policies and objectives. The GSIS and the
the required data are not applicable.
Otherwise, these banks will be sanctioned SSS shall likewise set up special credit
for incomplete submission of reports. window that will serve the financing needs
Erroneous/Delayed/Erroneous and of their respective members who may wish
Delayed/Unsubmitted reports shall be to establish a BMBE.
subject to penalties prescribed for Said FIs are encouraged to wholesale
Category A-2 report under Subsec. X184.3. funds to accredited private FIs including
(Circular No. 836 dated 13 June 2014, as amended by Circular community based organizations such as
No. 963 dated 27 June 2017) cooperatives, NGOs and people’s
organizations engaged in granting credit, for
§ X361.10 Sanctions. Violations of the relending to BMBEs.
provisions of this Section shall be subject Private banking and other FIs are
to any or all of the following sanctions: encouraged to lend to BMBEs.
a. Disqualification of the bank
concerned from the credit facilities of the § X365.2 Interest on loans to Barangay
Bangko Sentral except as may be allowed Micro Business Enterprises. Interest on
under Section 84 of R.A. No. 7653; BMBE loans shall be just and reasonable as
b. Prohibition of the bank concerned may be determined by management of the
from the extension of additional concerned entity to be consistent with its credit
microfinance loans; and policies.

§§ X365.3 - X365.8
11.12.31
§ X365.3 Amortization of loans to BMBEs shall be eligible as part of alternative

Barangay Micro Business Enterprises. The compliance for R.A. No. 6977, as amended,
schedule of loan amortization shall take into of the government-owned banks and the
consideration the projected cash flow of the accredited private banks at the maximum
borrowers. Thus, loans granted to BMBEs amount of 100% of their outstanding
may, at the discretion of the lender, be balance each:
amortized daily, weekly, monthly or at such Provided, further, That loans used as
interval as the conditions of the business of alternative compliance with R.A. No. 6977,
the BMBEs may warrant. as amended, computed at either twice their
outstanding balance or their maximum
§ X365.4 Waiver of documentary amount of 100% may be used as alternative
requirements. Banks and other FIs shall not compliance for either or both the prescribed
require from duly registered BMBE portions of loan portfolio to be allocated to
borrowers the submission of ITR as a MSEs and MEs, respectively, as long as the
condition to the grant of loans considering aggregate amount used does not exceed twice
that BMBEs are exempted from income tax their outstanding balance or their maximum
for income arising from their operations. amount of 100%, as the case may be.
They may, at their discretion, also waive b. Any existing laws to the contrary
the requirement of submission of financial notwithstanding, interests, commissions
statements from BMBEs: Provided, That and discounts derived from the loans by the
before granting any loan, banks shall LBP, DBP, PCFC, SBGFC granted to BMBEs
undertake reasonable measures to as well as loans extended by the GSIS and
determine that the borrower is capable of SSS to their respective member-employees
fulfilling his/its commitments. under BMBEs Act and this Section shall be
exempt from gross receipt tax (GRT).
§ X365.5 Incentives to participating (As amended by Circular Nos. 736 dated 20 July 2011 and 625
financial institutions. To encourage BMBE dated 14 October 2008)
lendings, the following incentives shall be
granted to banks and other FIs as may be § X365.6 Credit guarantee. The SBGFC
applicable: and the Quedancor under the DA, in case
a. All loans from whatever sources of agri-business activities, shall set up a
granted to BMBEs under R.A. No. 9178 special guarantee window to provide credit
(BMBEs Act) shall be considered as part of guarantee to BMBEs under their respective
alternative compliance to R.A. No. 6977, guarantee programs.
as amended.
For purposes of compliance with R. A. § X365.7 Record. The LBP, DBP, PCFC
No. 6977, as amended, loans granted to and SBGFC shall maintain separate records
BMBEs under the BMBEs Act shall be of loans granted to BMBEs and the GSIS and
computed at twice the amount of the SSS shall maintain records of loans extended
outstanding balance of the loans: Provided, to their respective members who wish to
That funds loaned by or rediscounted with establish BMBEs.
government-owned banks and other
government FIs to accredited private § X365.8 Reports to Congress. The LBP,
banking and other FIs for on-lending to DBP, PCFC, SBGFC, SSS, GSIS and

§§ X365.8 - X376.5
09.12.31
Quedancor shall report annually to the e. It has exceeded the individual and
appropriate Committees of both Houses of aggregate ceilings as well as the ceiling on
Congress, the status of their implementation unsecured credit accommodations to
of the provisions of Section 9 of R.A. No. DOSRI; and
9178. f. Its ratio of past due loans to total loan
portfolio exceeds twenty percent (20%).
§ X365.9 Administrative sanctions.
Any violation by the concerned government §§ X376.2 - X376.4 (Reserved)
FI of the provisions of Section 9 of R.A. No.
9178 shall be subject to a fine of not less § X376.5 Guidelines for major
than P500 thousand to be imposed by the investments. The following are the
Bangko Sentral and which shall be payable guidelines for major acquisitions or
to the BMBE Development Fund. In case of investments by a bank including corporate
a banking institution, the foregoing fine shall affiliations or structures to implement
be without prejudice to the administrative Section 50 of R.A. No. 8791.
sanctions provided for under Section 37 of a. Definition. Major investments are those
R.A. No. 7653. investments in allied or non-allied
undertakings including corporate affiliations
Secs. X366 - X375 (Reserved) or structures that give the bank significant
interest and/or control, such as stockholdings
H. EQUITY INVESTMENTS sufficient to elect one (1) member to the
acquired entity’s board of directors.
Sec. X376 Scope of Authority. The following b. Criteria for major investments.
rules shall govern the investment of banks Any major investment by a bank should be
in the equities of allied undertakings, approved by the bank’s board of directors.
whether financial or non-financial, and non-
In acting on such investments the Board
allied undertakings, as well as the
shall consider the following:
establishment/acquisition of subsidiaries
(1) Such investment must be in
and affiliates abroad.
accordance with the bank’s business plan
and management objectives, taking into
§ X376.1 Conditions for investment in
consideration the economic developments
equities. A bank shall not invest in the equity
and future prospects. The interests of the
of any enterprise, if the investing bank is in
different stakeholders of the bank -
any of the following situations:
shareholders, depositors and creditors -
a. Its capital is impaired, whether by
should always be considered before any
actual losses or unbooked valuation reserves
required by the Bangko Sentral; investment is made.
b. Its lending operations had been (2) Such investments will complement/
suspended on account of reserve or capital support the main business of the banks.
deficiency, until such suspension shall have Extra caution should be taken when
been lifted for at least one (1) year and investing in activities where the bank has
sufficient reserves or capital shall have been no managerial or technical expertise, or
maintained; businesses/industries, which are high-risk.
c. It incurred losses from its operations (3) Bank management shall provide for
during the preceding year; an efficient and effective “exit
d. It has not fully booked the valuation mechanism” or contingency plan in case
reserves and other capital adjustments the investee’s operations fail or do not
required by the Bangko Sentral; prosper.

§§ X376.5 - X377
09.12.31
c. Prior Bangko Sentral approval; The Bangko Sentral shall have the
information/ documents required. Subject to authority to seek corrective action, to issue
prior approval of the Bangko Sentral, banks orders to terminate activities with or divest
may invest in allied or non-allied undertakings, an interest in an investee company, if it
including corporate affiliations or structures. believes that such action is necessary to
A bank intending to make such investment prevent or redress unsafe or unsound
shall submit the following information/ practice by such company that poses a
documents to the appropriate department material risk to the financial safety,
of the SES for evaluation: soundness or stability of a bank.
(1) Name of the company; (As amended by Circular No. 671 dated 27 November 2009)
(2) Type of business activities;
(3) Board of directors’ approval on such Sec. X377 Financial Allied Undertakings.
investments; With prior Bangko Sentral approval, banks
(4) Certification from the bank’s board may invest in equities of the following
of directors that the criteria enumerated in financial allied undertakings, subject to the
Item “b” are complied with; limits prescribed under Sec. X378:
(5) Management contract; a. Leasing companies including
(6) Financial information and other leasing of stalls and spaces in a
information about financial strengths, e.g., commercial establishment: Provided, That
projected balance sheet and income bank investment in/acquisition of shares
statements for the first three (3) years; of such leasing company shall be limited/
(7) Members of the board and senior applicable only in cases of conversion of
management; outstanding loan obligations into equity;
(8) Interest to be held by the bank and the b. Banks;
manner in which such interest will be held; and c. IHs;
(9) Conformity of the investee company d. Financing companies;
for Bangko Sentral to examine its books. e. Credit card companies;
The Bangko Sentral may impose f. FIs catering to small and medium
conditions on any approval, including scale industries including venture capital
conditions to address financial, managerial, corporation (VCC), subject to the
safety and soundness, compliance, or other provisions of Sec. X379 and its
concerns. Further, the Bangko Sentral may
subsections;
disapprove a proposed investment if it finds
g. Companies engaged in stock
that the proposal would constitute an unsafe
brokerage/securities dealership; and
and unsound practice, or would violate any
h. Companies engaged in foreign
law, regulation, Monetary Board directive,
exchange dealership/brokerage.
or any condition imposed by, or written
In addition, UBs may invest in the
agreement with, the Bangko Sentral.
following as financial allied undertakings:
The Bangko Sentral may prescribe other
guidelines/regulations as it may consider (1) Insurance companies; and
necessary to ensure that banks’ major (2) Holding company: Provided, That
investments do not expose the banks to the investments of such holding company
undue risks or hinder effective supervision. are confined to the equities of allied
d. Examination and inspection. undertakings and/or non-allied
Whenever deemed necessary, Bangko undertakings of UBs allowed under
Sentral shall have the authority to examine Bangko Sentral regulations.
investee companies or to verify information The Monetary Board may declare such
provided by other supervisory authorities other activities as financial allied
such as the SEC. undertakings of banks.

§§ X377 - X379
14.12.31
The determination of whether the A publicly-listed UB or KB may own

corporation is engaged in a financial up to 100% of the voting stock of only
allied undertaking shall be based on its one (1) other UB or KB. Otherwise, it shall
primary purpose as stated in its articles of be limited to a minority holding.
incorporation and the volume of its The guidelines in determining
principal business. compliance with ceilings on equity
investments in financial allied
Sec. X378 Limits on Investment in the undertakings are shown in Appendix 79.
Equities of Financial Allied (As amended by Circular Nos. 858 dated 21 November 2014,
Undertakings. The equity investment of a 710 dated 19 January 2011, 671 dated 27 November 2009,
581 dated 14 September 2007 and 530 dated 19 May 2006)
bank in a single financial allied undertaking
shall be within the following ratios in
relation to the total subscribed capital stock Sec. X379 Investments in Venture Capital
and to the total voting stock of the allied Corporations. The following rules and
undertaking: regulations shall implement Presidential
To promote competitive conditions, the Decree No. 1688 entitled “Authorizing
Monetary Board may further limit the equity Banks to Invest in the Equity of Venture
investments in QBs of UBs and KBs to forty
percent (40%).
ACTIVITIES INVESTOR
Allied Enterprises UB KB TB RB Coop Banks
Financial Allied Publicly- Not Publicly- Not
Undertaking listed listed listed listed
UBs 100% 49% 100% 49% 49% 49% 49%

KBs 100 49 100 49 49 49 49
TBs 100 100 49 49 49
RBs 100 100 49 49 100
Coop Banks NA NA NA NA 30
Insurance
Companies 100 NA NA NA NA
VCCs 60 60 60 49 49
Trust Corporation 100 49 40 40 40
Others 100 49 40 40 40
(Next Page is Part III- Page 67)

§§ X379 - X379.2
09.12.31
Capital Corporations to Assist Small and e. The combined equity investments in,
Medium- Scale Enterprises”. and loans of, the bank to its VCC shall not
For purposes of this Section, a VCC shall exceed fifteen percent (15%) of the bank’s
refer to an entity organized jointly by private net worth; and
banks, the National Development f. The aggregate investments in equities
Corporation and the Technology Livelihood by a bank, including equity investments in
and Resource Center and/or such other a VCC, shall not exceed the prescribed
government agency as may be authorized ceilings under Sec. X383 on other limitations
by the appropriate authority, the primary and restrictions.
purpose of which is to develop, promote The guidelines in determining
and assist, thru debt or equity financing or compliance with ceilings on equity
any other means, any small and medium- investments in a VCC are shown in
scale enterprise in the country. Appendix 79.
Banks with acquired shares of stock of
§ X379.1 Requirements for investors. VCCs in excess of limits provided in this
Banks may invest in a VCC organized to Subsection which have not been previously
assist small and medium-scale enterprises, confirmed by the Monetary Board shall seek
subject to the following conditions: confirmation of the Monetary Board of such
acquisition not later than ninety (90)
a. The bank shall have a minimum
banking days from 20 December 2009:
capital of P100.0 million as defined in
Provided, That said confirmation shall be
Sec. X111;
subject, among others, to the condition that
b. Two (2) or more banks may own up
such shares of stock shall be disposed of
to sixty percent (60%) of the total voting
within a reasonable period not to exceed
equity and of the total equity of a VCC. A
five (5) years from the date of acquisition
bank shall not be allowed to invest in the thereof.
equity of more than one VCC; (As amended by Circular Nos.671 dated 27 November 2009 and
c. The initial paid-in capital of VCC shall 581 dated 14 September 2007)
not exceed P5.0 million. Any subsequent
increase in paid-in capital of the VCC in § X379.2 Equity investments of venture
which a bank owns equity shall be subject capital corporations. Equity investment of a
to prior approval of the Monetary Board; VCC in small and medium-scale enterprises
d. Loans which the investor-bank may shall be subject to the following conditions:
grant to a VCC shall be limited to such a. Equity financing by a VCC may be
amounts as would enable the VCC to extended to a small and medium-scale
promote equity financing to viable small enterprise engaged in an industry certified
and medium scale enterprise: Provided, as desirable by the Department of Trade and
however, That unless otherwise authorized Industry; and
by the Monetary Board, the aggregate b. The total assets of the enterprises shall
outstanding loans of such bank to a VCC not exceed P4.0 million, including the VCC’s
shall not exceed twice the amount of its equity investment. Should the total assets of
equity investment in the VCC: Provided, the small and medium-scale enterprise
further, That loans to the VCC, or the small subsequently exceed the prescribed P4.0
and medium-scale enterprises shall not be million maximum, the VCC equity
subject to the ceilings on DOSRI, except investment therein made before the total
where bank DOSRI are likewise assets of the enterprise exceeded P4.0
stockholders in the VCC or in the small and million, may be maintained but shall not be
medium-scale enterprise; increased.

§§ X379.3 - X380
15.12.31
§ X379.3 Business name of venture management of mutual funds but not in the
capital corporations. A VCC shall be mutual funds themselves;
known by any name not otherwise (5) Management corporations engaged
appropriated: Provided, however, That the or to be engaged in an activity similar to the
words “venture capital corporation” are management of mutual funds;
made a part thereof. (6) Companies engaged in providing
computer services;
§ X379.4 Reportorial requirements; (7) Insurance agencies/brokerages;
examination by Bangko Sentral. A VCC in (8) Companies engaged in home
which a bank owns equity shall be subject building and home development;
to Bangko Sentral reportorial requirements (9) Companies providing drying and/or
prescribed for non-bank financial milling facilities for agricultural crops such
intermediaries and may be subject to as rice and corn;
examination by the Bangko Sentral. (10) Service bureaus, organized to
perform for and in behalf of banks and NBFIs
§ X379.5 Interlocking directorships the services allowed to be outsourced
and/or officerships. Subject to prior enumerated in Sec. X162: Provided, That
approval of the Monetary Board, a person data processing companies may be allowed
may concurrently hold the position of a to invest up to forty percent (40%) in the
director or officer in a bank and a VCC. equity of service bureaus;
(11) Philippine Clearing House
Sec. X380 Non-Financial Allied Corporation (PCHC), Philippine Central
Undertakings. A bank may acquire up to Depository, Inc. and Fixed Income
100% of the equity of a non-financial allied Exchange;
undertaking: Provided, That the equity (12) Companies engaged in merchant
investment of a TB/RB in any single acquiring business;
enterprise shall remain less than fifty percent (13) Such other similar activities as the
Monetary Board may declare as non-
(50%) of the voting shares in that enterprise:
financial allied undertakings of banks.
Provided, further, That prior Monetary Board
UBs may further invest in health
approval is required if the investment is in
maintenance organizations (HMOs).
excess of forty percent (40%) of the total
In addition, TBs may also invest in the
voting stock of such allied undertaking.
equities of companies enumerated in Item
The determination of whether the
“b” of this Section.
corporation is engaged in a non-financial
b. RBs/Coop Banks
allied undertaking shall be based on the
RBs/Coop Banks may invest, as a non-
primary purpose as stated in its articles of
financial undertaking, in the equities of
incorporation and the volume of its principal
companies engaged in the following:
business.
(1) Warehousing and other postharvest
a. UBs/KBs/TBs facilities;
UBs/KBs and TBs may invest in equities (2) Fertilizer and agricultural chemical
of the following non-financial allied and pesticides distribution;
undertakings: (3) Farm equipment distribution;
(1) Warehousing companies; (4) Trucking and transportation of
(2) Storage companies; agricultural products;
(3) Safe deposit box companies; (5) Marketing of agricultural products;
(4) Companies primarily engaged in the (6) Leasing;

§§ X380 - 1381.2
15.12.31
(7) Automated Teller Machine (ATM) buildings constructed thereon) arising from
networks; and or in connection with the Government’s
(8) Other undertakings as may be privatization program; and
determined by the Monetary Board. d. Such other broad categories as the
The guidelines in determining Monetary Board may declare as appropriate:
compliance with ceilings on equity Provided, further, That the bank shall submit
investments in non-financial allied within thirty (30) banking days after the
undertakings are shown in Appendix 79. investment, the following information/
(As amended by Circular Nos. 896 dated 17 December 2015, documents to the appropriate department
671 dated 27 November 2009,581 dated 14 September 2007 of the SES:
and 563 dated 16 March 2007)
(1) The amount of investment;
(2) The name of investee company; and
(3) The nature of business, accompanied
by such pertinent documents as articles of
Sec. 1381 Investments in Non-Allied or incorporation, articles of partnership or
Non-Related Undertakings. Only UBs may registration certificate, whichever may be
invest in the equity of an enterprise engaged applicable.
in non-allied or non-related activities. (As amended by Circular No. 671 dated 27 November 2009)
The guidelines in determining
compliance with ceilings on equity § 1381.2 Limits on investments in non-
investments in non-allied or non-related allied enterprises.
undertakings are shown in Appendix 79. a. The equity investment of a UB, or of
(As amended by Circular Nos. 671 dated 27 November 2009, its wholly or majority-owned subsidiaries,
581 dated 14 September 2007) in a single non-allied enterprise shall not
exceed thirty-five percent (35%) of the total
§ 1381.1 Non-allied undertakings equity in that enterprise nor shall it exceed
eligible for investment by universal banks. thirty-five percent (35%) of the voting stock
The broad category of non-allied in that enterprise.
undertakings in which a UB may invest For the purpose of determining
directly or through its subsidiary shall compliance with the ceiling prescribed in
require prior approval of the Monetary the preceding paragraph, (i) the equity
Board: Provided, That individual equity investment of the bank; and (ii) the equity
investments in the following broad investment of the bank’s subsidiaries, shall
categories shall not require prior Monetary be combined.
Board approval, except as may be required b. In no case shall the total equity
in Subsec. X376.5: investments in a single non-allied enterprise
a. Enterprises engaged in physically of UBs, NBFIs performing QB functions and
productive activities in agriculture, mining their subsidiaries, whether or not the parent
and quarrying, manufacturing, public financial intermediaries have equity
utilities, construction, wholesale trade and investments in the enterprise, amount to fifty
community and social services following the percent (50%) or more of the voting stock
industrial groupings in the Philippine of that enterprise: Provided, however, That
Standard Industrial Classification (PSIC) as equity investments in excess of the ceilings
enumerated in Appendix 22; prescribed herein as of 01 April 1980 may
b. Industrial park projects and/or be maintained but may not be increased and
industrial estate developments; if reduced, shall not be increased thereafter
c. Financial and commercial complex beyond the ceiling prescribed herein.
projects (including land development and (As amended by Circular No. 671 dated 27 November 2009)

§§ 1381.3 - X382.3
10.12.31
§ 1381.3 Report on outstanding equity authorities in Appendix 5, the applicant bank

investments in and outstanding loans to shall comply with the following:
non-allied enterprises. a. The citizenship, ownership ceilings
(Deleted by Circular No. 671 dated 27 November 2009) and other limitations on voting
stockholdings in banks under existing law
Sec. X382 Investments in Subsidiaries and and regulations; and
Affiliates Abroad. The establishment or b. The experience and expertise in
acquisition of subsidiaries or affiliates international banking operations with proof
abroad shall require prior approval of the to the effect that:
Bangko Sentral. (1) It must have conducted international
banking for at least three (3) years prior to
§ X382.1 Application for authority to the date of application; and
establish or acquire subsidiaries and (2) Its international banking operations
affiliates abroad. The application for such must have contributed a substantial portion
authority shall be signed by the president of to its total earnings.
the bank and shall be accompanied, as a
minimum, by the following information/ § X382.3 Conditions for approval of
documents: application. The approval of the
a. Certified true copy of the resolution application to establish or acquire a
of the bank’s board of directors authorizing subsidiary of an affiliate abroad shall be
the establishment or acquisition of a subject to the following conditions:
subsidiary or an affiliate abroad; a. Without prejudice to the
b. Economic justification for such qualification requirements of the country
establishment, indicating the services to be where the subsidiary or the affiliate is to
offered, the minimum outlay for furniture, be established, the proposed officer(s), at
fixture and equipment, rental and other the time of appointment, must be at least:
expenses; (1) Twenty-five (25) years of age;
c. A certification that an application for (2) A college graduate, preferably with
such establishment has been filed with the training and experience abroad;
appropriate government agency of the host (3) With three (3) years experience in
country; international banking; and
d. Organizational set-up of the proposed (4) Must not be disqualified as an
banking office showing the proposed officer under existing regulations.
positions and the names, qualifications and b. The applicant shall also comply
experience of the proposed manager and with the licensing requirements of the host
other officers; and country and the necessary license to
e. Certification signed by the president operate shall be secured from the
or the executive vice-president that the bank appropriate government agency of the
has complied with all the requirements host country;
enumerated under Subsec. X382.2. c. The outward investment
representing initial capital outlay and
§ X382.2 Requirements for establishing other outlays shall be subject to existing
subsidiaries or affiliates abroad. In addition regulations;
to the standard pre-qualification d. All dividends earned shall be
requirements for the grant of banking inwardly remitted to the Philippines no later

§§ X382.3 - X382.8
10.12.31
than sixty (60) days after the date of reserves and other capital adjustments, if
payment. For purposes of this Subsection, any; and
re-investment of said dividend proceeds or (3) Its operations in the preceding
deposits/placements thereof in accounts of three (3) years were profitable; otherwise,
the investor banks with foreign the feasibility study on the proposed
correspondent banks abroad shall be subsidiary should show profits in the first
deemed compliance with the requirements two (2) years of operations.
of this Subsection; c. The application for authority of a
e. The proposed subsidiary or bank subsidiary shall be accompanied by
affiliate shall submit the reports required the following:
by the Bangko Sentral; (1) Certified true copy of the resolution
f. The proposed subsidiary or authorizing the investment by the board of
affiliate shall not carry any of the business directors of the parent bank and the bank
of a bank contemplated within the context subsidiary;
of the Philippine banking system; (2) Feasibility studies on the proposed
g. The proposed subsidiary or affiliate subsidiary indicating, among others, the
shall not engage in stock trading activity; economic justification, the type of industry
h. The applicant shall submit a and organizational expenses to be incurred,
certification from the host country that the duly including the capital expenditures; and
authorized personnel/examiners of the Bangko (3) Proposed organizational structures,
Sentral will be authorized to examine the including the proposed officers and their
proposed subsidiary or affiliate; and qualifications.
i. The applicant shall defray the d. The applicant parent subsidiary
necessary cost and expenses to be shall comply with the licensing
incurred by the appropriate department requirements of the host country and the
of the SES in the examination of the necessary license to operate shall be
foreign subsidiary. secured from the appropriate government
(As amended by Circular No. 692 dated 23 July 2010) agency of the host country;
e. The proposed subsidiary may
§§ X382.4 - X382.7 (Reserved) invest in another subsidiary with prior
approval of the Bangko Sentral;
§ X382.8 Investment of a bank subsidiary f. Any outward investment
in a foreign subsidiary. The following representing initial capital and other
guidelines shall govern the investment in a outlays shall be subject to existing
foreign subsidiary by a bank subsidiary: regulations;
a. The investment of a bank g. At least fifty percent (50%) of the
subsidiary in the equity of a subsidiary yearly net profits of the proposed
located abroad shall be subject to prior subsidiary shall be declared and paid as
Bangko Sentral approval; cash dividends to the parent subsidiary;
b. The bank subsidiary may invest in h. The proposed subsidiary shall be
a subsidiary if it meets the following subject to -
pre-qualification requirements: (1) the applicable reportorial
(1) It has complied with the minimum requirements such as the submission of
capital requirement of the host country; quarterly SOC and SIE; and
(2) It has booked the required valuation (2) the supervision and examination

§§ X382.8 - X388
13.12.31
by the Bangko Sentral and the cost of such such acquisition not later than ninety (90)
examination shall be charged against the banking days from 20 December 2009:
grandparent bank; and Provided, That said confirmation shall be
i. Any additional funding or advances subject, among others, to the condition
of the parent bank in the Philippines to its that such shares of stock shall be disposed
subsidiaries abroad or the subsidiary will of within a reasonable period not to
require prior Bangko Sentral approval. exceed five (5) years from the date of
acquisition thereof.
Sec. X383 Other Limitations and (As amended by Circular Nos. 822 dated 13 December 2013,
784 dated 25 January 2013, 671 dated 27 November 2009 and
Restrictions. The following limitations and 581 dated 14 September 2007)
restrictions shall also apply regarding equity
investments of banks. Sec. X384 (Reserved)
a. In any single enterprise. The equity
investments of UBs and KBs in any single Sec. X385 Sanctions. The following
enterprise shall not exceed at any time sanctions shall be imposed for equity
twenty-five percent (25%) of the net worth investments made without prior Monetary
of the investing banks as defined in Sec. Board approval:
X111 and Subsec. X105.4.b. a. First offense - If the investment
b. A g g r e g a t e l i m i t s . T h e t o t a l is not allowable under existing
amount of investments in equities in all regulations, divestment of the
enterprises shall not exceed the investment and reprimand on officer/
following ratios in relation to the net director who recommended/approved
worth of the investing bank: the investment.
UB KB TB RB Coop Bank
b. Subsequent offense -
LIMIT: 50% 35% 25% 25% 25% On the Bank. If the investment is not
allowable under existing regulations,
c. Exclusion of underwriting exposure divestment of the investment.
from ceiling. The exposure of a bank with On the director/officer. Fine of P20,000
UB authority arising from the firm for each investment to be imposed on the
underwriting of equity securities of members of the board and the executive
enterprises shall not be counted in officers who recommended/approved the
determining compliance with the ceilings investment per investment and to be
prescribed in this Section and Subsec. shouldered personally by the officer/
1381.2 for a period of ninety (90) calendar director: Provided, That if the subsequent
days from the issuance of such equity offense is an investment in a non-allied
securities1. enterprise, the fine shall be P40,000.
d. The guidelines in determining
compliance with the other limitations and I. (RESERVED)
restrictions on equity investments of
banks are shown in Appendix 79. Secs. X386 - X387 (Reserved)
Banks with acquired shares of stock
in excess of limits provided in this Section J . OTHER OPERATIONS
which have not been previously confirmed
by the Monetary Board shall seek Sec. X388 Purchase of Receivables and
confirmation of the Monetary Board of Other Obligations. The following
1
It shall cover all new underwritten debt and equity securities issued from from 15 February 2013.

§§ X388 - X388.3
08.12.31
regulations shall govern the purchase of promissory notes resulting from the
receivables and other obligations. purchase of receivables on a without
recourse basis shall be subject to the SBL
§ X388.1 Yield on purchase of of the bank: Provided, That the bank shall
receivables. The rate of yield, including evaluate the credit worthiness of the maker
commissions, premiums, fees and other of such promissory notes.
charges, from the purchase of receivables
and other obligations, regardless of § X388.3 Purchase of commercial
maturity, that may be charged or received paper. Before purchasing registered
by banks shall not be subject to any commercial paper, banks authorized to
regulatory ceiling. engage in quasi-banking functions shall -
a. Require the issuing entity to
§ X388.2 Purchase of receivables on submit a duly certified true copy of its
a “without recourse” basis. The total Certificate of Registration and Authority
exposure of a bank to a maker of to Issue Commercial Paper; and
(Next page is Part III - Page 73)

§§ X388.3 - X388.5
17.06.30
b. Ascertain that the registration conduct a continuous self-assessment of

number and expiry date indicated in the their compliance with said pre-qualification
commercial paper are the same as those in requirements.
the certificate of registration submitted. TBs may invest in evidences of
Any violation or failure to comply with indebtedness which are registered with the
the provisions of this Subsection shall SEC but are not readily marketable securities:
subject the erring bank to suspension or Provided, That these evidences of
revocation of its authority to engage in indebtedness shall be acquired with
quasi-banking functions. recourse against a bank or a QB.
It shall be the responsibility of the
§ X388.4 Reverse repurchase investing bank to undertake the necessary
agreements with Bangko Sentral. Reverse investigation to satisfy itself with regard to
repo agreements with the Bangko Sentral the particular security.
shall be governed by Subsec. X601.2. (2) Evidences of indebtedness of the
Republic of the Philippines or the Bangko
§ X388.5 Investment in readily Sentral, and any other evidences of
marketable bonds and other debt indebtedness or obligations the servicing
securities. The following rules and and repayment of which are guaranteed by
regulations shall govern investment in the Republic of the Philippines.
readily marketable bonds and other debt b. Any violation of the provision stated
securities. in Item “a” above shall subject the bank and
a. Banks may invest in the following: its concerned officer/s to applicable
(1) Readily marketable bonds and other enforcement action enumerated under
debt securities which are of such use or Subsec. X1101.3.
demand as to make them the subject of Regular banking unit (RBU) of UBs/
constant dealings in securities markets, with KBs and TBs are prohibited from
such frequent quotations of price as to make purchasing Philippine debt papers
the price easily and definitely ascertainable, representing debt papers of Philippine
and the security easy to realize upon sale at public sector and private sector obligors
any time: Provided, That the bonds and other which were restructured during the period
debt securities have complied with the new of moratorium in the payment of external
rules on registration of commercial papers: debt. They may, however, invest in, or
Provided, further, That RBs/Coop Banks purchase, other foreign currency
investing in readily marketable bonds and denominated debt instruments, subject to
other debt securities shall comply with the applicable rules and regulations,
prudential criteria enumerated under particularly on risk management:
Subsec. X1101.2. In addition to said criteria, Provided, That the RBU of TBs may invest
the investment shall not be held for trading only in readily marketable foreign
purposes. currency denominated debt instrument as
RBs/Coop Banks shall submit a one-time defined under Sec. 72 of Part V (MORFXT).
notarized certification that the (As amended by Circular Nos. 960 dated 04 May 2017, 813
pre-qualification requirements under dated 27 September 2013, 761 dated 20 July 2012, 738 dated 11
Subsec. X1101.2 have been complied with October 2011, 707 dated 07 January 2011, 670 dated 18 November
2009, 628 dated 31 October 2008, 626 dated 23 October 2008
to the appropriate department of the SES and 585 dated 15 October 2007, M-2007-006 dated 28 February
within ten (10) calendar days from date 2007; Circular Nos. 558 dated 22 January 2007, 546 dated 17
of initial investment. In addition, banks shall November 2006 and 509 dated 01 February 2006)

§§ 389 - X393.3
16.06.30
Sec. X389 (Reserved) Sec. 2390 Prohibition Against Non-

Residents from Investing in the SDA
Sec. 1389 Guidelines on the Investment Facility.
of Universal Banks and Commercial (Deleted by Circular No. 913 dated 02 June 2016)
Banks in Credit-Linked Notes, Structured
Products and Securities Overlying Sec. 3390 (Reserved)
Securitization Structures. In line with the
policy of encouraging banks to diversify Secs. X391 - X392 (Reserved)
their investment portfolios and to foster
the development of a market for new K. MISCELLANEOUS PROVISIONS
financial products, the Bangko Sentral has
issued guidelines on the investment of Sec. X393 Loans-to-Deposits Ratio. The
UBs and KBs in (1) CLNs and similar following policies and guidelines shall
products (Sec. 1628), (2) foreign currency govern the loans-to-deposits ratio (LDR) of
denominated structured products (Secs. head offices and branches.
1635 and 1636) and (3) securities overlying (As amended by Circular No. 613 dated 18 June 2008)
securitization structures (Sec. 1648).
No prior Bangko Sentral approval is § X393.1 Statement of policy. It is
required to enter into authorized the policy of the Bangko Sentral to promote
transactions. However, it shall be the healthy competition within the banking
responsibility of UBs/KBs to fully comply system as well as provide enhanced banking
with appropriate risk management statistics necessary for informed decision-
standards including, as a minimum, those making.
(As amended by Circular No. 613 dated 18 June 2008)
prescribed under relevant Sections. The
regulatory requirements enumerated in
Appendix 66 shall be fully complied with § X393.2 Regional loans-to-deposits
by UBs/KBs investing in products allowed ratio. An individual bank’s regional LDR is
under Secs./Subsec. 1628, 1635 and a measure of the extent of its lending activity
vis-à-vis deposits generated in a region. On
X115.3.
an aggregate basis, the regional LDR for the
The guidelines on the accounting for
banking system is an indicator of the level
investments in CLNs and other SPs, in
of bank deposits which have been
addition to those prescribed under PAS 39,
transformed into investments in a region.
is provided in Appendix 66a.
The latter may be used by banks as a
(As amended by Circular No. 708 dated 01 January 2011 and
M-2008-010 dated 07 March 2008)
benchmark in assessing their regional
lending and deposit operations as against
Secs. 2389 - 3389 (Reserved) that of the industry and their peer group.
(As amended by Circular No. 613 dated 18 June 2008)
Sec. X390 (Reserved) § X393.3 Computation of the

regional loans-to-deposits ratio. The
Sec. 1390 Prohibition Against Non- individual bank’s regional LDR shall be
Residents from Investing in the Special computed by dividing a bank’s aggregate
Deposit Account (SDA) Facility.
loans by its aggregate deposit liabilities on

§ X393.3
08.12.31
a per region basis as of the same reporting these were generated.

cut-off date. A bank, in computing its For purposes of this Section, loans shall
regional LDR, shall be guided by the refer to the amortized cost of a bank’s total
following: loan portfolio, excluding “Loans to Bangko
a. Loans shall be reported by a bank in Sentral”, “Interbank Loans Receivable” and
the region where the loan proceeds were loans granted by a bank’s FCDU/EFCDU.
utilized or channeled to, i.e., location of the Deposits, on the other hand, shall refer to a
end-users. bank’s total deposit liabilities, excluding
b. Deposits, on the other hand, shall be FCDU/EFCDU deposits.
reported by a bank in the region wherein (As amended by Circular No. 613 dated 18 June 2008)
(Next page is Part III- Page 75)

§ X394 - X394.2
13.12.31
Sec. X394 Acquired Assets in Settlement of the foreclosed/purchased asset shall be

of Loans. The following rules shall govern conducted by an independent appraiser
assets acquired in settlement of loans. acceptable to the Bangko Sentral.
b. The carrying amount of ROPA shall
§ X394.1 Posting. Banks shall post at be allocated to land, building, other
all times in a conspicuous place in the non financial assets and financial assets (e.g.,
premises of their head office and each of receivables from third party or equity interest
their branches and other banking offices a in an entity) based on their fair values, which
list of acquired assets together with the allocated carrying amounts shall become
corresponding lowest price at which the their initial costs.
bank is willing to sell such property. c. The non financial assets portion of
However, this requirement shall not ROPA shall remain in ROPA and shall be
relieve the bank from the requirement accounted for as follows:
under Section 52 of R.A. No. 8791 to (1) Land and buildings shall be
dispose of such acquired assets. accounted for using the cost model under
PAS 40 “Investment Property”;
§ X394.2 Booking (2) Other non financial assets shall be
a. ROPA in settlement of loans accounted for using the cost model under
through foreclosure or dation in payment PAS 16 “Property Plant and
shall be booked under the ROPA account Equipment”;
as follows: (3) Buildings and other non-financial
(1) Upon entry of judgment in case of assets shall be depreciated over the
judicial foreclosure; remaining useful life of the assets, which
(2) Upon execution of the Sheriff’s shall not exceed ten (10) years and three
Certificate of Sale in case of extrajudicial (3) years from the date of acquisition,
foreclosure; and respectively; and
(3) Upon notarization of the Deed of (4) Land, buildings and other
Dacion in case of dation in payment non-financial assets shall be subject to the
(dacion en pago). impairment provisions of PAS 36
ROPA shall be booked initially at the “Impairment”1.
carrying amount of the loan (i.e., d. Financial assets, shall be
outstanding loan balance adjusted for any reclassified and booked according to
unamortized premium or discount less intention under HFT, DFVPL, AFS, HTM,
allowance for credit losses computed INMES, Unquoted Debt Securities
based on PAS 39 provisioning Classified as Loans or Loans and Receivable
requirements, which take into account the and accounted for in accordance with the
fair value of the collateral) plus booked provisions of PAS 39, except interests in
accrued interest less allowance for credit subsidiaries, associates and joint ventures,
losses (computed based on PAS 39 which shall be booked under Equity
provisioning requirements) plus Investments in Subsidiaries, Associates and
transaction costs incurred upon acquisition Joint Ventures and accounted for in
(such as non refundable capital gains tax accordance with the provisions of PAS 27,
and documentary stamp tax paid in 28 and 31, respectively.
connection with the foreclosure/purchase e. ROPAs that comply with the
of the acquired real estate property): provisions of PFRS 5 “Non-Current Assets
Provided, That if the carrying amount of Held for Sale” shall be reclassified and
ROPA exceeds P5.0 million, the appraisal accounted for as such.
1
under Appendix 89a (Circular No. 820 dated 06 December 2013)
§§ X394.2 - X394.3
13.12.31
f. Claims arising from deficiency testing, which shall be reckoned from the
judgments rendered in connection with the time of acquisition.
foreclosure of mortgaged properties shall be (As amended by Circular Nos. 555 dated 12 January 2007 and
lodged under the real account “Deficiency 520 dated 20 March 2006)
Judgment Receivable”; while probable
claims against the borrower arising from the § X394.3 Sales contract receivable.
foreclosure of mortgaged properties shall be a. Sales Contract Receivable (SCR)
lodged under the contingent account shall be recorded based on the present
“Deficiency Claims Receivable”. value of the installments receivables
g. Appraisal of properties. Before discounted at the imputed rate of interest.
foreclosing or acquiring any property in Discount shall be accreted over the life of
settlement of loans, it must be properly the SCR by crediting interest income using
appraised to determine its true economic the effective interest method. Any
value. If the amount of ROPA to be booked difference between the present value of
exceeds P5.0 million, the appraisal must the SCR and the derecognized assets shall
be conducted by an independent appraiser be recognized in profit or loss at the date
acceptable to the Bangko Sentral. An in- of sale in accordance with the provisions
house appraisal of all ROPAs shall be made of PAS 18 “Revenue”: Provided,
at least every other year: Provided, That furthermore, That SCR shall be subject to
immediate re-appraisal shall be conducted impairment provision of PAS 39.
on ROPAs which materially decline in value. The provisions of this Subsection shall
h. Non-cash payment for interest. FIs be applied retroactively to all outstanding
that accept non-cash payments for interest ROPAs and SCRs: Provided: That for
on their borrowers’ loans shall book the properties acquired before 01 January
acquired assets as ROPA. The amount to be 2005, the carrying amount of the acquired
booked as ROPA shall be the booked properties when initially booked under
accrued interest less allowance for credit ROPA shall be the cost subject to
losses (computed based on PAS 39 depreciation and impairment testing,
provisioning requirements): Provided, That which shall be reckoned from the time of
if the carrying amount of ROPA exceeds P5.0 acquisition.
million, the appraisal of the foreclosed/ b. SCRs which meet all the
purchased asset shall be conducted by an requirements/conditions enumerated below
independent appraiser acceptable to the are hereby considered performing assets and
Bangko Sentral. The carrying amount of therefore, not subject to classification:
ROPA shall be allocated in accordance with (1) That there has been a downpayment
Item “b” and shall be subsequently of at least twenty percent (20%) of the
accounted for in accordance with Item “c” agreed selling price or in the absence
of this Subsection. thereof, the installment payments on the
The provisions of this Subsection shall principal had already amounted to at least
be applied retroactively to all outstanding twenty percent (20%) of the agreed selling
ROPAs and sales contract receivables: price;
Provided: That for properties acquired (2) That payment of the principal must
before 01 January 2005, the carrying be in equal installments or in diminishing
amount of the acquired properties when amounts and with maximum intervals of
initially booked under ROPA shall be the one (1) year;
cost subject to depreciation and impairment

§§ X394.3 - X394.15
12.12.31
(3) That any grace period in the payment §§ X394.11 - X394.14 (Reserved)
of principal shall not be more than two (2)
years; and §§ X394.15 Joint venture of banks with
(4) That there is no installment payment real estate development companies
in arrear either on principal or interest: a. Statement of policy. It is the policy
Provided, That an SCR account shall be of the Bangko Sentral to encourage banks
automatically classified “Substandard” and to dispose of their ROPAs in settlement of
considered non-performing in case of loans and other advances either through
non-payment of any amortization due: foreclosure or dacion en pago as well as
Provided, further, That an SCR which has other properties acquired as a consequence
been classified “Substandard” and considered of a merger/consolidation which are no
non-performing due to non-payment of any longer necessary for their banking
amortization due may only be upgraded operations. Towards this end, banks are
restored to unclassified and/or performing hereby authorized to enter into Joint Venture
status after a satisfactory track record of at Agreements (JVA) with real estate
least three (3) consecutive payments of the development companies for the
required amortization of principal and/or development of said properties, subject to
interest has been established. the requirements prescribed under this
(As amended by Circular No. 520 dated 20 March 2006) Subsection.
b. For purposes of this Subsection,
§§ X394.4 - X394.9 (Reserved) joint venture shall refer to a contractual
arrangement/undertaking between a
§ X394.10 Transfer/sale of non- bank and a duly registered real estate
performing assets to a special purpose development company (developer) for
vehicle or to an individual. The procedures the purpose of developing the
governing the transfer/sale of non-performing abovementioned properties of the bank.
assets (NPAs) to a Special Purpose Vehicle The bank contributes said properties to the
(SPV) or to an individual that involves a single undertaking while the developer
family residential unit, or transactions contributes all the development funds,
involving dacion en pago by the borrower resources, technical expertise, equipment,
or third party of an NPL, for the purpose of personnel and all other requirements
obtaining the Certificate of Eligibility (COE) desired or needed for the implementation
which is required to avail of the incentives and completion of the undertaking
provided under R.A. No. 9182 are including marketing, where applicable.
presented in Appendix 56. The bank and the developer shall be bound
The accounting guidelines on the sale by the contract that establishes joint control
of NPAs to SPVs and to qualified of the undertaking. Although the developer
individuals for housing under the SPV Act may be designated as operator or manager
of 2002 are presented in Appendix 56a. of the undertaking, it does not, however,
The significant timelines related to the absolutely control the undertaking but only
implementation of R.A. No. 9182, also acts in accordance with the authorities
known as the “Special Purpose Vehicle granted to him under the JVA.
Act” as amended by R.A. No. 9343 are c. Forms of a joint venture. A bank
presented in Appendix 56b. and a developer may undertake a joint
(As amended by M-2012-036 dated 24 July 2012, M-2008-014 venture under the following forms:
dated 17 March 2008, M-2008-005 dated 04 February 2008, (1) A jointly-controlled operation/
M-2007-013 dated 11 May 2007 and M-2006-001 dated 11 May 2006) undertaking, which does not involve the

§ X394.15
08.12.31
establishment of a corporation, partnership (3) The bank shall not recognize income
or other entity, or a financial structure that out of its contribution to the joint venture,
is separate from the bank and the regardless of the agreed valuation of said
developer themselves. Under this form of properties.
joint venture, the rights and obligations of (4) The bank shall not provide funds
the bank and the developer shall be to the joint venture either as a loan or
governed primarily by their contract that capital contribution.
must clearly specify the following: (5) The JVA or contractual
(a) authority of the developer to arrangement shall clearly stipulate the
develop/subdivide the property and rights and obligations of the bank and the
subsequently, to sell the individual lots developer.
under a special power of attorney; (6) The bank shall secure prior
(b) sharing in the sales proceeds of the Monetary Board approval of the JVA.
developed ROPAs or in the developed lots; e. Application for authority to enter
(c) sharing in taxes; into JVA. A bank desiring to enter into a
(d) sharing in the assets of the joint JVA with a developer for the purpose of
venture particularly in the developed/ developing its ROPAs and other properties
subdivided lots should there still be unsold acquired as a consequence of its merger/
lots at the time of termination of the joint consolidation with another bank/FI shall
venture; and secure prior Monetary Board approval of
(e) name under which the subdivided said agreement. For that purpose, the
lots shall be registered pending their sale. concerned bank shall submit an application
(2) A jointly-controlled entity, which for Monetary Board approval to the
involves the establishment of a new appropriate department of the SES. The
juridical entity, preferably a corporation application shall be signed by the bank’s
that is separate and distinct from the bank president or officer of equivalent rank and
and the developer. A jointly controlled shall be accompanied by the following
corporation may be established either for documents/information:
the purpose of developing properties of (1) The name of the developer;
banks for immediate sale or converting (2) Name of the principal stockholders
them into earning assets such as hotels and and officers as well as members of the
shopping malls. board of directors of said company;
d. Requirements and limitations in a (3) Relationship of the bank with the
joint venture. A bank desiring to enter into developer, if any;
a JVA with a developer for the purpose of (4) List and brief description of the
developing its ROPAs and/or other properties to be contributed by the bank
properties acquired as a consequence of including their market values, book values
merger/consolidation shall comply with the and the valuation agreed upon under the
following: proposed JVA;
(1) The JVA shall be approved by the (5) Certification by the bank’s
board of directors of the bank. president or officer of equivalent rank that
(2) The bank’s contribution to the joint the JVA is strictly in compliance or will
venture, in whatever form undertaken, strictly comply with the requirements of
shall be limited to ROPAs and properties this Subsection; and
acquired as a consequence of the bank’s (6) Such other documents/information
merger/consolidation with another bank/ that the concerned department of the SES
financial institution. may require.

§§ X394.15 - X395
08.12.31
f. Non-financial allied undertaking. All excess of the value of the capital stock
types of banks are hereby authorized to received by the bank over the book value of
invest in the equities of companies engaged the contributed properties shall be credited
in real estate development as a non- to the account “Deferred Credits”.
financial allied undertaking, subject to the (3) Properties invested in equities of
following conditions: developers shall be booked in accordance
(1) Investments shall be limited to with the PAS: Provided, That the bank shall
ROPAs and other properties acquired as a not recognize income out of the properties
consequence of a bank’s merger/ invested if there is already an existing
consolidation with another bank/FI; subsidiary or affiliate relationship between
(2) Investments shall be subject to the bank and the investee corporation prior
existing Bangko Sentral requirements to the investment, regardless of the agreed
applicable to investments in non-financial valuation of said properties. The excess of
allied undertakings; and the agreed valuation of said properties over
(3) If there is already an existing their book value shall be booked as
subsidiary or affiliate relationship between “Deferred Credits”.
the bank and the investee corporation prior h. Coverage. The provisions of this
to the investment, the bank shall not Subsection shall apply to ROPAs
recognize income out of its invested existing, as well as those which may be
properties. The excess of the value of the acquired by banks in settlement of non-
capital stock received by the bank over the performing o r p a s t d u e l o a n s a n d
book value of its invested properties shall advances outstanding, as of 09 March
be booked as “Deferred Credits”. 2006 and to properties acquired as a
g. Accounting treatment. Accounting consequence of merger or consolidation
treatment of the properties contributed by a which are outstanding in the books of
bank to a joint venture or invested in the banks as of said date.
equities of developers. i. Sanctions. Any violation of the
(1) In a joint venture in the form of a provisions of this Subsection and/or any
jointly controlled operations/undertaking, misrepresentation in the certification and
which does not involve the establishment information required to be submitted to the
of a corporation or other entity, the bank Bangko Sentral under this Subsection shall
shall continue to recognize in its books the subject the bank and the officer or officers
properties contributed to the undertaking. responsible therefore, to the penalties
However, the regular provisioning against provided under Sections 35, 36 and 37 of
probable losses required under existing R. A. No. 7653.
regulations may be discontinued upon (Circular No. 518 dated 09 March 2006)
execution and implementation of the JVA.
(2) In a joint venture in which a Sec. X395 Credit Policies of Government-
corporation is created, the bank shall book Owned Corporations. Government-owned
the properties contributed to the corporations which perform banking or
undertaking as investment pursuant to the credit functions shall coordinate their
provisions of PAS 31. It shall also recognize general credit policies with the Schedule of
its interest in the corporation using the Credit Priorities embodied in Appendix 23.
proportionate consolidation method or the Within the provision of their respective
equity method as long as it continues to have charters, these corporations shall limit their
joint control over the corporation: Provided, credits to the economic activities falling
That the bank shall not recognize income out under Priority II of said schedule to fifty percent
of its contribution to the joint venture. The (50%) of their outstanding loans at any time.

§§ X396 - 1397
15.12.31
Sec. X396 Parcellary Plans on Crop Loans. acquisition and development of land and/or
Banks shall require the submission of construction of buildings and structures,
parcellary plans a requisite for granting crop including housing units for sale/lease and/
loans to sugarcane planters. or for use in retail/wholesale, manufacturing
or other income-generating purposes,
Sec. X397 (Reserved) including loans for the land development
and construction of residential properties.
Sec. 1397 Limits on Real Estate Exposures It shall not include loans for
and Other Real Estate Property of UBs/KBs. construction of highways, streets, bridges,
1. Real Estate Loan Limit. Total real tunnels, railways, and other infrastructure
estate loans of UB/KBs, excluding Items “a” for public use.
to “d” below, shall not exceed twenty Purchase by banks of receivables under
percent (20%) of the total loan portfolio, net Contract to Sell (CTS) executed between the
of interbank loans: real estate developers and home buyers on
a. Loans extended to individual a with recourse basis shall be considered
households for purposes of financing the loans to real estate developers and shall be
acquisition, construction, and/or classified as commercial real estate loans.
improvement of housing units and Trust departments of UBs/KBs shall be
acquisition of any associated land that is or exempted from the prescribed limit on real
will be occupied by the borrower, regardless estate loans.
of amount; Under existing HUDCC guidelines,
b. Loans extended to land developers/ socialized and low-cost housing loans are
construction companies for the purpose of defined as follows:
development and/or construction of Housing Loan Ceiling
socialized and low-cost residential Package
properties as defined under existing
guidelines of the HUDCC for the Low-cost
implementation of government housing Level 1-A 400,000 and below
(Socialized)
programs, which are intended for sale to
individual households; Level 1-B Above P400,000
to P500,000
c. Loans to the extent guaranteed by
the HGC; and Level 2 Above P500,000
d. Loans to the extent collateralized by to P1,250,000
non-risk assets under existing regulations.
Level 3 Above P1,250,000
For this purpose, real estate loans shall
to P3,000,000
refer to loans granted to:
(1) individual households for the 2. Real Estate Stress Test (REST) Limits
acquisition, construction and/or improvement A prudential limit is set for real estate
of housing units and acquisition of any exposures and other real estate property of
associated land that is or will be occupied by UBs/KBs. Real estate exposures shall refer to:
the borrower, including loans granted to bank a. Real estate loans (RELs), which shall
officers and employees for the same purpose consist of:
which are covered by bank’s fringe benefit (1) Residential real estate loans to
plan and which plan was approved by the individual households for occupancy; and
Monetary Board; and (2) Commercial real estate loans,
(2) land developers/construction which shall refer to loans granted to the
companies and other borrowers for the following:

§§ 1397 - 2397
15.12.31
(a) individuals; The prudential REST limits, which shall

(b) land developers/construction be complied with at all times by UBs/KBs,
companies; and are six percent (6%) of Common Equity
(c) other borrowers, such as Tier I (CET1) capital ratio and ten percent
(i) real estate brokers; (10%) of risk-based capital adequacy ratio,
(ii) real estate lessors; on a solo and consolidated basis, under the
(iii) property management companies; prescribed write-off rate.
(iv) holding companies; and A UB/KB which does not meet either
(v) others, including other corporate or both the REST limits shall be directed to
borrowers; explain why its exposures do not warrant
for purposes of financing real estate immediate remedial action. The Monetary
activities; Board, upon the report of the appropriate
b. Investments in debt securities issued supervising department of the SES, shall
determine whether the UB/KB has been
by land developers/construction companies
able to render sufficient explanation,
and other corporate borrowers, such as real
otherwise, the UB/KB shall be directed to
estate brokers, real estate lessors, property
submit an action plan, within thirty (30)
management companies and holding
calendar days from date of notification, to
companies, for purposes of financing real
meet the REST limits within a reasonable
estate activities; and time frame.
c. Investments in equity securities A UB/KB which fails to submit an action
issued by land developers/construction plan or persistently breaches the REST
companies and other corporate borrowers, limits due to non-compliance with
such as real estate brokers, real estate lessors the commitments in its submitted action
and property management companies, for plan may be considered to be engaging
purposes of financing real estate activities. in unsafe and unsound practice, to be
Equity securities issued by holding determined in accordance with Section 56
companies are likewise covered, if proceeds of R.A. No. 8791 as implemented by
from the issue shall be/has been invested Sec. X149, and shall subject the UB/KB to
by the holding company in its subsidiary appropriate sanctions.
corporation/s that is/are engaged in real (As amended by Circular Nos. 890 dated 02 November 2015,
estate activities. 839 dated 27 June 2014, M-2012-046 dated 21 September 2012,
M-2011-035 dated 23 June 2011, Circular No. 600 dated 04
Real estate exposures shall not include February 2008)
loans and investments in debt and equity
securities for construction of highways, Sec. 2397 Limits on Real Estate Exposures
streets, bridges, tunnels, railways, and other and Other Real Estate Property of TBs. A
infrastructure for public use. prudential limit is set for real estate
Other real estate property shall include exposures as defined under Item 2 of
those recorded under Real and Other Section 1397, and other real estate property
Properties Acquired and Non-Current of TBs. Other real estate property shall
Assets Held for Sale. include those recorded under Real and
For this purpose, a stress test will be Other Properties Acquired and Non-Current
undertaken on a UB’s/KB’s REEs (Real Estate Assets Held for Sale. For this purpose, a stress
Exposures) and other real estate property test will be undertaken on a TB’s REEs and
under an assumed write-off rate of twenty- other real estate property under an assumed
five percent (25%). write-off rate of twenty-five percent (25%).

§§ 2397 - X398.4
16.09.30
The prudential REST limits which shall effects of the proposed credit operation on
be complied with at all times by TBs are: monetary aggregates, the price level and the
a. six percent (6%) of CET I capital, for balance of payments (BOP), pursuant to
TBs that are subsidiaries of UBs/KBs; Section 123 of Republic Act No. 7653, as
b. six percent (6%) of Tier I capital, for well as other pertinent laws and regulations
stand-alone TBs1; and shall be governed by the guidelines as
c. ten percent (10%) of risk-based CAR contained in Appendix 57.
for all TBs. (Circular No.769 dated 26 September 2012, as amended by
Circular Nos. 926 dated 13 September 2016 and 819 dated 12
A TB which does not meet either or both
November 2013)
the REST limits shall be directed to explain
why its exposures do not warrant § X398.2 Debt service limit on local
immediate remedial action. The Monetary government borrowings. To ensure the
Board, upon the report of the appropriate effective implementation of the debt service
supervising department of the SES, shall limit on local government borrowings as
determine whether the TB has been able to stipulated in Section 324 (b) of the Local
render sufficient explanation, otherwise, the Government Code of 1991, all banks shall
TB shall be directed to submit an action plan, require each borrowing LGU to present a
within thirty (30) calendar days from date certificate of its debt service and borrowing
of notification, to meet the REST limits within capacity, duly certified by the Bureau of
a reasonable time frame. Local Government Finance – Department
A TB which fails to submit an action of Finance (BLGF DOF).
plan or persistently breaches the REST limits (CL-2012-030 dated 29 April 2012, Circular No. 769 dated
due to non-compliance with the commitments 26 September 2012)
in its submitted action plan may be
considered to be engaging in unsafe and § X398.3 Domestic borrowings by
unsound practice, to be determined in Government-Owned and/or –Controlled
accordance with Section 56 of R.A. No. 8791, Corporations (GOCCs), Local Water
as implemented by Sec. X149, and shall Districts (LWDs) and State Universities and
subject the TB to appropriate sanctions. Colleges (SUCs) pursuant to Section 123
(Circular No. 839 dated 27 June 2014, as amended by Circular of R.A. No. 7653. The domestic borrowings
No. 890 dated 02 November 2015) of GOCCs, LWDs, and SUCs within the
Philippines, the procedures to be observed
Sec. 3397 (Reserved) as well as the documentary requirements
to be submitted, relative to the requests for
Sec. X398 Monetary Board Opinion on Monetary Board opinion on the probable
Domestic Borrowings of Government. effects of the proposed credit operation on
monetary aggregates, the price level and the
§ X398.1 Domestic borrowings by local BOP, pursuant to Section 123 of
government units (LGUs) pursuant to R.A. No. 7653, as well as other pertinent
Section 123 of R.A. No. 7653. The laws and regulations shall be governed by
domestic borrowings of LGUs within the the guidelines as contained in
Philippines, the procedures to be observed Appendix 57A.
as well as the documentary requirements (Circular No. 926 dated 13 September 2016)
to be submitted, relative to the requests for
Monetary Board opinion on the probable § X398.4 (Reserved)
1
TBs that are not subsidiaries of UBs and KBs.

§§ X398.5 - X399
16.09.30
§ X398.5 Enforcement actions. Any L. GENERAL PROVISION

violation of Sec. X398 shall be subject to ON SANCTIONS
appropriate enforcement/supervisory
action/s provided under Sec. X009 and Sec. X399 General Provision on Sanctions.
Sections 36 and 37 of R.A. No. 7653, as Any violation of the provisions of this Part
well as those contained in other applicable shall be subject to Sections 36 and 37 of
regulations of the Bangko Sentral. Imposition R.A. No. 7653.
of applicable enforcement action shall be The guidelines for the imposition of
on a per loan/borrowing account, regardless monetary penalty for violations/offenses
of the number of tranches or releases from with sanctions falling under Section 37 of
the same loan/borrowing. R. A. No. 7653 on banks, their directors
(Circular No. 926 dated 13 September 2016) and/or officers are shown in Appendix 67.

§ X401
14.12.31
PART FOUR
TRUST, OTHER FIDUCIARY BUSINESS AND INVESTMENT

MANAGEMENT ACTIVITIES
Section X401 Statement of Principles proprietary assets and from one (1) fiduciary/
The cardinal principle common to all trust trust/investment management account to
and other fiduciary relationships is fidelity. another.
Policies predicated upon this principle shall e. Keeping and rendering accounts. A
be directed towards observance of the true and accurate account or record of
following: transactions entered into shall be kept.
a. Prudent administration. The trust, Reports on the trust, investment management
investment management and other fiduciary and other fiduciary accounts shall be
accounts shall be administered in rendered to the trustor, principal, beneficiary,
conformity with the intention and purpose or other party in interest, or the court
of the client as manifested in the terms of concerned, or any party duly designated by
the agreement, and with the skill, care, a court order, as the case may be, in accordance
prudence and diligence necessary under the with Secs. X421 and X425. Likewise, all
circumstance then prevailing that a prudent material facts within the knowledge or
man acting in like capacity and familiar with reasonably discoverable by the TE, particularly
such matters would exercise in the conduct information that would enable clients to
of an enterprise of like character and with make well-informed decisions, shall be
similar aims. promptly transmitted/relayed to clients for
b. Undivided loyalty and utmost care. them to protect their interests.
In the discharge of fiduciary responsibility, Furthermore, practices shall be carried
the interests of clients shall be placed above out in accordance with the basic standards
those of the bank. Clear policies and (Appendix 83) and Risk Management
procedures shall be developed in dealing Guidelines (Appendix 83a) for trust, other
with conflict of interest situations. The fiduciary and investment management
fiduciary assets shall be objectively and accounts.
fairly administered, invested and distributed A bank authorized to engage in trust
giving due regard to the beneficiaries’ and fiduciary business is under no
respective interests. obligation, either legal or moral, to accept
c. Non-delegation of responsibilities. any such business being offered nor has it
The administration of the trust, investment the right to accept if the same is contrary to
management, or fiduciary responsibilities or law, rules, regulations, public order and
the performance of acts that should be public policy. It shall advertise its services
personally performed shall not be delegated in a dignified manner and enter such
as the client’s confidence is reposed on the business only when demand for such service
trust entity (TE). is evident, when specially equipped to
d. Preserving and protecting property. render such service and upon full
Reasonable care and diligence shall be appreciation of the responsibilities involved.
observed to preserve and protect the It shall be ready and willing to give full
property entrusted. Fiduciary assets shall be disclosure of the services being offered and
kept legally separate and distinct from shall conduct its dealing with transparency.
Manual of Regulations for Banks Part IV - Page 1

§§ X401 - X403
14.12.31
Harmonious relationship shall likewise be including investment management activities;

pursued with other professions to achieve B. Investment Management Activities
the common goal of mutual service to the shall apply to banks without trust authority
public and protection of its interest. but with authority to engage in investment
Banks may not receive or hold as trustee, management activities; and
agent, administrator, financial manager, or C. General Provisions shall apply to both.
other similar capacity, any fund or money
from the Government and government Sec. X403 Definitions. For purposes of
entities, except government financial regulating the operations of trust and other
institutions. Government-owned banks may fiduciary business and investment
receive or hold as trustee, agent, management activities, unless the context
administrator, financial manager, or other clearly connotes otherwise, the following
similar capacity, the following: shall have the meaning indicated.
a. Funds of local government units a. Trust entity (TE) shall refer to a:
(LGUs) which are expected to be available (1) bank or an NBFI, through its
for investment purposes for a relatively long specifically designated business unit to
period of time: Provided, further, That the perform trust functions; or
amounts held in trust or otherwise (2) trust corporation, authorized by the
managed/advised for and in behalf of the Bangko Sentral to engage in trust and other
LGUs shall be invested only in government fiduciary business under Section 79 of R.A.
securities, specifically, evidences of No. 8791 (The General Banking Law of
indebtedness of the National Government, 2000) or to perform investment management
the Bangko Sentral and other evidences of services under Section 53 of R.A. No. 8791.
indebtedness or obligations of government b. Trust business shall refer to any
entities, the servicing and repayment of activity resulting from a trustor-trustee
which are fully guaranteed by the National relationship (trusteeship) involving the
Government; and appointment of a trustee by a trustor for the
b. Funds of government and government administration, holding, management
entities which are authorized by special laws of funds and/or properties of the trustor by
to be placed in trust. the trustee for the use, benefit or advantage
(As amended by Circular Nos.828 dated 11 March 2014, 766 of the trustor or of others called
dated 17 August 2012, 721 dated 13 May 2011 and 618 dated 20 beneficiaries.
August 2008) c. Other fiduciary business shall refer
to any activity of a trust-licensed bank
Sec. X402 Scope of Regulations. These resulting from a contract or agreement
regulations shall govern the grant of whereby the bank binds itself to render
authority to and the management, services or to act in a representative
administration and conduct of trust, other capacity such as in an agency, guardianship,
fiduciary business and investment administratorship of wills, properties and
management activities (as these terms are estates, executorship, receivership, and
defined in Sec. X403) of banks. other similar services which do not create
The regulations are divided into three or result in a trusteeship. It shall exclude
(3) Sub-Parts where: collecting or paying agency arrangements
A. Trust and Other Fiduciary Business and similar fiduciary services which are
shall apply to banks authorized to engage inherent in the use of the facilities of the
in trust and other fiduciary business other operating departments of said bank.
Part IV - Page 2 Manual of Regulations for Banks

§ X403
12.12.31
Investment management activities, which called an agent, under a contract to enter

are considered as among other fiduciary into transactions in his behalf.
business, shall be separately defined in the m. Agent shall refer to a person who
succeeding item to highlight its being a acts in representation or on behalf of
major source of fiduciary business. another with the latter’s authority.
d. Investment management activity n. Trust department shall refer to then
shall refer to any activity resulting from a department, office, unit, group, division or
contract or agreement primarily for any aggrupation which carries out the trust
financial return whereby the bank (the and other fiduciary business of a bank.
investment manager) binds itself to handle o. Trust officer shall refer to the
or manage investible funds or any designated head or officer-in-charge of the
investment portfolio in a representative trust department.
capacity as financial or managing agent, p. Trust account shall refer to an
adviser, consultant or administrator of account where transactions arising from a
financial or investment management, trusteeship are kept and recorded.
advisory, consultancy or any similar q. Common trust fund (CTF) shall
arrangement which does not create or refer to a fund maintained by a bank
result in a trusteeship. authorized to perform trust functions
e. Trust is a relationship or an under a written and formally established
arrangement whereby a person called a plan, exclusively for the collective
trustee is appointed by a person called a investment and reinvestment of certain
trustor to administer, hold and manage money representing participation in the plan
funds and/or property of the trust or for the received by it in its capacity as the trustee.
benefit of a beneficiary. r. Fiduciary account shall refer to an
f. Trust agreement is an instrument account where transactions arising from
in writing covering the terms and any of the other fiduciary businesses are
conditions of the trust. kept and recorded.
g. Trustee is any person who holds s. Investment Manager shall refer to any
legal title to the funds and/or property of a person or entity engaged in investment
trust. management activities as herein defined.
h. Trustor is any person who creates t. Investment Management Department
a trust. shall refer to the department, unit, group,
i. Beneficiary is any person for division or any aggrupation which carries
whose benefit a trust is created. out the investment management activities of
j. Fiduciary shall refer to any person a bank that does not have an authority to
or entity engaged in any of the other engage in trust and other fiduciary
fiduciary business as herein defined where business.
no trustor-trustee relation exists. u. Investment Management Officer shall
k. Agency shall refer to a contract refer to the designated head or officer-in-
whereby a person binds himself to charge of the investment management
render some service or to do something in department of a bank which does not have
representation or on behalf of another, with the authority to engage in trust and other
the consent or authority of the latter. fiduciary business.
l. Principal shall refer to the person v. Investment Management Account
who grants authority to another person shall refer to an account where

§§ X403 - X404.3
12.12.31
transactions arising from investment with the appropriate department of the SES.
management activities are kept and The application shall be signed by the bank’s
recorded. president or officer of equivalent rank and
(As amended by Circular No.766 dated 17 August 2012) shall be accompanied by the following
documents:
a. Certified true copy of the resolution
A. TRUST AND OTHER of the institution’s board of directors
FIDUCIARY BUSINESS authorizing the application; and
b. A certification signed by the
Sec. X404 Authority to Perform Trust and president or the officer of equivalent rank
Other Fiduciary Business. With prior that the institution has complied with all
approval of the Monetary Board, banks may conditions/prerequisites for the grant of
engage in trust and other fiduciary business authority to perform trust and other
under Chapter VII of R.A. No. 337, as fiduciary business.
amended.
If a bank is found to engage in § X404.2 Required capital. Banks
unauthorized trust and other fiduciary applying for authority to perform trust and
business and/or investment management other fiduciary business must have
activities, whether as its primary, secondary minimum capital accounts as follows:
or incidental business, the Monetary Board UBs/KBs. The amount required under
may impose administrative sanctions against Sec. X111 or such amount as may be
such bank or its principal officers and/or required by the Monetary Board in the
majority stockholders or proceed against future.
them in accordance with law. Branches of foreign banks. The amount
The Monetary Board may take such action required under Sec. X105 or such amount
as it may deem proper such as, but may not as may be required by the Monetary Board
be limited to, requiring the transfer or in the future.
turnover of any trust and other fiduciary and/ TBs. P650.0 million or such amounts
or investment management account (IMA) as may be required by the Monetary Board
to duly incorporated and licensed entities in the future.
of the choice of the trustor, beneficiary or Banks authorized to perform and are
client, as the case may be. actually performing trust and other fiduciary
No bank shall advertise or represent business prior to 20 August 2002 whose
itself as being engaged in trust and other capital accounts are lower than the
fiduciary business or in investment management above-prescribed minimum capital
activities or represent itself as trustee or accounts shall, before declaring any
investment manager or use words of similar dividend, carry to surplus at least fifty
import; and/or use in connection with its percent (50%) of their net income from all
business title the words trust, trust corporation, operations since the last preceding dividend
trust company, trust plan or words of similar until such time that their capital accounts
import, without having obtained the meet the above requirement.
required authority to do so.
§ X404.3 Prerequisites for engaging in
§ X404.1 Application for authority to trust and other fiduciary business. Before
perform trust and other fiduciary business it may engage in trust and other fiduciary
Banks desiring to perform trust and other business, a bank shall comply with the
fiduciary business shall file an application following requirements:

§ X404.3
09.12.31
a. The applicant has been duly licensed board of directors conducted or accredited
or incorporated as a bank or created as such by the Bangko Sentral;
by special law or charter; (3) the ceilings on credit
b. The articles of incorporation or accommodations to DOSRI;
governing charter of the institution shall (4) liquidity floor requirements for
include among its powers or purposes, government deposits;
acting as trustee or administering any trust (5) single borrower’s limit; and
or holding property in trust or on deposit (6) investment in bank premises and
for the use, or in behalf of others; other fixed assets;
c. The by-laws of the institution shall h. It maintains adequate provisions for
include among other things, provisions on probable losses commensurate to the quality
the following; of its asset portfolio but not lower than the
(1) The organization plan or structure required valuation reserves as determined
of the department, office or unit which shall by the Bangko Sentral;
conduct the trust and other fiduciary i. It does not have float items outstanding
business of the institution; for more than sixty (60) calendar days in the
(2) The creation of a trust committee, “Due From/To Head Office/Branches/Other
the appointment of a trust officer and Offices” accounts and the “Due from
subordinate officers of the trust department; Bangko Sentral” account exceeding one
and
percent (1%) of the total resources as of date
(3) A clear definition of the duties and
of application;
responsibilities as well as the line and staff
j. It has no past due obligations with the
functional relationships of the various units,
Bangko Sentral or with any government
officers and staff within the organization;
financial institution;
d. The bank’s operation during the
k. It has established a risk management
preceding calendar year and for the period
system appropriate to its operations
immediately preceding the date of
application has been profitable; characterized by clear delineation of
e. The bank is well capitalized whose responsibility for risk management, adequate
risk-based capital adequacy ratio is not risk measurement systems, appropriately
lower than twelve percent (12%) at the time structured risk limits, effective internal
of filing the application; controls and complete, timely and efficient
f. It has not incurred net weekly reserve risk reporting system;
deficiencies during the eight (8)-week period l. It has a CAMELS composite rating of
immediately preceding the date of at least “3” in the last regular examination
application; with management rating of not lower than
g. It has generally complied with “3”; and
banking laws, rules and regulations, orders m. It has neither unpaid assessment due
or instructions of the Monetary Board and/ nor past due obligations with the PDIC.
or Bangko Sentral Management in the last Compliance with the foregoing as well
two (2) preceding examinations prior to the as with other requirements under existing
date of application, particularly on the regulations shall be maintained up to the
following: time the trust license is granted. A bank that
(1) election of at least two (2) fails in this respect shall be required to show
independent directors; compliance for another test period of the
(2) attendance by every member of the same duration.
board of directors in a special seminar for (As amended by Circular No. 674 dated 10 December 2009)

§§ X404.4 - 2404
16.09.30
§ X404.4 Pre-operating requirements. c. Application for authority to engage

A bank authorized to engage in trust and in limited trust business. A TB desiring to
other fiduciary business shall, before engage in a limited trust business shall file
engaging in actual operations, submit to the an application with the appropriate
Bangko Sentral the following: department of the SES. The application shall
a. Government securities acceptable to be signed by the bank president or officer
the Bangko Sentral amounting to P500,000 of equivalent rank and shall be accompanied
as minimum basic security deposit for the by the following documents:
faithful performance of trust and (1) Certified true copy of the resolution
other fiduciary duties required under of the bank’s board of directors authorizing
Subsec. X405.1; the application; and
b. Organization chart of the trust (2) Certification signed by the bank
department which shall carry out the trust president or officer of equivalent rank that
and other fiduciary business of the bank; and the bank has complied with all the
c. Names and positions of individuals conditions/pre-requisites for the grant of
designated as chairman and members of the authority to engage in a limited trust
trust committee, trust officer and other business.
subordinate officers of the trust department d. Required capital. A TB applying for
with their respective bio-data and statement authority to engage in limited trust business
of duties and responsibilities. must have minimum capital accounts under
existing regulations or P100.0 million,
Sec. 1404 (Reserved) whichever is higher, or such amounts as
may be required by the Monetary Board in
Sec. 2404 Grant of Authority to Engage in the future.
Limited Trust Business to Thrift Banks. e. Pre-requisites for the grant of authority
a. Statement of policy. It is hereby to engage in limited trust business. A TB
declared the policy of the Bangko Sentral to applying for authority to engage in limited
promote healthy competition in order to trust business must comply with the
improve the delivery of banking services following requirements:
especially in the countryside. Towards this (1) The bank’s operation during the
end, authority to engage in limited trust preceding calendar year and for the period
business shall be granted to qualified TBs immediately preceding the date of
which meet the minimum capital required application has been profitable;
for the grant of such authority, among others. (2) The bank is well capitalized whose
b. Scope of limited trust business. risk-based CAR is not lower than twelve
Limited trust business shall be confined to: percent (12%) at the time of filing the
(1) court trusts or trusts under orders of application;
court of competent jurisdiction, such as (3) It has not incurred net weekly reserve
acting as: deficiencies within eight (8) weeks
(a) executor or administrator of a will; immediately preceding the date of
and application;
(b) guardian of the estate of a minor or (4) It has generally complied with
incompetent; and banking laws, rules and regulations, orders
(2) administration of properties. or instructions of the Monetary Board and/

§ 2404
16.09.30
or Bangko Sentral Management in the last f. Requirements for engaging in limited

two (2) preceding examinations prior to the trust business. A TB authorized to engage
date of application, more particularly: in limited trust business shall comply with
(a) election of at least two (2) the following requirements:
independent directors; (1) The articles of incorporation of the
(b) attendance by every member of the bank shall include among its powers or
board of directors in a special seminar for purposes, acting as trustee or administering
board of directors conducted or accredited trust or holding property in trust or on
by the Bangko Sentral; deposit for the use, or in behalf of others;
(c) the ceilings on credit (2) The by-laws of the bank shall include
accommodations to DOSRI; among others, provisions on the following:
(d) liquidity floor requirements for (a) The organization plan or structure of
government deposits; the department, office or unit which shall
(e) SBL; and conduct the trust and other fiduciary
(f) investment in bank premises and business of the bank;
other fixed assets; (b) The creation of a trust committee, to
(5) It maintains adequate provisions for be composed of at least three (3) members
probable losses commensurate to the quality who are all members of the board of
of its asset portfolio but not lower than the directors and who are not operating officers
required valuation reserves as determined of the bank, and at least two (2) of whom
by the Bangko Sentral; are independent directors: Provided, That if
(6) It does not have float items the bank decides to have a trust committee
outstanding for more than sixty (60) calendar composed of at least five (5) members, the
days in the “Due From/To Head Office/ provisions of Subsec. X406.2 shall apply;
Branches/Offices” accounts and the “Due (c) The appointment of a trust officer and
From Bangko Sentral” account exceeding subordinate officers of the trust department,
one percent (1%) of the total resources as office or unit: Provided, That the trust officer
of date of application; shall have the following:
(7) It has no past due obligations with (i) At least two (2) years of actual
the Bangko Sentral or with any government experience in trust operations; or
FI; (ii) At least one (1) year of actual
(8) It has established a risk management experience in trust operations and:
system appropriate to its operations 1) completion of a training program in
characterized by clear delineation of trust, other fiduciary business, or investment
responsibility for risk management, adequate management activities acceptable to the
risk measurement systems, appropriately Bangko Sentral; or
structured risk limits, effective internal 2) completion of a relevant global or
controls and complete, timely and efficient local professional certification program; or
risk reporting system; (iii) At least two (2) years of actual
(9) It has a CAMELS composite rating of experience as officer of a bank/NBFI or
at least “3” in the last regular examination related activities; and
with Management rating not lower than 1) completion of a training program in
“3”; and trust, other fiduciary business, or investment
(10) It has neither unpaid assessment management activities acceptable to the
due nor past due obligations with the PDIC; Bangko Sentral; or

§§ 2404 - 3404
16.09.30
2) completion of a relevant global or (a) executor or administrator of a will;

local professional certification program; and
(d) A clear definition of the duties and (b) guardian of the estate of a minor or
responsibilities as well as the line and staff incompetent; and
functional relationships of the various units, (2) administration of properties.
officers and staff within the organization. c. Application for authority to engage
g. Administration of properties held in in limited trust business. An RB desiring to
trust. The properties held in trust or other engage in a limited trust business shall file
fiduciary capacity shall be administered in an application with the appropriate
accordance with the terms of the instrument department of the SES. The application shall
creating the trust and/or order of the court. be signed by the bank president or officer
Unless otherwise directed in writing by the of equivalent rank and shall be accompanied
court, investments of fiduciary funds shall by the following documents:
be limited to: (1) Certified true copy of the resolution
(1) Bank deposits; and of the bank’s board of directors authorizing
(2) Evidences of indebtedness of the the application; and
Republic of the Philippines or of the Bangko (2) Certification signed by the bank
Sentral, and any other evidences of president or officer of equivalent rank that
indebtedness or obligations the servicing the bank has complied with all the
and repayment of which are fully guaranteed conditions/pre-requisites for the grant of
by the Republic of the Philippines; authority to engage in a limited trust
h. Applicability of the rules and business.
regulations on trust, other fiduciary business d. Required capital. An RB applying for
and investment management activities. The authority to engage in limited trust business
provision of this Part which are not must have minimum capital accounts of
inconsistent with the provisions of this P100.0 million, or such amounts as may be
Section shall apply to TBs authorized to required by the Monetary Board in the
engage in limited trust business. future.
(Circular No. 583 dated 24 September 2007, as amended by e. Pre-requisites for the grant of authority
Circular Nos. 917 dated 08 July 2016, 766 dated 17 August 2012
to engage in limited trust business. An RB
applying for authority to engage in limited
trust business must comply with the
Sec. 3404 Grant of Authority to Engage in
following requirements:
Limited Trust Business to Rural Banks.
(1) The bank’s operation during the
a. Statement of policy. It is hereby
preceding calendar year and for the period
declared the policy of the Bangko Sentral to immediately preceding the date of
promote healthy competition in order to application has been profitable;
improve the delivery of banking services (2) The bank is well capitalized whose
especially in the countryside. Towards this risk-based CAR is not lower than twelve
end, authority to engage in limited trust percent (12%) at the time of filing the
business shall be granted to qualified RBs application;
which meet the minimum capital required (3) It has not incurred net weekly reserve
for the grant of such authority, among others. deficiencies within eight (8) weeks
b. Scope of limited trust business. immediately preceding the date of
Limited trust business shall be confined to: application;
(1) court trusts or trusts under orders of (4) It has generally complied with
court of competent jurisdiction, such as banking laws, rules and regulations, orders
acting as: or instructions of the Monetary Board and/

§ 3404
16.09.30
or Bangko Sentral Management in the last in limited trust business shall comply with
two (2) preceding examinations prior to the the following requirements:
date of application, more particularly: (1) The articles of incorporation of the
(a) election of at least two (2) bank shall include among its powers or
independent directors; purposes, acting as trustee or administering
(b) attendance by every member of the trust or holding property in trust or on
board of directors in a special seminar for deposit for the use, or in behalf of others;
board of directors conducted or accredited (2) The by-laws of the bank shall include
by the Bangko Sentral; among others, provisions on the following:
(c) the ceilings on credit (a) The organization plan or structure of
accommodations to DOSRI; the department, office or unit which shall
(d) liquidity floor requirements for conduct the trust and other fiduciary
government deposits; business of the bank;
(e) SBL; and (b) The creation of a trust committee, to
(f) investment in bank premises and be composed of at least three (3) members
other fixed assets; who are all members of the board of
(5) It maintains adequate provisions for directors and who are not operating officers
probable losses commensurate to the quality of the bank, and at least two (2) of whom
of its asset portfolio but not lower than the are independent directors: Provided, That if
required valuation reserves as determined the bank decides to have a trust committee
by the Bangko Sentral; composed of at least five (5) members, the
(6) It does not have float items provisions of Subsec. X406.2 shall apply;
outstanding for more than sixty (60) calendar (c) The appointment of a trust officer and
days in the “Due From/To Head Office/ subordinate officers of the trust department,
Branches/Offices” accounts and the “Due office or unit: Provided, That the trust officer
shall have the following:
From Bangko Sentral” account exceeding
(i) At least two (2) years of actual
one percent (1%) of the total resources as
experience in trust operations; or
of date of application;
(ii) At least one (1) year of actual
(7) It has no past due obligations with
experience in trust operations and:
the Bangko Sentral or with any government
1) completion of a training program in
FI;
trust, other fiduciary business, or investment
(8) It has established a risk management
management activities acceptable to the
system appropriate to its operations
Bangko Sentral; or
characterized by clear delineation of
2) completion of a relevant global or
responsibility for risk management, adequate
local professional certification program; or
risk measurement systems, appropriately (iii) At least two (2) years of actual
structured risk limits, effective internal experience as officer of a bank/NBFI or
controls and complete, timely and efficient related activities and:
risk reporting system; 1) completion of a training program in
(9) It has a CAMELS composite rating of trust, other fiduciary business, or investment
at least “3” in the last regular examination management activities acceptable to the
with Management rating not lower than Bangko Sentral; or
“3”; and 2) completion of a relevant global or
(10) It has neither unpaid assessment local professional certification program;
due nor past due obligations with the PDIC. (d) A clear definition of the duties and
f. Requirements for engaging in limited responsibilities as well as the line and staff
trust business. An RB authorized to engage functional relationships of the various units,

§§ 3404 - X405.2
16.09.30
officers and staff within the organization. of PERA Administrator shall be separately
g. Administration of properties held in accounted for and calculated as prescribed
trust. The properties held in trust or other under Sec. X960 and Appendix 34a.
fiduciary capacity shall be administered in (As amended by Circular Nos. 878 dated 22 May 2015 and 509
accordance with the terms of the instrument dated 01 February 2006)
creating the trust and/or order of the court.
§ X405.2 Eligible securities.
Unless otherwise directed in writing by the
Government securities which shall be
court, investments of fiduciary funds shall
deposited in compliance with the above
be limited to:
basic security deposit shall consist of:
(1) Bank deposits; and
a. Evidences of indebtedness of the
(2) Evidences of indebtedness of the
Republic of the Philippines and of the
Republic of the Philippines or of the Bangko
Bangko Sentral and any other evidences of
Sentral, and any other evidences of
indebtedness or obligations the servicing
indebtedness or obligations the servicing
and repayment of which are fully guaranteed
and repayment of which are fully guaranteed
by the Republic of the Philippines; and such
by the Republic of the Philippines;
other kinds of securities which may be
h. Applicability of the rules and
declared eligible by the Monetary Board:
regulations on trust, other fiduciary business
Provided, That such securities shall be free,
and investment management activities. The
unencumbered, and not utilized for any
provision of this Part which are not
other purpose: Provided, further, That such
inconsistent with the provision of this
securities shall have remaining maturity
Section shall apply to RBs authorized to
of not more than three (3) years from the
engage in limited trust business.
date of deposit with the Bangko Sentral;
(Circular No. 583 dated 24 September 2007, as amended by
Circular Nos. 917 dated 08 July 2016, 766 dated 17 August 2012 and
and 674 dated 10 December 2009) b. NDC Agri-Agra ERAP Bonds which
are not being used as alternative compliance
Sec. X405 Security for the Faithful with P.D. No. 717. The requirement that
Performance of Trust and Other Fiduciary the securities used shall have a remaining
Business. maturity of not more than three (3) years
shall not apply.
§ X405.1 Basic security deposit. A bank c. Five (5)- and Ten (10)-year SPTBs to
authorized to engage in trust and other finance the CARP-related expenditures,
fiduciary business shall deposit with the provided such bonds shall not be
Bangko Sentral eligible government hypothecated in any way or earmarked for
securities as security for the faithful any other purpose and they meet the three
performance of its trust and other fiduciary (3)-year remaining maturity requirement to
duties equivalent to at least one percent (1%) ensure that such bonds are liquid.
of the book value of the total volume of trust, d. Securities backed by the unreleased
other fiduciary and investment management IRAs of LGUs (issued by a Special Purpose
assets: Provided, That at no time shall such Trust administered by the DBP under the
deposit be less than P500,000. IRA Monetization Program of the Union of
Scripless securities under the Registry Local Authorities of the Philippines) the
of Scripless Securities (RoSS) System of the release of which IRA on scheduled date of
Bureau of Treasury (BTr) may be used as payment has been certified by the DBM as
basic security deposit for trust and other not being subject to any conditionalities:
fiduciary duties using the Guidelines Provided, That such securities shall be
enumerated in Appendix 34. eligible only to the extent of the present
The security for the faithful performance value of the bond computed using the

§§ X405.2 - X405.4
08.12.31
original yield to maturity (as of auction/ The base amount for the basic security
issue date): Provided, further, That for deposit shall be the average of the month-
reserve for trust and other fiduciary duties, end balances of total trust, investment
the remaining maturities of the securities management and other fiduciary assets of
shall not exceed three (3) years; and the immediately preceding calendar quarter.
e. Zero Coupon Bond Issue by the HGC
of up to P7.0 billion five (5)-year regular § X405.4 Compliance period; sanctions.
series and up to P3.0 billion seven (7)-year The trustee or fiduciary shall have thirty (30)
special series to finance its guaranty calendar days after the end of every calendar
servicing of socialized and low-cost quarter within which to deposit with the
housing projects: Provided, That they meet Bangko Sentral the securities required under
the three (3)-year remaining maturity this Section.
requirement to ensure that such bonds are The following sanctions shall be
liquid: Provided, further, That such bonds imposed for any deficiency in the basic
shall qualify as eligible reserve for trust and security deposit for the faithful
other fiduciary duties only to the extent of performance of trust, investment
the present value of the bond computed management and other fiduciary duties:
using the original yield to maturity (as of a. On the bank:
auction/issue date). i. Monetary penalty/ies:
f. Tobacco Excise Tax Receivable
Monetization Program Investment Offense Third and
Certificates (TEXTR Certificates) backed by Trust First Second subsequent
receivables representing the unreleased portion Asset Size offense(s)
of the obligation of the National Government TBs/RBs with
to its LGUs for their share of the Tobacco Limited Trust P300.00 P400.00 P500.00
Excise Taxes under R.A. No. 7171 amounting Authority
to P1.85 billion and covering the years 2001 Up to
and 2002: Provided, That such securities P500 P600.00 P700.00 P800.00
shall be eligible only to the extent of the million
UBs/KBs/TBs with Full Trust Authority and with Trust Assets of
present value of the securities computed Above

using the original yield to maturity as of P500
Penalty per calendar day
auction/issue date. million P1,000.00 P1,250.00 P1,500.00

g. Securities received, pursuant to the but not
Domestic Debt Exchange Offer of the Republic exceeding
of the Philippines, in exchange for securities P1 billion
that are eligible reserves for trust duties. Above
(As amended by Circular No. 509 dated 01 February 2006) P1 billion
but not P2,000.00 P3,000.00 P4,000.00
§ X405.3 Valuation of securities and exceeding
basis of computation of the basic security P10 billion
deposit requirement. For purposes of Above
determining compliance with the basic P10 billion
security deposit under this Section, the but not P5,000.00 P6,000.00 P7,000.00
amount of securities so deposited shall be exceeding
based on their book value, that is, cost as P50 billion
increased or decreased by the corresponding Above
discount or premium amortization. P50 billion P8,000.00 P9,000.00 P10,000.00

§§ X405.4 - X405.5
16.03.31
ii. Non-monetary penalty beginning § X405.5 Reserves 1 against peso-

with the third offense (all banks) - Prohibition denominated common trust funds and
against the acceptance of new trust and other trust and other fiduciary accounts -
fiduciary accounts, and from renewing others.
expiring trust and other fiduciary contracts a. Reserves against peso-denominated
up to the time the violation is corrected. CTFs. In addition to the basic security
b. On the trust officer and/or other deposit, a bank authorized to engage in trust
officer(s) responsible for the deficiency/non- and other fiduciary business shall maintain
compliance: reserves on:
(1) First offense - warning that subsequent (1) peso-denominated CTF; and
violations shall be dealt with more severely; (2) such other managed peso funds
(2) Second offense - written reprimand which partake the nature of collective
with a stern warning that subsequent investment of a peso-denominated CTF as
violations shall be subject to suspension; may be indicated by the presence of the
(3) Third offense - thirty (30) calendar following features:
day-suspension without pay; and (a) The funds are composed of
(4) Subsequent offense(s) - sixty (60) contributions from two (2) or more investors;
calendar day-suspension without pay. (b) The funds are managed/administered
For purposes of determining the frequency as a vehicle for collective investment and
of the violation, the bank’s compliance profile reinvestment;
for the immediately preceding three (3) years (c) The trustee/administrator/agent has
or twelve (12) quarters will be reviewed: the exclusive management and control over
Provided, That for purposes of determining the funds and the sole right at any time to
appropriate penalty on the trust officer and/or sell, convert, invest, exchange, transfer or
other responsible officer(s), any offense otherwise change or dispose of the assets
committed outside the preceding three (3) year comprising the funds; and
or twelve (12) quarter- period shall be (d) Investments/contributions to, or
considered as the first offense: Provided, withdrawals from, the funds are being
further, That in the case of trust officer, all allowed at anytime or as of a fixed date in
offenses committed by him in the past as trust the future, and/or the income, net of all
officer of other institution(s) shall also be expenses incurred in the management of the
considered: Provided, finally, That if the fund plus the fee of the trustee/administrator/
offense cannot be attributed to any other officer agent, are being distributed among the
of the bank, the trust officer shall be participants of the funds, without the need
automatically held responsible since the to liquidate all assets of the funds.
ultimate responsibility for ensuring compliance The required reserves against
with the regulation rests upon him, as evidence peso-denominated CTFs and such other
may warrant. managed peso funds which partake the
(As amended by Circular Nos. 617 dated 30 July 2008 and nature of a collective investment of
585 dated 15 October 2007) peso-denominated CTFs shall be as follows:
1
Reserve week starting 11 April 2014, the required reserves shall be as follows:
For reserves against peso –denominated CTFs and TOFA-Others
CTFs TOFA-Others
UBs/KBs 19% 16%
TBS 8% 8%
Increase in reserve requirements shall take effect on the reserve week starting 30 May 2014.

§§ X405.5 - X405.7
16.03.31
UBs/KBs - 20%1 fiduciary business with the Bangko Sentral

TBs - 9%1 in compliance with the reserve requirement
RBs - 4% shall no longer be paid interest effective
06 April 2012.
b. Reserves against TOFA - Others. In (As amended by Circular No. 753 dated 29 April 2012)
addition to the basic security deposit, banks/
institutions authorized to engage in trust and § X405.7 Computation of reserve
other fiduciary business shall maintain position. A bank authorized to engage in
reserves on TOFA - Others, except accounts trust and other fiduciary business shall
held under (1) Administratorship; (2) Trust calculate daily the required and available
Under Indenture; (3) Custodianship and reserves on the value per books of its peso-
Safekeeping; (4) Depository and denominated CTFs and such other managed
Reorganization; (5) Employee Benefit Plans peso funds, as well as on TOFA-Others,
Under Trust; (6) Escrow; (7) P e r s o n a l based on the seven-day week, starting
Trust (testamentary or living trust); Friday and ending Thursday including
(8) Executorship; (9) Guardianship; (10) Life Saturdays, Sundays, holidays, non-banking
Insurance Trust; (11) Pre-need Plans days or days when there is no clearing:
(institutional/ individual); (12) Personal Provided, That with reference to holidays,
Equity and Retirement Account (PERA); and non-banking days and days where there is
(13) Legislated and Quasi-Judicial Trust. no clearing, the reserve position at the close
The required reserves against TOFA- of banking day immediately preceding such
Others shall be as follows: holidays, non-banking days or days where
UBs/KBs - 17%1 there is no clearing, shall apply. For the
TBs - 9%1 purpose of computing reserve position, the
RBs - 4% principal office in the Philippines and all
(As amended by Circular Nos. 906 dated 10 March 2016, branches and agencies located therein shall
890 dated 02 November 2015, 878 dated 22 May 2015, 832 be treated as a single unit.
dated 27 May 2014, 830 dated 03 April 2014, 753 dated The required reserves in the current
29 March 2012, 551 dated 17 November 2006 and 539 dated
09 August 2006) period (reference reserve week) shall be
computed based on the corresponding
§ X405.6 Composition of reserves. levels of peso-denominated CTFs and such
The provisions of Sec. X254 shall other managed peso funds, as well as on
govern the composition of reserves against TOFA-Others of the prior week.
peso-denominated CTFs and such other For purposes of computing the required
managed peso funds, as well as TOFA- and available statutory and liquidity reserves
Others, of banks authorized to engage in for peso-denominated CTFs and such other
trust and other fiduciary business. managed peso funds, as well as TOFA-
For purposes of this Subsection, a separate Others, the term value per books shall refer
deposit account shall be maintained by banks to the total volume of CTFs, other managed
with the Bangko Sentral exclusively for trust peso funds, as well as TOFA-Others less
reserves. Deposits maintained by banks booked “Allowance for Probable Losses”.
authorized to engage in trust and other (As amended by Circular No. 535 dated 04 July 2006)
1
Reserve week starting 11 April 2014, the required reserves shall be as follows:
For reserves against peso –denominated CTFs and TOFA-Others
CTFs TOFA-Others
UBs/KBs 19% 16%
TBS 8% 8%
Increase in reserve requirements shall take effect on the reserve week starting 30 May 2014.

§§ X405.8 - X406.1
08.12.31
§ X405.8 Reserve deficiencies; proper administration and management of

sanctions. The provisions of Sec. X257 shall investment management activities.
govern the computation of reserve No bank shall undertake any of the trust
deficiencies for peso-denominated CTFs and and other fiduciary business and, whenever
such other managed peso funds, as well as applicable, investment management
TOFA-Others, of banks authorized to engage activities outside the direct control, authority
in trust and other fiduciary business, including and management of the trust department or
the sanctions provided in said Section. through any department or office which is
involved in the other businesses of the bank,
§ X405.9 Report of compliance. Every such as the Treasury, Funds Management
bank shall submit a report to the Bangko or any similar department, otherwise, any
Sentral of its daily required and available
such business shall be considered part of
reserves on peso-denominated CTFs and
the bank’s real liabilities.
such other managed peso funds, as well as
The bank proper and the trust
TOFA- Others, in such frequency and within
department may share the following
the deadline stated in Appendix 6.
activities: (1) electronic data processing;
Sec. X406 Organization and Management. (2) credit investigation; (3) collateral
appraisal; and (4) messengerial, janitorial
§ X406.1 Organization. A bank and security services.
authorized to engage in trust and other b. The trust department, trust officer and
fiduciary business shall, pursuant to Subsec. other subordinate officers of the trust
X404.1, include in its by-laws, provisions department shall only be directly
on the organization plan or structure of responsible to the bank’s trust committee
the department, office or unit which shall which shall, in turn, be only directly
conduct such business. The by-laws shall responsible to the bank’s board of directors.
also include provisions on the creation of No director, officer or employee taking
a trust committee, the appointment of a part in the management of trust and other
trust officer and other subordinate officers fiduciary accounts shall perform duties in
and a clear definition of their duties and other departments or the audit committee
responsibilities as well as their line and of the bank and vice versa. However,
staff functional relationships within the branch managers duly authorized by the
organization which shall be in accordance board of directors may, for or on behalf of
with the following guidelines. the trust officer, sign predrawn trust
a. Trust and other fiduciary business of instruments such as CTFs.
a bank shall be carried out through a trust c. The organization structure and
department which shall be organizationally, definition of duties and responsibilities of
operationally, administratively and the trust committee, officers and employees
functionally separate and distinct from the of the trust department shall reflect
other departments and/or businesses of the adherence to the minimum internal control
institution. standards prescribed by the Bangko Sentral.
A bank which is also engaged in d. Provisions shall be made by the bank
investment management activities, shall to have legal assistance readily available in
conduct the same only through its trust the review of proposed and/or existing trust
department and the responsibilities of the and fiduciary agreements and documents
board of directors, trust committee and trust and in the handling of legal and tax matters
officer shall be construed to include the related thereto.

§§ X406.2 - X406.3
17.09.30
§ X406.2 Composition of trust An independent professional may be

committee. The Trust Committee shall be appointed as a Trust Committee member of
composed of at least five (5) members other banks that belong to the same financial
including the (1) president or any senior conglomerate.
officer of the bank; and (2) the trust officer. For purposes of this Subsection, the
The remaining committee members, including definition of officer under Subsec. X141.1j
the chairperson, may be any of the shall apply.
following: (1) non-executive directors1 or (As amended by Circular Nos. 969 dated 22 August 2017 and
independent directors2 who are both not
part of the audit committee; or (2) those § X406.3 Qualifications of committee
considered as qualified “independent members, officers and staff. The bank’s trust
professionals”: Provided, That the Philippine department shall be staffed by persons of
branch of a foreign bank may appoint its competence, integrity and honesty.
resident manager or chief executive officer Directors, committee members and officers
in lieu of the president while the positions charged with the administration of trust and
allotted for members of the board may be other fiduciary activities shall, in addition
filled up by the area manager and/or officers/ to meeting the qualification standards
representatives from the Head Office, or prescribed for directors and officers of banks
affiliates or subsidiaries of the head office or for qualified “independent
who are not involved in audit-related professionals”, possess the necessary
activities: Provided, further, That in case of technical expertise and relevant experience
more than five (5) trust committee in such business which may be indicated
membership, majority shall be composed by any of the following:
of qualified non-executive members. a. at least one (1) year of actual
A qualified “independent professional” experience in trust, other fiduciary business,
shall refer to a person who – or investment management activities;
a. is not a director/officer/employee of b. at least three (3) years of professional
the bank during the last twelve (12) months experience in relevant field such as banking,
counted from the date of committee finance, economics, law, and risk
membership; management;
b. is not a relative within the fourth c. completion of at least ninety (90)
degree of consanguinity or affinity, training hours on trust, other fiduciary
legitimate or common-law of any executive business, or investment management
director or those involved in the day to day activities acceptable to the Bangko Sentral;
management of institution’s operations or or
officer of the bank; and d. completion of a relevant global or
c. is not engaged or does not engage in local professional certification program.
any transactions with the bank whether by A Trust Committee member should be
himself or with other persons or through a familiar with Philippine laws, rules and
firm of which he is a partner, other than regulations on trust business, as well as
transactions which are conducted at arm’s uphold at all times ethical and good
length and could not materially interfere governance standards.
with or influence the exercise of his The trust officer who shall be appointed
judgment. shall possess any of the following:
1 As defined under Subsec. X141.1i

2 As defined under Subsec. X141.1g
Manual of Regulations for Banks Part IV - Page 14a

§§ X406.3 - X406.4
17.09.30
a. at least five (5) years of actual (2) ensure that policies and procedures
experience in trust operations; that translate the board’s objectives and risk
b. at least three (3) years of actual tolerance into prudent operating standards
experience in trust operations and must are in place and continue to be relevant,
have: comprehensive and effective;
(1) completed at least ninety (90) training (3) oversee the implementation of the
hours in trust, other fiduciary business, or risk management framework and ensure that
investment management activities internal controls are in place relative to the
acceptable to the Bangko Sentral; or fiduciary activities;
(2) completed a relevant global or local (4) adopt an appropriate organizational
professional certification program; or structure/staffing pattern and operating budgets
c. at least five (5) years of actual that shall enable the trust department to
experience as an officer of a bank and must effectively carry out its functions;
have: (5) oversee and evaluate performance
(1) completed at least ninety (90) training of the trust officer;
hours in trust, other fiduciary business, or (6) conduct regular meetings at least
investment management activities once every quarter, or more frequently as
acceptable to the Bangko Sentral; or necessary, depending on the size and
(2) completed a relevant global or local complexity of the fiduciary business; and
professional certification program. (7) report regularly to the board of
For the purpose of this Subsection, actual directors on matters arising from fiduciary
experience refers to exposures in trust activities.
operations either as officer of a trust entity c. Trust Officer
or member of trust committee. The management of day-to-day fiduciary
(As amended by Circular Nos. 766 dated 17 August 2012 and activities shall be vested in the trust officer.
665 dated 04 September 2009) In this regard, the trust officer shall:
(1) ensure adherence to the basic
§ X406.4 Responsibilities of standards in the administration of trust,
administration. other fiduciary and investment management
a. Board of directors accounts pursuant to Appendix 83;
The responsibilities of the board of (2) develop and implement relevant
directors in relation to trust activities of a policies and procedures on fiduciary
bank shall be those set forth under activities;
Subsec. X143.1. The board of directors shall (3) observe sound risk management
ensure an appropriate degree of practices and maintain necessary controls
independence between the activities of the to protect assets under custody and held in
bank proper and its trust department. trust or other fiduciary capacity;
b. Trust Committee (4) carry out investment and other
The trust committee is a special fiduciary activities in accordance with
committee which reports directly to the agreements with clients and parameters set
board of directors and is primarily by the trust committee as approved by the
responsible for overseeing the fiduciary board of directors;
activities of the bank. In discharging its (5) report regularly to the trust committee
function, it shall: on business performance and other matters
(1) ensure that fiduciary activities are requiring its attention;
conducted in accordance with applicable (6) maintain adequate books, records
laws, rules and regulations, and prudent and files for each trust or other fiduciary
practices; account and provide timely and regular

§§ X406.4 - X407
17.09.30
disclosure to clients on the status of their assumed the position to which he/she was
accounts; and appointed or delegated.
(7) submit periodic reports to regulatory (Circular No. 665 dated 04 September 2009 and CL-045 dated
agencies on the conduct of the trust operations. 01 July 2011, as amended by Circular Nos. 969 dated 22 August
(As amended by Circular Nos. 969 dated 22 August 2017 and 2017, 766 dated 17 August 2012 and 758 dated 11 May 2012)
Sec. X407 Non-Trust, Non-Fiduciary and/
§§ X406.5 - X406.8 (Reserved) or Non-Investment Management Activities.
The basic characteristic of trust, other
§ X406.9 Outsourcing services in trust fiduciary and investment management
departments. relationship is the absolute non-existence of
(Deleted by Circular No. 765 dated 03 August 2012) a debtor-creditor relationship, thus, there is
no obligation on the part of the trustee,
§ X406.10 Confirmation of the fiduciary or investment manager to
appointment/designation of trust officer
guarantee returns on the funds or properties
and independent professional. An
regardless of the results of the investment.
independent professional and trust officer
The trustee, fiduciary or investment manager
must be fit and proper to discharge their
is entitled to fees/commissions which shall
respective functions. In determining
be stipulated and fixed in the contract or
whether a person is fit and proper for the
indenture and the trustor or principal is
position, regard shall be given to the
entitled to all the funds or properties and
following: Integrity/probity, physical/mental
earnings less fees/commissions, losses and
fitness, competence, relevant education/
other charges. Any agreement/arrangement
financial literacy/training, diligence and
that does not conform to these shall not be
knowledge/experience.
considered as trust, other fiduciary and/or
The appointment or designation of
independent professional and trust officer investment management relationship.
shall be subject to confirmation by the SES The following shall not constitute a trust,
Committee. The bio-data of the proposed other fiduciary and/or investment
independent professional and trust officer management relationship
shall be submitted to the Bangko Sentral, in a. When there is a preponderance of
a prescribed form indicated in Appendix 6, purpose or of intent that the arrangement
within seven (7) banking days from approval creates or establishes a relationship: other
of the board of directors or its functional than a trust, fiduciary and/or investment
oversight equivalent which shall include the management;
country head in case of foreign banks. b. When the agreement or contract is
Moreover, the independent professional itself used as a certificate of indebtedness
shall certify that he/she possesses the in exchange for money placement from
qualifications as herein prescribed and that clients and/or as the medium for confirming
all the information thereby supplied are true placements and investment thereof;
and correct. c. When the agreement or contract of
If after evaluation, the Monetary Board an account is accepted under the
shall find grounds for disqualification, the signature(s) of those other than the trust
concerned bank shall be informed thereof officer or subordinate officer of the trust
and the independent professional and trust department or those authorized by the board
officer so appointed or delegated shall be of directors to represent the trust officer;
removed from office even if he/she has d. Where there is a fixed rate or guaranty

§§ X407 - X408
08.12.31
of interest, income or return in favor of its reported as deposit substitutes and shall be
client or beneficiary: Provided, however, subject to the reserve requirement for
That where funds are placed in fixed deposit substitutes from the time of
income-generating investments, a quotation inception, without prejudice to the
of income expectation or like terms, shall imposition of the applicable sanctions
neither be considered as arrangements with provided for in Sections 36 and 37 of R.A.
a fixed rate nor a guaranty of interest, No. 7653.
income or return when the agreement or
indenture categorically states in bold letters Sec. X408 Unsafe and Unsound Practices.
that the quoted income expectation or like Whether a particular activity may be
terms is neither assured nor guaranteed by considered as conducting business in an
the trustee or fiduciary and it does not, unsafe or unsound manner all relevant facts
therefore, entitle the client to a fixed interest must be considered. An analysis of the
or return on his investments: Provided, impact thereof on the bank’s operations and
further, That any of the following practices financial conditions must be undertaken,
or practices similar and/or tantamount including evaluation of capital position,
thereto shall be construed as fixing or asset condition, management, earnings
guaranteeing the rate of interest, income or posture and liquidity position.
return: In determining whether a particular act
(1) Issuance of certificates, side or omission, which is not otherwise
agreements, letters of undertaking or other prohibited by any law, rule or regulation
similar documents providing for fixed rates affecting banks, may be deemed as
or guaranteeing interest, income or return; conducting business in an unsafe or
(2) Paying trust earnings based on unsound manner, the Monetary Board,
indicated or expected yield regardless of the upon report of the head of the supervising
actual investment results; or examining department based on findings
(3) Increasing or reducing fees in order in an examination or a complaint, shall
to meet a quoted or expected yield; consider any of the following
(4) Entering into any arrangement, circumstances:
scheme or practice which results in the a. The act or omission has resulted or
payment of fixed rates or yield on trust may result in material loss or damage, or
investments or in the payment of the abnormal risk or danger to the safety,
indicated or expected yield regardless of the stability, liquidity or solvency of the bank;
actual investment results; and b. The act or omission has resulted or
e. Where the risk or responsibility is may result in material loss or damage or
exclusively with the trustee, fiduciary or abnormal risk to the bank’s depositors,
investment manager in case of loss in the creditors, investors, stockholders or to the
investment of trust, fiduciary or investment Bangko Sentral or to the public in general;
management funds, when such loss is not c. The act or omission has caused any
due to the failure of the trustee or fiduciary undue injury, or has given unwarranted
to exercise the skill, care, prudence and benefits, advantage or preference to the bank
diligence required by law. or any party in the discharge by the director
Trust, other fiduciary and investment or officer of his duties and responsibilities
management activities involving any of the through manifest partiality, evident bad faith
foregoing which are accepted, renewed or or gross inexcusable negligence; or
extended after 16 October 1990 shall be d. The act or omission involves entering

§ X408
09.12.31
into any contract or transaction manifestly considered unsafe and unsound is shown
and grossly disadvantageous to the bank, in Appendix 48.
whether or not the director or officer In line with the statement of principles
profited or will profit thereby. governing trust and other fiduciary business
The list of activities which may be under Sec. X401, the trustee, fudiciary or

§§ X408 - X409.1
09.12.31
investment manager shall desist from the appropriate, but in no case to exceed
following unsound practices: P30,000 a day on a per transaction basis
a. Entering in an arrangement whereby taking into consideration the attendant
the client is at the same time the borrower circumstances, such as the gravity of the act
of his own fund placement, or whereby the or omission and the size of the bank, to be
trustor or principal is a borrower of other imposed on the bank, their directors and/or
trust, fiduciary or investment management responsible officers;
funds belonging to the same family or c. Suspension of interbank clearing
business group of such trustor or principal; privileges/immediate exclusion from
b. Granting loans or accommodations clearing;
to any trust committee member, officer and d. Suspension of rediscounting
employee of the trust department except privileges or access to Bangko Sentral credit
where such loans are obtained by said facilities;
persons as members of an employee benefit e. Suspension of lending or foreign
fund of the trustee’s own institution; exchange operations or authority to accept
c. Borrowing from, or selling trust, other new deposits or make new investments;
fiduciary and/or investment management f. Suspension of responsible directors
assets to, the bank proper to cover portfolio and/or officers;
losses and/or to guarantee the return of g. Revocation of quasi-banking license;
principal or income; and/or
d. Granting new loans to any borrower h. Receivership and liquidation under
who has a past due and/or classified loan Section 30 of R.A. No. 7653.
account with the bank proper or the trust All other provisions of Sections 30 and
department; and 37 of R.A. No. 7653, whenever appropriate,
e. Requiring clients to sign documents shall also be applicable on the conduct of
in blank. business in an unsafe or unsound manner.
(As amended by Circular No. 640 dated 16 January 2009) The imposition of the above sanctions
is without prejudice to the filing of
§§ X408.1 - X408.8 (Reserved) appropriate criminal charges against
culpable persons as provided in Sections
§ X408.9 Sanctions. The Monetary 34, 35 and 36 of R.A. No. 7653.
Board may, at its discretion and based on
the seriousness and materiality of the acts Sec. X409 Trust and Other Fiduciary
or omissions, impose any or all of the Business. The conduct of trust and other
following sanctions provided under Section fiduciary business shall be subject to the
37 of R.A. No. 7653 and Section 56 of R.A. following regulations.
No. 8791, whenever a bank conducts
business in an unsafe and unsound § X409.1 Minimum documentary
manner: requirements. Each trust or fiduciary
a. Issue an order requiring the bank to account shall be covered by a written
cease and desist from conducting business document establishing such account, as
in an unsafe and unsound manner and may follows:
further order that immediate action be taken a. In the case of accounts created by an
to correct the conditions resulting from such order of the court or other competent
unsafe or unsound practice; authority, the written order of said court or
b. Fines in amounts as may be authority.
determined by the Monetary Board to be b. In the case of accounts created by

§§ X409.1 - X409.2
17.09.30
corporations, business firms, organizations administered in accordance with the terms

or institutions, the voluntary written of the instrument creating the trust or other
agreement or indenture entered into by the fiduciary relationship.
parties, accompanied by a copy of the board When a trustee or fiduciary is granted
resolution or other evidence authorizing the discretionary powers in the investment
establishment of, and designating the disposition of trust or other fiduciary funds
signatories to, the trust or other fiduciary and unless otherwise specifically
account. enumerated in the agreement or indenture
c. In the case of accounts created by and directed in writing by the client, court
individuals, the voluntary written agreement of competent jurisdiction or other
or indenture entered into by the parties. competent authority, loans and investments
The voluntary written agreement or of the fund shall be limited to:
indenture shall include the following a. Traditional deposit products of
minimum provisions: UBs and KBs in the Philippines with long-
(1) Title or nature of contractual term credit rating of at least AA- or its
agreement in noticeable print; equivalent by a third party credit
(2) Legal capacities, in noticeable print, assessment agency recognized by the
of parties sought to be covered; Bangko Sentral;
(3) Purposes and objectives; b. Evidences of indebtedness of the
(4) Funds and/or properties subject of Republic of the Philippines and of the
the arrangement; Bangko Sentral, and any other evidences of
(5) Distribution of the funds and/or indebtedness or obligations where the
properties; servicing and repayment of which are fully
(6) Duties and powers of trustee or guaranteed by the Republic of the
fiduciary; Philippines or loans against such
(7) Liabilities of the trustee or fiduciary; government securities;
(8) Reports to the client; c. Loans fully guaranteed by the
(9) Termination of contractual Republic of the Philippines as to the
arrangement and, in appropriate cases, payment of principal and interest;
provision for successor-trustee or fiduciary; d.Tradable securities issued by the
(10) The amount or rate of the government of a foreign country or any
compensation of trustee or fiduciary; supranational entity with long-term credit
(11) A statement in noticeable print to rating of at least AA- or its equivalent by a
the effect that trust and other fiduciary third party credit assessment agency
business are not covered by the PDIC and recognized by the Bangko Sentral;
that losses, if any, shall be for the account e. Loans fully secured by a hold-out
of the client; and on, assignment or pledge of deposits
(12) Disclosure requirements for maintained either with the bank proper
transactions requiring prior authority and/ or other banks, or of deposit substitutes
or specific written investment directive from of the bank, or of mortgage and chattel
the client, court of competent jurisdiction mortgage bonds issued by the trustee or
or other competent authority. fiduciary;
f. Loans fully secured by real estate or
§ X409.2 Lending and investment chattels in accordance with Sec. X311 and
disposition1. Assets received in trust or in Subsecs. X178.7 and X304.1; and
other fiduciary capacity shall be g. Placements in the Bangko Sentral TDF
1
Trust entities shall be given six (6) months from 01 August 2017 to make appropriate changes in their policies,
processes, and procedures in order to comply with the above requirements.

§§ X409.2 - X409.3
17.09.30
and the ODF subject to the applicable consanguinity or affinity, or the related
provisions of Sec. X601 and Appendix 78a.1 interest of such directors, officers and
The specific directives required under stockholders; or to any corporation where
this Subsection shall consist of the following the trustee or fiduciary owns at least
information: fifty percent (50%) of the subscribed capital
(1) The transaction to be entered into; or voting stock in its own right and not as
(2) Name of the issuer or borrower; trustee nor in a representative capacity;
(3) Amount involved; and b. Purchase or acquire property or debt
(4) Terms of the security, including instruments from any of the departments,
collateral, if any. directors, officers, stockholders, or
Trust entities with composite rating of employees of the trustee or fiduciary, or
at least “3” under the Revised Trust Rating relatives within the first degree of
System in the latest Bangko Sentral consanguinity or affinity, or the related
examination will not be subject to the interest of such directors, officers and
investment limitations provided under this stockholders; or from any corporation where
Subsection. the trustee or fiduciary owns at least fifty
(As amended by Circular Nos. 966 dated 11 July 2017, 961 percent (50%) of the subscribed capital or
dated 02 June 2017, M-2016-016 dated 18 November 2016,
Circular No. 913 dated 02 June 2016, M-2013-021 dated 17 May
voting stock in its own right and not as
2013, M-2012-034 dated 13 July 2012, M-2007-038 dated trustee nor in a representative capacity;
29 November 2007 and M-2007-011 dated 08 May 2007) c. Invest in equities of, or in securities
underwritten by, the trustee or fiduciary
§ X409.3 Transactions requiring prior or a corporation in which the trustee or
authority. A trustee or fiduciary shall not fiduciary owns at least fifty percent (50%)
undertake any of the following transactions of the subscribed capital or voting stock
for the account of a client, unless prior to in its own right and not as trustee nor in a
its execution, such transaction has been fully representative capacity; and
disclosed and specifically authorized in d. Sell, transfer, assign, or lend money or
writing by the client, beneficiary, other property from one trust or fiduciary account
party-in-interest, court of competent to another trust or fiduciary account except
jurisdiction or other competent authority: where the investment is in any of those
a. Lend, sell, transfer or assign money enumerated in Items “a” to “d” of
or property to any of the departments, Subsec. X409.2.
directors, officers, stockholders or DOSRIs covered by this Subsection
employees of the trustee or fiduciary, or shall be those considered as such under
relatives within the first degree of existing regulations on loans to DOSRI in
(Next Page is Part IV - Page 21)
1
The Monetary Board, in its Resolution No. 1945 dated 27 October 2016 approved the discontinuance of
access of trust entities to the Bangko Sentral deposit facilities. Trust entities shall no longer have outstanding
placement in the ODF and TDF by 30 June 2017.

§§ X409.3 - X409.6
09.12.31
Part III - E of this Manual. The procedural b. Provisions of Section 4(e) of the New
and reportorial requirements in said Rules on Registration of Short-Term
regulations shall also apply. Commercial Papers and Section 7(f) of the
The disclosure required under this New Rules on Registration of Long-Term
Subsection shall consist of the following Commercial Papers issued by the SEC
minimum information: (Appendices 13 and 14).
(1) The transactions to be entered into; c. Criteria for past due accounts; and
(2) Identities of the parties involved in d. Qualitative appraisal of loans,
the transactions and their relationships (shall investments and other assets that may require
not apply to Item “d” of this Subsection); provision for probable losses which shall be
(3) Amount involved; and booked in accordance with the Financial
(4) Collateral security(ies), if any. Reporting Package for Trust Institutions
The above information shall be made (FRPTI);
known to clients in a separate instrument e. Requirements of Sections 3 and 8
or in the very instrument creating the trust of the Securities and Regulation Code (SRC);
or fiduciary relationship. and
f. Provisions of Section 44 - Investments
§ X409.4 Ceilings on loans. Loans by Philippine residents - of the BSP Manual
funded by trust accounts shall be subject of Regulations on Foreign Exchange
to the SBL and DOSRI ceilings imposed Transactions (MORFXT), such that the
on banks under Secs. X303, X330 and cross-currency investments of peso trust and
X331. For purposes of determining other fiduciary accounts, including peso unit
compliance with said ceilings, the total investment trust (UIT) funds, shall be subject
amount of said loans granted by the trust to the following conditions:
department and the bank to the same (1) All cash flows of the trustee or
person, firm or corporation shall be fiduciary shall only be in pesos. In case the
combined. foreign exchange acquired or received by
the trustee or fiduciary as dividends/earnings
§ X409.5 Funds awaiting investment or divestment proceeds on such investment
or distribution. Funds held by the trustee are intended for reinvestment abroad, the
or fiduciary awaiting investment or same proceeds are not required to be
distribution shall not be held uninvested inwardly remitted and sold for pesos
or undistributed any longer than is through authorized agent banks: Provided,
reasonable for the proper management of That such proceeds are reinvested abroad
the account. within two (2) banking days from receipt of
the funds abroad;
§ X409.6 Other applicable regulations (2) The trustee or fiduciary shall
on loans and investments. The loans and purchase, invest, reinvest, sell, transfer or
investments of trust and other fiduciary dispose foreign currency-denominated
accounts shall be subject to pertinent laws, financial instruments, including securities as
rules and regulations for banks that shall defined in Section 3 of the SRC, through a
include but need not be limited to the distributor or underwriter duly authorized
following: or licensed by the government of the issuer
a. Requirements of Sections 39 and 40 of such instruments, or a counterparty FI
of R.A. No. 8791 (The General Banking (seller or buyer) accredited by the trustee or
Law of 2000; fiduciary: Provided, That, the conduct,
Manual of Regulations for Banks Part IV- Page 21

§§ X409.6 - X409.8
09.12.31
documentation, and settlement of any of twenty percent (20%) final tax under Section
these transactions shall be outside 24(B)(1) of R.A. No. 8424 (The Tax Reform
Philippine jurisdiction; Act of 1997):
(3) The trustee of fiduciary shall record a. The tax exemption shall apply to
cross-currency investment transactions in trust indentures/agreements contracted on
the peso regular books at their foreign or after 03 January 2000;
currency amounts and their local currency b. The trust indenture/agreement shall
equivalent using the Philippine Dealing only be between individuals who are
System peso/US dollar closing rate and the Filipino citizens or resident aliens and
New York US dollar/third currencies closing banks acting as trustee. The trust indenture/
rate; and agreement shall be non-negotiable and
(4) The trustee or fiduciary shall comply non-transferable;
with the reportorial requirements that may be c. The trust indenture/agreement shall
prescribed by the BSP, which shall include as indicate that pursuant to Section 24(B)(1)
a minimum, the foreign currency amount and of R.A. No. 8424, interest income of the
the local currency equivalent of the total cross trust fund derived from investments in
currency investments with details on: (a) type interest-bearing instruments (e.g., time
of investments; and (b) amount of cash flow deposits, government securities, loans and
converted. other debt instruments) which are
For purposes of this Subsection, otherwise subject to the twenty percent
“resident”, as defined under Section 1 of the (20%) final tax shall be exempt from said
FX Manual, shall refer to the (a) trustee or final tax provided the fund was held by
fiduciary that administers the assets received the trustee-bank for at least five (5) years.
in trust or in other fiduciary capacity; or (b) If said fund was held for a period less than
principal that engages the services of the five (5) years, interest income shall be
investment manager under an investment subject to a final tax based on the following
management agreement. schedule –
(As amended by Circular No. 676 dated 29 December 2009)
Holding Period Rate of Tax
§ X409.7 Operating and accounting
Four (4) years to less than five (5) years 5%
methodology. Trust and other fiduciary Three (3) years to less than four (4) years 12%
accounts shall be operated and accounted Less than three (3) years 20%
for in accordance with the following:
a. The trustee or fiduciary shall Necessarily, the trust indenture/
administer, hold or manage the fund or agreement shall clearly indicate the date
property in accordance with the instrument when the trustee-bank actually received the
creating the trust or other fiduciary trust funds which shall serve as basis for
relationship; and determining the holding period of the
b. Funds or property of each client funds.
shall be accounted separately and distinctly d. A trustee may accept additional
from those of other clients herein referred funds for inclusion in trust accounts which
to as individual account accounting. have been established as tax-exempt under
R.A. No. 8424. However, the receipt of
§ X409.8 Tax-exempt individual trust additional funds shall be properly
accounts. The following shall be the documented by indicating that they are part
features/requirements of individual trust of existing tax-exempt trust accounts and
accounts which may be exempted from the that the interest income of the additional
Part IV- Page 22 Manual of Regulations for Banks

§§ X409.8 - X409.9
16.09.30
funds derived from investments in interest- balances of up to P500,000 shall only be

bearing instruments shall be exempt from invested in deposits and government
the twenty percent (20%) final tax under the securities;
same conditions mentioned in the preceding (2) The agreement shall clearly state the
item. The document shall also indicate the specific purpose(s) for which the account
date when the funds were received by the was established which shall be consistent
trustee-bank to serve as basis for with the general objectives of the PMT
determining the minimum five (5)- year which is the preservation of the assets or
holding period for tax exemption purposes property for the future use of the
of the additional funds; and beneficiaries and/or to answer for their
e. Tax-exempt individual trust accounts current needs;
established under this Subsection shall The distribution clause shall clearly and
be subject to the provisions of specifically define the manner and
Subsecs. X409.1(c) and X409.2 up to conditions under which the assets (including
X409.7. income thereof) will be distributed. Any
distribution/withdrawal of assets (including
§ X409.9 Personal management trust. income thereof) shall be consistent with the
The guidelines on personal management purpose of the PMT, strictly in accordance
trust (PMT) accounts are as follows: with the distribution clause, and made only
a. Definition. PMT is a living trust1 to the designated beneficiary/ies.
created by an agreement whereby the trustor Consequently, the trustee is expected to
conveys property or a sum of money to be obtain adequate documentation to ensure
managed by the trustee, as the agreement the propriety of distribution/withdrawal of
dictates, generally for the preservation of the assets (including income thereof).
assets or property for future use of the Pre-printed PMT agreements may be
beneficiaries and/or to answer for their allowed for expediency: Provided, That the
current needs. The trustor may or may not section for the trust purpose and the
nominate third-party beneficiary/ies. The distribution clause shall not be pre-printed
trust agreement must specify the name/s of and shall be filled up only upon signing
the beneficiary/ies. thereof by the trustor;
By 02 September 2016, no new Living (3) The length of PMT’s existence should
Trust Account (LTA) shall be established; be consistent with the purpose of the trustor.
consequently and for purposes of reporting, Any termination for causes that are
all valid and existing LTA shall now be inconsistent with the purpose/distribution
considered as PMT. If the LTA does not clause shall render the trustor ineligible from
conform with LTA guidelines, it shall be opening a new PMT within a period of one
considered as other fiduciary account. (1) year from termination date; and
b. Minimum criteria2. A PMT account (4) Management of the trust assets shall
shall meet the following criteria: be aligned with the investment objective/s
(1) The minimum entry amount and and risk parameters set forth by the trustor.
maintaining balance shall be equivalent to PMT accounts that do not meet any of
at least P100,000: Provided, That PMT with the above criteria shall be considered as other
(Next Page is Part IV - Page 23)
1
Being a living trust, PMT becomes operational during the lifetime of the trustor as soon as the agreement is
accomplished.
2
This applies to the newly created PMT account effective 02 September 2016.

§ X409.9
16.09.30
fiduciary accounts subject to applicable Department and give a short introduction

reserves. on the PMT product to prospective clients.
c. Marketing. Officers and personnel d. Reserve requirement. The PMT shall
of the Bank proper, including branch be subject to zero-percent (0%) reserve
managers, shall not be allowed to market requirement.
PMT products and sign pre-printed PMT (Circular Nos. 553 dated 22 December 2006 and 521 dated
agreements. However, branch managers/ 21 March 2006, as amended by Circular No. 920 dated
officers may refer clients to the Trust 18 August 2016)

§§ X409.10 - X409.16
08.12.31
§§ X409.10 - X409.15 (Reserved) of more than ten percent (10%) of any class
of its equity security.
§ X409.16 Qualification and e. Investment and management of
accreditation of private banks acting as the funds. A domestic bank designated as
trustee on any mortgage or bond issuance trustee of a mortgage or bond issuance may
by any municipality, government-owned or hold and manage, in accordance with the
controlled corporation, or any body politic provisions of the trust indenture or
a. Applicability. Private banks duly agreement, the proceeds of the mortgage
accredited by the BSP may act as trustee or bond issuance and such assets and funds
on any mortgage or bond issued by any of the issuing municipality, corporation, or
municipality, GOCC, or any body politic. body politic as may be required to be
b. Application for accreditation. A delivered to the trustee under the trust
private bank desiring to act as trustee on indenture/agreement, subject to the
any mortgage or bond issued by any following conditions/restrictions:
municipality, GOCC, or any body politic (1) Pending the utilization of such funds
shall file an application for accreditation pursuant to the provisions of the trust
with the appropriate supervising and indenture/agreement, the same shall only be
examining department of SES. The deposited in any bank, other than the trustee/
application shall be signed by the president bank proper, its subsidiary or affiliate
or officer of equivalent rank of the bank authorized to accept deposits from the
and shall be accompanied by the following Government or government entities, or
documents: invested in peso-denominated treasury bills
(1) certified true copy of the resolution acquired/purchased from any securities
of the institution’s board of directors dealer/entity, other than the trustee or any of
authorizing the application; its unit/department, its subsidiary or affiliate.
(2) a certification signed by the (2) Investments of funds constituting or
president or officer of equivalent rank that forming part of the sinking fund created as
the institution has complied with all the the primary source for the payment of the
qualification requirements for accreditation. principal and interests due the mortgage
c. Qualification requirements. A bank or bonds shall also be limited to deposits
applying for accreditation to act as trustee in any bank, other than the trustee/bank
on any mortgage or bond issued by any proper, its subsidiary or affiliate, authorized
municipality, government-owned or to accept deposits from the Government
controlled corporation, or any body politic or government entities and investments in
must comply with the requirements in government securities that are consistent
Appendix 5b. with such purpose which must be acquired/
d. Independence of the trustee. A purchased from any securities dealer/entity,
bank is prohibited from acting as trustee of other than the trustee or any of its unit/
a mortgage or bond issuance if any elective department, its subsidiary or affiliate.
or appointive official of the LGU, GOCC, f. Waiver of confidentiality. A bank
or body politic which issued said mortgage designated as trustee of any mortgage or
or bond and/or his related interests own bond issued by any municipality, GOCC,
such number of shares of the bank that will or any body politic shall submit to the
allow him or his related interests to elect appropriate supervising and examining
at least one (1) member of the board of department of SES a waiver of the
directors of such bank or is directly or confidentiality of information under
indirectly the registered or beneficial owner Sections 2 and 3 of R.A. No. 1405, as

§§ X409.16 - X409.17
08.12.31
amended, duly executed by the issuer of the date the violation was committed up to
the mortgage or bond in favor of the BSP. the date it was corrected;
g. Reportorial requirements. A bank (b) Suspension or revocation of the
authorized by the BSP to act as trustee of trust license;
the proceeds of mortgage or bond issuance (c) Suspension for one hundred twenty
of a municipality, GOCC or controlled (120) days without pay of the directors/
corporation, or body politic shall comply officers responsible for the violation.
with reportorial requirements that may be
prescribed by the BSP. § X409.17 Trust fund of pre-need
h. Applicability of the rules and companies. The following rules and
Regulations on Trust, Other Fiduciary regulations shall govern the acceptance,
Business and Investment Management management and administration of the trust
Activities. The provisions of the Rules and funds of pre-need companies by banks and
Regulations on Trust, Other Fiduciary other entities authorized to perform trust
Business and Investment Management and other fiduciary functions.
Activities not inconsistent with the a. Administration of trust fund. In line
provisions of this Subsection shall form part with the policy of providing greater
of these rules. protection to pre-need planholders,
i. Sanctions. Without prejudice to the prudential measures are hereby laid out in
penal and administrative sanctions the administration of trust funds of preneed
provided for under Sections 36 and 37, companies. The trust fund, inclusive of
respectively, of the R.A. No. 7653, violation earnings, shall be administered and
of any provision of this Subsection shall be managed by the trustee with the skill, care,
subject to the following sanctions/penalties prudence and diligence necessary under
depending on the gravity of the offense: the circumstances then prevailing that a
(1) First offense – prudent man, acting in the same capacity
(a) Fine of up to P10,000 a day for the and familiar with such matters, would
institution for each violation reckoned from exercise in the conduct of an enterprise of
the date the violation was committed up a like character and similar aims.
to the date it was corrected; and The trustee shall have exclusive
(b) Reprimand for the directors/officers management and control over the trust
responsible for the violation. fund and the right at any time to sell,
(2) Second offense – convert, invest, change, transfer or
(a) Fine of up to P20,000 a day for the otherwise dispose of the assets comprising
institution for each violation reckoned from the funds.
the date the violation was committed up b. Trustee. No trust entity shall act as a
to the date it was corrected; trustee or administer or hold a trust fund
(b) Suspension for ninety (90) days established by a pre-need company, which
without pay for directors/officers is a subsidiary or affiliate, as defined under
responsible for the violation; and existing BSP regulations, of such trust entity.
(c) Revocation of the authority to act Trust entities currently holding or
as trustees on any mortgage or bond administering trust funds of an affiliate
issuance by any municipality, GOCCs, or pre-need company may continue to act as
body politic. trustee of such funds after the transition
(3) Subsequent offense – period provided under Item “g” only upon
(a) Fine of up to P30,000 a day for the prior approval of the Monetary Board on
institution for each violation reckoned from the basis of a clear showing that no potential

§§ X409.17 - X410
08.12.31
conflict of interest will arise. An absence of purchase or acquire property from, or sell,
any exception or finding on conflicts of transfer, assign or lend money or property
interest during an examination of the trust to, or purchase debt instruments of, any of
entity shall be deemed as prima facie the departments, directors, officers,
evidence that no potential conflict of interest stockholders, employees, subsidiaries and
will arise. affiliates of the trustee and/or the trustor,
c. Investment of the trust fund. Unless and relatives within the first degree of
otherwise allowed under existing laws or consanguinity or affinity, or the related
regulations issued by the agency having interests, of such directors, officers and
jurisdiction and supervision over pre-need stockholders, without prejudice to any rule
companies, or with prior written approval that may be issued by the agency having
by said agency, loans and investments of jurisdiction and supervision over such
the trust funds shall be limited to: preneed company allowing such transaction
(1) Evidences of indebtedness of the with the prior written approval of such
Republic of the Philippines and of the BSP, agency. Such written approval shall clearly
and any other evidences of indebtedness specify the amount of the loan and/or
or obligations wherein the servicing and investment including the name of the
repayment of which are fully guaranteed concerned director, officer, stockholder and
by the Republic of the Philippines or loans their related interests.
against such government securities; e. Applicability of the Rules and
(2) Commercial papers duly registered Regulations on Trust, Other Fiduciary
with the SEC with a credit rating of one (1) Business and Investment Management
for short term and “AAA” for long-term or Activities (Trust Rules). The provisions of the
their equivalent; Trust Rules consistent with the provisions of
(3) Loans fully guaranteed by the this Subsection shall supplementarily apply
Republic of the Philippines, as to the to trust funds of pre-need companies.
payment of principal and interest; f. Penalties and sanctions. Any
(4) Loans fully secured by a hold-out violation of the provisions of this Subsection
on, assignment or pledge of deposits shall be a ground for prohibiting the
maintained either with the bank proper or concerned entity from accepting, managing
other banks, and/or of deposit substitutes and administering trust funds of pre-need
or of mortgage and chattel mortgage bonds companies without prejudice to the
issued by the trustee/fiduciary or by other imposition of the applicable sanctions
banks; prescribed or allowed under the Trust Rules.
(5) Loans fully secured by real estate g. Transitory provisions. Banks which
in accordance with Section 37 and subject are presently administering and managing
to the requirements of Sections 39 and 40 trust funds of pre-need companies are
of R.A. No. 8791 and their implementing hereby given a period of one (1) year from
regulations; and 25 April 2006 to comply with the
(6) Loans fully secured by requirements hereof.
unconditional payment guarantees (such as (Memorandum to All Banks and NBFIs dated 28 March 2006)
standby letters of credit and letter of
indemnity) issued by banks/multilateral Sec. X410 Unit Investment Trust Funds/
financial institutions. Common Trust Funds.1 The following rules
d. Transactions with DOSRI. The and regulations shall govern the creation,
trustee shall not, for the account of the administration and investment/s of Unit
trustor or the beneficiary of the trust, Investment Trust (UIT) Funds.
1
The regulations on common trust funds (CTFs) were relocated to Appendix 60. UIT Funds regulations took effect on
01 October 2004 (effectivity of Circular 447 dated 03 September 2004).

§§ X410 - X410.3
15.10.31
The rules and regulations on Common Sentral under existing Bangko Sentral
Trust Funds (CTFs) are in Appendix 60. regulations.
i. Multi-class fund. A UIT fund structure
§ X410.1 Definitions. which has more than one (1) class of units
a. Unit Investment Trust Funds. Unit in the fund and is invested in the same pool
Investment Trust Funds are open-ended of securities and the same portfolio,
pooled trust funds denominated in pesos investment objectives and policies.
or any acceptable currency, which are j. Related party/company. For the
operated and administered by a trust entity purpose of this Section, the term refers to
and made available by participation. The another entity which is the trust entity’s
term Unit Investment Trust Funds is (a) parent or holding company or
synonymous to CTFs. As an open-ended (b) subsidiary or affiliate, and wholly or
fund, participation or redemption is allowed majority-owned or controlled-entities of
as often as stated in its plan rules. such subsidiaries.
UIT Funds shall not include long term (As amended by Circular Nos. 853 dated 21 October 2014 and
funds designed for the primary purpose of 767 dated 21 September 2012)
availing the tax incentives/exemption under
Section 24(B)(1) of R.A. No. 8424 (The Tax § X410.2 Establishment of a Unit
Reform Act of 1997). Investment Trust Fund. Any trust entity
b. Trust entity. Trust entity as defined authorized to perform trust functions may
under Section X403. establish, administer and maintain one (1)
c. Board of directors. For this purpose, or more UIT Funds subject to applicable
the term shall include a trust entity’s duly provisions under this Section. A UIT Fund
constituted board of directors or its may be allowed to operate as a 1) feeder
functional oversight equivalent which shall fund, 2) fund-of-funds and/or 3) multi-class
include the country head in the case of fund: Provided, That the plan rules and
foreign banks. related documents shall state that the UIT
d. Collective investment scheme. An Fund is a feeder fund or a fund-of-funds,
investment vehicle where funds are solicited and/or multi-class fund, and provide an
from investors for collective investment and explanation or illustration of such
which are managed for the account of such structures. A UIT Fund may also be allowed
investors. to have a unit-paying feature where the
e. Feeder fund. A UIT Fund structure income of the fund is distributed in the form
that mandates the fund to invest at least of units called unit income.
(As amended by Circular Nos. 876 dated 20 April 2015,
ninety percent (90%) of its assets in a single 853 dated 21 October 2014 and 767 dated 21 September 2012)
collective investment scheme.
f. Fund-of-funds. A UIT Fund structure § X410.3 Administration of a Unit
that mandates the fund to invest at least Investment Trust Fund. The trustee shall
ninety percent (90%) of its assets in more have exclusive management and control
than one (1) collective investment scheme. of each UIT Fund under its
g. Target fund. A local or foreign administration, and the sole right at any
collective investment scheme in which the time to sell, convert, reinvest, exchange,
UIT Fund invests all or a portion of its transfer or otherwise change or dispose
assets. of the assets comprising the fund:
h. Investor fund. A UIT Fund created Provided, That no participant in a UIT
to take the form of a feeder fund or a fund- Fund shall have or be deemed to have any
of-funds and is approved by the Bangko ownership or interest in any particular

§§ X410.3 - X410.6
15.10.31
account or investment in the UIT Fund but units. Total Net Assets is a summation of
shall have only its proportionate beneficial the market value of each investment less
interest in the fund as a whole. fees, taxes, and other qualified expenses,
as defined under the plan rules.
§ X410.4 Relationship of trustee with When there is a different fee structure
Unit Investment Trust Fund. A trustee for each class, the NAVPu of each class shall
administering a UIT Fund shall not have any be computed by dividing total net assets of
other relationship with such fund other a class by the total outstanding units of such
than its capacity as trustee of the UIT Fund: class; where the net assets of each class shall
Provided, however, That a trustee which represent its proportionate share on the net
simultaneously administers other trust, assets of the multi-class fund less the trustee
fiduciary or investment management funds fee and expenses attributable to that class.
may invest such funds in the trustee’s UIT The net assets of the multi-class fund is the
Fund, if allowed under a policy approved summation of the market value of each
by the board of directors. investment less fees, taxes, and other
qualified expenses, but gross of trustee fees
§ X410.5 Operating and accounting and expenses attributable to a particular
methodology. A UIT Fund shall be class, as defined under the plan rules.
operated and accounted for in accordance e. For a UIT Fund with unit-paying
with the following: feature, the trustee may distribute the
a. The total assets and accountabilities income of the Fund subject to the minimum
of each fund shall be accounted for as a conditions enumerated hereunder.
single account referred to as pooled-fund (1) Distribution of income shall be made
accounting method. The investments of a only from cash received from interest
multi-class fund shall remain as one (1) pool income earned and cash dividends;
and are not separately allocated to classes. (2) Distribution of income shall be made
b. Contributions to each fund by clients after the trust entity has taken into
shall always be through participation in units consideration the following:
of the fund and each unit shall have uniform (a) Income for the period; and
rights and privileges, as any other unit; in the (b) The investment objective and
case of multi-class fund, units shall be distribution policy of the fund;
issued as units in a class of a fund. (3) Distribution of income to
c. All such participations shall be participants shall be after deduction of taxes
pooled and invested as one (1) account and expenses (net distribution);
(referred to as collective investments). (4) Distribution of income shall be
d. The beneficial interest of each effected through conversion of the income
participation unit shall be determined under for distribution into its equivalent units
a unitized net asset value per unit (NAVPu) based on the NAVPu as at the first business
valuation methodology defined in the day when units in the fund are quoted ex-
written plan of the UIT Fund, and no distribution1. Participants shall be entitled
participation shall be admitted to, or to his/her pro-rata share of said units which,
redeemed from, the fund or class of a fund, on distribution date, shall be automatically
except on the basis of such valuation. To considered redeemed;
arrive at a fund’s NAVPu, the fund’s total (5) The Plan rules shall state the
Net Assets is divided by the total outstanding distribution policy, including the sources of
1
Cum-distribution and ex-distribution refer to the date before and after distribution, respectively.

§§ X410.5 - X410.6
17.06.30
income to be distributed and the intended c. Risk disclosure. The Plan rules shall
frequency of distribution; state both the general risks and risks specific
(6) For monitoring purposes, the trustee to the type of fund.
shall separately account for the fund’s d. Investment powers of the trustee with
income due for distribution; respect to the fund, including the character
(7) Where a distribution is made, a and kind of investments, which may be
notice to each participant on his/her unit purchased, by the fund. There must be an
income shall be made available containing unequivocal statement of the full discretionary
information on the total amount of income powers of the trustee as far as the fund’s
for distribution by the trustee, NAVPu investments are concerned. These powers
ex-distribution and its basis, total number shall be limited only by the duly stated
of units for distribution, and unit income. investment objective and policies of the fund.
Unit income refers to the number of units e. The unitized NAVPu valuation
for every unit held by the participant entitled methodology as prescribed under
for distribution. Subsec. X410.5.d shall be employed. The
(As amended by Circular Nos. 876 dated 20 April 2015, 853 plan rules shall also provide the method of
dated 21 October 2014) determining the proportionate share of the
classes of units to the value of the assets of
§ X410.6 Plan rules. Each UIT Fund the fund.
shall be established, administered and f. Terms and conditions governing the
maintained in accordance with a written admission or redemption of units of
trust agreement drawn by the trustee, participation in the fund. The Plan rules shall
referred to as the “Plan” which shall be state that the trustee, prior to admission of a
approved by the board of directors of the client’s initial participation in the UIT Fund,
trustee and a copy of which shall be shall conduct a client suitability assessment
submitted to the Bangko Sentral for to profile the risk-return orientation and
processing and approval prior to its suitability of the client to the specific type
implementation. Each new UIT Fund Plan of fund. If the frequency of admission or
filed for approval shall be charged a redemption is other than daily; that is, any
processing fee of P10,000.00. business day, the same should be explicitly
The Plan shall contain the following stated in the Plan rules: Provided, That the
minimum elements: admission and redemption prices shall be
a. Title of the Plan. This shall based on the end of day NAVPu of the fund
correspond to the product/brand name by or of the class of a fund, if applicable,
which the UIT Fund is proposed to be computed after the cut-off time for fund
known and made available to its clients. participation and redemption for that
The Plan rules shall state the classification reference day, in accordance with existing
of the UIT Fund (e. g., money market fund, Bangko Sentral regulations on mark to
bond fund, balanced fund and equity fund). market valuation of investment securities.
b. Manner by which the fund is to be g. Aside from the regular audit
operated. A statement of the fund’s requirement applicable to all trust accounts,
investment objectives, policies and an external audit of each UIT Fund shall be
limitations, and, if applicable, income conducted annually by an independent
distribution policies, distinctive features of auditor acceptable to the Bangko Sentral and
the different classes of units such as the level the results thereof made available to
of trustee fees and expenses for each class participants. The external audit shall be
and other peculiarities which the Bangko conducted by the same external auditor
Sentral may allow. engaged for the audit of the trust entity.

§§ X410.6
17.06.30
h. Basis upon which the fund may be enhance the value of the fund, (2) payable
terminated. The Plan rules shall state the to a third party covered by a separate
rights of participants in case of termination contract, and (3) disclosed to participants.
of the fund. Termination of the fund shall The trustee shall secure prior Bangko Sentral
be duly approved by the trustee’s board of approval for outsourcing services provided
directors and a copy of the resolution under existing regulations. No other fees
submitted to the appropriate department of shall be charged to the fund.
the Bangko Sentral. Sales, distribution, marketing and/or
i. Liability clause of the trustee. There other promotional related expenses shall be
must be a clear and prominent statement for the account of the trustee and shall be
adjacent to where a client is required to presumed covered by the trust fee.
sign the participating trust agreement that In the case of a multi-class fund that have
(1) the UIT Fund is a trust product and different level of trustee fees and expenses,
not a deposit account or an obligation of, there shall be a policy on the equitable
or guaranteed, or insured by the trust allocation of any costs, charges, and
entity or its affiliates or subsidiaries; expenses payable out of the multi-class fund,
(2) the UIT Fund is not insured or governed which are not attributable to any particular
by the PDIC; (3) due to the nature of the class.
investment, yields and potential yields k. Such other matters as may be
cannot be guaranteed; (4) any loss/income necessary or proper to define clearly the
arising from market fluctuations and price rights of participants in the UIT Fund. The
volatility of the securities held by the UIT provisions of the Plan shall govern
Fund, even if invested in government participation in the fund including the rights
securities, is for the account of the client/ and benefits of persons having interest in
participant; (5) as such, the units of such participation, as beneficiaries or
participation of the investor in the UIT Fund, otherwise. The Plan may be amended by a
when redeemed, may be worth more or be resolution of the board of directors of the
worth less than his/her initial investment/ trustee: Provided, however, That participants
contributions; (6) historical performance, in the fund shall be immediately notified
when presented, is purely for reference of such amendments and shall be allowed
purposes and is not a guarantee of similar to withdraw their participations within a
future result; and (7) the trustee is not liable reasonable time but in no case less than
for losses unless upon willful default, bad thirty (30) calendar days after the
faith or gross negligence. amendments are approved, if they are not
j. Amount of fees/commission and other in conformity with the amendments made
charges to be deducted from the fund. The thereto: Provided, further, That amendments
amount of fees that shall be charged to a to the Plan shall be submitted to the Bangko
fund shall cover the fund’s fair and equitable Sentral within ten (10) business days from
share of the routine administrative expenses approval of the amendments by the board
of the trustee such as salaries and wages, of directors. For purposes of imposing
stationery and supplies, credit investigation, monetary penalties provided under
collateral appraisal, security, messengerial Subsec. X184.3 for Delayed/Unsubmitted
and janitorial services, EDP expenses, reports, the amendments to the Plan shall
Bangko Sentral supervision fees and internal be considered as “Category A-3” report. The
audit fees. However, the trustee may charge amendments shall be deemed approved
a UIT Fund for special expenses in case such after thirty (30) business days from date of
expenses are (1) necessary to preserve or completion of requirements.

§§ X410.6 - X410.7
17.06.30
A copy of the Plan shall be available at shall clearly state:

the principal office of the trustee during (a) The designated name and
regular office hours, for inspection by any classification of the fund, the fund’s trustee,
person having an interest in the fund or by and the classes of a UIT fund, if any
his authorized representative. Upon request, . (b) Minimum information regarding:
a copy of the Plan shall be furnished such (i) The general investment policy and
interested person. applicable risk profile. There shall be a clear
(As amended by Circular Nos. 963 dated 27 June 2017, 876 description/explanation of the general risks
dated 20 April 2015, 853 dated 21 October 2014 and 593 dated attendant with investing in a UIT Fund,
08 January 2008) including risk specific to a type of fund.
§ X410.7 Minimum disclosure Technical terms should likewise be defined
in laymen’s terms1.
requirements.
(ii) Particulars including administrative
a. Key Information and Investment
and marketing details, such as but not
Disclosure Statement. This document
limited to, pricing, cut-off time for
shall contain the key features and the
participation and redemption, early
prospective and outstanding investments
redemption penalty/ies, and any special
of a UIT Fund. It shall use plain language
features of the UIT fund, as applicable. For
presented in a concise manner, and shall
a UIT Fund with unit-paying feature, the
comply substantially with the format
marketing materials shall provide relevant
prescribed in Appendix 62. This information on this feature including, but
document shall be updated and made not limited to, disclosures that distributions
available to participants at least every are not guaranteed and shall be determined
calendar quarter thereof. by the trustee in accordance with the plan
For investments of feeder funds/fund rules; and that income distribution may
of-funds, the trustee shall likewise make result in an immediate decrease in NAVPu
available to all UIT Fund clients all by the amount of distribution.
relevant information on the target fund/s. (iii) All charges made/to be made
For a UIT Fund with unit-paying feature, against the fund or class of a UIT Fund,
the KIIDS shall include the intended including trust fees and other related charges.
frequency of income distribution and the (iv) The availability of the Plan Rules
last five distribution dates, with information governing the fund, upon the client’s request
on the unit income and the distribution and the contact details of the trustee.
yield: Provided, further, That the KIIDS shall (v) Client and Product Suitability
disclose that distributions are not guaranteed Standards. Prior to admission, the trustee
and are determined by the trustee in shall perform a client profiling process for
accordance with the plan rules; and that all UIT Fund participants under the general
income distribution may result in an principles on client suitability assessment
immediate decrease in NAVPu by the to guide the client in choosing investment
amount of the distribution. outlets that are best suited to his objectives,
b. Distribution of investment units. risk tolerance, preferences and experience.
The trustee may issue such conditions or The profiling process shall, at the minimum,
rules, as may affect the distribution of require the trustee to obtain client
investment units, subject to the minimum information through the Client Suitability
conditions enumerated hereunder. Assessment (CSA) form, classify the client
(1) Marketing materials. All marketing according to his financial sophistication
materials related to the sale of a UIT Fund and communicate the CSA results to the
1
Example: "Fixed income securities" does not really mean a guarantee of fixed earnings on the investor's
participation; "Risk-free" government securities which may be sovereign "risk-free" but not interest rate
"risk-free"
§§ X410.7
14.12.31
subject client. The general principles on investment/contributions; (6) historical

CSA shall also require the trustee to adopt performance, when presented, is purely for
a notice mechanism whereby clients are reference purposes and is not a guarantee of
advised and/or reminded of the explicit similar future result; and (7) the trustee is not
requirement to notify the trustee or its UIT liable for losses unless upon willful default,
Fund marketing personnel of any change bad faith or gross negligence.
in their characteristics, preferences or In addition to the agreement, every UIT
circumstances to enable the trustee to Fund participant shall be provided with -
update client’s profile at least every (1) CSA form to be accomplished
three (3) years. during the profiling process required under
(c) The participation is not a “deposit the general principles on CSA. This is
account” but a trust product; and that any designed to ensure that based on relevant
loss/income is for the account of the information about the client, his investment
participant; that the trustee is not liable for profile is matched against the investment
losses unless upon willful default, bad faith parameters of the UIT Fund. At the
or gross negligence. minimum, client information shall include
(d) A balanced assessment of the personal or institutional data, investment
possible gains and losses of the UIT Fund objective, investment horizon, investment
and that the participation does not carry experience, and risk tolerance; and
any guaranteed rate of return, and is not (2) Risk disclosure statement, which in
insured by the PDIC. reference to Subsec. X410.6c, shall describe
(e) An advisory that the investor must the attendant general and specific risks that
read the complete details of the fund in the may arise from investing in the UIT Fund.
Plan Rules, make his/her own risk This statement shall be accomplished by the
assessment, and when necessary, he/she client every time he participates in a different
must seek independent/professional fund and shall be substantially in the form
opinion, before making an investment. as shown in Annex A of Appendix 62a.
(2) Evidence of participation. Every UIT Both documents shall be signed by the
Fund participant shall be given - client/participant and the UIT marketing
(a) A participating trust agreement. personnel who assessed and explained to
Such agreement shall clearly indicate that the concerned client his/her ability to bear
(1) the UIT Fund is a trust product and not a the risks and potential losses.
deposit account or an obligation of, or (b) A confirmation of participation and
guaranteed, or insured by the trust entity or redemption made to/from the fund that shall
its affiliates or subsidiaries; (2) the UIT Fund contain the following information:
is not insured or governed by the PDIC; (i) NAVPu of the fund on day of
(3) due to the nature of the investment, yields purchase/redemption;
and potential yields cannot be guaranteed; (ii) Number of units purchased/
(4) any loss/income arising from market redeemed; and
fluctuations and price volatility of the (iii) Absolute peso or foreign currency
securities held by the UIT Fund, even if value.
invested in government securities, is for the No indicative rates of return shall be
account of the client/participant; (5) as such, provided in the trust participating
the units of participation of the investor in the agreement. Marketing materials may present
UIT Fund, when redeemed, may be worth relevant historical performance purely for
more or be worth less than his/her initial reference and with clear indication that past

§§ X410.7- X410.8
16.03.31
results do not guarantee similar future (1) Duties and responsibilities of all UIT
results. marketing personnel;
(3) A participating trust agreement or (2) Conduct of due diligence check on
confirmation of contribution/redemption the fitness and propriety of all UIT marketing
need not be manually signed by the trustee personnel which includes monitoring and
or his authorized representative if the same reviewing on an ongoing basis their
is in the form of an electronic document performance; and
that conforms with the implementing rules (3) Conduct of continuing training and
and regulations of R.A. No. 8792, otherwise education especially on updates relative to
known as the E-Commerce Act. the fund products.
c. Regular computation and For purposes of this Subsection, a UIT
availability of NAVPu and other Fund may be sold by a bank employee
information. The trustee managing a UIT belonging to the same financial
fund shall: conglomerate as the trustee, subject to the
(1) Compute the NAVPu daily; provision of the cross-selling framework.
(2) Publish at least weekly the NAVPu To ensure the competence and integrity
in one (1) or more newspapers of national of all duly designated UIT marketing
circulation: Provided, That a pooled weekly personnel, all personnel involved in the sales
publication of such NAVPu shall be of these funds shall be required to undergo
considered as substantial compliance with standardized training program in
this requirement. The said publication, at accordance with the guidelines of this
the minimum, shall clearly state the name Subsection. This training program may be
of the fund, its general classification, the conducted by their respective trust entities
fund’s NAVPu and the moving return on in accordance with the minimum training
investment (ROI) of the fund on a year-to- program guidelines provided by the Trust
date (YTD) and year-on-year (YOY) basis; Officers Association of the Philippines
and (TOAP). Such training program shall
(3) Make available the historical net asset however be regularly validated by TOAP.
value per unit, declaration of trust or its (As amended by Circular Nos. 876 dated 20 April 2015, 852
equivalent document, disclosure dated 21 October 2014, 767 dated 21 September 2012 and 593
documents, and other pertinent information
about a UIT Fund via its website or the Trust
Officers Association of the Philippines § X410.8 Exposure limits. The
(TOAP)-administered website. For a UIT combined exposure of the UIT Fund to any
Fund with unit-paying feature, it shall also entity and its related parties shall not exceed
disclose when there is an income fifteen percent (15%) of the market value of
declaration, the total amount of income for the UIT Fund: Provided, That, a UIT Fund
distribution, NAVPu ex-distribution and its invested, partially or substantially, in
basis, total number of units for distribution, exchange traded equity securities shall be
unit income and historical distributions, if subject to the fifteen percent (15%) exposure
any. limit to a single entity/issuer: Provided,
d. Marketing personnel. The trustee further, That, in the case of an exchange
shall ensure that there are board-approved traded equity security which is included in
policies and procedures covering the an index and tracked by the UIT Fund, the
following: exposure of the UIT Fund to a single entity
(Next page is Part IV - Page 33)
Manual of Regulations for Banks Part IV- Page 32a

§§ X410.8 - X410.9
16.03.31
shall be the actual benchmark weighting of (f) Loans arising from repo agreements
the issuer or fifteen percent (15%), which are transacted through an exchange
whichever is higher. recognized by the SEC, subject to the
This limitation shall not apply to condition that the repo contracts may be
non-risk assets as defined by the Bangko pre-terminated lawfully by the trust entity
Sentral. administering the UITF and acting as lender,
In the case of feeder fund/fund-of-funds, with due notice to its counterparty and the
the exposure limit shall be applied on the market operator; and
target fund’s underlying investments. (g) Units/shares in collective investment
Notwithstanding said limit, if the target fund schemes (CIS), i.e., target fund, shall include
is allowed by its respective regulatory exchange traded fund (ETF) and other CIS,
authority to invest in units/shares of other subject to the following:
open-ended CIS, the exposure limit (1) The investment objectives of the
prescribed by said regulatory authority shall target fund are aligned with that of the
instead apply. Furthermore, the investments investor fund;
in any one (1) target fund shall not exceed (2) The underlying investments of target
ten percent (10%) of the total net asset value funds are limited to the allowable
of the target fund. investment outlets set forth in this
In case the limits prescribed above are subsection;
breached due to the marking-to-market of (3) The target fund is neither structured
certain investment/s or any extraordinary nor similarly structured as a feeder fund or
circumstances, e.g., abnormal redemptions fund-of-funds; and
which are beyond the control of the trustee, (4) The target fund is supervised by a
the trustee shall be given thirty (30) days regulatory authority, as follows:
from the time the limit is breached, or in (i) a local target fund shall either be
case of investor funds thirty (30) days from approved by the Bangko Sentral or registered
date of receipt of report indicating the net with the SEC.
asset value of the fund, to correct the same. (ii) a target fund constituted in another
(As amended by Circular Nos. 907 dated 10 March 2016, 767 jurisdiction shall be registered/authorized/
dated 21 September 2012 and 577 dated 17 August 2007) approved, as the case may be, and is
recognized as a collective investment
§ X410.9 Allowable investments and scheme in its home jurisdiction by a
valuation. UIT Fund investments shall be regulatory authority that is a member of the
limited to bank deposits and the following International Organization of Securities
financial instruments: Commissions (IOSCO); or any regulatory
(a) Securities issued by or guaranteed authority acceptable to the Bangko Sentral
by the Philippine government, or the to supervise the CIS.
Bangko Sentral; (h) Such other tradable investment
(b) Tradable securities issued by the outlets/categories as the Bangko Sentral may
government of a foreign country, any allow:
political subdivision of a foreign country or Provided, That the investment of the
any supranational entity; peso UIT Fund in tradable foreign currency
(c) Exchange-listed securities; denominated financial instruments shall be
(d) Marketable instruments that are subject to Items “e” and “f” of Subsec.
traded in an organized exchange; X409.6.
(e) Loans traded in an organized Provided, further, That a financial
market; and instrument is regarded as tradable if quoted

§§ X410.9 - X410.12
16.03.31
two-way prices are readily and regularly § X410.11 Unit Investment Trust Fund
available from an exchange, dealer, broker, administration support.
industry group, pricing service or regulatory a. Backroom operations. Administrative
agency, and those prices represent actual rules on backroom under Sec. X421 shall
and regularly occurring market transactions be applicable to UIT Fund. Adequate
on an arm’s length basis: Provided, finally, systems to support the daily marking-to-
That the financial instrument is easy to market of the fund’s financial instruments
realize upon sale at any time. shall be in place at all times. In this
The UIT Fund may avail itself of respect, a daily reconcilement of the fund’s
financial derivatives instruments solely for resultant marked-to-market value with the
the purpose of hedging risk exposures of unrealized market losses and gains
the existing investments of the Fund, (respective contra asset balance) versus the
provided these are accounted for in book value of the fund for investments in
accordance with existing Bangko Sentral financial instruments shall be done and
hedging guidelines as well as the trust all differences resolved within the day.
entity’s risk management and hedging b. Custody of securities. Investments
policies duly approved by the Trust
in securities of a UIT Fund shall be held
Committee and disclosed to participants.
for safekeeping by Bangko Sentral
The use of hedging instruments shall
accredited third party custodians which
also be disclosed in the “Plan” as provided
shall perform independent marking-to-
in Item “c” of Subsec. X410.6 and specified
market of such securities.
in the key information and investment
disclosure statement as provided in Item “a” Investments in target funds of a UIT
of Subsec. X410.7. Fund structured as an investor fund shall
(As amended by Circular Nos. 907 dated 10 March 2016, 876 be held for safekeeping by an institution
dated 20 April 2015, 852 dated 21 October 2014 and 767 dated registered/authorized/approved by a
21 September 2012, M-2010-033 dated 04 October 2010, Circular relevant regulatory authority in its home
Nos. 676 dated 29 December 2009 and 675 dated 22 December
jurisdiction to act as third party custodian.
2009)
§ X410.10 Other related guidelines on
§ X410.12 Counterparties.
valuation of allowable investments.
a. Dealings with related interests/bank
a. In pricing debt securities, the
proper/holding company/subsidiaries/
provision of Appendix 33a under the “Other
affiliates and related companies. A trustee
Guidelines” section shall apply for non-
of a UIT Fund shall be transparent at all
benchmark securities.
times and maintain an audit trail for all
b. In case outstanding UIT Fund
transactions with related parties or entities.
investments may deteriorate in quality, i.e.,
no longer tradable as defined under Subsec. The trustee shall observe the principle of
X410.9, the trustee shall immediately best execution and no purchase/sale shall
provision to reflect fair value in accordance be made with related counterparties
with generally accepted accounting without considering at least two (2)
principles or as may be prescribed by the competitive quotes from other sources.
Bangko Sentral. If no fair value is available, Consistent with the provisions of
the instrument shall be assumed to be of no Subsec. X410.4, a trustee may invest the
market value. funds of a UIT Fund structured as an
(As amended by Circular No. 813 dated 27 September 2013) investor fund in a target fund that is

§§ X410.12 - X411.1
12.12.31
administered by the trustee or its related § X411.1 Minimum documentary

party/company: Provided, That: requirements. An investment management
(i) there shall be no cross-holding account shall be covered by a written
between the investor fund and the target document establishing such account, as
fund, where cross-holding refers to the follows:
holding of shares/units of participation in a. In the case of accounts created by
one another by two (2) or more funds; corporations, business firms,
(ii) all initial charges on the target fund organizations or institutions, the voluntary
are waived; and written agreement or indenture entered
(iii) the trust/management fee shall be into by the parties, accompanied by a
charged only once, either at the level of the copy of the board resolution or other
investor fund or at level of the target fund. evidence authorizing the establishment of
b. Accreditation of counterparties. The and designating the signatories to, the
Fund shall only invest with approved investment management account.
counterparties qualified in accordance with b. In the case of accounts created by
the policy duly approved by the Trust individuals, the voluntary written
Committee. Counterparties shall be subject agreement or indenture entered into by
to appropriate limits in accordance with the parties.
sound risk management principles. The voluntary written agreement or
contract shall include the following
minimum provisions:
§ X410.13 Foreign currency- (1) Pre-numbered contractual agreement
denominated unit investment trust funds. form;
UIT Fund denominated in any acceptable (2) Title or nature of contractual
foreign currency provided under existing agreement in noticeable print;
Bangko Sentral rules and regulations may (3) Legal capacities, in noticeable print,
be established. Such fund may only be of parties sought to be covered;
invested in allowable investments (4) Purposes and objectives;
denominated in pesos or any acceptable (5) The initial amount of funds and/or
foreign currency as expressly allowed under value of securities subject of the
the fund’s plan rules and properly disclosed arrangement delivered to the investment
to fund participants. manager;
(6) Statement in underlined noticeable
§ X410.14 Exemptions from statutory print that:
and liquidity reserves, single borrower’s (a) The agreement is an agency and not
limit, director, officers, stockholders and a trust agreement. As such, the client shall
their related interests. The provisions on at all times retain legal title to funds and
reserves, single borrower’s limit and DOSRI properties subject of the arrangement;
ceilings under Subsec. X405.5, and (b) The arrangement does not guaranty
Secs. X303, X330 and X331, respectively, a yield, return or income by the investment
applicable to trust funds in general shall not manager. As such, past performance of the
be made applicable to UIT Funds. account is not a guaranty of future
performance and the income of investments
Sec. X411 Investment Management can fall as well as rise depending on
Activities. The conduct of investment prevailing market conditions; and
management activities shall be subject to the (c) The investment management
following regulations. agreement is not covered by the PDIC and
Manual of Regulations for Banks Part IV- Page 34a

§§ X411.1 - X411.4
17.09.30
that losses, if any, shall be for the account in accordance with the terms of the
of the client; instrument creating the investment
(7) Duties and powers of the investment management relationship.
manager; When an investment manager is granted
(8) Liabilities of the investment manager; discretionary powers in the investment
(9) Reports to the client; disposition of investment management
(10) The amount or rate of the funds and unless otherwise specifically
compensation of the investment manager; enumerated in the agreement or indenture
(11) Terms and conditions governing and directed in writing by the client, loans
withdrawals from the account; and investments of the fund shall be limited
(12) Termination of contractual to:
arrangement; and a. Traditional deposit products of
(13) Disclosure requirements for UBs/KBs in the Philippines with long-term
transactions requiring prior authority and/ credit rating of at least AA- or its equivalent
or specific written investment directives by a third party credit assessment agency
from the client. recognized by the Bangko Sentral;
A sample investment management b. Evidences of indebtedness of the
agreement which conforms to the foregoing Republic of the Philippines and of the
requirements is shown as Appendix 24. Bangko Sentral, and any other evidences of
indebtedness or obligations where the
§ X411.2 Minimum size of each servicing and repayment of which are fully
investment management account. No guaranteed by the Republic of the
investment management account shall be Philippines or loans against such
accepted or maintained for an amount less government securities;
than P1.0 million. An investment c. Loans fully guaranteed by the
management account reduced to less than Republic of the Philippines as to the
P1.0 million due to investment losses shall payment of principal and interest;
be exempt from this requirement. d. Tradable securities issued by the
government of a foreign country or any
§ X411.3 Commingling of funds. supranational entity with long-term credit
Two (2) or more individual investment rating of at least AA- or its equivalent by a
management accounts shall not be third party credit assessment agency
commingled except for the purpose of recognized by the Bangko Sentral;
investing in government securities or in e. Loans fully secured by a hold-out
duly registered commercial papers: on, assignment or pledge of deposits
Provided, That the participation of each maintained either with the bank proper or
of the aforementioned accounts in the other banks, or of deposit substitutes of
commingled account shall not be less the bank, or of mortgage and chattel
than P1.0 million: Provided, further, That mortgage bonds issued by the investment
such commingling has been duly disclosed manager; and
and specifically agreed in writing by the f. Loans fully secured by real estate
clients. or chattels in accordance with Sec. X311
and Subsecs. X178.17 and X304.1.
§ X411.4 Lending and investment The specific directives required under
disposition1. Assets received in investment this Subsection shall consist of the following
management capacity shall be administered information:
1
Part IV- Page 34b Manual of Regulations for Banks

§§ X411.4 - X411.5
17.09.30
(1) The transaction to be entered into; Subsection.

(2) Name of the issuer or borrower; (As amended by Circular No. 966 dated 11 July 2017)
(3) Amount involved; and
(4) Terms of the security, including § X411.5 Transactions requiring prior
collateral, if any. authority. An investment manager shall not
Trust entities with composite rating of undertake any of the following transactions
at least “3” under the Revised Trust Rating for the account of a client, unless prior to
System in the latest Bangko Sentral its execution, such transaction has been fully
examination will not be subject to the disclosed and specifically authorized in
investment limitations provided under this writing by the client:
(Next Page is Part IV- page 35)
Manual of Regulations for Banks Part IV- Page 34c

§§ X411.5 - X411.8
09.12.31
a. Lend, sell, transfer or assign money (1) The transaction to be entered into;
or property to any of the departments, (2) Identities of the parties involved in
directors, officers, stockholders, or the transaction and their relationships
employees of the investment manager, or (shall not apply to Item “d” of this
relatives within the first degree of Subsection);
consanguinity or affinity, or the related (3) Amount involved; and
interests of such directors, officers and (4) Collateral security(ies), if any.
stockholders; or to any corporation where The above information shall be made
the investment manager owns at least fifty known to clients in a separate instrument
percent (50%) of the subscribed capital or or in the very instrument creating the
voting stock in its own right and not as investment management relationship.
trustee nor in a representative capacity;
b. Purchase or acquire property or debt § X411.6 Title to securities and other
instruments from any of the departments, properties. Securities such as promissory
directors, officers, stockholders, or notes, shares of stocks, bonds and other
employees of the investment manager, or properties of the portfolio shall be issued
relatives within the first degree of or registered in the name of the principal
consanguinity or affinity, or the related or of the investment manager: Provided,
interests of such directors, officers and That in case of the latter, the instrument
stockholders; or from any corporation shall indicate that the investment manager
where the investment manager owns at least is acting in a representative capacity and
fifty percent (50%) of the subscribed capital that the principal’s name is disclosed
or voting stock in its own right and not as thereat.
trustee nor in a representative capacity;
c. Invest in equities of, or in securities § X411.7 Ceilings on loans. Loans
underwritten by, the investment manager funded by IMAs shall be subject to the
or a corporation in which the investment DOSRI ceilings imposed on banks and IHs
manager owns at least fifty percent (50%) under Secs. X330 and X331. For purposes
of the subscribed capital or voting stock in of determining compliance with said
its own right and not as trustee nor in a ceilings, the total amount of said loans
representative capacity; and granted by the trust department and the bank
d. Sell, transfer, assign or lend money proper to the same person, firm or
or property from one trust, fiduciary or corporation shall be combined.
investment management account to
another trust, fiduciary or IMA except where § X411.8 Other applicable regulations
the investment is in any of those enumerated on loans and investments. The loans and
in Items “a” to “d” of Subsec. X411.4. investments of IMAs shall be subject to
Directors, officers, stockholders, and pertinent laws, rules and regulations for
their related interests covered by this banks that shall include, but need not be
Subsection shall be those considered as limited to, the following:
such under existing regulations on loans a. Requirements of Sections 39 and 40
to DOSRI in Part III-E of this Manual. The of R.A. No. 8791 (The General Banking
procedural and reportorial requirements in Law of 2000);
said regulations shall also apply. b. Provisions of Section 4(e) of the New
The disclosure required under this Rules on Registration of Short-Term
Subsection shall consist of the following Commercial Papers and Section 7(f) of the
minimum information: New Rules on Registration of Long-Term

§§ X411.8 - X411.10
09.12.31
Commercial Papers issued by the SEC closing rate and the New York US dollar/
(Appendices 13 and 14); third currencies closing rate; and
c. Criteria for past due accounts; (4) The investment manager shall
d. Qualitative appraisal of loans, comply with the reportorial requirements
investments and other assets that may that may be prescribed by the BSP, which
require provision for probable losses which shall include as a minimum, the foreign
shall be booked in accordance with the currency amount and the local currency
FRPTI; equivalent of the total cross currency
e. Requirements of Sections 3 and 8 investments with details on: (a) type of
of the SRC; and investments; and (b) amount of cash flow
f. Provisions of Section 44 – converted.
Investments by Philippine Residents – of the For purposes of this Subsection,
FX Manual, such that the cross-currency “resident”, as defined under Section 1 of the
investments of peso IMAs, shall be subject FX Manual, shall refer to the principal that
to the following conditions: engages the services of the investment
(1) All cash flows of the investment manager under an investment management
manager shall only be in pesos. In case the agreement.
foreign exchange acquired or received by (Circular No. 676 dated 29 December 2009)
the principal as dividends/earnings or
divestment proceeds on such investment are § X411.9 Operating and accounting
intended for reinvestment abroad, the same methodology. IMAs shall be operated and
proceeds are not required to be inwardly accounted for in accordance with the
remitted and sold for pesos through following:
authorized agent banks: Provided, That such a. The investment manager shall
proceeds are reinvested abroad within two administer, hold, or manage the fund or
(2) banking days from receipt of the funds property in accordance with the instrument
abroad; creating the investment management
(2) The investment manager shall relationship; and
purchase, invest, reinvest, sell, transfer or b. Funds or property of each client
dispose foreign currency-denominated shall be accounted separately and distinctly
financial instruments, including securities from those of other clients herein referred
as defined in Section 3 of the SRC, through to as individual account accounting.
a distributor or underwriter duly (As amended by Circular No. 676 dated 29 December 2009)
authorized or licensed by the government
of the issuer of such instruments, or a § X411.10 Tax-exempt individual
counterparty financial institution (seller or investment management accounts. The
buyer) authorized in writing by the following shall be the features/requirements
principal and/or accredited by the of IMAs of individuals which may be
investment manager: Provided, That, the exempted from the twenty percent (20%)
conduct, documentation, and settlement final tax under Section 24(B)(1) of R.A. No.
of any of these transactions shall be 8424 (The Tax Reform Act of 1997):
outside Philippine jurisdiction; a. The tax exemption shall apply to
(3) The investment manager shall investment management agreements
record cross-currency investment contracted on or after 03 January 2000;
transactions in the peso regular books at b. The investment management
their foreign currency amounts and their agreement shall only be between individuals
local currency equivalent using the who are Filipino citizens or resident aliens
Philippine Dealing System peso/US dollar and investment manager-banks. The

§§ X411.10 - X412.2
09.12.31
agreement shall be non-negotiable and date when the additional funds were
non-transferable; received by the investment manager-bank
c. The minimum amount of investment to serve as basis for determining the
for an IMA shall be P1.0 million; minimum five (5)-year holding period for tax
d. The investment management exemption purposes of the additional funds;
agreement shall indicate that pursuant to and
Section 24(B)(1) of R.A. No. 8424, interest f. Tax-exempt individual IMAs
income of the investment management established under this Subsection shall be
funds derived from investments in subject to the provisions of Subsecs.
interest-bearing instruments (e.g., time X411.1(b) and X411.2 up to X411.8.
deposits, government securities, loans (As amended by Circular No. 676 dated 29 December 2009)
and other debt instruments) which are
otherwise subject to the twenty percent Sec. X412 Foreign Currency Deposit Unit/
(20%) final tax, shall be exempt from said Expanded Foreign Currency Deposit Unit
final tax provided the funds are held under Trust Accounts; Other Fiduciary or
investment management by the investment Investment Management Accounts. Only a
manager for at least five (5) years. If said bank with authority to operate a foreign
funds are held by the investment manager currency deposit unit (FCDU) or an
for a period less than five (5) years, interest expanded foreign currency deposit unit
income shall be subject to a final tax which (EFCDU) under R.A. No. 6426, as amended,
shall be deducted and withheld from the may accept foreign currency-denominated
proceeds of the IMA based on the trust, other fiduciary or IMAs.
following schedule– (As amended by Circular No. 666 dated 24 September 2009)
Holding Period Rate of Tax § X412.1 Banks with trust authority or

investment management authority. A bank
Four (4) years to less than five (5) years 5% authorized to engage in trust business under
Three (3) years to less than four (4) years 12%
Less than three (3) years 20% Section 79 of R.A. No. 8791, or in
investment management activities only
Necessarily, the investment under Subsection 53.4 of R.A. No. 8791,
management agreement shall clearly which is also authorized to operate an
indicate the date when the investment FCDU or EFCDU under R.A. No. 6426, as
manager actually received the funds which amended, shall include FCDU/EFCDU trust
shall serve as basis for determining the other fiduciary or IMAs among those
holding period of the funds; managed or administered by its trust/
e. The investment manager may investment management department under
accept additional funds for inclusion in the responsibility of the board of directors,
IMAs which have been established as tax- the trust/investment management committee
exempt under R.A. No. 8424. However, the and the trust/investment management
receipt of additional funds shall be properly officer.
documented by indicating that they are part (As amended by Circular No. 666 dated 24 September 2009)
of existing tax-exempt IMAs and that the
interest income of the additional funds § X412.2 Additional deposit for the
derived from investments in interest-bearing faithful performance of trust duties or
instruments shall be exempt from the investment management activities. A bank
twenty percent (20%) final tax under the authorized to engage in trust business or
same conditions mentioned in the preceding investment management activities that
item. The document shall also indicate the accepts FCDU/EFCDU trust other fiduciary

§§ X412.2 - X414.1
12.12.31
or IMAs shall deposit with the Bangko capital stock and no part of such surplus
Sentral additional eligible government shall at any time be paid out in dividends
securities under Subsec. X405.2 as security but losses accruing in the course of its
for the faithful performance of trust duties business may be charged against surplus.
or investment management activities
equivalent to at least one percent (1%) of B. INVESTMENT MANAGEMENT
the value of the FCDU/EFCDU trust or ACTIVITIES
investment management assets based on the
average of the month-end balances of such Sec. X414 Authority to Perform
assets during the immediately preceding Investment Management. Banks may be
quarter as converted in the local currency authorized by the Monetary Board to act as
at the prevailing foreign exchange rate. Such managing agent, adviser, consultant or
securities shall be deposited within thirty administrator of investment management/
(30) banking days after the end of every advisory/consultancy account under Section
calendar quarter. 53.4 of R.A. No. 8791. However, such
(As amended by Circular No. 666 dated 24 September 2009) authority shall not be construed to include
the authority to engage in trust and other
§ X412.3 Applicability of rules and fiduciary business under Chapter IX of R.A.
regulations. Unless otherwise revised by the No. 8791.
provisions of this Section, the rules and If a bank is found to engage in
regulations governing the administration of unauthorized investment management
trust, other fiduciary or IMAs, including activities, the Monetary Board may impose
UITFs, shall be observed. Also applicable administrative sanctions against such bank
are rules and regulations on the operations or its principal officers and/or majority
of FCDUs/EFCDUs that include, among stockholders or proceed against them in
other things, regulations on acceptable accordance with law.
foreign currencies, eligible and ineligible The Monetary Board may take such
foreign currency sources; foreign currency action as it may deem proper such as, but
cover requirements; and allowable loans and may not be limited to, requiring the transfer
investments. or turnover of any IMA to duly incorporated
(As amended by Circular No. 666 dated 24 September 2009) and licensed entities of the choice of the
client.
§ X412.4 Liquidity requirement for A bank not authorized to engage in
foreign currency deposit unit/expanded investment management activities shall not
foreign currency deposit unit common advertise or represent itself as being
trust funds engaged in investment management
(Deleted by Circular No. 666 dated 24 September 2009) activities or represent itself as investment
manager or use words of similar import.
Sec. X413 Required Surplus. A bank
authorized to engage in trust and other fiduciary § X414.1 Required capital. Banks
business shall, before the declaration of applying for authority to perform investment
dividends, carry to surplus at least ten percent management activities must have minimum
(10%) of its net profits realized out of its trust, capital accounts of not less than P300
investment management and other fiduciary million or such amount as may be required
business since the last preceding dividend by the Monetary Board or other regulatory
declaration until the surplus shall amount to agency.
twenty percent (20%) of its authorized (As amended by Circular No. 756 dated 24 April 2012)

§§ X414.2 - X415.3
12.12.31
§ X414.2 Prerequisites for engaging in faithful performance of investment

investment management activities. A bank management duties required under Subsec.
before it may engage in investment X415.1;
management activities shall comply with the b. Organization chart of the investment
following requirements: management department which shall carry
a. The bank has been duly licensed by out the investment management activities of
the Bangko Sentral or created by special law the bank; and
or charter. c. Names and positions of individuals
b. The articles of incorporation or designated as chairman and members of the
charter of the bank shall include among its investment management committee,
powers or purposes the authority to engage investment management officer and other
in investment management activities. subordinate officers of the investment
c. The by-laws of the bank shall include, management department.
among other things: (As amended by Circular No. 756 dated 24 April 2012)
(1) The organization plan or structure
of the department, office or unit which shall Sec. X415 Security for the Faithful
conduct the investment management Performance of Investment Management
activities of the institution; Activities.
(2) The creation of an investment
§ X415.1 Basic security deposit. A bank
management committee, the appointment
authorized to engage in investment
of an investment management officer and
management activities shall deposit with the
subordinate officers of the investment
Bangko Sentral eligible government
management department; and
securities as security for the faithful
(3) A clear definition of the duties and
performance of its investment management
responsibilities as well as the line and staff
activities equivalent to at least one percent
functional relationships of the various units, (1%) of the book value of the total
officers and staff within the organization. investment management assets: Provided,
d. The applicant shall also meet the That at no time shall such deposit be less
additional requirements under Subsec. than P500,000.
X404.3d to m. Scripless securities under the RoSS
Compliance with the foregoing as well system of the BTr may be used as basic
as with other requirements under existing security deposit for the faithful performance
regulations, shall be maintained up to the of investment management activities
time the investment management authority using the guidelines enumerated in
is granted. A bank that fails in this respect Appendix 33.
shall be required to show compliance for
another test period of the same duration. § X415.2 Eligible securities. Securities
(As amended by Circular No. 756 dated 24 April 2012) enumerated in Subsec. X405.2 shall be eligible
as security deposit for faithful performance of
§ X414.3 Pre-operating requirements. investment management activities.
A bank authorized to engage in investment
management activities shall, before engaging § X415.3 Valuation of securities and
in actual operations, submit to the Bangko basis of computation of the basic security
Sentral the following: deposit requirement. For purposes of
a. Government securities acceptable to determining compliance with the basic
the Bangko Sentral amounting to P500,000 security deposit under this Section, the
as minimum basic security deposit for the amount of securities so deposited shall be

§§ X415.3 - X415.4
08.12.31
based on their book value, that is, cost as ii. Non-monetary penalty beginning
increased or decreased by the corresponding with the third offense (all banks) -
discount or premium amortization. Prohibition against the acceptance of new
The base amount for the basic security IMAs and from renewing expiring
deposit shall be the average of the month- investment management contracts up to the
end balances of the total assets of investment time the violation is corrected.
management funds of the immediately b. On the Head of the Investment
preceding calendar quarter. Management Department and/or other
officers responsible for the deficiency/
§ X415.4 Compliance period; sanctions. non-compliance:
The investment manager shall have thirty (1) First offense - warning that
(30) calendar days after the end of every subsequent violations shall be dealt with
calendar quarter within which to deposit more severely;
with the Bangko Sentral securities required (2) Second offense - written reprimand
under this Section. with a stern warning that subsequent
The following sanctions shall be violations shall be subject to suspension;
imposed for any deficiency in the basic (3) Third offense - thirty (30) calendar
security deposit for the faithful performance day-suspension without pay; and
of investment management activity: (4) Subsequent offense(s) - sixty (60)
a. On the bank: calendar day-suspension without pay.
i. Monetary penalty/ies: For purposes of determining the
Offense Third and frequency of the violation, the bank’s
Trust First Second subsequent compliance profile for the immediately
Asset Size offense(s) preceding three (3) years or twelve (12)
TBs/RBs with quarters will be reviewed: Provided, That
Limited Trust P300.00 P400.00 P500.00 for purposes of determining appropriate
Authority penalty on the head of the Investment
Up to Management Department and/or other
P500 P600.00 P700.00 P800.00 responsible officer(s), any offense
UBs/KBs/TBs with Full Trust Authority and with Trust Assets of
million committed outside the preceding three (3)

Above year or twelve (12) quarter - period shall
Penalty per Calendar Day
P500 be considered as the first offense:

million P1,000.00 P1,250.00 P1,500.00 Provided, further, That in the case of the
but not head of the Investment Management
exceeding Department, all offenses committed by
P1 billion him in the past as the head of the
Above Investment Management Department of
P1 billion other institution(s) shall also be
but not P2,000.00 P3,000.00 P4,000.00 considered: Provided, finally, That if the
exceeding offense cannot be attributed to any other
P10 billion officer of the bank, the head of the
Above Investment Management Department
P10 billion shall be automatically held responsible
but not P5,000.00 P6,000.00 P7,000.00 since the ultimate responsibility for
exceeding ensuring compliance with the regulation
P50 billion rests upon him, as evidence may warrant.
Above (As amended by Circular Nos. 617 dated 30 July 2008 and
P50 billion P8,000.00 P9,000.00 P10,000.00 585 dated 15 October 2007)

§§ X416 - X421
09.12.31
Sec. X416 Organization and Management but losses accruing in the course of its
The provisions of Sec. X406 up to Subsec. business may be charged against surplus.
X406.9 shall govern the organization and
management of banks without trust license C. GENERAL PROVISIONS
which are engaged in investment
management activities only. The following Sec. X421 Books and Records. The bank’s
terms shall, however, be used: trust department or investment management
a. Investment management activities, department shall keep books and records
in lieu of trust and other fiduciary business; on trust, other fiduciary and IMAs separate
b. Investment management accounts, and distinct from the books and records of
in lieu of trust and other fiduciary accounts; its other businesses and shall follow the
c. Investment management committee, FRPTI prescribed by the BSP.
in lieu of trust committee; Each trust, other fiduciary or IMA shall
d. Investment management officer, in have a record separate from all other
lieu of trust officer; and accounts except only in the case of CTFs
e. Investment management department, where the trustee can maintain common
in lieu of trust department. records utilizing pooled fund accounting
(As amended by M-2007-009 dated 22 March 2007) method for each fund: Provided, That the
trustee shall clearly indicate in the records
Sec. X417 Non-Investment Management the trustors owning participation in the
Activities. The provisions of Sec. X407 shall CTF and the extent of the interest of such
apply in determining non-investment trustors.
management activities except that the terms Books and records shall contain full
trust, other fiduciary, trustee and fiduciary information relative to each trust, other
shall be disregarded. fiduciary or IMA and shall be supported by
duplicate signed copies of related
Sec. X418 Unsound Practices. The documents. Said records and duplicate
provisions of Sec. X408 shall govern the signed copies of related documents shall be
unsound practices for IMAs. compiled and kept as to allow inspection
by BSP examiners and submission of
Sec. X419 Conduct of Investment information or reports as may be required
Management Activities. The provisions of by competent authorities.
Secs. X411 and X412 shall govern the The bank’s trust department or
conduct of investment management investment management department shall
activities of a bank without a trust license. maintain separate general ledger accounts
(As amended by Circular No. 666 dated 24 September 2009) and other relevant sub-accounts for tax-
exempt individual trust accounts, CTFs and
Sec. X420 Required Surplus. A bank individual management accounts
authorized to engage in investment established under Section 24(B)(1) of
management activities shall, before the R.A. No. 8424 and Subsecs. X409.8,
declaration of dividends, carry to surplus at X411.9, and Item “8” of Appendix 60. The
least ten percent (10%) of its net profits bank’s trust department or investment
realized out of its investment management management department shall also adopt
activities since the last preceding dividend appropriate systems, internal control
declaration until the surplus shall amount procedures and audit trail mechanisms to
to twenty percent (20%) of its authorized ensure that the correct amount of final tax
capital stock and no part of such surplus is withheld or exempted from such accounts.
shall at any time be paid out in dividends, (As amended by Circular No. 653 dated 05 May 2009)

§§ X422 - X424
08.12.31
Sec. X422 Custody of Assets. All moneys, persons or entities unless the rebates, fees
properties or securities received by a bank and other payments shall accrue to the
in its capacity as trustee, fiduciary, or benefit of the trust, other fiduciary or IMA
investment manager shall be kept physically or the beneficiaries thereof.
separate and distinct from the assets of its Officers and employees of the trust
other businesses and shall be under the joint department or investment management
custody of at least two (2) persons, one of department of banks, while serving as such,
whom shall be an officer of the trust or shall be prohibited from retaining any
investment management department, compensation for acting as co-trustee or
designated for that purpose by the board of fiduciary in the administration of a trust,
directors. other fiduciary or IMA.
The investment of each trust, other No bank shall collect, for its own
fiduciary or investment management account, referral and/or arrangement fees,
account shall be kept physically separated or any other fees that take the nature of
from those of other trust, other fiduciary or payment to the bank from whatever source,
IMAs, and adequately identified as the assets in connection with loans sourced from trust
or property of the relevant account. funds managed by its trust department:
Provided, That if such fees are collected, the
Sec. X423 Fees and Commissions. A bank same shall be properly disclosed to the
acting as trustee, fiduciary or investment trustor, and shall accrue to the benefit of
manager shall be entitled to reasonable fees the trust, in accordance with the provisions
and commissions which shall be of Secs. X401 and X407.
determined on the basis of the cost of (As amended by Circular No. 541 dated 30 August 2006)
services rendered and the responsibilities
assumed: Provided, That where the trustee, Sec. X424 Taxes. The terms and conditions
fiduciary or investment manager is acting of trust, other fiduciary or investment
as such under appointment by a court, the management agreements including CTF
compensation shall be that allowed or plans shall contain provisions regarding the
approved by the court: Provided, further, applicability of regulations governing
That in the case of CTFs, the fee which a taxation on the income of trust, other
trustee may charge each participant shall be fiduciary or IMAs. For this purpose, the
fully disclosed by the trustee in the CTF plan, trustee, fiduciary or investment manager
prospectus, flyers, posters and in all forms shall maintain adequate records and shall
of advertising materials to market the funds include information such as the amount of
and in the documents given to clients as final income tax withheld at source and the
proof of participation in the fund. In no case amount withheld by the trustee, fiduciary
shall such fees and commissions be based or investment manager in the periodic
on the excess of the income of the trust, reports submitted to trustors, beneficiaries,
other fiduciary or investment management principals and other parties in interest.
funds over a certain amount or percentage. With respect to tax-exempt CTFs,
No trustee, fiduciary or investment individual trust and IMAs established under
manager shall solicit or receive rebates on Section 24(B)(1) of R.A. No. 8424, the
commissions, fees and other payments for bank’s trust department or investment
the services rendered to the trust, other management department shall be
fiduciary or IMA or beneficiaries of the trust, responsible for obtaining the tax-exemption
other fiduciary or IMA by stockbrokers, real certifications which may be required by the
estate brokers, insurance agents and similar BIR for the interest-bearing instruments

§§ X424 - X425.3
17.09.30
where the CTFs, individual trust funds and (1) For Discretionary accounts, the
investment management funds will be reports shall also consist of balance sheet,
invested. Likewise, the banks shall ensure income statement; investment activity
that the correct amount of final tax on the report; and Return on Investment report.
interest income on the interest-bearing (2) For Non-discretionary accounts, a
instruments is withheld/deducted from the confirmation of transaction shall be required
proceeds from the CTF participation, trust covering every purchase and sale
or IMA and remitted to the BIR in the event instructions. It shall contain the following
said tax becomes due such as when funds information:
are withdrawn before the required five (5)-year (i) Transaction entered into;
holding period or when corporations (ii) Borrower's or issuer's name;
happen to invest in the tax-exempt trust (iii) Amount involved;
instruments created within the purview of (iv) Terms of the security, including
R.A. No. 8424. collateral, if any;
(v) Settlement price;
Sec. X425 Reports Required. (vi) Value date and settlement date; and
(vii) Fees and charges related to the
§ X425.1 To trustor, beneficiary, transaction.
principal 1. An entity acting as trustee, c. The reports, except for Item "b.(2)",
fiduciary or investment manager shall shall be prepared in such frequency as
render reports on the trust, other fiduciary required under the agreement but shall not
or IMAs to the trustor, beneficiary, in any case be longer than once every
principal or other party in interest or the quarter; and
court concerned or any party duly d. The reports shall be made available
designated by the court order, as the case to clients not later than twenty (20) calendar
may be. The reports shall be in such forms days from the end of the reference date/
as to apprise the party concerned of the period in Item "c" above.
significant developments in the (As amended by Circular No. 966 dated 11 July 2017)
administration of the account and shall
comply with the following guidelines: § X425.2 To the Bangko Sentral. A bank
a. All clients shall be provided with a acting as trustee, fiduciary or investment
schedule of earning assets which contains manager shall submit periodic reports
the following information: prescribed by the appropriate department
(1) Borrower's or issuer's name of the SES on the bank’s trust and other
(2) Type of instrument; fiduciary business and investment
(3) Collateral, if any; management activities within the deadlines
(4) Principal amount or Acquisition cost; indicated in Appendix 6.
(5) Market value; (As amended by Circular No. 880 dated 22 May 2015)
(6) Marking-to-market gains or losses;
(7) Earning rate or yield; § X425.3 Audited financial statements.
(8) Amount of earnings/Accrued interest; The trust/investment management
(9) Transaction date; and department shall adopt the provisions of the
(10) Maturity date, if any. PFRS/PAS in all respect, for purposes of
b. Additional reports shall be required preparing the AFS of its trust and other fiduciary
depending on the investment discretion as and investment management activities. The
follows: following guidelines shall likewise be
1

§§ X425.3
09.12.31
observed in the preparation of the AFS: each of the general categories of

(a) The provisions of PFRS/PAS shall be contractual relationships (i.e., UITF-trust,
adopted effective the annual financial institutional-trust, and individual-trust;
statements beginning 01 January 2008; other fiduciary; institutional-agency, and
(b) A complete set of financial individual-agency; and special purpose
statements shall comprise of the following: trust) of the trust/investment management
(1) Balance sheet as of the end of the department of a bank with its clients;
period; (d) Comparative information for
(2) Income statement for the period; periods before 01 January 2008 need not
(3) Statement of changes in be presented in the AFS for the financial
accountabilities, which shall show a reporting period beginning 01 January 2008:
reconciliation of the net carrying amount at Provided, That disclosure statements on
the beginning and end of the period of the the end-2007 balances of total assets of
following accounts: the general categories of contractual
(i) principal; relationships of the trust/investment
(ii) accumulated income; and management department of a bank with
(iii) net unrealized gains/(losses) on its clients prepared based on the Generally
available for sale financial assets, separately Accepted Accounting Principles (GAAP)
disclosing the changes in each of the previously applied, shall be presented in
foregoing accounts; the notes to financial statements:
(4) Notes, which shall comprise of a Provided, further, That comparative
summary of significant accounting policies periods shall be presented in the AFS for
and other disclosure requirements provided the financial reporting period beginning
under PFRS/PAS: Provided, That for 01 January 2009 and thereafter.
purposes of complying with the disclosure (e) The following transitory rules and
of the nature and extent of risks arising from regulations shall govern the accounting
financial instruments as required under treatment of specific items for
PFRS 7, disclosure statements may be made purposes of preparing the AFS for the
based on the general categories of financial reporting period beginning
contractual relationships (i.e., UITF-trust, 01 January 2008:
institutional- trust, and individual-trust; other (1) The provisions of PFRS/PAS shall
fiduciary; institutional-agency, and only be applied to accounts outstanding as
individual-agency; and special purpose trust) of end-December 2008;
of the trust/investment management (2) Reclassification of previously
department of a bank with its clients; and recognized financial instruments shall no
(5) Balance sheet as at the beginning of longer be allowed except as allowed under
the earliest comparative period when a trust/ existing regulations;
investment management department applies (3) The fair value of ROPA and
an accounting policy retrospectively or Investment Properties as of the date of
when it makes a retrospective restatement transition to PFRS/PAS may be used as the
of items in the financial statements, or when deemed cost of said properties as of that
it reclassifies items in the financial date: Provided, That said ROPA and
statements. Investment Properties shall be subsequently
(c) The balance sheet, income accounted for in accordance with the
statement and statement of changes in provisions of the FRPTI.
accountabilities shall be presented for (Circular No. 653 dated 05 May 2009)

§§ X425.4 - X426.1
15.10.31
§ X425.4 Post-bond flotation report. the board of directors, in a resolution entered

(Superseded by Circular No.769 dated 26 September 2012) in its minutes, require the internal auditor
to adopt a suitable continuous audit system
Sec. X426 Audits. to supplement and/or to replace the
performance of the annual audit, the audit
§ X426.1 Internal audit. The bank’s may be conducted in intervals
internal auditor shall include among his commensurate with the assessed levels of
functions, the conduct of annual audit of risk in trust and investment management
the trust department or investment operations: Provided, That such intervals
management department. However, should shall be supported and reassessed regularly
(Next page is Part I- Page 45)

§§ X426.1 - X428
15.10.31
to ensure appropriateness given the current institutional-trust, and individual trust; other
risk and volume of the trust and investment fiduciary; institutional-agency, and
management operations. In any case, the individual-agency; and special purpose trust)
audit shall ascertain whether the institution’s of the trust/investment management
trust and other fiduciary business and department of a bank with its clients
investment management activities have following the format in Appendix 87.
been administered in accordance with laws, (As amended by Circular No. 653 dated 05 May 2009)
Bangko Sentral rules and regulations, and
sound trust or fiduciary principles. § X426.3 Board action. A report of the
(As amended by Circular No. 871 dated 05 March 2015) foregoing audits, together with the actions
thereon, shall be noted in the minutes of
§ X426.2 External audit. The trust and the board of directors of the bank.
other fiduciary business and investment
management activities of a bank shall be Sec. X427 Authority Resulting from Merger
included in the annual financial audit by or Consolidation. In merger of FIs, the
independent external auditors required authority to engage in trust and other
under Subsec. X190.1. fiduciary business and in investment
The audit of the assets and management activities shall continue to be
accountabilities of the trust department/ in effect if the surviving institution has such
investment management department of a authority and the same has not been
bank authorized to engage in trust and other withdrawn by the Bangko Sentral. In case
fiduciary business, investment management the surviving institution does not have
activities, which shall cover at the minimum previous authority but desires to engage in
a review of the trust investment management trust and other fiduciary business and in
operations, practices and policies, including investment management activities, it shall
audit and internal control system, shall be secure the prior approval of the Monetary
subject to auditing standards to the extent Board to engage in such business as part of
necessary to express an opinion on the its application for merger to enable it to
financial statements. incorporate such among its powers or
The audit of the trust/investment purpose clause in its articles of
management department of a bank incorporation, articles of merger, by-laws
authorized to engage in trust and other and such other pertinent documents.
fiduciary business/investment management In the consolidation of FIs where the
activities shall be covered by a separate resulting entity is an entirely new one, it shall
secure from the Monetary Board an authority
supplemental audit report to be submitted
to engage in trust and other fiduciary
to the bank’s board of directors and to the
business or in investment management
Bangko Sentral within the prescribed period
activities before it may engage in such
containing, among other things, the
business.
complete set of financial statements of the
trust/ investment management department Sec. X428 Receivership. Whenever a
of a bank prepared in accordance with the receiver is appointed by the Monetary Board
provisions of Subsec. X425.3 together with for a bank which is authorized to engage in
the other information required by the trust and other fiduciary business or in
Bangko Sentral to be submitted under investment management activities, the
Subsec. X190.1: Provided, That a receiver shall, pursuant to the instructions
reconciliation statement of the balance sheet of the Monetary Board, proceed to close the
in the AFS and the FRPTI shall be prepared trust, other fiduciary and IMAs promptly
for each of the general categories of and/or transfer all other accounts to substitute
contractual relationships (i.e., UITF-trust, trustees, fiduciaries or investment managers

§§ X428 - X441.4
16.03.31
acceptable to the trustors, beneficiaries, (As amended by Circular Nos. 903 dated 29 February 2016, 873
principals or other parties in interest: Provided, dated 25 March 2015, 714 dated 10 March 2011, M-2007-002
dated 23 January 2007, M-2006-009 dated 06 July 2006, M-
That where the trustee, fiduciary or investment 2006-002 dated 05 June 2006 and Circular No. 524 dated 31
manager is acting as such under appointment March 2006)
by a court, the receiver shall proceed pursuant
to the instructions of said court. § X441.1 Statement of policy. It is the
policy of the Bangko Sentral to promote the
Sec. X429 Surrender of Trust or Investment protection of investors in order to gain their
Management License. Any bank which has confidence and encourage their participation
been authorized to engage in trust and other in the development of the domestic capital
fiduciary business or in investment market. Therefore, the following rules and
management activities and which intends regulations are promulgated to enhance
to surrender said authority shall file with the transparency of securities transactions with
Bangko Sentral a certified copy of the the end in view of protecting investors.
resolution of its board of directors
manifesting such intention. The appropriate § X441.2 Applicability of this
department of the SES shall then conduct regulation. This regulation shall govern
an examination of the bank’s trust, other securities custodianship and securities
fiduciary business and investment registry operations of banks and NBFIs under
management activities. If the bank is found Bangko Sentral supervision. It shall cover
to have satisfactorily discharged its duties all their transactions in securities as defined
and responsibilities as trustee, fiduciary or in Section 3 of the Securities Regulation
investment manager, and has provided for Code (SRC), whether exempt or required to
the orderly closure or transfer of its trust, be registered with the SEC, that are sold,
fiduciary or investment management borrowed, purchased, traded, held under
accounts, the Monetary Board, on the basis custody or otherwise transacted in the
of the recommendation of the examining Philippines where at least one (1) of the
parties is a bank or an NBFI under Bangko
department, shall order the withdrawal of
Sentral supervision. However, this
the bank’s authority to engage in trust and
regulation shall not cover the operations of
other fiduciary management activities.
stock and transfer agents duly registered
Secs. X430 – X440 (Reserved) with the SEC pursuant to the provisions of
SRC Rule 36-4.1 and whose only function
Sec. X441 Securities Custodianship and is to maintain the stock and transfer book
Securities Registry Operations 1 . The for shares of stock.
following rules and regulations shall govern
securities custodianship and securities § X441.3 Prior Bangko Sentral
approval. Banks may act as securities
registry operations of banks under Bangko
custodian and/or registry only upon prior
Sentral regulations. Monetary Board approval.
The guidelines to implement the delivery
of securities are provided in Appendix 68. § X441.4 Application for authority. A
Violation of any provision of the bank desiring to act as securities custodian
guidelines in Appendix 68 shall be subject to and/or registry shall file an application
the sanctions/penalties under Subsec. X441.29. with the appropriate supervising
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. Banks which intend to convert to another mode of delivery shall submit to the appropriate SES
department within 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 March 2015 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.

§§ X441.4 - X441.5
13.12.31
and examining department of the Bangko operations) and other related documents
Sentral. The application shall be signed by embodying the risk management system
the highest ranking officer of the bank and must be submitted to the appropriate
shall be accompanied by a certified true supervising and examining department at
copy of the resolution of the bank’s board the time of application for authority and
of directors authorizing the bank to engage within thirty (30) days from updates;
in securities custodianship and/or registry f. It must have adequate technological
and, in the case of a branch of a foreign capabilities and the necessary technical
bank, approval by its highest ranking expertise to ensure the protection, safety and
regional officer with proof of delegated integrity of client assets, such as:
authority from the bank’s board of directors. (1) It can maintain an electronic registry
dedicated to recording of accountabilities
§ X441.5 Pre-qualification requirements to its clients; and
for a securities custodian/registry. (2) It has an updated and
a. The securities custodian must be a comprehensive computer security system
bank that is authorized to engage in covering system, network and
investment management or trust business. telecommunication facilities that will:
The securities registry must be a bank. (a) limit access only to authorized
b. It must have complied with the users;
minimum capital accounts required under (b) preserve data integrity; and
existing regulations, as follows: (c) provide for audit trail of
(1) Domestic banks. The minimum transactions.
capital required under Subsec. X111.1 or the g. It has complied, during the period
minimum capital required for TBs operating immediately preceding the date of
in Metro Manila, whichever is higher. application, with the following:
(2) Branches of foreign banks. The (1) ceilings on credit accommodation
minimum capital required under Subsec. to DOSRI; and
X105.4.b. (2) single borrower’s limit.
c. Its risk-based capital adequacy ratio h. It has no reserve deficiencies during
is not lower than twelve percent (12%) at the eight (8) weeks immediately preceding
the time of filing the application; the date of application;
d. It must have a CAMELS composite i. It has set up the prescribed
rating of at least “4” (as rounded off) in the allowances for probable losses, both general
last regular examination; and specific, as of date of application;
e. It must have in place a j. It has not been found engaging in
comprehensive risk management system unsafe and unsound practices during the last
approved by its board of directors (or six (6) months preceding the date of
equivalent management committee in the application;
case of foreign bank branches) appropriate k. It has generally complied with laws,
to its operations characterized by a clear rules and regulations, orders or instructions
delineation of responsibility for risk of the Monetary Board and/or Bangko
management, adequate risk measurement Sentral Management;
systems, appropriately structured risk limits, l. It has submitted additional
effective internal control and complete, documents/information which may be
timely and efficient risk reporting systems. requested by the appropriate supervision
In this connection, a manual of operations and examination department, such as, but
(which includes custody and/or registry not limited to:

§§ X441.5 - X441.8
13.12.31
(1) Standard custody/registry agreement in respect of dividends, interest earnings or

and other standard documents; proceeds from the sale/redemption/maturity
(2) Organizational structure of the of securities held under custodianship:
custody/registry business; Provided, That the custodian shall immediately
(3) Transaction flow; and make known to the securities owner all
(4) For those already in the custody or collections received and payments made with
registry business, a historical background for respect to the securities under custody.
the past three (3) years; j. In addition to the above basic
m. It shall be conducted in a separate functions, it may perform the value-added
unit headed by a qualified person with at service of securities lending as agent:
least two (2) years experience in custody/ Provided, That it complies with the
registry operations; pre-qualification requirements under Item
n. It can interface with the clearing and “o” of Subsec. X441.5: Provided, further,
settlement system of any recognized That the securities lending service shall be
exchange in the country capable of covered by a Securities Lending
achieving a real time gross settlement of Authorization Agreement (SLAA) which
trades; and shall be attached to the custody contract.
o. A securities custodian which A securities custodian which renders the
provides the value-added service of value-added service of securities lending
securities lending involving securities that involving securities that are sold, offered and
are sold, offered for sale or distributed within distributed within the Philippines shall
the Philippines must be a duly-licensed comply with all other pertinent rules
lending agent registered with the SEC. and regulations of the SEC on securities
(As amended by Circular Nos. 822 dated 13 December 2013 lending and borrowing operations.
and 714 dated 10 March 2011) (As amended by Circular No. 714 dated 10 March 2011)
§ X441.6 Functions and responsibilities § X441.7 Functions and responsibilities

of a securities custodian. A securities of a securities registry.
custodian shall have the following basic a. Maintains an electronic registry
functions and responsibilities: book;
a. Safekeeps the securities of the client; b. Delivers confirmation of transactions
b. Holds title to the securities in a and other documents within agreed trading
nominee capacity; periods;
c. Executes purchase, sale and other c. Issues registry confirmations for
instructions; transfers of ownership as it occurs;
d. Performs at least a monthly d. Prepares regular statement of
reconciliation to ensure that all positions are securities balances at such frequency as may
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
actions in accordance with the direction documentation to govern its relationship
provided by the securities owner; with the Issuer.
g. Conducts mark-to-market valuation
and statement rendition; § X441.8 Protection of securities of the
h. Does earmarking of encumbrances customer. A custodian must incorporate the
or liens such as, but not limited to, Deeds following procedures in the discharge
of Assignment and court orders; and of its functions in order to protect
i. Acts as a collecting and paying agent the securities of the customer:

§§ X441.8 - X441.9
15.10.31
a. Administration of securities c. Documentation. The appropriate

custodianship accounts of banks. 1 documentation for custodianship shall be
Securities custodianship accounts shall be made and it shall clearly define, among
administered in the Trust Unit of a bank. others, the authority, role, responsibilities,
As an exception, however, a custodian fees and provision for succession in the event
bank may be allowed to administer the custodian can no longer discharge
custodianship accounts in the Bank Proper: its functions. It shall be accepted
Provided, That this is limited to in writing by the counterparties.
custodianship accounts wherein the The governing custodianship agreement
securities custodian performs the basic shall be pre-numbered and this number shall
functions and responsibilities provided be referred to in all amendments and
under Subsec. X441.6: Provided, further, supplements thereto.
That the custodian bank secures prior MB d. Confirmation of custody. The custodian
approval on this arrangement: Provided, shall issue a custody confirmation to the
finally, That a custodian bank that is purchaser or borrower of securities to
seeking exemption from the general evidence receipt or transfer of securities as
requirement should be able to demonstrate they occur. It shall contain, as a minimum,
that it has instituted adequate risk the following information on the securities
management systems and prudential under custody:
controls in the Bank Proper to ensure the (1) Owner of securities;
protection of client assets, maintain (2) Issuer;
proper segregation of functions and (3) Securities type;
prevent conflict of interest situations that (4) Identification or serial numbers;
may arise in the administration (5) Quantity;
of securities custodianship accounts (6) Face value; and
b. Accounting and recording for (7) Other information, which may be
securities. Custodians must employ requested by the parties.
accounting and safekeeping procedures that e. Periodic reporting. The custodian
fully protect customer securities. It is shall prepare at least quarterly (or as frequent
essential that custodians segregate customer as the owner of securities will require)
securities from one another and from its securities statements delivered to the
proprietary holdings to protect the same registered owner’s address on record. Said
from the claims of its general creditors. statement shall present detailed information
Securities held under custodianship such as, but not limited to, inventory of
shall be recorded in the books of the securities, outstanding balances, and market
custodian at the face value of said securities values.
in the off-balance sheet account “Securities (As amended by Circular No. 714 dated 10 March 2011)
Held Under Custodianship by Bank
Proper”, if booked in the Bank Proper, or § X441.9 Independence of the registry
the other fiduciary sub-account and securities custodian. A Bangko Sentral-
“Custodianship”, if booked in the Trust accredited securities registry must be a third
Department. party that does not belong to the same
Securities held under custodianship financial conglomerate or banking group as
where the custodian performs the that of the issuer of securities. A Bangko
value-added service of securities Sentral-accredited securities custodian must
lending as agent shall be booked in the Trust be a third party that does not belong to the
Department. same financial conglomerate or banking
1
Existing Bangko Sentral-accredited custodian banks which intend to administer their securities custodianship business in
the bank proper shall be given thirty (30) banking days from 01 April 2011 to comply with the provisions of the Subsection.

§§ X441.9 - X441.13
15.10.31
group as that of the issuer and seller of registry shall not disclose to any
securities held under custody. A bank unauthorized person any information
accredited by Bangko Sentral as securities relative to the securities under its
custodian may, however, continue holding custodianship/registry. The Management
securities it sold under the following cases: shall likewise ensure the confidentiality of
a. where the purchaser is a related entity client accounts of the custody or registry
acting in its own behalf and not as agent or unit from other units within the same
representative of another; organization.
b. where the purchaser is a non-resident
with existing global custody agreement § X441.12 Compliance with Anti-
governed by foreign laws and conventions Money Laundering laws/regulations. For
wherein the bank is designated as custodian purposes of compliance with the
or sub-custodian; and requirements of R.A. No. 9160, otherwise
c. upon approval by the Bangko Sentral, known as the “Anti-Money Laundering Act
where the purchaser is an insurance of 2001,” as amended, particularly
company whose custody arrangement is the provisions regarding customer
either governed by a global custody identification, record keeping and reporting
agreement where the bank is designated as of suspicious transactions, a Bangko Sentral-
custodian or sub-custodian or by a direct accredited custodian may rely on referral
custody agreement with features at par with by the seller issuer of securities: Provided,
the standards set under this Subsection That it maintains a record of such referral
drawn or prepared by the parent company together with the minimum identification,
owning more than fifty percent (50%) of the information/documents required under the
capital stock of the purchaser and executed law and its implementing rules and
by the purchaser itself and its custodian. regulations.
Purchases by non-residents and insurance A Bangko Sentral-accredited custodian
companies that are exempted from the must maintain accounts only in the true and
independence requirement of this Section full name of the owners of the security.
shall, however, be subject to all other However, said securities owners may be
provisions of this Subsection. identified by number or code in reports and
(As amended by Circular No. 873 dated 25 March 2015)
correspondences to keep his identity
§ X441.10 Registry of Scripless confidential.
Securities of the Bureau of the Treasury. Securities subject of pledge and/or deed
The Registry of Scripless Securities (RoSS), of assignment as of 14 October 2004 (date
operated by the Bureau of the Treasury, of Circular 457), may be held by a lending
which is acting as a registry for government bank up to the original maturity of the loan
securities is deemed to be automatically or full payment thereof, whichever comes
accredited for purposes of this Section and is earlier.
likewise exempted from the independence
requirement under Subsec. X441.9. Securities § X441.13 Basic security deposit.
registered under the RoSS shall be delivered Securities held under custodianship whether
in accordance with the guidelines set forth in booked in the Trust Department or carried
Appendices 68 and 68a. in the regular books of the bank shall be
(As amended by Circular No. 873 dated 25 March 2015) subject to a security deposit for faithful
performance of duties at the rate of 1/25 of
§ X441.11 Confidentiality. A Bangko one percent (1%) of the total face value or
Sentral-accredited securities custodian/ P500,000 whichever is higher.

§§ X441.13 - X499
12.12.31
However, securities held under c. Subsequent offenses –

custodianship where the custodian also (1) Fine of up to P30,000 a day for the
performs securities lending as agent shall institution for each violation from the date
be subject to a higher basic security deposit the violation was committed up to the date
of one percent (1%) of the total face value. it was corrected;
Compliance shall be in the form of (2) Suspension or revocation of the
government securities deposited with the authority to act as securities custodian and/
Bangko Sentral eligible pursuant to existing or registry; and
regulations governing security for the faithful (3) Suspension for one hundred twenty
performance of trust and other fiduciary (120) days without pay of the directors/
business. officers responsible for the violation.
(As amended by Circular No.714 dated 10 March 2011)
Secs. X442 – X498 (Reserved)
§ X441.14 Reportorial requirements.
An accredited securities custodian shall D. GENERAL PROVISION ON
comply with reportorial requirements that SANCTIONS
may be prescribed by the Bangko Sentral,
which shall include as a minimum, the face Sec. X499 Sanctions. Any violation of the
and market value of securities held under provisions of this Part shall be subject to
custodianship. Sections 36 and 37 of R.A. No. 7653
without prejudice to the imposition of
§§ X441.15 – X441.28 (Reserved) other sanctions as the Monetary Board
may consider warranted under the
§ X441.29 Sanctions. Without prejudice circumstances that may include the
to the penal and administrative sanctions suspension or revocation of a bank’s
provided for under Sections 36 and 37,
authority to engage in trust and other
respectively, of the R.A. No. 7653,
fiduciary business or in investment
violation of any provision of this Section management activities, and such other
shall be subject to the following sanctions/ sanctions as may be provided by law.
penalties: In the case of non-compliance with
a. First offense – the requirements of Secs. X401, 2404
(1) Fine of up to P10,000 a day for the Items “(i) – (iii)” and 3404 Items “(i) –
institution for each violation reckoned from (iii)” and Subsecs. X406.2 to X406.4 and
the date the violation was committed up to X406.10 additional sanction may be
the date it was corrected; and imposed, which may include but not
(2) Reprimand for the directors/officers limited to, curtailment of fiduciary
responsible for the violation. activities and/or introduction of new
b. Second offense - business. 1
(1) Fine of up to P20,000 a day for the The guidelines for the imposition of
institution for each violation reckoned from monetary penalty for violations/offenses
the date the violation was committed up to with sanctions falling under Section 37 of
the date it was corrected; and R.A. No. 7653 on banks, their directors
(2) Suspension for ninety (90) days and/or officers are shown in Appendix 67.
without pay of directors/officer responsible (As amended by Circular No. 766 dated 17 August 2012)
for the violation.
________________
1
Trust entities of banks that do not meet the requirements shall be given twelve (12) months from
10 September 2012 to comply.

PART FIVE
MANUAL OF REGULATIONS ON
FOREIGN EXCHANGE TRANSACTIONS
For the updated version of the Manual of Regulations on Foreign Exchange Transactions,
please refer to http://www.bsp.gov.ph/downloads/Regulations/MORFXT/MORFXT.pdf
Manual of Regulations for Banks Part V- Page 1

§§ X601 - X601.1
16.09.30
PART SIX
TREASURY AND MONEY MARKET OPERATIONS
A. MONETARY OPERATIONS OF THE by the issuer of such agreement, the same

BANGKO SENTRAL may be sold in the open market or transferred
to the Bangko Sentral portfolio; and
Section X601 (2015- Open Market (3) Should an issuer of a repo agreement
Operations) Monetary Operations. become no longer qualified as such, its
Monetary operations refer to the buying/ outstanding repo agreement shall
selling of government securities, lending/ immediately become due and payable.
borrowing against underlying assets as If settlement of the amount due is not made
collateral, acceptance of fixed-term within three (3) days from the date of its
deposits, foreign exchange swaps, and other disqualification, the Bangko Sentral shall
monetary instruments of the Bangko Sentral proceed to collect said amount in
aimed at influencing the underlying demand accordance with the preceding paragraph.
and supply conditions for money. d. Reverse repo agreements covering the
The following rules and regulations shall sale of portion of the security holdings of the
govern the buying and selling of government Bangko Sentral portfolio may be made under
securities in the open market, pursuant to the terms provided for in Subsec. X601.2.
Section 91 of R.A. No. 7653: e. The purchase and sale of
a. The Bangko Sentral may buy and sell government securities by the National
in the open market for its own account: Treasury and government-owned or
(1) Evidences of indebtedness issued controlled corporations shall be made only
directly by the Government of the with (a) the Bangko Sentral; (b) the DBP,
Philippines or its political subdivisions; and the LBP, the SSS, the GSIS, the Al-Amanah
(2) Evidences of indebtedness issued Islamic Investment Bank of the Philippines
by government instrumentalities and fully and banks that are wholly-owned or
guaranteed by the Government. controlled by these institutions; and (c) the
The above evidences of indebtedness must Philippine Veterans Bank. Transactions
be freely negotiable and regularly serviced. shall be done with the bank proper and not
Purchases and sales in the open market shall through its trust department.
be made through banks, QBs and (As amended by Circular No. 913 dated 02 June 2016)
accredited government securities dealers.
b. Outright purchases and sales of § X601.1 Repurchase agreements with
government securities shall be effected at Bangko Sentral.
prevailing market prices. a. Repo agreements may be entered
c. Repo agreements shall be open to into with the Bangko Sentral subject to the
banks (except RBs), QBs, and accredited following terms and conditions:
government securities dealers and shall be (1) Rate. The rates on repo transactions
made under the terms provided for in shall be determined by auction, based on
Subsec. X601.1 and the following: guidelines as prescribed by the Bangko
(1) The repo agreement may be paid Sentral.
at any time before maturity, subject to (2) Term. The tenor of the repo
mutual agreement of both parties; agreement shall be set by the Bangko Sentral.
(2) In the event the securities covered (3) Security. Only direct obligations of
by the repo agreement are not repurchased the National Government and its
Manual of Regulations for Banks Part VI - Page 1

§§ X601.1 - X601.2
16.09.30
instrumentalities and political subdivisions, denominated repo agreement with the

which are fully guaranteed by the Bangko Sentral:
Government, with a remaining maturity of (1) Termination of eligibility and
at least six (6) days and longer than the tenor pre-termination of any outstanding balance
of the Repo Agreement and which are freely through repayment and/or sale of the
negotiable, unencumbered, and regularly collateral;
serviced, shall be eligible as underlying (2) Fine of up to P30,000 per
instruments for repo agreements subject to the transaction per day of violation reckoned
collateral requirement prescribed by the from the time the violation was committed
Bangko Sentral. up to the date it is corrected;
(4) Delivery. Delivery of the (3) Suspension of interbank clearing
underlying instruments shall be made to privileges/immediate exclusion from
the Bangko Sentral at the prescribed time clearing;
based on guidelines as prescribed by the (4) Suspension of access to Bangko
Bangko Sentral. Sentral rediscounting facilities;
(5) At the maturity of the repo (5) Suspension of lending or foreign
agreement, the Bangko Sentral Treasury exchange operations or authority to accept
Department shall return the underlying new deposits or make new investments;
instruments to the issuer of such agreement. (6) Revocation of authority to perform
b. US dollar (USD) denominated trust operations;
repo agreement facility may likewise be (7) Revocation of quasi-banking
entered into with the Bangko Sentral, license;
subject to the following terms and (8) Suspension for 120 days without
conditions, and as may be provided under pay of the officers and/or directors
the repo agreement facility: responsible for the violation; and
(1) Eligible borrowers. The USD (9) Other sanctions as may be
denominated repo facility shall only be provided by law.
available to banks with legitimate foreign (As amended by Circular Nos. 921 dated 22 August 2016, 913
currency denominated funding needs as dated 02 June 2016, 631 dated 12 November 2008, 627 dated
23 October 2008, M-2008-034 dated 12 November 2008 and
may be provided under the repo facility: M-2008-031 dated 23 October 2008)
Provided, That the borrowing shall be for
the account of the applicant bank and shall § X601.2 Reverse repurchase
not be used to fund liquidity requirements agreements with the Bangko Sentral.
of foreign branches, affiliates, or Reverse Repurchase Agreement (RRP) refers
subsidiaries. to the Bangko Sentral’s monetary instrument
(2) Security. Only USD denominated where the Bangko Sentral sells government
obligations of the National Government of securities with a commitment to buy them
the Republic of the Philippines shall be back at a later date. RRPs shall be open to
eligible as collateral. banks (UBs/KBs and TBs) and NBQBs.
(3) The guidelines on the availment of These counterparties may enter into RRP
USD repo agreement with the Bangko transactions with the Bangko Sentral by
Sentral are shown in Appendix 86. participating in the RRP auction operation
The Monetary Board may, at its and said transactions with the Bangko
discretion, impose any or all of the Sentral shall be subject to the following
following sanctions to a bank and/or its terms and conditions:
director/s or officer/s found to be a. Rate. The interest rate on the RRP
responsible for violation of the provisions facility shall be set by the Bangko Sentral in
on the terms and conditions of the USD accordance with its monetary policy
Part VI - Page 2 Manual of Regulations for Banks

§§ X601.2 - X601.4
16.09.30
decision making. agent. In both cases, payment of the FWT

b. Term. Tenors shall be set at a to the Bangko Sentral shall be made on or
minimum of one (1) day (overnight) and a before 03 April 2009, either in full or in
maximum of 364 days, or as determined by three (3) installments: Provided, That a
the Bangko Sentral. bank which intends to pay in installments
c. Auction Schedule. RRP auctions will shall remit the first payment on or before
be held regularly based on a schedule 06 March 2009, the second on or before
prescribed by the Bangko Sentral. 20 March 2009 and the last on or before
d. Volume. The auction size will be 03 April 2009: Provided, further, That
determined by the Bangko Sentral based on payments due shall be deducted from the
its assessment of liquidity conditions. Regular Demand Deposit Account (RDDA)
e. Eligible Security. The underlying of concerned banks. The Bangko Sentral
securities shall consist of securities shall issue the certificate of final withholding
representing obligations of the National tax reflecting the amount of the FWT paid;
Government. Such securities shall be valued and
at 100%. The Bangko Sentral shall prescribe (3) Concerned banks shall issue the
the rules for the constructive delivery of corresponding debit authority to the Bangko
securities. Sentral to cover the twenty percent (20%)
f. Access to the RRP facility shall be FWT on their RRPs with the Bangko Sentral
governed by guidelines issued by the as mentioned in Item “2” above.
Bangko Sentral. (As amended by Circular Nos. 913 dated 02 June 2016, 647
dated 03 March 2009 and 619 dated 22 August 2008)
RRPs entered into by the Bangko Sentral
with any AAB are included in the definition
§ X601.3 Settlement procedures on the
of the term “deposit substitutes” under
purchase and sale of government securities
Sec. 22 (y) Chapter 1 of the National Internal
under repurchase agreements with the
Revenue Code of 1997.
Bangko Sentral. Purchase and sale of
The Bangko Sentral shall withhold twenty
government securities under repo
percent (20%) Final Withholding Tax (FWT)
agreements (GS/repo agreements) between
and five percent (5%) Gross Receipt Tax on
and among banks and QBs and Bangko
its RRPs, under the following guidelines:
Sentral in connection with the latter’s open
(1) All overnight RRPs with the Bangko
market operations shall be settled in
Sentral shall be subject to the twenty percent
accordance with the provisions of the
(20%) FWT and five percent (5%) Gross
agreement for the PhilPaSS executed on
Receipts Tax (GRT) in the same manner as
12 December 2002 between the Bangko
term RRPs, which tax is deducted on each
Sentral and BAP/CTB/RBAP and any
maturity date and remitted to the BIR. These
subsequent amendments thereto.
taxes shall be automatically withheld; and (As superseded by the agreement between the BSP and BAP/
(2) With respect to repurchase CTB/RBAP dated 12 December 2002)
agreements from 01 January 2008 to
22 August 2008, the concerned banks shall § X601.4 Borrowings from the
reimburse the Bangko Sentral the amount Overnight Lending Facility (OLF) of the
equivalent to forty percent (40%) of the Bangko Sentral. The OLF is a Bangko Sentral
twenty percent (20%) FWT due thereon. standing facility which allows counterparties
However, banks which choose to pay the to obtain overnight liquidity from the Bangko
whole twenty percent (20%) FWT shall Sentral on an open-volume basis against
remit the amount equivalent to the sixty eligible collateral in order to cover
percent (60%) balance thereof to the BIR, short-term liquidity requirements. The OLF
through the Bangko Sentral as withholding shall be open to banks (UBs/KBs and TBs) and

§ X601.4 - X601.6
17.06.30
NBQBs. counterparties during trading hours as

a. Counterparties may avail of prescribed by the Bangko Sentral.
borrowings from the Bangko Sentral’s OLF e. Access to the ODF shall be governed
subject to the following terms and by guidelines issued by the Bangko Sentral.
conditions: The Bangko Sentral shall withhold the
(1) Rate. The interest rate on borrowings twenty percent (20%) FWT and the five
from the OLF shall be set by the Bangko percent (5%) GRT on its overnight deposit
Sentral in relation to the policy interest rate. transactions, under the following guidelines:
(2) Term. Tenor shall be for one (1) day only. (1) All overnight deposit transactions
(3) Volume. Open volume, limited only with the Bangko Sentral shall be subject to
by the eligible collateral offered by the the twenty percent (20%) FWT and the five
availing counterparties. percent (5%) GRT which tax is deducted
(4) Eligible collateral. Only direct on each maturity date and remitted to the BIR;
obligations of the National Government or (2) The Bangko Sentral Treasury
of its instrumentalities and political Department shall automatically withhold the
subdivisions which are fully guaranteed by twenty percent (20%) FWT and the five
the Government, with a remaining maturity percent (5%) GRT on the overnight deposit of
of not less than six (6) days and which are eligible counterparties with the Bangko Sentral.
freely negotiable and are unencumbered, (As amended by Circular No. 961 dated 02 June 2017, M-2016-016
shall be eligible as collateral. The Bangko dated 18 November 2016 and Circular No. 913 dated 02 June 2016)
Sentral shall prescribe rules for the delivery
of collateral. § X601.6 (2016 - Bangko Sentral
(5) Operating hours. The OLF is available trading windows and services during
on demand to eligible counterparties during public sector holidays) The Bangko Sentral
trading hours as prescribed by the Bangko Term Deposit Facility (TDF).1 The TDF is a
Sentral. key liquidity absorption facility of the Bangko
(As amended by Circular Nos. 921 dated 22 August 2016 and Sentral used to withdraw liquidity from the
913 dated 02 June 2016) system in bulk.2 Term deposit transactions
shall be open to banks (UBs/KBs and TBs),
§X601.5 Overnight deposits with NBQBs, and trust entities and may be
Bangko Sentral.1 The Overnight Deposit effected with the Bangko Sentral subject to
Facility (ODF) is a Bangko Sentral standing the following terms and conditions:
facility which allows banks (UBs/KBs and a. Rate. The interest rates shall be
TBs), NBQBs, and trust entities to place determined by auction, based on
overnight deposits with the Bangko Sentral, guidelines as prescribed by the Bangko
subject to the following terms and Sentral.
conditions: b. Term. The tenor of term deposits shall
a. Rate. The interest rate on the be set by the Bangko Sentral.
overnight deposit facility shall be set by the c. Auction Schedule. TDF auctions will
Bangko Sentral in relation to the policy be held on a weekly basis or as determined
interest rate. by the Bangko Sentral.
b. Term. Tenor shall be one (1) day only. d. Volume. The auction size will be
c. Volume. No limit. determined by the Bangko Sentral and
d. Operating hours. The ODF is announced with an appropriate lead time
available on demand to eligible ahead of the auction date.
1
The Monetary Board, in its Resolution No. 1945 dated 27 October 2016 approved the discontinuance of
access of trust entities to the Bangko Sentral deposit facilities. Trust entities shall no longer have outstanding
placement in the ODF and TDF by 30 June 2017.
2
The TDF also refers to the Term Deposit Auction Facility in Participation Agreements and Rules and Regulation
pertaining to the Bangko Sentral facilities under the Monetary Operations System.

§§ X601.6 - X602.1
17.09.30
e. Placements in the TDF shall be Sentral, shall comply with the Guidelines
governed by guidelines issued by the on the Prohibition Against the Use of Funds
Treasury Department of the Bangko Sentral. from Non-Resident Sources for Placements
The Bangko Sentral shall withhold the in the Bangko Sentral’s TDF and the ODF
twenty percent (20%) FWT and the five shown in Appendix 78.
percent (5%) GRT on its term deposit (Circular No. 913 dated 02 June 2016)
transactions, under the following guidelines:
(1) All term deposit transactions with Sec. X602 Treasury Activities of Bangko
the Bangko Sentral shall be subject to the Sentral Supervised Financial Institutions
twenty percent (20%) FWT and the five (BSFIs). Statement of Policy. The Bangko
percent (5%) GRT which tax is deducted Sentral is cognizant that treasury activities
on each maturity date and remitted to the may expose BSFIs to significant risks along
BIR; with profitable opportunities. These
(2) The Bangko Sentral Treasury regulations are being issued to set out
Department shall automatically withhold minimum expectations on BSFIs' treasury
the twenty percent (20%) FWT and the five activities pursuant to Section 4 of R.A.
percent (5%) GRT on the term deposit of No. 8791 or the General Banking Law of
eligible counterparties with the Bangko Sentral. 2000, which recognizes the authority of the
(As amended by Circular No. 961 dated 02 June 2017, M-2016-016 Bangko Sentral to issue rules of conduct and
dated 18 November 2016 and Circular No. 913 dated 02 June 2016) establish standards of operation for its
supervised financial institutions. These
§ X601.7 (2015 - X621.6) Bangko regulations, which cover the governance and
Sentral trading windows and services operation of the trading function, among
during public sector holidays. The others, are aligned with the thrust of the
guidelines on Bangko Sentral’s trading Bangko Sentral to ensure that the activities
windows and services during public sector of BSFIs are undertaken with prudence and
holidays are shown in Appendix 84. integrity, and that these are supported by
(M-2008-025 dated 13 August 2008, as amended by Circular No. commensurate risk management systems
913 dated 02 June 2016) and internal controls.
(Circular No. 899 dated 02 November 2015)
§ X601.8 Prohibition against funds
from non-residents being accepted in the § X602.1 Treasury operations. 1 A
TDF and ODF. TheTDF and ODF are BSFI's treasury activities may be a
monetary instruments deployed by the significant source of operational risk, 2
Bangko Sentral for the purpose of managing apart from giving rise to market, liquidity
domestic liquidity in the financial system. and credit risks.3 Losses to the institution
These facilities should not be made available may arise from the failure to meet
for opportunistic investment activities professional obligations to clients, faulty
funded from non-resident sources. Further, product design, unethical business
placements in the TDF and the ODF are practices, and the failure to execute
contractual in nature and thus shall be transactional processes. The institution
governed by the intent of the contracting must likewise be cognizant of the
parties. In keeping with the nature of these increased exposure to reputational risk in
facilities, counterparties of the Bangko the presence of such factors.
1
This subsection should be read in conjunction with existing regulations on Operational Risk Management.
2
Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, people and
systems; or from external events. This definition includes legal and compliance risks.
3
BSFIs should refer to Sec. X175 for the Guidelines on Market Risk Management, Sec. X176 for the Guidelines on
Liquidity Risk Management and Sec. X178 for the Guidelines on Sound Credit Risk Management Practices.
Manual of Regulations for Banks Part VI - Page 4a

§ X602.1
17.09.30
In this regard, the operational risk The code and standards shall be
management framework for treasury complementary to any codes adopted by the
activities shall include the following entire institution, as well as those
elements: a strong governance structure that promulgated by the industry. It is likewise
safeguards the integrirty of the Treasury unit, the responsibility of the board to institute
especially the trading function; mechanisms to ensure compliance with the
comprehensive policies and procedures; provisions of the code of conduct and the
effective internal controls; a reliable standards of practice, as well as to mete out
management information system that appropriate sanctions for violations thereof.
facilitates the comprehensive monitoring b. Conduct treasury activities within a
and timely reporting of exposures; and a board-approved structure that is designed
robust process for dealing with clients. to meet the BSFI's objectives while enabling
The BSFI shall: the strict enforcement of controls. The
a. Conduct its treasury activities with a structure shall clearly distinguish between
high degree of integrity. Consistent wih the different functions (e.g., between
principles embodied in Subsec. X143.1, the asset-liability management, trading/
board of directors shall be primarily leadeship, underwriting, and brokering) and
responsible for establishing the tone of good recognize the need for effective separation
governance from the top and setting between operational units. The scope of
standards of appropriate and ethical authority and responsibility of each
behavior for itself, senior management, and personnel shall be adequately defined,
other employees. The board shall ensure documented, and clearly communicated.
compliance with market conduct rules, and c) Appoint personnel who possess a
the relevant requirements and standards of high degree of integrity and sufficient
any regulatory body, professional body, expertise to understand the financial
clearing house or exchange, or government instruments dealt and transactions entered
and any of its instrumentalities/agencies. into by the Treasury unit. These
In accordance with the board's duty to qualifications shall not only apply to
articulate acceptable and unacceptable personnel who originate and process the
activities, transactions and behaviors, it must transactions but also to those who are
adopt a code of conduct and standards of responsible for reviewing the transactions'
practice that are binding on the Treasury conformity to the BSFI's accepted trading
unit, especially personnel involved in practices. There shall likewise be
risk-taking. The code and standards should manpower adept at operating and
highlight and provide specific guidance on maintaining the management information
upholding market integrity and system (MIS).
professionalism. Practices which d. Segregate the duties of the front,
undermine market integrity include engaging risk control and back office functions. The
in trading transactions which have the effect, dealers in the front office are primarily
of creating a false or misleading appearance responsible for transacting and managing
of active trading in any security, currency positions. In this regard, the settlement and
or commodity, or with respect to the market confirmation of transactions, the recording
for, or the price of, any security, currency of contracts in the accounting system, the
or commodity. The code and standards revaluation of positions, the reconciliations
should likewise include safeguards to and procedures required to avoid errors, and
prevent conflict of interest or self-dealing in other related processes in the back office
any form when allowing personnel to deal shall be performed outside the dealing room
for their own account. to ensure objectivity and to prevent
Part VI - Page 4b Manual of Regulations for Banks

§ X602.1
17.09.30
manipulation or fraud. There should be cancellation of deals, analyze unusual trading

comprehensive and well-documented activity, and flag limit exceptions, among
policies and procedures that describe the others. Meanwhile, the compliance function/
activities performed by each function. system referred to in Sec. X180 and
e. Provide for the prompt evaluation and Subsec. X180.1 is responsible for the regular
escalation of suspicious trading trends and conduct of reviews to ensure that the BSFI’s
patterns, and unusual gains or losses. While activities conform to applicable laws, rules,
the primary responsibility for ensuring that and regulations, including securities laws,
transactions are undertaken with integrity as well as its obligations as a market
lies with front office personnel, there should participant. Lastly, internal audit shall be
be units tasked to perform reviews of tasked with evaluating the Treasury unit’s
treasury activities. The unit responsible for compliance with the BSFI’s own policies and
executing such reviews shall be procedures, especially in the conduct of
independent from the risk-taking function trading activities, in accordance with
and accorded sufficient resources and Subsec. X186.2. The scope of internal audit
stature in the institution. In this way, it shall shall likewise include the review of the
be empowered to quickly escalate any performance of risk management and
activity that seems unusual or inconsistent compliance duties in respect of treasury
with compliance, the financial and activities.
operational controls to the appropriate g. Employ treasury systems that are able
authorities. "Appropriate authorities" shall to support the volume and complexity of the
refer to persons, units, or committees that treasury transactions in the areas of deal
are independent of the Treasury function and entry, confirmation, settlement and
its management but possess equivalent or accounting. Institutions that engage in heavy
higher stature, such as the chief executive trading should endeavor to move to the use
officer, the chief compliance officer, or the of straight-through processing to minimize
board-level committee. Personnel tasked to input errors. On the other hand, institutions
perform reviews shall have, among others, whose processes involve manual
sufficient understanding of the strategies intervention should endure that the integrity
engaged in by trading desks to allow them of data is preserved through proper controls.
to evaluate whether trading activities are h. Ensure that the MIS is able to serve
aligned with the risk appetite of the financial the needs of its users. The MIS should enable
institution. the accumulation and production of accurate
f. Regularly and actively engage the and timely financial, regulatory, and
control functions namely, risk management, management reports. At a minimum,
internal audit and compliance, in the management reports should highlight trading
oversight of treasury activities. Owing to positions, profits/losses, and limit utilization.
their inherent responsibilities and stature If the institution uses more than one (1)
within the BSFI, the control functions are system for its information needs, it should
well placed to perform reviews and render establish controls and perform
assessment of the Treasury unit and its reconciliations to minimize the likelihood
activities. The operational risk management of producing corrupted consolidated data.
framework shall include tools and i. Subject new products to a rigorous
mechanisms to identify, measure, monitor approval process. The handling of new
and control risks in all aspects of treasury products shall be embodied in an internal
operations. As an example, risk and policy that, among others, defines the
performance indicators may consist of those circumstances under which a product shall
that identify errors in deal entry, track the be considered "new". The policy shall
Manual of Regulations for Banks Part VI - Page 4c

§ X602.1
17.09.30
likewise contain guidelines for the review Appendix 26.

of the product, including the conduct of an k. Uphold accountability in its treasury
analysis of its risks, costs and benefits to the activities by retaining reliable, accurate, and
institution; the identification of product complete records of transactions. In
features, uses, and target markets, as accordance with Sec. X001, deals or
applicable; potential risks and mitigants to transactions that are consummated orally
such risks; and the procedures involved in or in written form should be coursed through
operationalizing the product. The policy shall official recorded media. It shall be the
identify the stages within the product responsibility of the BSFI to ensure that other
development process at which approvals shall parties to the transaction are aware that a
be obtained and from whom. All relevant units record of the same is being made and shall
should sign off on the product program as part be deemed part of the formal
of the new product approval process. documentation of the BSFI's transactions.
j. Act with honesty, fairness, and Moreover, it shall also be the responsibility
prefessionalism, and pursue the best of the BSFI to inform its counterparties that
interests of its clients. Due to the the records of such transactions may be
increasingly sophisticated products being disclosed to regulators. To ensure effective
introduced in the market, a BSFI acting as a compliance with these requirements, the
dealer or broker shall have a clearly official telephone lines used by the BSFI to
articulated strategy for the sale and consummate deals or transactions should
marketing of financial products. The BSFI is have an automatic voice-prompted
expected to manage the risks arising from announcement at the start of the
such activities and protect the interest of its conversation /transaction between the BSFI
clients. In this regard, a BSFI shall have and its counterparties stating that: (1) said
appropriate policies, procedures and conversation/transaction will be recorded;
controls in place to ensure the suitability of and (2) the recording and/or contents thereof
products being offered to its clients. It shall may be disclosed to regulators. The
ensure that (1) the client understands the recordings of the conversations and any
nature of the transaction and the risks other records of the exchanges pertaining
involved and (2) the transaction meets the to the said deals or transactions should be
client's financial objectives and is aligned placed under custody of an independent unit
with his/its risk tolerance. It shall also and stored in a manner that is practicable
provide sufficient, accurate and to retrieve.
comprehensible information about the The failure of an institution covered by
products, including inherent risks, in a clear these guidelines to consistently observe the
and balanced manner to enable its clients same may be considered by the Bangko
to make informed financial decisions. The Sentral as conducting business in an unsafe
BSFI shall likewise use reasonable diligence or unsound manner, subject to applicable
to ascertain the best market for the products provisions of laws and regulations.
offered to customers and buy and sell in Supervisory enforcement actions. The
such market so that the result to the customer Bangko Sentral reserves the right to deploy
is as favorable as possible under prevailing its range of supervisory tools to promote
market conditions. adherence to the requirements set forth in
Management should refer to the existing these guidelines and bring about timely
Consumer Protection Framework and Sales corrective actions and compliance with
and Marketing Guidelines under Bangko Sentral directives. In this regard, the
Part VI - Page 4d Manual of Regulations for Banks

§§ X602.1 - X611
17.09.30
Bangko Sentral may, among others, issue Derivative is broadly defined as a

directives to refrain from engaging in financial instrument that primarily derives
treasury activities with serious supervisory its value from the performance of an
issues. Sanctions may likewise be imposed underlying variable. For purposes of these
on the BSFI and responsible persons, which guidelines, a financial derivative is any
may include restrictions or prohibitions financial instrument or contract with all of
from certain authorities/acivities; and the following characteristics:
warning, reprimand, suspension, removal a. Its value changes in response to a
and disqualification of concerned directors, change in a specified interest rate, financial
officers and employees. instrument price, commodity price, FX rate,
(Circular No. 889 dated 02 November 2015, as amended by index of prices or rates, credit spread, credit
Circular Nos. 972 dated 22August 2017 and 969 dated 22August 2017 rating or credit index or other variables not
and 957 dated 17 April 2017)
prohibited under existing laws, rules and
regulations (the “underlying”);
b. It requires either no initial net
investment or an initial net investment that
B. FINANCIAL INSTRUMENTS
is smaller than would be required for other
types of contracts that would be expected
Sec. X611 (2008 - X602) Derivatives. A
to have a similar response to changes in
bank may engage in authorized derivatives
activities: Provided, That the bank: market factors; and
a. Understands, measures, monitors c. It is settled at a future date.
and controls the risks assumed from its Financial derivatives activities shall also
derivatives activities; include transactions in cash instruments
b. Adopts effective risk management with embedded derivatives that reshape the
practices whose sophistication are risk-return profile of the host instrument,
commensurate to the risks being monitored such as credit-linked notes (“CLNs”) and
and controlled; and other structured products (“SPs”).
c. Maintains capital commensurate A market participant may take any of the
with the risk exposures assumed. following roles in a derivatives transaction:
Further, a bank may likewise engage in a. An end-user is defined as a financial
financial derivatives activities in accordance market participant that enters, for its own
with these guidelines. The transacting bank account, in a derivatives transaction for
shall have the responsibility to comply with legitimate economic purposes. These
the guidelines set out in this Section, purposes may include, but are not limited
including the relevant appendices, and other to, the following: hedging, proprietary
applicable laws, rules and regulations trading, managing capital or funding costs,
governing derivatives transaction. In case obtaining indirect exposures to desired
of derivatives instruments involving foreign market factors, investment, yield-
currencies and/or other foreign currency- enhancement, and/or altering the risk-
denominated assets, the transacting reward profile of a particular item or an
bank shall observe the pertinent FX entire balance sheet.
rules and regulations. For purposes of An end-user may be classified according
these guidelines, a bank that transacts to its financial sophistication:
(i.e., transacting bank) whether as end-user, (1) Market counterparty - refers to any
broker or dealer, in derivatives instruments UB or KB, only with respect to the
is considered to be engaging in a derivatives instruments for which it is authorized to
activity. engage in as a dealer.
Manual of Regulations for Banks Part VI - Page 4e

§ X611
08.12.31
(2) Institutional counterparty - refers to other institutional or individual clients not

an institution which is not a market categorized as market counterparty,
counterparty and has the level of net worth, institutional counterparty or sophisticated
knowledge, expertise, and experience to individual end-user.
deal with financial derivatives. b. A broker is a financial market
(3) Sophisticated individual end-user - participant that facilitates a derivatives
refers to an individual who has transaction between a dealer and its client,
demonstrated to the bank as having the for a fee or commission. The counterparties
level of net worth, knowledge and to the derivatives contract are the client and
experience in dealing with financial an authorized dealer.
products, including financial derivatives. c. A dealer is defined as a financial
An individual may register as a market participant that engages in a
sophisticated individual end-user with the derivatives activity as an originator of
appropriate department of the SES. derivatives products or as market-maker in
(4) Other end-user - This refers to all derivatives products. A dealer can distribute
(Next page is Part I- Page 5)
Part VI - Page 4f Manual of Regulations for Banks

§§ X611 - X611.1
16.09.30
its own derivatives products, including those derivatives transaction for the purpose of
of others. A dealer can also act as broker hedging its own risks: Provided, That it
and/or end-user of derivatives instruments. observes all the requirements for hedging
(As amended by Circular Nos. 917 dated 08 July 2016 and 594 transactions under PAS.
dated 08 January 2008) (b) A UB or KB may trade with
counterparties in order to take positions for
§ X611.1 (2008 - X602.1) Generally its own account in “organized market” -
authorized derivatives activities. A bank traded financial instruments enumerated
may engage in the following derivatives under Item “1” above. It can also take long
activities without need of prior Bangko positions in naked FX options with a tenor
Sentral approval: Provided, That it observes of three (3) years or less.
the provisions of Appendix 25 and meets (c) RBU and EFCDU of UBs and KBs,
the following conditions: including its trust departments, may invest,
a. UBs and KBs may transact in the for their own account, in the following SPs:
following derivatives in the capacities (i) Principal-protected foreign currency-
specified: denominated SPs, the revenue streams
(1) As a dealer. A UB or KB may of which are linked to interest rate
originate and distribute the following indices, interest rate instruments, listed
“organized market”-traded financial equity shares or indices, FX rates, credit
derivatives: rating or index, or gold: Provided, That
(a) FX forwards, FX swaps, currency the maximum contractual maturity shall be
swaps and analogous financial futures with five (5) years;
a tenor of three (3) years or less; and (ii) Plain vanilla single-name CLNs
(b) Interest rate swaps, forward rate where the reference asset is an obligation
agreements and analogous financial futures issued or guaranteed by the Republic of the
with a tenor of ten (10) years or less: Philippines.
Provided, That the issuance of sub- Provided, That the bank or trust entity
participation in any derivatives held as an shall comply with the following conditions:
end-user shall be deemed as undertaking the (aa) Total carrying value of all
role of a dealer: Provided, further, That the investments in SPs shall not exceed 100%
dealer UB or KB observes the provisions of of the bank’s qualifying Tier 1 capital or fifty
Appendix 26 and other pertinent securities percent (50%) of a trust entity’s trust assets;
laws, rules and regulations. and
For purposes of this Subsection, an (bb) For investments in SPs under the
organized market refers to an exchange or a EFCDU, total carrying value of SPs as
Bangko Sentral-recognized over-the-counter defined herein shall also not exceed twenty
market governed by transparent and binding percent (20%) of the total FCDU assets:
market conventions on price transparency, Provided, That SPs which are not booked
trade reporting, market surveillance and in an investment account (e.g., booked as
orderly conduct/operations of the market. inter-bank loans), for this purpose, shall be
(2) As end-user1. considered as part of the EFCDU assets.
(a) A UB or KB, including its trust An SP is considered principal-protected
department, may enter in any financial if the minimum all-in return for such
1
All transactions involving warrants issued under the ROP’s “Paired Warrants Program” shall be considered
as among the generally authorized derivatives activities that banks (including TBs and RBs/Coop Banks)
may engage in as end-user, without need for additional derivatives authority required under this Subsection:
Provided, That banks holding such instruments shall comply with the requirements of Appendix 25,
where applicable.

§§ X611.1 - X611.2
14.12.31
investment is at least zero and such to enter on behalf of its trustor/principal/s

minimum all-in return is guaranteed by an in derivatives transactions under
entity (i.e., issuer or a third party) rated at Subsec. X611.1(a)(2). Any trust entity may
least “A” or its equivalent by an international also apply for Type 3 authority in order to
rating agency acceptable to the Bangko transact as end-user on behalf of its trustor/
Sentral or fully collateralized by an asset principal/s with derivatives instrument outside
with equivalent credit quality. those enumerated under Subsec. X611.1(a)(2).
(3) As a broker. A UB or KB may (As amended by Circular Nos. 605 dated 05 March 2008 and
facilitate derivatives transactions between 594 dated 08 January 2008)
dealers and market and/or institutional
counterparties and/or sophisticated § X611.2 (2008 - X602.2) Activities
individual end-users: Provided, That the UB/ KB, requiring additional derivatives authority.
acting as broker, ensures that its client fully A bank shall apply for prior Bangko Sentral
understands its limited responsibility as a approval of additional derivatives authority
broker: Provided, further, That the bank to engage in all other financial derivatives
adheres to procedures for evaluating client activities not expressly allowed in
suitability, including risk disclosures, as Subsec. X611.1. A bank may apply for
prescribed in Appendix 26: Provided, finally, two (2) or more additional authorities. A
That the bank complies with other pertinent bank applying for additional derivatives
securities laws, rules and regulations. authority/ies must have and maintain a risk
b. TBs, RBs and Coop Banks may enter management system commensurate to the
in derivatives transactions as end-user with additional authority/ies being applied for, in
Bangko Sentral - authorized dealers and accordance with the provisions of Appendix 25
brokers solely for hedging purposes: and meet other conditions specified under this
Provided, That they observe all the Subsection.
requirements for hedging transactions under a. Classification of additional derivatives
PAS1. A TB, RB or Coop Bank may apply authority
for a Type 3 authority to enter into (1) Type 1 - Expanded dealer authority
derivatives transactions as end-user for A UB or KB may apply for a Type 1
purposes other than hedging: Provided, That authority. A bank with Type 1 authority may
the applicant bank agrees to be covered by transact in any financial derivatives as a dealer:
all regulations prescribing capital for market Provided, That a bank with Type 1 authority
risk, notwithstanding any provision to the shall comply with the sales and marketing
contrary; and guidelines prescribed in Appendix 26. A bank
c. A trust department of a UB or KB may with Type 1 authority may likewise transact
transact, as an institutional counterparty, in any financial derivatives as a broker and an
with financial derivatives instruments end-user.
enumerated under Subsec. X611.1(a)(2) on The Bangko Sentral expects banks applying
behalf of its trustor/principal/s as may be for Type 1 authority to institutionalize a
authorized by such trustor/principal/s: (a) comprehensive and integrated risk
Provided, That the trust department observes management system; and (b) sales and
the relevant provisions of Appendices 25 marketing practices that are deemed
and 26. Trust entities other than that within appropriate and adequate for the different
a UB or KB may apply for a Type 3 authority derivatives activities it expects to engage
1
All transactions involving warrants issued under the ROP’s “Paired Warrants Program” shall be considered as
among the generally authorized derivatives activities that banks (including TBs and RBs/Coop Banks) may
engage in as end-user, without need for additional derivatives authority required under this Subsection:
Provided, That banks holding such instruments shall comply with the requirements of Appendix 25, where
applicable.

§ X611.2
14.12.31
in. It must be rated at least CAMELS (or than that within a UB or KB, a Type 3
ROCA for branches of foreign banks) of “4” authority will enable said bank/entity to
or better over-all, notwithstanding any transact as end-user of a derivative
provision to the contrary. instrument as may be applied for by the
(2) Type 2 - Limited dealer authority bank/entity.
A UB or KB may apply for a Type 2 (4) Type 4 - Special broker authority
authority. A bank with Type 2 authority may A bank, other than a UB or KB, may
operate as a dealer in specific types of apply for a Type 4 authority. A bank with
derivatives products with specific Type 4 authority may facilitate a derivatives
underlying reference, as applied for by the transaction between a UB or KB, as dealer,
bank, outside those financial derivatives and market and institutional counterparties
instruments under Subsec. X611.1(a)(1): and sophisticated individual end-users:
Provided, That a bank with Type 2 authority Provided, That the bank, acting as broker,
shall comply with the sales and marketing ensures that its client fully understands its
guidelines prescribed in Appendix 26. The limited responsibility as a broker and
Type 2 authority also carries authority to observes the provisions of Appendix 26.
transact as broker and end-user of the said A UB or KB may likewise apply for a
specific derivatives instruments. Type 4 authority to enable itself to broker a
A TB with an existing authority to issue derivatives transaction for or with other
foreign letters of credit and pay/accept/ end-users.
negotiate import/export drafts/ bills of A bank with additional Type 1, 2 or 4
exchange under Subsec. 2101.1 may apply authorities shall be responsible for
for a Type 2 authority to operate as a dealer complying with pertinent securities laws,
of deliverable FX forwards in order to rules and regulations.
service the trade-related hedging For purposes of this Subsection, the
requirements of its clients: Provided, That types of derivatives are classified as follows:
the tenor of the FX forwards dealt shall forwards, swaps and options. Underlying
match the term of the underlying trade reference pertains to the following: interest,
transaction: Provided, further, That the FX, equity, credit and commodity.
applicant bank shall be covered by all b. Qualification requirements. A bank
regulations prescribing capital for market applying for additional authority to engage
risk, notwithstanding any provision to the in expanded derivatives activities shall:
contrary: Provided, furthermore, That the TB (1) Demonstrate adequate competence
shall comply with the sales and marketing in its general operations as evidenced by:
guidelines prescribed in Appendix 26. The (a) CAMELS (or ROCA for branches of
Type 2 authority also carries the authority foreign banks) composite rating of at least
to transact as a broker and an end-user of “3” with a similar rating for Management;
deliverable FX forwards. (b) No unresolved major safety and
(3) Type 3 - Limited user authority soundness issues that threaten liquidity or
Any bank may apply for a Type 3 solvency; and
authority. A bank with Type 3 authority may (c) Substantial compliance with
transact, as an end-user, in specific types of regulations on anti-money laundering,
derivatives products, with specific corporate governance and risk management.
underlying reference, as applied for by the (2) Hold capital commensurate to the
bank, outside of those instruments under risks assumed or to be assumed from the
Subsec. X611.1(a)(2). However, as regards derivatives activities. The Bangko Sentral
a TB, RB or Coop Bank and trust entity other expects a bank applying for or holding

§ X611.2
14.12.31
additional derivatives authority to have (d) Analysis of the risks involved in

adequate capital to accommodate existing transacting in each type of derivatives;
and future risks from additional and (e) Procedures/methodologies that the
generally authorized derivatives activities as bank will implement to measure, monitor
well as risks arising from the bank’s other (including risk management reports) and
business activities. For this purpose, the control the risks inherent in the types of
Bangko Sentral may require capital higher derivatives;
than the minimum required under (f) Relevant accounting guidelines,
prudential regulations. including pro-forma accounting entries;
(3) Have and maintain a risk (g) Analysis of any actual or potential
management system that conforms to the legal/regulatory restrictions; and
principles and complies with the minimum (h) Process flow chart, from deal
standards prescribed in Appendix 25. initiation to risk reporting, indicating the
c. Applicability to trust entities. Trust departments and personnel involved in
entities may apply for Type 3 authority: identified processes.
Provided, That they comply with the (4) Payment of a non-refundable
requirements prescribed and observe the processing fee amounting to:
provisions of Appendix 26.
d. Application procedures. The applicant Authority Amount
shall submit to the Capital Markets Type 1 P 200,000
Type 2 100,000 (UBs and KBs)
Specialist Group, SES of the Bangko Sentral Type 3 50,000
a written application for additional 25,000 (other applicants)
derivatives authority/ies accompanied by: Type 4 25,000 (all banks)
(1) A copy of the board resolution (or
equivalent management review body in the (5) The Bangko Sentral will not accept
case of branches of foreign banks or trust applications lacking any of the above-stated
committee, in case of trust entities) requirements. The Bangko Sentral, however,
approving the application for a specific type may require additional documents to aid its
of derivatives authority; evaluation of the application. By virtue of
(2) A notarized certification signed the application, the applicant automatically
jointly by the president, treasurer and authorizes the Bangko Sentral to conduct
compliance officer of the applicant-bank (or an on-site evaluation of the applicant’s risk
two (2) authorized signatories of equivalent management capabilities, if this is deemed
rank of the trust committee in case of trust necessary.
entities), stating that the bank complies with (6) Type 1 authority shall be subject to
all the requirements for the authority being approval by the Governor, upon
applied for specified in Subsec. X611.2; and recommendation of the Deputy Governor,
(3) A list of the types of derivatives and SES. All other applications for additional
underlying reference the bank intends to authority/ies shall be subject to approval by
engage in, including the following the Deputy Governor, SES.
information for each derivatives class or (7) A bank whose application for
type: additional derivatives authority/ies or an
(a) Target customers for such derivatives; upgrade thereof (e.g., from Type 2 to Type
(b) The capacity in which the bank 1 authority) has been denied cannot submit
intends to engage in such derivatives; a new application for additional derivatives
(c) Description of each type of derivatives authorities until after six (6) months from
and underlying reference with which it will deal; receipt of denial. The same rule applies for

§§ X611.2 - X611.3
14.12.31
a bank whose authorities have been additional derivatives authority.

limited or downgraded. (As amended by Circular Nos. 864 dated 22 December 2014
(8) A bank that holds an additional and 594 dated 08 January 2008)
derivatives authority may apply for
additional derivatives authorities (e.g., § X611.3 (2008 - X602.3) Intra-group
currently holding Type 3 authority who transactions. All derivatives transactions
wish to apply for Type 4 authority) or an between a bank and any of its subsidiaries
upgrade thereof only after the lapse of and affiliates shall comply with minimum
six (6) months from the grant of the previous risk management standards for related-
(Next page is Part VI - Page 9)

§§ X611.3 - X611.6
08.12.31
party transactions outlined in Appendix 25, reports required under Subsec. X611.5
as part of the bank’s internal control within the prescribed deadline shall be
procedures. The Bangko Sentral expects subject to monetary penalties applicable for
banks to establish internal reporting and delayed reporting under existing
monitoring system for derivatives activities regulations. Moreover, submission of
for related-party transactions. Failure to incomplete, uncertified or improperly
comply with minimum standards shall be a certified or otherwise erroneous reports
ground for citing non-compliance with shall be considered non-reporting, subject
Subsecs. X611.1 and X611.2 without to applicable penalties for amended/
prejudice to other Bangko Sentral rules and delayed reports. For purposes of imposing
regulations such as those related to monetary penalties, the reports shall be
corporate governance and unsafe and classified as a Category A-1 report.
unsound banking practices. Habitual delayed or erroneous reporting
(As amended by Circular No. 594 dated 08 January 2008) may be a ground for further sanction,
including limitation of generally authorized
§ X611.4 (2008 - X602.4) Accounting activities and/or additional authorities
guidelines. A bank that engages in and/or suspension of authority to engage
derivatives activities must strictly account for in such derivatives activities.
such transactions in accordance with PAS. c. Non-compliance with the
(As amended by Circular No. 594 dated 08 January 2008) provisions of Sec. X611 and its Subsections
and Appendices 25 and 26. Any bank/trust
§ X611. 5 (2008 - X602.5) Reporting entity found violating any of the provisions
requirements. A bank or trust department/ of Sec. X611 and its Subsections, and/or
entity engaged in any derivatives Appendices 25 and/or 26 shall be
transaction shall submit, in addition to the sanctioned with the penalties prescribed
derivatives reports enumerated under the under Sections 36 and 37 of R.A. No. 7653
Bangko Sentral FRP, a monthly report on in accordance with the gravity/seriousness
derivatives transactions/outstanding of the offense taking into consideration the
derivatives within fifteen (15) banking days number of times the offense was
from end of the reference month. The reports committed, possible consequent losses on
shall be certified by the treasurer. the clients, effect on the financial markets
(As amended by Circular No. 594 dated 08 January 2008) and other relevant factors.
d. Curtailment of derivatives authority.
§ X611.6 (2008 - X602.6) Sanctions. The Bangko Sentral reserves the right to
a. Unauthorized transactions. suspend, modify, downgrade, limit or
Sanctions prescribed under Sections 36 and revoke any bank’s derivatives authority
37 of R.A. No. 7653 shall be imposed on (including any or all of those generally
any bank (including its directors and authorized activities) for prudential
officers) found to have engaged in an reasons as may be evidenced by any or
unauthorized derivatives activity. all of the following:
A bank undertaking unauthorized (1) The bank is assigned a CAMELS
derivatives activities may be considered (or ROCA in the case of branches of foreign
as conducting its business in an unsafe and banks) composite rating or component
unsound manner under Section 56 of management rating of lower than that
R.A. No. 8791. prescribed under Subsec. X611.2, in the
b. Delayed/erroneous/inaccurate most recent regular examination.
reporting. Banks failing to submit the (2) The bank has not maintained

§§ X611.6 - X624.3
16.09.30
adequate risk management systems given the § X624.1 Policy statement. Financial
level and type of derivatives activities it has crises and other emergency situations may
engaged in as may be determined by the lead to severe shortage in PHP liquidity that
Bangko Sentral in any on-site evaluation and may curtail financing activities in the
confirmed by the Monetary Board. Philippines and affect the Philippine
(3) The Monetary Board has confirmed economy. The establishment of the JPY/PHP
an SES finding that the bank has conducted Swap Facility in the Philippines allows
business in an unsafe and unsound manner. banks operating in the Philippines to access
An erring bank may apply for PHP liquidity against said banks' JPY
reinstatement of its derivatives authority holdings.
only after six (6) months from lapse of the (Circular No. 919 dated 02 August 2016)
implementation of the sanction: Provided,
That the bank has satisfactorily addressed § X624.2 Availment of the JPY/PHP
all Bangko Sentral concerns. Swap Facility. Banks may avail of the JPY/
Transitory provisions. Expanded or any PHP Swap Facility from the Bangko Sentral
other derivatives authority granted prior to during emergency situations.
30 January 2008 shall be operative for one (1) For purposes of this facility, an
year from the said date: Provided, That a bank "emergency situation" arises when a bank
undertaking any derivatives activities pursuant is under a state of severe shortage of PHP
thereto shall immediately comply with the liquidity or under serious financial pressures
pertinent provisions of Appendices 25 and 26. brought about by unforeseen events or
A bank which intends to continue its existing events which though foreseeable, cannot be
derivatives authority not covered by those prevented by the bank concerned.
generally authorized under Subsec. X611.1, (Circular No. 919 dated 02 August 2016)
must submit an application for the appropriate
additional derivatives authority within the § X624.3 Eligibility requirements. A
one (1) - year transitory period. After the lapse bank can avail of the JPY/PHP Swap Facility
of the one (1) - year transitory period, a bank provided it has met the following eligibility
can only perform those activities which are requirements:
permissible under Sec. X611 and its a. Has established the presence of an
Subsections. "emergency situation" as defined in
A bank whose SPs, as of 30 January 2008, Subsec. X624.2;
exceed the prudential limits prescribed b. Has JPY holdings which can be
under Subsec. X611.1(a)(3) may maintain delivered and deposited to the Bangko
existing positions but cannot increase its Sentral's account at the BOJ;
exposures or invest in additional SPs until c. Has a CAMELS/ROCA composite
rating of at least "3" and a Management/
such time when its exposure levels are
Risk Management component rating of at
within the prescribed limits.
least "3" in the latest Report of Examination;
(As amended by Circular No. 594 dated 08 January 2008)
d. Has no unsafe or unsound banking
practice cited in the latest Report of
Secs. X612 - X623 (Reserved) Examination; and
e. Has complied with the minimum
Sec. X624 The Japanese Yen/Philippine capital requirement and risk-based capital
Peso (JPY/PHP) Swap Facility under the ratio as provided under applicable and
Cross-Border Liquidity Arrangement existing capital adequacy framework.
(CBLA) between the Bangko Sentral and the The bank shall submit an application
Bank of Japan (BOJ). letter to the appropriate department of the
(Circular No. 919 dated 02 August 2016) SES, copy furnished the Treasury
Part VI - Page 9a Manual of Regulations for Banks

§§ X624.3 - X624.6
16.09.30
furnished the Treasury Department (TD), changes in the value of the JPY against the
along with the following documents: PHP.
a. A cetification under oath that the b. Pricing and Terms. The price of the
applicant bank meets the eligibility JPY/PHP swap transaction shall be
requirements and a declaration that there is determined by the TD, taking into account
an emergency situation in the bank as prevailing liquidity/market conditions. A
defined under Subsec. X624.2. maximum tenor of thirty (30) days shall
b. A duly notarized secretary's apply. Trading time shall be set from
certificate together with a resolution of the 10:00 AM to 12:00 NN, then from 2:00 PM
board of directors of the bank (or its to 3:00 PM.
equivalent in the case of foreign bank c. Pretermination. Bangko Sentral shall
branches): have the right to terminate any transaction
(1) Authorizing the application for the in any of the following events:
JPY/PHP Swap Facility of the Bangko (1) Funds from the transaction are found
Sentral; to have been used by the bank for purposes
(2) Indicating the bank's purpose for the other than those they were originally
availment and amount to be availed of under approved for and specified in its application;
the JPY/PHP Swap Facility with supporting or
documents that indicate the existence of an (2) Any misinterpretation by the bank.
emergency situation as defined under In addition, any outstanding transaction
Subsec. X624.2 and certifying that the PHP may be terminated at any time before
proceeds of the JPY/PHP Swap Facility shall maturity, subject to mutual agreement of
be utilized by the bank to address PHP both parties.
liquidity needs specified in its application (Circular No. 919 dated 02 August 2016)
as approved by the Bangko Sentral;
(3) Committing to deposit the JPY § X624.4 Delivery of the JPY to the BOJ.
currencies to the account of the Bangko In exchange for the PHP liquidity, banks
Sentral at the BOJ in exchange for the PHP shall deliver the required amount of JPY to
liquidity that it will receive from the Bangko the BOJ. The Bangko Sentral will hold the
Sentral; JPY in its JPY account at BOJ for the term of
(4) Committing to comply with the the JPY/PHP swap transaction.
guidelines set forth in Sec. X624 and its (Circular No. 919 dated 02 August 2016)
Subsections and other terms and conditions
that may be imposed by the Bangko Sentral; § X624.5 Allowable amounts. The
and amount of PHP that may be availed of by
(5) Designating authorized officers to the bank will be determined by the Bangko
sign and execute an agreement and other Sentral taking into account, among others,
relevant documents in connection with the the amount applied for and the bank's JPY
availment of the JPY/PHP Swap Facility. holdings.
The bank shall execute with TD a (Circular No. 919 dated 02 August 2016)
Master Swap Agreement (MSA) which TD
will provide containing the following § X624.6 Execution. The TD will advise
provisions, among others: the bank of the approval of the swap
a. Valuation of JPY. A haircut on the JPY transaction and execute it in accordance
shall be determined by the TD. The TD may with the MSA referred in Subsec. X624.3.
make margin calls, as necessary, to cover (Circular No. 919 dated 02 August 2016)
(Next page is Part I - page 10)
Manual of Regulations for Banks Part VI - Page 9b

§§ X624.7 - X625.2
16.09.30
§ X624.7 Enforcement actions. dated 13 April 1993, as amended.

Consistent with Sec. X009 (Supervisory Customers may, likewise, cover their
Enforcement Policy), the Bangko Sentral may funding requirements thru FX swaps.
employ the appropriate enforcement tools Banks may only engage in FX forwards
to ensure compliance with the rules and and swap transactions with customers if the
regulations for the operation of the JPY/PHP latter is hedging market risk or covering
Swap Facility, including the imposition of funding requirements. There shall be no
sactions on the bank and/or its directors, double/multiple hedging such that at any
officers and/or employees. given point in time, the total notional
The imposition of sanctions shall be amount of the FX derivatives transaction/s
without prejudice to the application of shall not exceed the amount of the
administrative sanctions under Section 37 underlying FX obligation/exposure.
of R.A. No. 7653 (The New Central Bank The customer shall no longer be allowed
Act) and/or to the filing of appropriate to buy FX from the banking system for FX
criminal charges against culpable persons obligations/exposures that are fully covered
as provided under Sections 34, 35, and 36 by deliverable FX forwards and FX swaps.
of R.A. No. 7653 for refusing to make The following guidelines, as well as
reports or permit examination, making a minimum documentary requirements, shall
false/misleading statement or for wilfully cover FX forward and swap transactions
violating banking laws or any order, involving the Philippine peso between
instruction, rule or regulation issued by the authorized dealer banks and their customers.
Monetary Board. (As amended by Circular No. 591 dated 27 December 2007)
§ X625.2 (2008 - X602.15) Definition
Sec. X625 (2008 - X602.14) Forward and of terms.
Swap Transactions. The following guidelines a. Credit default swaps (CDS) - refers
shall govern the forward and swap to a financial contract between two (2)
transactions in Philippine peso. parties, the protection buyer and protection
seller, with reference to a certain notional
§ X625.1 (2008 - X602.14) Statement of value of a reference credit or a basket of
policy. It is the policy of the Bangko Sentral reference credits, whereby the former pays
to support the deepening of the Philippine a premium to the latter, and in return the
financial markets. In line with this policy, latter agrees to make certain protection
customers may, thru FX forwards, hedge payments to the former contingent upon the
their market risks arising from FX obligations occurrence of a credit event with respect to
and/or exposures: Provided, That forward the reference entity(ies)/asset(s).
sale of FX (deliverable and non-deliverable) b. Credit-linked note (CLN) - refers to
may only be used when the underlying a pre-funded credit derivative instrument
transaction is eligible for servicing by the under which the note holder effectively
banking system under Circular No. 1389 accepts the transfer of credit risk pertaining

§ X625.2
08.12.31
to a reference asset or basket of assets g. FX obligation - refers to an actual FX

issued by a reference entity/ies. The commitment to a non-resident or any AAB
repayment of the principal to the note where the amount, payment tenor and party
holder is contingent upon the occurrence have been determined.
of a defined credit event. In consideration h. FX options - refers to option
thereof, the note holder receives an contracts which convey the right or the
economic return reflecting the underlying obligation depending upon whether the
credit risk of the reference assets. For bank is the purchaser or the writer,
purposes of Sec. X611, the term shall respectively to buy or sell at a specified
generically include similar instruments price by a specified future date, for a fee
such as credit-linked deposits (CLDs) and or a premium, two (2) different currencies
credit-linked loans (CLLs). Unless at a specified exchange rate.
otherwise stated, the term shall refer only i. FX swaps - refers to an agreement
to plain vanilla CLNs. Plain vanilla CLNs involving an initial exchange of two (2)
are composed of a debt or deposit currencies, usually at the prevailing spot
instrument and a CDS. Non-plain vanilla rate, and a simultaneous commitment to
CLNs are those that are leveraged and/or reverse the exchange of the same two (2)
include features of other SPs (e.g., coupon currencies at a date further in the future at
payments linked to interest or FX rate a rate (different from the rate applied to the
movements) and/or contains more than initial exchange) agreed on deal date.
one (1) embedded derivative. j. Interest rate swaps (IRS) - refers to
c. Currency swaps - refers to an an agreement in which the parties agree to
arrangement in which two parties exchange interest cash flows on a principal
exchange a series of cash flows in one (1) amount at certain times in the future
currency for a series of cash flows in according to an agreed upon formula.
another currency, at specified exchange k. Non-deliverable forward (NDF) -
and/or interest rates and at agreed intervals refers to a forward FX contract where only
over an agreed period. the net difference between the contracted
d. Forward FX contracts - refers to an forward rate and the market rate shall be
agreement for delayed delivery of a foreign settled at maturity.
currency in which the buyer agrees to l. Non-resident - refers to an individual,
purchase and the seller agrees to deliver a corporation or other juridical person not
at a specified future date a specified amount included in the definition of resident.
at a specified exchange rate. m. Resident - refers to:
e. Forward rate agreement (FRA) - (1) An individual citizen of the
refers to an agreement fixing the interest Philippines residing therein; or
rates for a specified period whereby the (2) An individual who is not a citizen
buyer receives (or pays) and the seller pays of the Philippines but is permanently
(or receives) the interest rate differential if residing therein; or
the reference rate rises above (or falls (3) A corporation or other juridical
below) the contract rate, respectively. person organized under the laws of the
f. FX exposure - refers to an FX risk Philippines; or
arising from an existing commitment to or (4) A branch, subsidiary, affiliate,
from a non-resident or AAB which leads extension office or any other unit of
to payment of an FX obligation or receipt corporations or juridical persons which are
of an FX asset based on verifiable organized under the laws of any country and
documents on deal date. operating in the Philippines, except OBUs.

§§ X625.2 - X625.6
13.12.31
n. Structured product (SP) - refers to a than: (i) the maturity of the underlying FX
financial instrument where the total return obligation; or (ii) the approximate due date
is a function of one (1) or more underlying or settlement of the FX exposure. For
indices, such as interest rates, equities and deliverable FX forward contracts, the tenor/
exchange rates. It is composed of a host maturity shall be co-terminus with the
contract (e.g., plain vanilla debt or equity maturity of the underlying obligation or the
securities) and an embedded derivative approximate due date or settlement of the
(e.g., swaps, forwards or options) that FX exposure. This shall not preclude
re-shape the risk-return pattern of the pretermination of the contract due to
hybrid instrument. For purposes of prepayment of the underlying obligation
guidelines under Sec. X611, the term SP or exposure: Provided, That for foreign
does not include asset-backed securities. currency loans, prior Bangko Sentral
Provisions under Sec. 1648 shall continue approval has been obtained for the
to apply for securities overlying prepayment and a copy of such approval is
securitization structures. presented to the bank counterparty.
(As amended by Circular Nos. 594 dated 08 January 2008 and b. FX Swaps - No restriction on tenor.
591 dated 27 December 2007) c. Settlement of NDFs - All NDF
contracts with residents shall be settled in
§ X625.3 (2008 - X602.16) Documentation pesos.
Minimum documentary requirements for d. Remittance of FX proceeds of
FX forward and swap transactions in deliverable forward and swap contracts
Appendix 58 shall be presented on or FX proceeds of deliverable forward and
before deal date to the banks unless swap contracts shall be delivered by the
otherwise indicated. bank counterparty directly to the
FX selling banks shall stamp the beneficiaries concerned except for foreign
supporting documents upon presentation investments where said FX proceeds are
by customers as follows: reconverted to Philippine pesos and
a. For hedging transactions: “FX reinvested in eligible peso instrument
hedged/deliverable” or “FX hedged/ such as those listed in Item “A.2.2” of
non-deliverable"; Appendix 58. For this purpose,
b. For funding transactions: “FX sold”, beneficiaries shall refer to the FCDU of a
indicating the contract date and amount bank or a nonresident entity (e.g., creditor,
involved, and signed by the bank’s supplier, investor) to whom the customer
authorized officer. Copies of all duly is committed to pay/remit FX.
marked supporting documents shall be (As amended by Circular No. 591 dated 27 December 2007)
retained by the banks and made available
to the Bangko Sentral for verification. The § X625.5 (Reserved)
retained copies shall also be marked
“Documents Presented as Required” and § 1625.5 (2008 - 1602) Forward
signed by the bank’s authorized officer. contracts with non-residents.
(As amended by Circular No. 591 dated 27 December 2007) (Deleted by Circular No. 790 dated 06 March 2013)
§ X625.4 (2008 - X602.17) Tenor/ § 2625.5 (Reserved)

maturity and settlement
a. Forward sale of FX (whether § 3625.5 (Reserved)
deliverable or non-deliverable). The tenor/
maturity of such contracts shall not be longer § X625.6 (2008 - X602.18) Cancellations,

§§ X625.6 - X625.9
13.12.31
roll overs or non-delivery of FX forward ii. Banks in breach of the limits shall be
contracts. All cancellations, roll-overs or required to submit remedial plan to comply
non-delivery of all FX deliverable forward with the limits.
contracts and the forward leg of swap b. Subsequent Offense- Bank will be
contracts shall be subject to the following subject to any or all of the following, as may
guidelines to determine the validity thereof: be recommended by the SES to the
a. Eligibility test - Contracts must be Monetary Board:
supported by documents listed in i. Restriction or prohibition on the bank
Appendix 58 hereof. from requesting new authority and/or
b. Frequency test - the reasonableness licenses of any sort;
of the cancellation, roll-over or non-delivery ii. Restriction or prohibition on the bank
shall be based on the results of the evaluation from declaring dividends; and
of the justification/explanation submitted by iii. Issuance of an order requiring the
banks as evidenced by appropriate bank to cease and desist from conducting
documents. business in an unsafe and unsound manner
c. Counterparty test - the cancellation and may further order that immediate action
or roll-over of contracts must be duly be taken to correct the conditions resulting
acknowledged by the counterparty to the from such unsafe or unsound practice.
contract as shown in documents submitted (As amended by Circular No. 790 dated 06 March 2013)
by banks, e.g., there should be conforme of
counterparty as evidenced by the § X625.8 (2008 - X602.20) Compliance
counterparty signature on pertinent with anti-money laundering rules. All
documents. transactions under Sec. X625 and Subsecs.
d. Mark-to-Market test - the booking or X625.1 to X625.9 shall comply with existing
recording in the books of accounts of the profit regulations on anti-money laundering under
or loss on contracts and cash flows/settlement Sec. X801.
to counterparties must be fully supported by (As amended by Circular No. 591 dated 27 December 2007)
appropriate documents such as
authenticated copy of debit/credit tickets, § X625.9 (2008 - X602.21) Reporting
schedules showing among others, mark-to- requirements. Banks duly authorized to
market valuation computation, etc. engage in derivatives transactions shall
(As amended by Circular No. 591 dated 27 December 2007) continue to be covered by the Bangko
Sentral’s existing reporting requirements
§ X625.7 (2008 - X602.19) Non- on financial derivatives. Cancellations,
deliverable forward contracts involving the roll-overs or non-delivery of deliverable
Philippine peso. NDF contracts involving FX forward contracts and under the
the Philippines peso shall be covered by the forward leg of swap contracts shall be
provisions of Appendix 101. reported electronically in Excel format to
Any violation of the provisions of the Bangko Sentral not later than five (5)
Appendix 101 shall constitute grounds for banking days after reference month as
the imposition on the bank/director(s)/ indicated in Appendix 6.
officer(s) of the following: Swap contracts with counterparties
a. First Offense involving purchase of FX by banks at the
i. Reprimand for the directors/officers initial leg shall likewise be reported
responsible for the violation with a warning electronically in Excel format to the
that subsequent violations will be subject Bangko Sentral not later than five (5)
to more severe sanctions. banking days after reference month as

§§ X625.9 - X625.14
08.12.31
indicated in Appendix 6. (1) “chronic”, i.e., when the violation

The reports shall be transmitted to the continues beyond three (3) banking days
International Department at within a calendar month, but the excess
iod@bsp.gov.ph, copy furnished the SDC position is less than thirty percent (30%) of
at the following addresses: the allowable limit; and
sdcfxkbdom@bsp.gov.ph (for domestic (2) “abusive”, i.e., when the violation
banks) and sdcfxkbfor@bsp.gov.ph (for continues beyond three (3) business days
foreign banks). within a calendar month and excess position
(As amended by Circular No. 591 dated 27 December 2007) is thirty percent (30%) or more of the
allowable limit.
§§ X625.10 - X625.13 (Reserved)
“Chronic” Suspension of the bank’s
§ X625.14 (2008 - X602.26) Sanctions violation rediscounting privileges,
Violations of Sec. X625 and Subsecs. X625.1 cash dividend declaration
to X625.9 shall be subject to the penalty and branching privileges
until the violation is
provisions under R.A. No. 7653 (The New corrected but in no case
Central Bank Act) and other existing shall such suspension be
banking laws and regulations. less than thirty (30)
Failure to comply with Subsec. X625.6 calendar days.
shall result in the exclusion of the forward “Abusive” Suspension of the bank’s
contracts in the computation of the bank’s violation rediscounting privileges,
consolidated daily position starting from cash dividend declaration
day one, i.e., when the individual and branching privileges
until the violation is
contracts were entered into. Violations
corrected but in no case
of the prescribed FX position limits shall shall such suspension be
be subject to the following sanctions less than sixty (60)
provided under Circular Letter dated calendar days.
13 March 1998:
a. Monetary Penalties c. The Monetary Board may impose
Per Calendar Month Daily Penalty other non-monetary sanctions on a bank
for violations determined by Bangko
1st banking day P10,000 Sentral as “chronic” or “abusive” on a
nd
2 banking day 20,000 case-to-case basis, pursuant to Sec. 37
3rd banking day of 30,000 of R.A. No. 7653.
violation, and onwards, d. Banks shall be duly advised by
or if the excess FX position the Bangko Sentral of their violations
of the bank is thirty percent and the corresponding sanctions
(30%) or more of the imposed for such violations.
allowable limits in any e. A monetary penalty imposed on a
banking day, regardless of bank shall be paid to the Bangko Sentral
whether a bank is in the first, Cash Department, within three (3) banking
second, third or more days of days from the bank’s receipt of advice of
violation said penalty imposition.
For purposes of imposing sanctions for
b. In addition, the following delayed, erroneous or unsubmitted reports,
non-monetary sanctions shall be imposed reports required under Subsec. X625.9 are
on the bank committing violations classified as Category B reports and subject
considered as: to corresponding penalties.

§ X625.14 - 1628.3
15.12.31
Counterparties that habitually cancel defined above on the principle that such
deliverable forwards without proper banks have already demonstrated a more
justification may be subject of a Bangko sophisticated ability to manage risks. Subject
Sentral watchlist. to the provisions in Sec. 1648, they may also
(As amended by Circular No. 591 dated 27 December 2007) invest in SPV-issued CLNs that co-exist with
other CLNs of different seniority of claims
Secs. X626 - X628 (Reserved) against the reference asset pool. As an
exception to the general rule, a UB/KB
Sec. 1628 (2008 - 1633) Credit-linked Notes without expanded derivatives authority may
and Similar Credit Derivative Products. The invest in single name CLNs where the
following are the guidelines for the capital reference asset is a direct ROP obligation or
treatment of investments in credit-linked an obligation fully guaranteed by the ROP.
notes and similar credit derivative products
such as credit-linked deposits and credit § 1628.3 (2008 - 1633) Capital
linked loans. treatment of investments in CLNs.
(1) Banking book. Positions in CLNs in
§ 1628.1(2008 - 1633) Definitions. the banking book shall be reported in the
(1) A credit-linked note (CLN) pertains computation of the risk-based capital
to a pre-funded credit derivative instrument adequacy ratio covering credit risks under
under which the note holder effectively applicable and existing capital adequacy
accepts the transfer of credit risk pertaining framework.
to a reference asset or basket of assets issued Through holding a CLN, a bank
by a reference entity/ies. The repayment of acquires credit exposure on two (2) fronts
the principal to the note holder is contingent - to the reference entity of the note and also
upon the occurrence of a defined credit to the note issuer. The on-balance sheet
event. In consideration, the note holder exposure arising from the CLN should be
receives an economic return reflecting the weighted by the higher of the risk weight of
underlying credit risk of the reference asset/s. the reference entity or the risk weight of the
All references to CLNs in this Section note issuer. The amount of exposure is the
shall be taken to generically include similar book value of the note. If the CLN principal
instruments, such as Credit-Linked Deposits is fully collateralized by securities that are
(CLDs) and Credit-Linked Loans (CLLs). acceptable as credit risk mitigant under
(2) An SPV, for purposes of this Section, applicable and existing capital adequacy
refers to an entity specifically established framework and provided such collateral is
to issue CLNs of a single, homogeneous risk constituted in a legally effective manner as
class that are fully collateralized as to to give priority to the note holders’ interest
principal by high-grade securities purchased in the event of bankruptcy of the note issuer,
out of the proceeds of the note issuance. the risk weight of the note issuer is substituted
Collateral shall be limited to securities with with the risk weight associated with the
an assignable risk weight of not more than relevant security.
twenty percent (20%) under existing When the CLN is referenced to a basket
regulations. of reference entities and the contract
terminates and pays out on the first entity to
§ 1628.2 (2008 - 1633) Qualified banks. default in the basket, capital should be held
In general, only banks with expanded to consider the cumulative risk of all the
derivatives authority may invest in CLNs as reference entities in the basket. This means

§ 1628.3
15.12.31
that the risk weights of all the reference risk-weighted according to each reference
entities are added up and the sum compared entity’s share of protection under the
with the risk weight of the note issuer. If the contract. Thus, if there are two (2)
sum of the risk weights of all the reference reference entities in a P100.0 million
entities in the basket is higher than the risk contract, one (1) with a 100% risk weight
weight of the note issuer, then this sum is and a twenty percent (20%) share and the
adopted. The resultant risk-weighted other with a twenty percent (20%) risk
exposure to the basket is, however, capped weight and an eighty percent (80%) share,
at ten (10) times the book value of the note. the risk weighted exposure is P36.0
Accordingly, the maximum capital charge million, i.e., P100.0 million x 20%
is 100% of the book value of the note. The x 100% + P100.0 million x 80% x 20%.
multiplier ten (10) is the reciprocal of the The corresponding capital charge is
BSP-required minimum capital adequacy P3.6 million (P36.0 million x 10%).
ratio of ten percent (10%). (2) Trading book. Positions in CLNs
If, on the other hand, the risk weight of taken up in the trading book should be
the note issuer is still higher than the sum reported in the computation of the adjusted
of the risk weights of all the reference risk-based capital adequacy ratio covering
entities in the basket, then the risk weightof combined credit risk and market risk under
the note issuer is adopted. Appendix 46.
When the contract terminates and pays (a) Standardized approach
out on the nth (other than the first) entity to The following describes the positions
default in the basket, the treatment above to be reported for investments in CLNs for
shall apply except that in aggregating the risk purposes of calculating specific risk and
weights of reference entities, the risk general market risk charges under the
weight/s of n–1 entity/ies is/are excluded standardized approach.
from the computation. The bank may choose A CLN investment is treated as a
which entity/ies to exclude. position in the note itself, with an
If a CLN that pays out on the nth entity embedded credit default product. The
to default is rated such that it meets the CLN is subject to the specific risk
criteria of a security with the “highest credit associated with the issuer or the collateral
quality” as defined under Appendix 46, only when the issuer is an SPV. In addition, it
the highest risk weight in the basket of is subject to general market risk that is a
reference entities is compared with the risk function of the maturity and coupon or
weight of the note issuer. interest rate of the note. The embedded
If the CLN is issued by an SPV, the bank credit default product creates a notional
is exposed to both the reference entity and position in the specific risk of the
the collateral held by the SPV. Thus, the risk reference obligation (with no additional
weight/s of the reference entity/ies should general market risk position created).
be compared with the risk weight of the Specific risk
riskiest eligible collateral for purposes of A CLN investment should be reported
computing the risk-weighted exposure of the as a long position on the reference
note and the corresponding capital charge. obligation and a long position on the note
Subject to prior Bangko Sentral clearance, itself.
a bank may disapply the additive rule when a When a CLN is referenced to multiple
very strong correlation among the reference obligations in a basket, the positions
entities in the basket can be demonstrated. reported shall depend on the structure of
A CLN which is referenced to entities the contract. When the contract terminates
in the basket proportionately should be and pays out on the first obligation to default

§§ 1628.3 - 1628.6
15.12.31
in the basket, the note should be reported necessary expertise and systems, use
as long positions in each of the reference preprocessing techniques to calculate
obligations in the basket, with the total capital charge for CLNs. Banks wishing to
capital charge for the product capped at the adopt these techniques should seek Bangko
book value of the note. Sentral’s prior consent. The preprocessing
When the contract terminates and pays models are subject to verification by the
out on the nth (other than the first) entity to Bangko Sentral.
default in the basket, the treatment above (As amended by Circular Nos. 890 dated 02 November and 827
shall apply except that in aggregating the dated 28 February 2014)
risk weights of the reference obligations, the
risk weight/s of n-1 obligations is/are § 1628.4 (2008 - 1633) Risk management.
excluded from the computation. The bank CLN structures are considered to be
may choose which obligations to exclude. exposed to greater risks than comparable
Subject to prior Bangko Sentral investments in direct obligations. In
clearance, a bank may disapply the additive particular, investing banks should be
rule when a very strong correlation among aware of the potential legal risk arising
the reference obligations in the basket can from an unenforceable contract. They
be demonstrated. should consult their legal advisors about
The additive treatment may also be these and related legal issues before
disapplied when an nth-to-default CLN is engaging in such transactions. In addition,
rated such that it meets the criteria of a all investments in CLNs must be duly
security with the “highest credit quality” as approved by a bank’s board of directors
defined under Appendix 46. Positions in the and subjected to appropriate risk
reference obligations can be reported as a management procedures.
single long position in a debt security with
the “highest credit quality”. A long position § 1628.5 (2008 - 1633) Transitional
on the note should also be reported whether arrangements. Banks which have
or not the CLN meets the criteria of a outstanding investments in CLNs, but
security with the “highest credit quality”. which have not been authorized under
When the CLN is referenced to multiple this Section to invest in such, shall be
obligations under a proportionate structure, given a period of ninety (90) calendar days
positions in the reference obligations should from 25 February 2004 (effectivity of
be reported according to their respective Circular No. 417) to divest themselves of
proportions in the contract. such investments.
General market risk
A CLN investment creates a long § 1628.6 (2008 - 1633) Bangko Sentral
position in the note itself. approval not required. No prior Bangko
(b) Internal models approach Sentral approval is required to invest in CLNs
Banks may seek the Bangko Sentral’s and similar products. However, it shall be the
approval to include CLNs in their responsibility of UBs/KBs to fully comply with
recognized models for calculating capital appropriate risk management standards
charges. The detailed requirements relating including, as a minimum, those prescribed
to the use of internal models are set out in under this Section. The regulatory
Annex A of Appendix 46. requirements enumerated in Appendix 66
While some banks may not be able to shall be fully complied with by UBs/KBs
run full internal models to calculate market investing in products allowed under this
risk capital charges, they may, with the Section.

§§ 1628.6 - 1635.4
11.12.31
Investment in credit-linked notes (CLNs) § 1635.2 Definition. A structured product

and similar structured products with refers to a financial instrument where the
embedded credit derivatives, as defined under return is a function of one (1) or more
Section 1628.1, including those that were underlying indices, such as interest rates,
reclassified from HFT to Available for Sale equities and exchange rates. There may also
(AFS)/Held to Maturity (HTM)/Unquoted Debt be embedded derivatives such as swaps,
Securities Classified as Loans (UDSCL) or from forwards, options, caps, and floors that
AFS to HTM/UDSCL in accordance with the reshape the risk-return pattern. For purposes
reclassification rules under Circular No. 626 of this Subsection, structured products do
dated 23 October 2008 and Circular No. 628 not include asset-backed securities, credit-
dated 31 October 2008, shall be classified and linked notes and other similar instruments.
measured at FVPL upon initial application of
PRFS 9. § 1635.3 Qualified banks. As a general
The accounting treatment for rule, only UBs and KBs with expanded
investments in CLNs and other structured
derivatives license may obtain exposures in
products under BSP Memorandum
structured products. Banks without
M-2008-10 dated 07 March 2008 and the
expanded derivatives license may only
guidelines on reclassification of CLNs and
invest in structured products duly approved
other similar instruments that are linked to
by the Bangko Sentral.
the ROP under Memorandum M-2009-12
dated 16 April 2009 shall no longer apply
to financial assets that are accounted for in § 1635.4 Capital treatment of banks’
accordance with FPRS 9. exposures to structured products.
(As amended by Circular Nos. 733 dated 05 August 2011 and a. Banking book
708 dated 10 January 2011) (1) Risk weights. Capital charge for
structured products held in the banking
Sec. 2628 (Reserved) book shall depend on the rating of the
issuing entity, or rating of the collateral in
Sec. 3628 (Reserved) case of structured products issued by
special purpose vehicles (SPVs), given by
the following BSP-recognized international
credit rating agencies:
Sec. 1635 Banks’ Exposures to Structured
(a) Moody’s;
Products. The following rules and
(b) Standard & Poor’s;
regulations shall govern the capital treatment
(c) Fitch Ratings; and
of banks’ exposures to structured products.
(d) Such other international rating
§ 1635.1 Statement of policy. The agencies as may be approved by the
Bangko Sentral aims to foster the Monetary Board.
development of a market for new financial In cases where there are two (2) or more
products in the country, while at the same types of collateral, capital charge shall
time ensure that banks hold sufficient depend on the lowest rated collateral.
capital commensurate to the risks inherent The mapping of ratings to the
in these products. corresponding risk weights shall be a follows:

§§ 1635.4 - 1635.5
08.12.31
Risk weight Moody’s Standard Fitch cases where there are two (2) or more
& Poor's Ratings
50% Aaa to Aa3 AAA to AA- AAA to AA-
ratings which map into different risk
100% A1 to A3 A+ to A- A+ to A- weights, the higher of the lowest two (2)
150% Baa1 to Baa3 BBB+ to BBB+ to
BBB- BBB-
risk weights should be used.
Deduction b. Trading book. Capital charge for
from total structured products held in the trading book
of Tier 1 and Below Baa3 Below BBB- Below BBB-
Tier 2 capital Unrated
shall be determined in accordance with
Appendix 46.
(2) Use of ratings. If an issuer of a § 1635.5 Bangko Sentral approval not
structured product has only one (1) rating required. No prior BSP approval is required
by any of the BSP-recognized international to enter into authorized transactions.
rating agencies, that rating shall be used to However, it shall be the responsibility of
determine the risk weight of the product; in UBs/KBs to fully comply with appropriate
(Next page is Part VI - Page 19)

§§ 1635.5 - 1636.3
08.12.31
risk management standards including, as b. Credit quality of issuer - Acceptable

a minimum, those prescribed under this issuers are banks and SPVs collateralized
Section. The regulatory requirements by securities rated at least “A” or its
enumerated in Appendix 66 shall be fully equivalent by an international rating
complied with by UBs/KBs investing in agency acceptable to the Monetary Board.
products allowed under this Section. c. Booking - Investments in structured
products as herein defined shall be booked
Sec. 2635 (Reserved) under banking book accounts as follows:
(1) DFVPL, (2) AFS, (3) Held to Maturity
Sec. 3635 (Reserved) (HTM); or (4) Unquoted Debt Securities
Classified as Loans, which shall be
Sec. X636 (Reserved) accounted for in accordance with Subsecs.
X186.1, X388.5 and Appendix 33, but not
Sec. 1636 Expanded Foreign Currency under the HFT category.
Deposit Units Investments in Foreign d. Prudential limits - The total carrying
Currency Denominated Structured value of all investments in structured
Products. The following guidelines allow products as defined herein at any given
UBs and KBs without expanded derivatives point in time must not exceed twenty
authority to invest in certain specified percent (20%) of the total investment
structured products. portfolio of the EFCDU [combined amount
of Trading Account Securities (TAS), ASS
§ 1636.1 Statement of policy. The BSP and IBODI].
encourages banks to diversify their EFCDU e. Risk management - Investing banks
investment portfolios in order to stabilize must have established internal processes to
earnings, control maturity mismatches and identify, evaluate, monitor and manage the
minimize over concentration of exposures. risk exposures, e.g., credit risk, market risk,
liquidity risk, operational risk, legal risk,
§ 1636.2 Scope. EFCDUs of UBs and compliance risk, created by their investments
KBs without expanded derivatives authority in structured products. As a minimum:
may invest, for their own account, in foreign (1) Such investments must be specifically
currency-denominated structured products approved by the board of directors and be
issued by banks and SPVs of high credit subject to appropriate internal limits and
quality: Provided, That the revenue streams periodic reporting to the Board.
of such products may only be linked to (2) Banks must comply with generally
interest rate indices and/or foreign exchange accepted accounting and disclosure
rates other than those that involve the standards and/or rules and regulations
Philippine Peso: Provided, further, That the prescribed by the BSP.
minimum all-in return of such investments (3) An independent risk management
may not be lower than zero. For purposes of function must be in place.
this Section, structured products do not (4) Banks should have the ability to
include asset backed securities, credit-linked value their investments on a continuing and
notes and other similar instruments. consistent basis and to measure their
sensitivity to market movements. This
§ 1636.3 Other conditions. should include performing, at regular
a. Maturity - The maximum intervals, stress tests that reflect extreme
contractual maturity of any investment in market conditions. As part of the valuation
structured products shall be five (5) years. exercise, banks should be able to obtain bid

§§ 1636.3 - 1648.4
08.12.31
prices from the issuers of the investment § 1648.1 Statement of policy. The BSP
instruments on a monthly basis. aims to foster the development of a market
(5) Management should ensure that the for new financial products in the country
risks of the investments are accurately and provide banks with expanded
aggregated in risk reports on a timely basis. opportunities for investment diversification,
while at the same time ensure that they
§ 1636.4 Capital treatment of hold sufficient capital commensurate to the
structured products. The capital treatment risks inherent in these products.
shall be in accordance with existing rules
and regulations as modified for structured § 1648.2 Definition. Securitization
instruments. structures refer to:
a. structures where the cash flow from
§ 1636.5 Bangko Sentral approval not an underlying pool of exposures is used to
required. No prior BSP approval is required service at least two (2) different stratified
to enter into authorized transactions. risk positions or tranches reflecting
However, it shall be the responsibility of different degrees of credit risk (also known
UBs/KBs to fully comply with appropriate as traditional securitization); or
risk management standards including, as b. structures with at least two (2)
a minimum, those prescribed under this different stratified risk positions or tranches
Section. The regulatory requirements that reflect different degrees of credit risk,
enumerated in Appendix 66 shall be fully where credit risk of an underlying pool of
complied with by UBs/KBs investing in exposures is transferred, in whole or in
products allowed under this Section. part, through the use of credit derivatives
or guarantees that serve to hedge the credit
§ 1636.6 Sanctions. Non-compliance risk of the portfolio (also known as
with the provisions of this Section shall synthetic securitization).
subject the bank to a fine of one-tenth of one
percent (1/10 of 1%) of the outstanding § 1648.3 Qualified banks. UBs/KBs with
investment per day, but not to exceed expanded derivatives authority may invest
P30,000 per day, to be reckoned from the in securities overlying any tranches of
day the bank is deemed in violation of securitization structures. UBs/KBs without
regulations, until the day the bank has expanded derivatives authority may also
complied with the requirements. Banks may invest but only in securities overlying
also be temporarily or permanently tranches of securitization structures that are
prohibited from such investments as rated at least “A”, or its equivalent, by a BSP-
circumstances may warrant. recognized credit rating agency.
Sec. 2636 (Reserved) § 1648.4 Capital treatment of

investments in securities overlying
Sec. 3636 (Reserved) securitization structures.
a. Credit risk
Secs. X637 - X648 (Reserved) (1) Risk weights. Capital charge for
investments in securitization structures held
Sec. 1648 Investments in Securities in the banking book shall be based on the
Overlying Securitization Structures. The latest rating given by any of the following
following rules shall govern banks’ BSP-recognized credit rating agencies:
investments in securities overlying (a) International rating agencies:
securitization structures. (i) Moody’s;

§§ 1648.4 - X651.1
08.12.31
(ii) Standard & Poor’s; § 1648.5 Bangko Sentral approval not

(iii) Fitch IBCA; and required. No prior BSP approval is required
(iv) Other international rating agencies to invest in securities overlying
as may be approved by the Monetary securitization structures. However, it shall
Board be the responsibility of UBs/KBs to fully
(b) Domestic rating agencies: comply with appropriate risk management
(i) PhilRatings; and standards including, as a minimum, those
(ii) Other domestic rating agencies as prescribed under this Section. The
may be approved by the Monetary Board regulatory requirements enumerated in
The assignment of risk weights Appendix 66 shall be fully complied with
corresponding to agency ratings shall be by UBs/KBs investing in products allowed
as follows: under this Section.
Risk weight Moody’s Standard Fitch PhilRatings Sec. 2648 (Reserved)

& Poor’s IBCA
20% Aaa to AAA to AAA to Aaa to Aa
Aa3 AA- AA- Sec. 3648 (Reserved)
50% A1 to A3 A+ to A- A+ to A- A
100% Baa1+ BBB+ BBB+ Baa Secs. X649 - X650 (Reserved)
to Baa3 to BBB- to BBB-
Deduction Below Below Below Below Baa Sec. X651 Asset-Backed Securities. The
from total Baa3 BBB- BBB- following regulations shall govern the
of Tier 1 and
Tier 2 capital Unrated
origination, issuance, sale, servicing and
administration of asset-backed securities
(2) Use of ratings. Ratings of BSP (ABS) by any bank including its
recognized credit rating agencies shall be subsidiaries and affiliates engaged in
used as follows: allied activities, which are domiciled in
(a) Securities overlying securitization the Philippines.
structures created within the Philippines
may be rated by any BSP-recognized § X651.1 Definition of terms.
international or domestic credit rating a. Assets shall mean loans or
agency, while securities overlying receivables existing in the books of the
securitization structures created outside originator prior to securitization. Such
of the Philippines may only be rated by assets are generated in the ordinary course
any of the international credit rating of business of the originator and may
agencies that are recognized by the BSP; include mortgage loans, consumption
and loans, trade receivables, lease receivables,
(b) In cases when overlying securities credit card receivables and other similar
have split ratings which map into different financial assets.
risk weights, the higher risk weight should b. Asset-backed securities shall refer
be used. to the certificates issued by a Special
b. Market risk. Capital charge for Purpose Trust (SPT) representing undivided
securities overlying securitization ownership interest in the asset pool.
structures held in the trading book shall be c. Asset pool shall mean a group of
determined in accordance with Appendix identified, self-amortizing assets that is
46 and the use of agency ratings for such conveyed the SPT issuing the ABS and such
purpose shall be consistent with the above other assets acquired as a consequence of
principles. the securitization.

§§ X651.1 - X651.4
08.12.31
d. Clean-up call shall refer to an and selling of the ABS either on guaranteed
option granted to the seller to purchase the or best effort basis.
remaining assets in the asset pool.
e. Credit enhancement shall refer to § X651.2 Prior Bangko Sentral approval.
any legally enforceable scheme that is Any bank including its subsidiaries and
intended to enhance the marketability of affiliates engaged in allied activities, may
the ABS and increase the probability that securitize its assets upon prior approval of
investors receive payment of amounts due the BSP.
them.
f. Guarantor shall refer to an entity § X651.3 Board approval requirement.
that guarantees the repayment of principal The originator/seller shall have the
and interest on loans or receivables securitization program approved by its
included in the asset pool in the event of board of directors. The originator/seller
default by the borrower. shall integrate such securitization program
g. Investible funds shall refer to the into its corporate strategic plan. The board
proceeds of collection of loans or of directors shall ensure that the
receivables included in the asset pool which securitization of assets is consistent with
are not yet due for distribution to investors. such program.
h. Issuer shall refer to the SPT that
issues the ABS. § X651.4 Minimum documents required.
i. Originator shall refer to a bank The application to securitize must be
and/or its subsidiary or affiliate engaged in accompanied by the following documents
allied activities that grants or purchases as a minimum requirement:
loans or receivables and assembles them a. Trust indenture evidencing the
into a pool for securitization. conveyance of the assets from the seller
j. Residual certificates shall refer to to the Issuer or SPT, the features of which
certificates issued representing claims on shall include the following:
the remaining value of the asset pool after (1) Title or nature of the contract in
all ABS holders are paid. noticeable print;
k. Seller shall refer to the entity which (2) The parties involved, indicating in
conveys to the SPT the assets that constitute noticeable print, their respective legal
the asset pool. capacities, responsibilities and functions;
l. Servicer shall refer to the entity (3) Features and amount of ABS;
designated by the Issuer primarily to collect (4) Purposes and objectives;
and record payment received on the Assets, (5) Description and amount of assets
to remit such collections to the Issuer and comprising the asset pool;
perform such other services as may be (6) Representations and warranties;
specifically required by the issuer excluding (7) Credit enhancements;
asset management or administration. (8) Distribution of funds;
m. Special Purpose Trust shall refer to (9) Authorized investment of
a trust administered by a trustee and investible funds;
created solely for the purpose of issuing (10) Rights of the investor;
and administering an ABS. (11) Reports to investors; and
n. Trustee shall refer to the entity (12) Termination and final settlement.
designated to administer the SPT. The trust indenture shall include as
o. Underwriter shall refer to the entity annexes the servicing agreement
engaged in the act or process of distributing between the trustee and the servicer and

§§ X651.4 - X651.7
08.12.31
the underwriting agreement between the inviting investment, application to purchase

seller and the underwriter. ABS and the certificate itself:
b. Prospectus. As a minimum a. The ABS do not represent deposits
requirement, it shall contain the following: or liabilities of the originator, servicer or
(1) Summary of the contents of the trustee and that they are not insured with
prospectus; PDIC;
(2) Description of each class of b. The investor has an investment risk;
certificate, including such matters as c. The trustee does not guarantee the
probable yields, payment dates and priority capital value of the ABS or the collectibility
of payments; of the asset pool; and
(3) Description of the assets d. The right of an investor.
comprising the Asset Pool as well as the The investors shall be required to sign
representations and warranties set forth by an acknowledgment indicating that they
the originator and/or seller; have read and understood the disclosures.
(4) Assumptions underlying the cash
flow projections for each class of § X651.7 Conveyance of assets.
certificate; a. The conveyance of the assets
(5) Description of any credit comprising the asset pool shall be done
enhancements; within the context of a true sale and, for
(6) Identity of the servicer; and this purpose, the seller may not retain in
(7) Disclosure statements as required its books the ABS, except the residual
under Subsec. X651.6. certificate, if any.
c. Specimen of application to b. The seller shall have no obligation
purchase ABS. It shall include the terms to repurchase or substitute an asset or any
and conditions of the purchase and the part of the asset pool at any time, except
disclosures required under Subsec. X651.6. in cases of a breach of representation or
d. Specimen of certificate. It shall warranty, or under a revolving structure,
indicate the features of the ABS and the to replace performing assets which have
disclosures required under Subsec. X651.6. been paid out in part or full.
c. The seller shall be under no
§ X651.5 Minimum features of asset- obligation to provide additional assets to
backed securities.The ABS shall be the SPT to maintain a “coverage ratio” of
pre-numbered and printed on security collateral to outstanding ABS. A breach
paper. The ABS shall be signed and of this requirement will be considered a
authenticated by the trustee.They are credit enhancement and should be
transferable by endorsement of the charged against capital. However, this
certificate. The transfer shall be recorded will not apply to an asset pool conveyed
in the books of the trustee, indicating the under a revolving structure such as the
names of the parties to the transaction, the securitization of credit card receivables.
date of the transfer and the number of the d. Securitized assets shall be
certificate transferred. considered the subject to a true sale
The minimum denomination of any between the seller and the SPT. Sold
ABS shall be P10,000. assets shall be taken off the books of the
seller and shall be transferred to the
§ X651.6 Disclosure requirements. books of the SPT.
The following disclosures must be provided For accounting purposes, the transfer
in a conspicuous manner in any document shall only be considered a true sale if the

§§ X651.7 - X651.11
08.12.31
following three (3) conditions have been affiliates has agreed to pay damages arising
satisfied: out of any breach of representation or
(1) the transferred assets have been warranty.
isolated and put beyond the reach of the
seller and its creditor; § X651.9 Third party review. A due
(2) the SPT has the right to pledge or diligence review by an independent entity
exchange its interest in the assets; and mutually agreed upon by the seller and the
(3) the seller does not effectively Issuer shall be done before the assets are
maintain control over the transferred assets sold.
by any concurrent agreement.
e. All expenses incidental to § X651.10 Originator and seller.
underwriting, conveyance of the asset pool a. The seller may itself be the
including expenses for credit enhancement originator, and may likewise be designated
may be paid by the originator/seller: as the servicer.
Provided, That no further expenses shall b. The seller or originator shall deliver
be borne by the originator/seller after the to the trustee all original documents or
asset pool has been conveyed to the SPT. instruments with respect to each asset sold.
§ X651.8 Representations and § X651.11 Trustee and issuer.

warranties. a. The trustee shall be the trust
a. Standard representations and department of a bank licensed to do
warranties refer to an existing state of facts business in the Philippines.
that the originator, seller or servicer can b. The trustee shall have the right to
either control or verify with reasonable due manage or administer the asset pool. The
diligence at the time the assets are sold. trustee shall see to it that necessary
Any breach of representation or warranty measures are taken to protect the asset
may give rise to legal recourse. pool.
b. The representations or warranties c. The trustee shall undertake a
shall be clear and explicit and, in particular, performance review of the asset pool at
shall not relate to the future least quarterly and shall prepare a report
creditworthiness of the assets in the asset to investors indicating, among others,
pool or the performance of the SPT or the collections, fees and other expenses as
securities issued. well as defaults, which report shall be
c. Any agreement to pay damages as made available to the investors at anytime
a result of breach of warranties and after thirty (30) days from end of the
representations shall hold only where: reference quarter.
(1) there is a well-documented d. The trustee shall initiate all civil
negotiation of the agreement in good faith; actions including foreclosure of mortgaged
(2) the burden of proof for a breach of properties to effect collection of
representation or warranty rests with the receivables in the asset pool. The servicer
other party; or any other party may be designated by
(3) damages are limited to the loss the trustee to perform such function on a
incurred as a result of the breach; and case-by-case basis.
(4) there is a written notice of claim e. The trustee may invest the
specifying the basis for the claim. Investible funds only in obligations issued
The BSP shall be notified of any and/or fully guaranteed by the government
instance where a bank or its subsidiaries/ of the Republic of the Philippines or by the

§§ X651.11 - X651.15
08.12.31
BSP and such other high-grade readily administered by its trust department, the
marketable debt securities as the BSP may trust departments of its subsidiaries/
approve. affiliates, the trust department of its parent
f. The trustee shall designate a bank or the trust department of its parent
replacement of the servicer if the latter fails bank’s subsidiaries/affiliates.
to satisfactorily perform its duties and e. The underwriter may not extend
responsibilities according to the terms and credit for the purpose of purchasing the
conditions of the servicing agreement. ABS which such UB/IH underwrites or that
which is underwritten by its subsidiaries/
§ X651.12 Servicer. affiliates, its parent bank or its parent bank’s
a. The servicer shall perform its duties subsidiaries/affiliates.
according to the terms and conditions of
the servicing agreement and such other § X651.14 Guarantor.
written instructions as the trustee may issue a. Only an entity the regular business
on a case-by-case basis. Collections made of which includes the issuance of
by the servicer shall be remitted promptly guarantees or similar undertaking may act
to the trustee or as may be agreed upon by as guarantor.
the parties in the servicing agreement, but b. The guarantor must have the
in no case shall the remittance period be financial capacity to perform its
longer than one (1) month. responsibilities in accordance with the
b. The servicer shall prepare periodic terms and conditions of the guarantee
reports as may be required by the trustee. agreement. It shall submit to the trustee at
c. The servicer shall report to the trustee least once in every six (6) months such
within thirty (30) days, any borrower which financial reports as the trustee may require.
fails to pay its debt at maturity date or any c. The originator or seller may not
adverse development that may affect the issue a counter-guarantee in favor of the
collectibility of any loan account or guarantor.
receivable comprising the asset pool.
d. The servicer shall have no authority § X651.15 Credit enhancement. Credit
to waive penalties and charges except with enhancement may be provided in any of
a written authority from the trustee. the following manner:
a. Standby letter of credit issued by a
§ X651.13 Underwriter. UB/KB other than the originator/seller or
a. A UB or IH shall have written its subsidiary/affiliate, its parent bank or the
policies and procedures on underwriting parent bank’s subsidiary/affiliate, and
of ABS. trustee or its subsidiary/affiliate;
b. The underwriter shall perform its b. Surety bond issued by any
functions according to the terms and insurance company other than the
conditions of the underwriting agreement. originator’s/seller’s subsidiary or affiliate,
c. An underwriter may deal in ABS, the subsidiary or affiliate of the originator’s/
except those administered by its trust seller’s parent bank and the trustee or its
department, the trust departments of its subsidiary/affiliate;
subsidiaries/affiliates, the trust department c. Guarantee issued by any entity
of its parent bank or the trust department other than the originator/seller or its
of its parent bank’s subsidiaries/affiliates. subsidiary/ affiliate, its parent bank or the
d. A UB/IH may act as underwriter, parent bank’s subsidiary/affiliate, and
on a firm basis, of ABS except those trustee or its subsidiary/affiliate;

§§ X651.15 - X651.19
08.12.31
d. Overcollateralization provided by § X651.17 Prohibited activities.

the originator/seller wherein the assets a. The seller may not, under any
conveyed to the SPT exceed the amount circumstance, designate its trust department,
of securities to be issued. the trust department of its subsidiaries/
Losses arising from overcollateralization affiliates, the trust department of its parent
shall be recognized by the originator/seller bank or the trust department of its parent
upfront. Such losses shall be treated as capital bank’s subsidiaries/affiliates as trustee.
charges. b. Any director, officer or employee
e. Spread account wherein the of the originator, seller or servicer may not
income from the underlying pool of serve as a member of the board of directors
receivables is made available to cover any or trust committee of the trustee or vice
shortfall in the repayment of ABS. The versa for the duration of the securitization.
spread account shall be handled by the c. The trust indenture shall not contain
trustee which shall account for it any stipulation whereby the seller, its
separately. If not needed, this "spread" subsidiaries/affiliates, its parent bank or the
generally reverts to the holder of the parent bank’s subsidiaries/affiliates shall
residual certificate. commit to extend any credit facility to the
f. Subordinated securities that are issuer and/or trustee.
lower ranking, or junior to other obligations d. The ABS shall not be eligible as
and are paid after claims to holders of senior collateral for a loan extended by a bank
securities are satisfied. which originated/sold the underlying assets
g. Other credit enhancements as may of such ABS.
be approved by the Monetary Board. e. The trust department of a bank that
To be consistent with the concept of has discretion in the management of any
true sale, subordinated securities shall be trust or investment management account
sold to third party investors other than may not purchase for said trust/investment
originator’s/seller’s parent company or its management account ABS administered
subsidiary/affiliate and the trustee or its by the trust department of the same bank,
subsidiary/affiliate or, if held by the the trust department of such trustee’s
seller, capital charges should be booked subsidiaries/affiliates, the trust department
upfront. Otherwise, the subordinated of such trustee’s parent bank and the trust
securities shall be treated as deposit department of the parent bank’s
substitute subject to legal reserves. subsidiaries/affiliates.
f. The trustee may not designate its
§ X651.16 Clean-up call. A clean-up subsidiary/affiliate, its parent or the parent’s
call may be exercised by the seller once subsidiaries/affiliates as servicer or vice
the outstanding principal balance of the versa.
receivable component of the asset pool falls
to ten percent (10%) or less of the original § X651.18 Amendment of trust
principal balance of the asset pool. Where indenture. Any amendment to the trust
the asset pool includes foreclosed and other indenture shall require the prior approval
assets, such assets shall be included in the of the BSP.
clean-up call and the consideration thereof
shall be at current market value. Such a § X651.19 Trustee or servicer in
clean-up call shall not be considered securitization. Without prior approval of the
recourse or in violation of Subsec. X651.7 BSP, a bank or any entity supervised by the
on conveyance of assets. BSP may act as trustee or servicer

§§ X651.19 - X661
16.09.30
in a securitization scheme originated by an valued similar to other foreign

entity not supervised by the Bangko Sentral: currencydenominated securities traded
Provided, That the assets which are the abroad;
subject of such securitization are existing c. Investments in GPNs shall be subject
in the books of the entity prior to to a credit risk weight of twenty percent
securitization: Provided, further, That such (20%) for purposes of computing a bank’s
entity acting as trustee or servicer is not a risk-based CAR;
subsidiary/affiliate of the originator/seller, d. Investments in GPNs shall be
its parent bank or the parent bank’s excluded in the computation of a bank’s
subsidiaries/affiliates or vice versa: Provided, daily net foreign exchange position;
finally, That such entity acting as trustee may e. Trading of GPNs shall be subject to
not designate its subsidiaries/affiliates, its pertinent securities laws and provisions,
parent or the parent’s subsidiaries/affiliates including the appropriate licensing of
as servicer or vice versa. dealers;
f. Pursuant to Sec. X340, investments in
§ X651.20 Report to Bangko Sentral. GPNs shall be excluded by government FIs
The trustee bank shall submit a report of in determining compliance with DOSRI
every securitization scheme in formats to ceilings; and
be prescribed by the Bangko Sentral. The g. Risks attendant to investments in
report shall be submitted to the appropriate GPNs shall be captured under a bank’s
department of the SES, within fifteen (15) Internal Capital Adequacy Assessment
banking days after end of every reference Process such that investing institutions must
quarter. Such report shall be considered a manifest their approach in handling the risks
Category A report for purposes of attendant to holding/trading GPNs.
implementing fines in the submission of (M-2010-028 dated 08 September 2010, as amended by M-
required reports pursuant to existing 2011-020 dated 30 March 2011)
regulations.
Sec. X661 Sales and Marketing Guidelines
Secs. X652 - X659 (Reserved) for Financial Products1.
General principles. A BSFI shall
Sec. X660 Global Peso Notes. The following always act with honesty, fairness, and
are the guidelines on the regulatory professionalism, and pursue the best
treatment of investments of banks in Global interests of its clients. Due to the
Peso Notes (GPNs) issued by the Republic increasingly sophisticated products being
of the Philippines: introduced in the market, a BSFI acting as
a. Investments in GPNs shall be a dealer or broker shall have a clearly
recorded in the RBU books of a bank as a articulated strategy for the sale and
foreign currency-denominated asset in marketing of financial products. The BSFI
accordance with the provisions of the is expected to manage the risks arising
Philippine Financial Reporting Standards/ from such activities and protect the
Philippine Accounting Standards at their interest of its clients. In this regard, a BSFI
foreign currency amount and local currency shall have appropriate policies,
equivalent; procedures and controls in place to ensure
b. Investments in GPNs that are the suitability of the products being offered
classified at fair value shall be subject to to its clients. It shall ensure that (1) the
mark-to-market valuation and shall be client understands the nature of the
1
BSFIs shall be given three (3) months from 28 November 2015 to make appropriate changes in their sales and
marketing policies, processes and materials in order to comply with the requirements of Sec. X661 as well as
Subsecs. X661.1 to X661.8.

§§ X661 - X661.3
16.09.30
transaction and the risks involved and (2) a. Financial products – refer to debt
the transaction meets the client’s financial and equity securities, hybrid securities,
objectives and is aligned with the client’s derivatives as defined under Sec. X611,
risk tolerance. It shall also provide sufficient, securitization structures, and similar
accurate and comprehensible information products with substantial investment
about the products, including inherent risks, characteristics.
in a clear and balanced manner to enable b. Broker - a person engaged in the
its clients to make informed financial business of buying and selling securities for
decisions. the account of others.
The BSFI shall be guided by the principle c. Dealer - a person who buys and
of proportionality in setting policies and sells securities for own account in the
procedures for its sales and marketing ordinary course of business.
activities. It shall differentiate between less d. Complex products – refer to
and more sophisticated clients, and tailor financial products whose terms, features and
the manner by which they are engaged in risks are not reasonably likely to be
accordance with such sophistication. understood by a non-sophisticated client
Controls shall be in place to ensure that the because of their complex structure, and
BSFI complies with its internal policies and which are also difficult to value, particularly
procedures, as well as relevant rules and when there is a very limited or no secondary
regulations. At the minimum, BSFIs must market.
satisfy the expectations set out in these (Circular No. 891 dated 09 November 2015)
guidelines.
The BSFI’s sales and marketing policies, § X661.3 Client suitability guidelines.
procedures and controls shall form part of its A BSFI shall ensure that the financial
consumer protection risk management system, products it recommends to a client are
consistent with the regulations on financial appropriate for that client through a client
consumer protection set forth under Part Ten. suitability process, which involves obtaining
(As amended by Circular Nos. 917 dated 08 July 2016 and 891 client information, classifying a client
dated 09 November 2015) according to financial sophistication and
risk tolerance, and conducting a suitability
§ X661.1 Scope of application. These review.
guidelines prescribe the minimum standards a. Client Information
for sales and marketing activities of BSFIs acting The BSFI shall obtain necessary and
as dealers or brokers of financial products. sufficient information about the client that
These shall apply to all banks and non- will serve as bases for its suitability
bank financial institutions performing quasi- assessment. At a minimum, the following
banking functions. Trust departments shall information shall be obtained in addition
not be covered by these regulations; they to the basic account information:
shall continue to be governed by the (1) Investment amount/ investible funds
provisions of Part IV as applicable. Likewise, or amount of exposure to be hedged;
cross-selling activities shall not be covered (2) Financial situation - the client’s
by these guidelines; they shall be governed financial standing, which includes
by the provisions of Sec. X172. information on assets, net worth, financial
(Circular No. 891 dated 09 November 2015) commitments, regular income, and capacity
to withstand losses arising from financial
§ X661.2 Definition of terms. For transactions;
purposes of this Section, the following terms (3) Knowledge of financial products -
shall have the meanings set forth below: the client’s knowledge and understanding

§ X661.3
15.12.31
of the financial markets and products and While the client is responsible for
the risks involved therein; providing accurate and updated information,
(4) Investment/hedging experience - the BSFI personnel shall exercise diligence in
nature of investments and/or derivatives reviewing the consistency of the responses
transactions undertaken by the client, and reliability of the information provided
including the length of time, frequency of based on available documents, such as
dealings, and the extent to which he/it has publicly disclosed information and those
relied on the advice of a bank or a financial obtained from the client’s existing
advisor, if any; contractual relationships with the BSFI. It is
(5) Financial objectives - the client’s highly recommended that the BSFI requests
goal or purpose for entering into a for documents to support the client’s
transaction, whether it be for regular representations, particularly where the client
income, capital appreciation, capital wishes to transact in complex products.
preservation, maintenance of purchasing Subsequent changes to client information,
power, hedging as against investment, and/ if any, shall be adequately documented and
or long-term buy and hold as opposed to concurred with by the client along with the
short-term active trading; discussions and/or clarifications made.
(6) Risk appetite – the level of risk a For a legal entity or a group of two (2)
client is willing to take;
or more natural persons, the BSFI shall
(7) Holding period or investment
obtain evidence that: (1) the client is
horizon – the length of time over which the
specifically authorized to enter into all or
position or exposure to be hedged will be
specific kinds of financial transactions, and
held by the client;
(2) the client’s representative/s is/are
(8) Regulatory and legal constraints –
authorized to carry out transactions on behalf
prohibitions or limitations imposed on the
of the entity/other parties, in accordance
activity of the client by existing laws, rules,
with the applicable legal framework.
and regulations, and;
(9) Liquidity needs – the client’s need When gathering information from a
to convert positions into cash and the timing representative, the BSFI should be able to
of such requirement. demonstrate that it has taken steps to
To foster cooperation from the client, ascertain that the information obtained is
the BSFI shall explain the reason for reflective of the entity or group’s situation.
assessing suitability. If the BSFI is unable to In addition, it shall determine if the client
obtain sufficient information, it shall refrain has competent/qualified personnel to handle
from offering or recommending any financial the proposed activities.
product. If a corporate client seeks to participate
A BSFI may design and use its own in complex products, the BSFI shall require
system for obtaining client information, the client to incorporate in the document
which may include questionnaires and authorizing the latter’s activities that it
interviews. However, pre-formatted likewise has appropriate risk management
questions and responses shall be fit for the systems sufficient to manage and monitor
purpose and presented in a clear and the risks it will take.
understandable manner. Likewise, At a minimum, client information,
technical or unfamiliar terms shall be including client classification, shall be
explained as needed, in order to prevent reviewed and updated prior to transacting
different interpretations and/or erroneous in a product that is new to the client, or
responses. earlier in case of material changes in the

§ X661.3
15.12.31
client’s financial situation or goals. Adequate the primary goal is to prevent the loss of
controls shall be implemented to ensure the principal;
confidentiality and security of client (2) Moderate - Client is willing and able
information. to expose funds to a moderate level of risk
b. Client Classification in consideration for higher returns or to
Based on the information obtained from meet certain objectives; and
a client, a BSFI should be able to classify a (3) Aggressive - Client is willing and able
client into one of the following categories to accept higher risks involving volatility of
according to financial sophistication: returns and even possible loss of investment
(1) Market counterparty - refers to any in return for potentially higher long-term
financial institution, only with respect to the results.
instruments in which it is authorized to Whenever a scoring system is used for
engage as a broker dealer; client profiling, the BSFI shall ensure that
(2) Sophisticated institutional client - the system is robust, fit for the purpose, and
refers to an institution that is not a market adequately tested. Any limitation in the
counterparty but has the level of net worth, system shall be mitigated through client
knowledge, expertise, and experience to discussions and the suitability review
deal with financial products; process. The system shall be calibrated as
(3) Sophisticated individual client - necessary to reflect appropriate results.
refers to an individual who has The BSFI shall make a record of the
demonstrated to the BSFI that he has the classification under which each client is
level of net worth, knowledge and categorized, including sufficient information
experience to deal with financial products; or to support the categorization. The
(4) Other clients – refer to all other classifications of the client according to
institutional or individual clients not sophistication and risk tolerance shall serve
categorized as market counterparty, as bases for the BSFI’s product offerings and
sophisticated institutional client or the level of disclosures required.
sophisticated individual client. c. Suitability Review
BSFIs are encouraged to adopt a more Before proposing or recommending a
granular categorization according to particular product to a client, a BSFI shall
financial sophistication, provided that the determine that the product is:
categories can be mapped into the broad (1) Suitable to the client’s needs,
classifications above and the differences financial situation, and objectives;
between categories are clearly set out. (2) Consistent with the client’s
In addition, a BSFI shall classify a client mandate, risk tolerance, and constraints; and
according to risk tolerance. This entails (3) Aligned with the client’s knowledge
assessing the client’s preferences, and experience, such that he/it understands
willingness to take on the risks associated the nature of and risks associated with the
with a product, and ability or capacity to product.
absorb the losses that may arise from such Likewise, the BSFI shall inform its client
product, as well as whether such losses of alternative products that are suitable to
will have a detrimental impact on the his/its circumstances.
client’s financial condition. At a minimum, A BSFI shall maintain a record of the
a BSFI’s classification of a client according assessment as well as all information used
to risk tolerance shall include, but need as bases of its suitability review. This
not be limited to, the following categories: includes written documentation to the extent
(1) Conservative - Client prefers an that such was created to evidence interviews
investment and/or hedging strategy where and analyses made in the performance of

§§ X661.3 - X661.4
15.12.31
its due diligence process. The BSFI is the client’s confirmation in writing that:
expected to conduct a more in-depth (1) The BSFI has informed the client of
assessment before offering complex the protections he/it may lose and conversely,
products. It is highly recommended that a of the risks that he/it is exposed to,
BSFI requires a client to sign his/its conformity (2) The client still wishes to proceed
to the suitability assessment (including the with the transaction despite the BSFI’s
information on which it is based) in order assessment, and
to avoid disputes with the client. (3) The client fully understands and is
A client who is classified as willing to take the risks attendant to the
conservative may only transact in plain product to be availed of.
vanilla financial products as follows: However, in no case shall the BSFI offer
(i) peso-denominated Government to its clients the option to automatically and
Securities representing direct obligations of comprehensively waive the outcome of the
the Government of the Republic of the client classification process and the resulting
Philippines; (ii) foreign currency- protections offered by the rules on client
denominated Government Securities suitability.
representing direct obligations of the (As amended by Circular No. 891 dated 09 November 2015)
Government of the Republic of the
Philippines; (iii) highly liquid sovereign § X661.4 Disclosures. A BSFI shall
bonds, corporate bonds, and commercial always be mindful of its statements
papers issued off-shore rated at least “AA-” regarding its products/services, whether the
or its equivalent by a reputable international statements pertain to promotion, marketing
credit rating agency; (iv) highly liquid or sale thereof or in the course of making
domestic corporate bonds and commercial the required disclosures. It shall institute
papers rated at least “AAA” or its equivalent measures to ensure that its clients
by a reputable credit rating agency; and/or understand the nature of and risks in a
(v) foreign exchange derivatives solely for financial transaction. Although a BSFI can
hedging, subject to the results of the tailor-fit information, marketing and sales
suitability review.1 presentations/materials depending upon the
In cases where the client is classified as sophistication of its client, it shall institute
a market counterparty, the BSFI does not measures to ensure that its clients
need to comply with the required suitability understand the nature of the financial
review, considering the client’s recognized transaction. The BSFI shall also take further
sophistication. However, a BSFI should be steps to adequately disclose the attendant
able to provide sufficient support for its risks of the financial transactions when
classification. dealing with an unsophisticated client,
Appropriate controls shall be in place either generally or with respect to a
to deter unauthorized overriding of the particular product being offered. A BSFI shall
results of the suitability assessment. A BSFI adopt standards for its publications/
shall only offer the range of products that is materials/disclosure statements and
viewed as suitable for the client. regularly review the aforementioned
Nevertheless, it is recognized that, in certain documents to ensure that they meet the
instances, a client may insist on transacting standards.
in a particular product that has previously A BSFI shall not misrepresent or give a
been assessed as unsuitable for his/its false impression of the financial products it
profile. In such cases, the BSFI shall obtain offers in any of its advertisements, electronic
1
The BSFI is expected to have an internal policy for the identification of reputable credit rating agencies and
prudent use of external credit assessment.

§ X661.4
15.12.31
communications, written materials (whether be verifiable; alternatively, the relevant

publicly disseminated or not) or oral assumptions shall be disclosed;
representations. A misrepresentation is any (7) No reference to an approval by a
statement that deviates from the truth or regulatory body or its officials is made, unless
omits a material fact or even tends to mislead a written approval was actually obtained;
the recipients. (8) A recommendation to consult/refer
a. Financial promotion (marketing and to a financial advisor is made; and
sales) (9) It does not omit any information, the
A BSFI embarking on a financial omission of which causes a material fact to
promotion, whether through a direct offer be misleading, unclear, or unfair.
or information/sales publications, shall A BSFI shall consider the client’s
ensure that it gives sufficient information on knowledge of the transaction to which the
the entire transaction, including the given information relates. However, it shall
underlying financial instruments, if any, to not assume that clients/recipients
enable a client to make an informed decision. necessarily have an understanding of the
A BSFI shall prominently indicate its name product being promoted. It shall also assess
in all its promotional materials and specify its usage of terms, especially those which
its role or capacity in the transaction (e.g., are technical in nature. If promotional or
issuer, dealer, broker).
marketing materials are specially designed
A financial promotion is considered
for a targeted client base that is reasonably
clear, fair and not misleading if all of the
believed to have particular knowledge of
following requisites are present:
the investment, this fact shall be made clear
(1) The information provided does not
in the materials.
only emphasize the potential benefits of the
b. Product disclosures
product but also presents a fair and
A BSFI shall endeavor to explain the
prominent description of the relevant risks
financial products it offers to its clients to
and assumptions;
(2) It draws the customer’s attention to enable the latter to make an informed
the warnings, exclusions and disclaimers in decision. Product disclosures shall present
all documents relating to the financial an adequate description of (a) the nature and
product; features of the financial product, including
(3) The design, content or format of the any underlying instrument(s), (b) the amount
presentation does not disguise, obscure or of outlay required, (c) the costs involved,
diminish the significance of any statement, and (d) the risks related to the product. In
warning or other matters that the customer general, disclosures shall always be
should be aware of; presented in a balanced manner whereby
(4) A client, by himself, can discern the potential benefits of a product are
from the presentation whether a statement tempered by a fair indication of the risks
is a fact, promise or forecast; involved.
(5) The accuracy of all material Disclosure statements shall be
statements of fact can be substantiated; presented in a clear, concise and effective
(6) Any comparison or contrast of a manner to promote the client’s
product offered is made with another understanding of the product. The use of
product that is intended to meet the same industry and legal jargon shall be minimized
needs or to serve the same purpose. The to the extent possible. If such cannot be
comparison or contrast shall include all avoided, these terms shall be clearly defined
relevant factors. The facts presented shall and explained to the client. A greater level

§ X661.4
15.12.31
of disclosure shall be provided if a product the client the counterparty (e.g., issuer/
is not generally understood by clients, for guarantor) risk involved so that he/it is not
instance, in the case of new or complex misled about the product’s capital
products. security/principal protection. When
Should the BSFI make use of materials applicable, a BSFI shall state if the
provided by the issuer of a particular guaranteed or protected amount is payable
instrument, the client shall be made aware only at the end of the term.
that the issuer is responsible for the Product disclosures for leveraged
representations contained therein. transactions1 should emphasize that while
However, the BSFI is responsible for these types of products/strategies amplify
communicating the relevance of said the potential gain from an investment, they
materials to the client. also increase the potential loss thereof. A
A product disclosure that includes an client who intends to engage in margin
illustration of past or future performance buying, a means of applying leverage in
shall comply with the following: investing, shall be cautioned on possible
(1) When the product’s past loss exceeding the margin or initial cash
performance is used to illustrate possible outlay.
future returns, the disclosure shall state that c. Minimum required disclosures
past performance is not necessarily The minimum required disclosures
indicative of future performance. This shall shall always be in writing. A BSFI shall
be presented in the main text of the require its client to sign or initial the
presentation material. Past performance disclosure statement as affirmation of the
shall be culled from a reasonable time frame client’s receipt and understanding of the
to provide a fair and balanced indication of disclosure statement, unless the client is
a product’s performance; a market counterparty. A BSFI may opt to
(2) When using any forecast on the draft an individual or separate disclosure
economy or financial markets, the statement for its client or incorporate the
disclosure shall state that such forecast is same in the main transaction agreement/
not necessarily indicative of the future contract.
performance of the product; and Product-specific minimum disclosures
(3) Illustrations of returns shall include shall include:
worst-case scenarios (i.e., not just the likely (1) The nature of the financial product,
or best scenarios). Benefits shown in including the underlying financial
headline rates (pro-forma returns instruments, and how these products work;
highlighted) should be realistic and (2) Investment horizon or tenor of the
achievable, and not based on unreasonably financial product;
optimistic views of events. (3) Fees and charges, if any;
Disclosures for products with some (4) Details on the issuing entity in case
form of guarantee or protection should the dealing BSFI is not the issuing institution
highlight which benefits are guaranteed/ (i.e., the BSFI acts as a broker/dealer or
protected and those which are not. In market maker);
instances where the guarantee or (5) Returns or benefits likely to be
protection involves a cost to the client, derived from the instrument, the amount
the BSFI shall disclose the fees or charges and timing thereof and whether the benefits
for the same. A BSFI shall also disclose to are guaranteed or not;
1
Leverage or gearing can be employed in a structured product in order to offer higher yields.

§§ X661.4 - X661.5
15.12.31
(6) All risk factors that may result in the (2) Mismatch between the change in
client receiving returns less than the the price of a hedge versus the change in
illustrated returns and factors affecting the the price of the exposure it hedges;
recoverable amount by the client; (3) Volatility of returns;
(7) Details of conflicts of interest, if any; (4) Lack of liquidity considering that
(8) Information on the handling of there may be no secondary market for the
complaints related to the product; instrument;
(9) All termination clauses, when (5) Restrictions on transferring interests;
appropriate, including charges and and
restrictions; (6) Absence of information regarding
(10) Any warning, exclusion or valuation and pricing.
disclaimer in relation to the risk and (As amended by Circular No. 891 dated 09 November 2015)
rewards of the product, including, but not
§ X661.5 Sales and marketing
limited, to the following:
personnel. Any informational or
(a) The product carries higher risks
promotional presentation regarding
than those associated with ordinary bank
financial products shall be undertaken only
savings or time deposits;
by personnel who are knowledgeable on
(b) The product is risky and may not be the products involved. In assessing the
appropriate if the client is not willing and knowledge of its personnel, a BSFI may
able to accept the risk of adverse movements consider their educational background;
in the underlying securities or reference relevant training; certification; and
rates; professional experience in rendering
(c) Past performance of the product is investment advice, making presentations
not a guarantee of its future performance; regarding financial products and/or
(11) Other disclosures that may be assessing the propriety of financial products
required by existing laws, rules and for a client. The personnel involved in the
regulations. transactions shall likewise be familiar with
Where applicable, a BSFI shall draw the all relevant laws and applicable rules and
attention of the client to the following: regulations and shall ensure compliance
(i) The effect of early redemption of a therewith.
product on the return (e.g., penalties and/or At a minimum, a BSFI shall establish
a poor returns); qualification standards for personnel
(ii) The availability of maximum benefit involved in sales and marketing activities
advertised after a specified period; and and require compliance with the registration
(iii) The required conditions for the requirements prescribed by existing
advertised growth rate of income to securities laws, rules and regulations. In
materialize. addition, a BSFI shall implement, and
Complex products should carry a maintain a reasonably comprehensive
standard warning that they are not suitable system of training geared at enhancing the
for all clients, and are intended for technical knowledge of its personnel to
experienced and sophisticated clients. They enable them to understand, and explain the
should likewise carry appropriate warnings nature and risks of a BSFI’s financial
on the high economic risks of the products, and ensure client suitability.
transaction, such as: Management shall regularly review the
(1) Loss of all or a substantial portion BSFI’s compensation and incentive
of the investment due to leveraging or other programs and ensure that such
sophisticated practices; remuneration schemes do not place the

§§ X661.5 - X699
17.09.30
interests of the sales and marketing § X661.7 Record retention. Documents

personnel in conflict with those of their evidencing compliance with this Section
clients. shall be retained for a period of not less than
The BSFI’s board of directors and senior five (5) years unless an investigation is being
management shall be liable for the acts conducted, or a criminal, civil, or
performed and representations made by administrative case has been filed in a
sales and marketing personnel in their competent judicial or administrative body
official capacity. Notwithstanding the where a client is involved or impleaded as
foregoing, a BSFI’s board of directors and a party to the case or investigation. In such
senior management are not precluded from cases, the above documents shall be
filing the necessary action against the erring preserved beyond the five (5)-year period
sales and marketing personnel. until such time that a final judgment has
(As amended by Circular No. 891 dated 09 November 2015) been reached by the judicial or
administrative body.
§ X661.6 Role of control functions. The (As amended by Circular No. 891 dated 09 November 2015)
control functions shall periodically monitor
and evaluate the continuing effectiveness § X661.8 Enforcement actions. The
and adequacy of the sales and marketing Bangko Sentral may deploy its range of
policies and procedures. They shall supervisory tools to promote adherence
regularly provide senior management or the to the requirements set forth in these
Board, as appropriate, with written reports guidelines and bring about timely
on the results of their review. corrective actions and compliance with
A BSFI’s operational risk management Bangko Sentral directives. Sanctions may
framework shall take into account sales and likewise be imposed on the BSFI and
marketing activities in the identification and responsible persons, which may include
assessment, monitoring and reporting, and restrictions or prohibitions from certain
control and mitigation of risks. 1 The authorities/activities; and warning,
compliance function referred to in Sec. X180 reprimand, suspension, removal and
and Subsec. X180.1 shall be responsible for disqualification of concerned directors,
monitoring and assessing the BSFI’s officers and employees.
compliance with applicable laws, rules and (Circular No. 891 dated 09 November 2015)
regulations in the conduct of sales and
marketing activities. The internal audit Secs. X662 - X698 (Reserved)
function shall include in its scope the review
and evaluation of the BSFI’s compliance Sec. X699 General Provision on Sanctions.
with internal policies and procedures for Any violation of the provisions of this Part
the sales and marketing of financial products, shall be subject to Sections 36 and 37 of
issuance of recommendations based on the R.A. No. 7653.
results of the audits conducted, and the The guidelines for the imposition of
verification of compliance with those monetary penalty for violations/offenses
recommendations, in accordance with with sanctions falling under Section 37 of
Subsec. X186.2. R. A. No. 7653 on banks, their directors
(Circular No. 891 dated 09 November 2015, as amended by
and/or officers are shown in Appendix 67.
1
BSFIs should refer to existing Guidelines on Operational Risk Management.

§§ X701 - X701.2
08.12.31
PART SEVEN
ELECTRONIC BANKING SERVICES AND OPERATIONS
Section X701 (2008 - X621) Electronic (4) Integrity - assures that data have not
Banking Services. The following are the been altered; and
guidelines concerning electronic (5) Confidentiality - assures that no one
banking activities. except the sender and the receiver of the
data can actually understand the data.
§ X701.1 (2008 - X621.1) Application. c. The system had been tested prior
Banks wishing to provide and/or enhance to its implementation and that the test
existing electronic banking services shall results are satisfactory. As a minimum
submit to the BSP an application describing standard, appropriate systems testing and
the services to be offered/enhanced and user acceptance testing should have been
how it fits the bank’s overall strategy. This conducted; and
shall be accompanied by a certification d. A business continuity planning
signed by its president or any officer of process and manuals have been adopted
equivalent rank and function to the effect which should include a section on
that the bank has complied with the electronic banking channels and systems.
following minimum pre-conditions:
a. An adequate risk management § X701.2 (2008 - X621.2) Pre-screening
process is in place to assess, control, of applicants.
monitor and respond to potential risks a. The BSP, thru the Technical
arising from the proposed electronic Working Group on Electronic Banking,
banking activities; shall pre-screen the overall financial
b. A manual on corporate security condition as well as the applicant-bank’s
policy and procedures exists that shall compliance with BSP rules and regulations
address all security issues affecting its based on the latest available Bank
electronic banking system, particularly the Performance Rating (BPR) and Report of
following: Examination (ROE) including CAMELS
(1) Authentication - establishes the Rating.
identity of both the sender and the b. The Working Group shall ensure
receiver; uses trusted third parties that that the applicant bank’s overall financial
verify identities in cyberspace; condition can adequately support its
(2) Non-repudiation - ensures that electronic banking activities and that it shall
transactions can not be repudiated or have complied with certain comprehensive
presents undeniable proof of participation prudential requirements such as, but not
by both the sender and the receiver in a limited to, the following:
transaction; (1) Minimum capital requirement and
(3) Authorization - establishes and net worth to risk assets ratio;
enforces the access rights of entities (both (2) Satisfactory solvency, liquidity and
persons and/or devices) to specified profitability positions;
computing resources and application (3) CAMELS composite rating of at
functions; also locks out unauthorized least 3, (this number, however can be
entities from physical and logical access flexible depending on other circumstances
to the secured systems; prevailing), and with at least a moderate
Manual of Regulations for Banks Part VII - Page 1

§§ X701.2 - X701.5
08.12.31
risk assessment system (RAS) based on the (3) A list of software and hardware
latest regular examination. components indicating the purpose of the
(4) There are no uncorrected major software and hardware in the electronic
findings/exceptions noted in the latest BSP banking infrastructure;
examination. (4) A description of the security policies
and procedures manual containing:
§ X701.3 (2008 - X621.3) Approval in (i) description of the bank’s security
principle. organization;
a. Based on the recommendation of (ii) definition of responsibilities for
the Technical Working Group on Electronic designing, implementing, and monitoring
Banking, the Deputy Governor, SES, shall information security measures; and
approve in principle the application so that (iii) established procedures for
banks may immediately launch and/or evaluating policy compliance, enforcing
enhance their existing electronic banking disciplinary measures and reporting
services. security violations;
b. Banks shall be informed of the (5) A brief description of the
conditional approval of the DG, SES and contingency and disaster recovery plans
they shall in turn notify the BSP on the actual for electronic banking facilities and event
date of its launching/enhancement. scenario/problem management plan/
program to resolve or address problems,
§ X701.4 (2008 - X621.4) Documentary such as complaints, errors and intrusions
requirements. and the availability of back-up facilities;
a. Within thirty (30) calendar days (6) Copy of contract with the
from such launching/enhancement, banks communications carrier, arrangements for
shall submit to the BSP thru the SDC for any liability arising from breaches in the
evaluation, the following documentary security of the system or from
requirements: unauthorized/fraudulent transactions;
(1) A discussion on the banking (7) Copy of the maintenance
services to be offered/enhanced, the agreements with the software/hardware
business objectives for such services and provider/s; and
the corresponding procedures, both (8) Latest report on the periodic
automated and manual, offered through the review of the system, if applicable.
electronic banking channels; b. If after the evaluation of the
(2) A description or diagram of the submitted documents, the Working Group
configuration of the bank’s electronic banking has still some unresolved issues and gray
system and its capabilities showing: areas, the bank may be required to make
(i) how the electronic banking system a presentation of its electronic banking
is linked to other host systems or the transactions to BSP.
network infrastructure in the bank;
(ii) how transaction and data flow § X701.5 (2008 - X621.5) Conditions
through the network; for Monetary Board approval. Upon
(iii) what types of telecommunications completion of evaluation, the appropriate
channels and remote access capabilities recommendation shall be made to the
(e.g., direct modem dial-in, internet access, Monetary Board. The following shall be
or both) exist; and the standard conditions for approval:
(iv) what security controls/measures are a. Existence at all times of appropriate
installed; top-level risk management oversight;
Part VII - Page 2 Manual of Regulations for Banks

§§ X701.5 - X701.12
08.12.31
b. Operation of electronic banking § X701.6 (2008 - X621.6)

system outsourced to a third party service Requirements for banks with pending
provider taking into consideration the applications. The same procedure and
existence of adequate security controls and requirements stated in the foregoing shall
the observance of confidentiality [as apply to all banks with pending applications
required in R.A. No. 1405 (Bank Secrecy with the Bangko Sentral, except on the
Law)] of customer information; submission of the documents enumerated
c. Adoption of measures to properly in Subsec. X701.4. Banks which have
educate customers on safeguarding of user already submitted all the required
ID, PIN and/or password, use of bank’s information/documents need not comply
products/services, actual fees/bank charges with this requirement.
thereon and problem/error resolution
procedures; § X701.7 (2008 - X621.7) Exemption.
d. Clear communication with its Electronic banking services that are purely
customers in connection with the terms informational in nature are exempted from
and condition which would highlight how these regulations: Provided, however, That
any losses from security breaches, systems should such services be upgraded to
failure or human error will be settled transactional service, then prior Bangko
between the bank and its customers; Sentral approval shall be required.
e. Customer’s acknowledgement in
§ X701.8 (2008 - X621.8)
writing that they have understood the
Transitory provision. Banks with existing
terms and conditions and the
electronic banking services but do not
corresponding risks that entail in availing
qualify as a result of the pre-screening
electronic banking service;
process mentioned in Item “b”, Subsec.
f. The bank’s oversight process shall
X701.1, shall be given three (3) months from
ensure that business expansion shall not
21 December 2000, within which to show
put undue strains on its systems and risk proof of improved overall financial
management capability; condition and/or substantial compliance
g. The establishment of procedures with Bangko Sentral's prudential
for the regular review of the bank’s requirements, otherwise, their electronic
security arrangements to ensure that such banking activities will be temporarily
arrangements remain appropriate having suspended until such time that the same
regard to the continuing developments in have been complied with.
security technology;
h. Strict adherence to Bangko Sentral §§ X701.9 - X701.11 (Reserved)
regulations on fund transfers in cases where
clients use the electronic banking services § X701.12 (2008 - X621.12) Sanctions.
to transfer funds; For failure to seek Bangko Sentral approval
i. The electronic banking service before launching/enhancing/implementing
shall not be used for money laundering or electronic banking services, and/or submit
other illegal activities that will undermine within the prescribed deadline the required
the confidence of the public; and information/documents, the following
j. The Bangko Sentral shall be notified monetary penalties and/or suspension of
in writing thirty (30) days in advance of any electronic banking activities or both, shall
enhancements that may be made to the be imposed on erring banks and/or its
online electronic banking service. officers:

§§ X701.12 - X780.2
13.12.31
Monetary penalties Amount § X705.4 (2008 - App. 70) Minimum

a. For responsible officer/s a one time disclosure requirements.
and/or director/s - for penalty of (Transferred to X177.7 pursuant to Circular No. 808 dated
failure to seek prior Bangko P200,000 22 August 2013)
Sentral approval and/or
for non-submission delayed § X705.5 (2008 - App. 70) Complaint
submission of required resolution.
information/documents (Transferred to X177.7 pursuant to Circular No. 808 dated
22 August 2013)
b. On the bank - for failure P30,000 per
to seek prior Bangko Sentral day starting § X705.6 (2008 - App. 70) Applicability.
and/or for non-submission/ from the day (Transferred to X177.7 pursuant to Circular No. 808 dated
delayed submission of the offense 22 August 2013)
required information/ was committed
documents up to the time
the same was
Sec. X780 Issuance and Operations of
corrected.
Electronic Money. The following guidelines
shall govern the issuance of electronic
money (e-money) and the operations of
§ X701.13 (2008 - X621.13) Outsourcing
electronic money issuers.
of internet and mobile banking services (Circular No. 649 dated 09 March 2009)
§ X780.1 Declaration of policy. It is the
Secs. X702 – X704 (Reserved) policy of the Bangko Sentral to foster the
development of efficient and convenient
Sec. X705 (2008 - X624 and App. 70) retail payment and fund transfer
Consumer Protection for Electronic Banking mechanisms in the Philippines. The
(Transferred to X177.7 pursuant to Circular No. 808 dated availability and acceptance of e-money as a
22 August 2013)
retail payment medium will be promoted
by providing the necessary safeguards and
§ X705.1 (2008 - App. 70) E-Banking
controls to mitigate the risks associated in
oversight function.
(Transferred to X177.7 pursuant to Circular No. 808 dated
an e-money business.
22 August 2013) (Circular No. 649 dated 09 March 2009)
§ X780.2 Definitions.
§ X705.2 (2008 - App. 70) E-Banking risk
managment and internal control. E-money shall mean monetary value as
(Transferred to X177.7 pursuant to Circular No. 808 dated represented by a claim on its issuer, that is -
22 August 2013) a. electronically stored in an instrument
or device;
§ X705.3 (2008 - App. 70) Compliance b. issued against receipt of funds of an
with consumer awareness program. amount not lesser in value than the
(Transferred to X177.7 pursuant to Circular No. 808 dated monetary value issued;
22 August 2013) c. accepted as a means of payment by

§§ X780.2 - X780.4
09.12.31
persons or entities other than the issuer; b. EMIs shall put in place a system to
d. withdrawable in cash or cash maintain accurate and complete record of
equivalent; and e-money instruments issued, the identity
e. issued in accordance with this of e-money holders, and the individual
Section. and consolidated balances thereof. The
Electronic money issuer (EMI) shall be system must have the capability to monitor
classified as follows: the movement of e-money transactions and
a. Banks (hereinafter called EMI-Bank);
link e-money instruments issued to
b. NBFI supervised by the Bangko
common e-money holders. The
Sentral (hereinafter called EMI-NBFI); and
susceptibility of a system to intentional or
c. Non-bank institutions registered with
the Bangko Sentral as a monetary transfer unintentional misreporting of transactions
agent under Sec. 4511N of the MORNBFI and balances shall be sufficient ground for
(hereinafter called EMI-Others). imposition by the Bangko Sentral of
For purposes of this Section: sanctions, as may be applicable.
a. Electronic instruments or devices c. E-money may only be redeemed at
shall mean cash cards, e-wallets accessible face value. It shall not earn interest nor
via mobile phones or other access device, rewards and other similar incentives
stored value cards, and other similar convertible to cash, nor be purchased at a
products. discount. E-money is not considered a
b. E-money issued by banks shall not deposit, hence, it is not insured with the
be considered as deposits. PDIC.
(Circular No. 649 dated 09 March 2009) d. EMIs shall ensure that e-money
§ X780.3 Prior Bangko Sentral approval. instruments clearly identify the issuer who
Banks planning to be an EMI-Bank shall is ultimately responsible to the e-money
apply in accordance with Sec. X701 relating holders. This shall be communicated to the
to the guidelines on electronic banking client who shall acknowledge the same in
services and with Sec. X162 on outsourcing writing.
of banking functions, when applicable. e. It is the responsibility of EMIs to
(Circular No. 649 dated 09 March 2009) ensure that their distributors/e-money agents
comply with all applicable requirements of
§ X780.4 Common provisions. The the Anti-Money Laundering Law, rules and
following provisions are applicable to all regulations.
EMIs: f. EMIs shall provide an acceptable
a. E-money instrument issued shall be redress mechanism to address the
subject to aggregate monthly load limit of complaints of its customers.
P100,000 unless a higher amount has
g. EMIs shall disclose in writing and
been approved by the Bangko Sentral. In
its customers shall signify agreement to the
case an EMI issues several e-money
information embodied in Item “c” above
instruments to a person (e-money holder),
the total amount loaded in all the e-money upon their participation in the e-money
instruments shall be consolidated in system. In addition, it shall provide clear
determining compliance with the guidance in English and Filipino on
aggregate monthly load limit; consumers’ right of redemption, including
(No pages 6 to 8)
(Next page is Part VII page 9)

§§ X780.4 - X780.6
09.12.31
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 (Circular No. 649 dated 09 March 2009)
place:
(1) Sound and prudent management, § X780.5 (Reserved)
administrative and accounting procedures
and adequate internal control mechanisms; § X780.6 Sanctions. Monetary penalties
(2) Properly-designed computer and other sanctions for the following
systems which are thoroughly tested prior violations committed by EMI-Banks shall be
to implementation; imposed:
(3) Appropriate security policies and
measures intended to safeguard the integrity, Nature of Violation/ Sanction/Penalties
authenticity and confidentiality of data and Exception
operating processes; 1. Issuing e-money Applicable penalties
(4) Adequate business continuity and without prior BSP under Sections 36 &
approval 37 of R.A. No. 7653;
disaster recovery plan; and
Watchlisting of
(5) Effective audit function to provide owners/partners/
periodic review of the security control principal officers
environment and critical systems. 2. Violation of any Applicable penalties
i. EMIs shall provide the SDC of the provisions of prescribed under the
quarterly statements containing, among R.A. No. 9160 (Anti- Act
others, information on investments, volume Money Laundering
of transactions, total outstanding e-money Law of 2001 as
balances, and liquid assets in such forms amended by R.A.No.
as may be prescribed later on. 9194) and its
implementing rules
j. EMIs shall notify the BSP in writing
and regulations
of any change or enhancement in the 3. Violation/s of Penalties and sanctions
e-money facility thirty (30) days prior to this Section under the
implementation. If said change or abovementioned laws
enhancement requires prior BSP approval, and other applicable
the same shall be evaluated accordingly. laws rules and
Any change or enhancement that shall regulations
expand the scope or change the nature of
the e-money instrument shall be subject to In addition, the susceptibility of a
prior approval of the Deputy Governor, SES. system to intentional or unintentional
These changes or enhancements may misreporting of transactions and balances
include the following: shall be sufficient ground for appropriate
(1) Additional capabilities of the BSP action or imposition of sanctions,
e-money instrument/s, like access to new whenever applicable.
channels (e.g. inclusion of internet channel (Circular No. 649 dated 09 March 2009)

§§ X780.7 - X799
10.12.31
§ X780.7 Transitory provisions. EMI- Sanctions. Violations committed by

Banks granted authority to issue e-money EMIs pertaining to outsourcing activities to
prior to 26 March 2009 may continue to EMNSP shall be subject to monetary
exercise such authority: Provided, That it penalties as graduated under Appendix 67
shall submit to the BSP, within one (1) and/or other non-monetary sanctions under
month from 26 March 2009, a certification Section 37 of RA No. 7653.
signed by the President or Officer with Transitory provisions. EMIs that were
equivalent rank and function that it is in granted an authority to outsource their E-
compliance with all the applicable money activities to an EMNSP may continue
requirements of this Section. Otherwise, to exercise such authority provided that they
they are required to submit within the same have to conform to the provisions of
period the measures they will undertake, Appendix 95 within a six-month period from
with the corresponding timelines, to 20 January 2011.
conform to the provisions that they have not (Circular 704 dated 22 December 2010)
complied with subject to BSP approval.
(Circular No. 649 dated 09 March 2009) Secs. X781 - X798 (Reserved)
§ X780.8 - § X780.10 (Reserved) Sec. X799 (2008 - X199) General Provision

on Sanctions. Except as otherwise provided,
§ X780.11 Outsourcing of services by any violation of the provisions of this Part
Electronic Money Issuers (EMIs) to shall be subject to Sections 36 and 37 of
Electronic Money Network Service R.A. No. 7653.
Providers (EMNSP). The guidelines on The guidelines for the imposition of
outsourcing of services by Electronic Money monetary penalty for violations/offenses
Issuers (EMIs) to Electronic Money Network with sanctions falling under Section 37 of
Service Providers (EMNSP) are shown in R. A. No. 7653 on banks, their directors
Appendix 95. and/or officers are shown in Appendix 67.

§§ X801 - X803
17.03.31
PART EIGHT
ANTI-MONEY LAUNDERING REGULATIONS
Section X801 Declaration of Policy. to not more than fifty percent (50%), is
The Bangko Sentral adopts the policies of owned by a covered person.
the State to (a) protect the integrity and Pursuant to Section 20 of the General
confidentiality of bank accounts and ensure Banking Law of 2000, a bank authorized by
that the Philippines, in general, and the Bangko Sentral to establish branches or
covered persons, in particular, shall not be other offices within or outside the
used, respectively, as a money laundering Philippines shall be responsible for all
site and conduit for the proceeds of an business conducted in such branches and
unlawful activity as herein defined; and offices to the same extent and in the same
(b) to protect life, liberty and property from manner as though such business had all
acts of terrorism and to condemn terrorism been conducted in the head office. A bank
and those who support and finance it and and its branches and offices shall be treated
reinforce the fight against terrorism by as one (1) unit.
criminalizing the financing of terrorism and Whenever a covered person’s branch,
related offenses. office, subsidiary or affiliate based outside
(Circular No. 706 dated 05 January 2011, as amended by Circular the Philippines is prohibited from
No. 950 dated 15 March 2017) implementing this Part or any of the
provisions of the Anti-Money Laundering Act
Sec. X802 Scope of Regulations.These (AMLA), as amended, or its Revised
regulations shall apply to all covered Implementing Rules and Regulations (RIRR),
persons supervised and regulated by the by reason of local laws, regulations or a
Bangko Sentral. The term “covered persons” supervisory directive, said branch, office,
shall refer to banks, non-banks, QBs, trust subsidiary or affiliate, or the covered person
entities, non-stock savings and loan shall (1) formally notify the Bangko Sentral
associations, pawnshops, foreign exchange of this situation and furnish a copy of the
dealers, money changers, remittance and applicable laws and/or regulations or the
transfer companies, electronic money supervising authority’s directive, as the case
issuers and other financial institutions may be; and (2) apply appropriate additional
which under special laws are subject to measures or mitigating controls to manage
Bangko Sentral supervision and/or the money laundering (ML) and terrorist
regulation, including their subsidiaries and financing (TF) risks.
affiliates, which are also covered persons, (Circular No. 706 dated 05 January 2011, as amended by Circular
wherever they may be located. For this No. 950 dated 15 March 2017)
purpose, subsidiary and affiliate shall be
defined as: Sec. X803 Definition of Terms. Except as
a. A subsidiary means an entity more otherwise defined herein, all terms used
than fifty percent (50%) of the outstanding shall have the same meaning as those terms
voting stock of which is owned by a covered that are defined in the AMLA, as amended,
person. and its RIRR.
b. An affiliate means an entity the voting a. Money laundering is committed by
stock of which, at least twenty percent (20%) any person who, knowing that any monetary
Manual of Regulations for Banks Part VIII - Page 1

§ X803
17.03.31
instrument or property represents, involves, monetary instrument exceeding five

or relates to the proceeds of any unlawful hundred thousand pesos (P500,000).
activity: d. Suspicious transaction (ST) refers to
(1) transacts said monetary instrument a transaction with a covered person,
or property; regardless of the amount involved, where
(2) converts, transfers, disposes of, any of the following circumstances exists:
moves, acquires, possesses or uses said (1) There is no underlying legal or trade
monetary instrument or property; obligation, purpose or economic
(3) conceals or disguises the true nature, justification;
source, location, disposition, movement or (2) The client is not properly identified;
ownership of or rights with respect to said (3) The amount involved is not
monetary instrument or property; commensurate with the business or
(4) attempts or conspires to commit financial capacity of the client;
money laundering offenses referred to in (4) Taking into account all known
Items “(1)”, “(2)” or “(3)” above; circumstances, it may be perceived that the
(5) aids, abets, assists in or counsels the client’s transaction is structured in order to
commission of the money laundering avoid being the subject of reporting
offenses referred to in Items “(1)”, “(2)” or requirements under the AMLA, as amended;
“(3)”above; and (5) Any circumstance relating to the
(6) performs or fails to perform any act transaction which is observed to deviate
as a result of which he facilitates the offense from the profile of the client and/or the
of money laundering referred to in Items client’s past transactions with the covered
“(1)”, “(2)” or “(3)” above. person;
Money laundering is also committed by (6) The transaction is in any way related
any covered person who, knowing that a to an unlawful activity or any money
covered or suspicious transaction is required laundering activity or offense, that is about
to be reported to the Anti-Money to be committed, is being or has been
Laundering Council (AMLC) under any of committed; or
the provisions of the AMLA, as amended, (7) Any transaction that is similar,
its RIRR, or this Part, fails to do so. analogous or identical to any of the
b. Financing of terrorism is a crime foregoing.
committed by a person who, directly or Any unsuccessful attempt to transact
indirectly, willfully and without lawful with a covered person, the denial of which
excuse, possesses, provides, collects or uses is based on any of the foregoing
property or funds or makes available circumstances, shall likewise be considered
property, funds or financial service or other as ST.
related services, by any means, with the e. Monetary instrument shall include,
unlawful and willful intention that they but is not limited to the following:
should be used or with the knowledge that (1) Coins or currency of legal tender of
they are to be used, in full or in part: (1) to the Philippines, or of any other country;
carry out or facilitate the commission of any (2) Credit instruments, including bank
terrorist act; (2) by a terrorist organization, deposits, financial interest, royalties,
association or group; or (3) by an individual commissions and other intangible property;
terrorist. (3) Drafts, checks, and notes;
c. Covered transaction (CT) refers to a (4) Stocks or shares, participation or
transaction in cash or other equivalent interest in a corporation or in a commercial
Part VIII - Page 2 Manual of Regulations for Banks

§ X803
17.03.31
enterprise or profit-making venture and (9) Swindling under Article 315 and
evidenced by a certificate, contract, "Other Forms of Swindling" under
instrument, whether written or electronic Article 316 of the RPC, as amended;
in character including those enumerated in (10) Smuggling under R.A. Nos. 455 and
Section 3 of the Securities Regulation Code; 1937, as amended, otherwise known as the
(5) A participation or interest in any Tariff and Customs Code of the Philippines;
non-stock, non-profit corporation; (11) Violations under R.A. No. 8792,
(6) Securities or negotiable instruments, otherwise known as the Electronic
bonds, commercial papers, deposit Commerce Act of 2000;
certificates, trust certificates, custodial (12) Hijacking and other violations
receipts or deposit substitute instruments, under R.A. No. 6235, otherwise known as
trading orders, transaction tickets and the "Anti-Hijacking Law"; "Destructive
confirmations of sale or investments and Arson"; and "Murder", as defined under the
money market instruments; RPC, as amended;
(7) Contracts or policies of insurance, (13) Terrorism and conspiracy to
life or non-life, contracts of suretyship, commit terrorism as defined and penalized
pre-need plans and member certificates under Sections 3 and 4 of R.A. 9372;
issued by mutual benefit association; and (14) Financing of terrorism under
(8) Other similar instruments where Section 4 and offenses punishable under
title thereto passes to another by Sections 5, 6, 7 and 8 of R.A. No. 10168,
endorsement, assignment or delivery. otherwise known as the Terrorism
f. Unlawful activity refers to any act or Financing Prevention and Suppression Act
omission or series or combination thereof of 2012;
involving or having direct relation to the (15) Bribery under Articles 210, 211 and
following: 211-a of the RPC, as amended, and
(1) Kidnapping for ransom under Article Corruption of Public Officers under
267 of Act No. 3815, otherwise known as Article 212 of the RPC, as amended;
the Revised Penal Code (RPC), as amended; (16) Frauds and illegal exactions and
(2) Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, transactions under Articles 213, 214, 215
14, 15 and 16 of R.A. No. 9165, otherwise and 216 of the RPC, as amended;
known as the Comprehensive Dangerous (17) Malversation of public funds and
Drugs Act of 2002; property under Articles 217 and 222 of the
(3) Section 3 paragraphs “B”, “C”, “E”, RPC, as amended;
“G”, “H” and “I” of R.A. No. 3019, as (18) Forgeries and counterfeiting under
amended, otherwise known as the Articles 163, 166, 167, 168, 169 and 176
Anti-Graft and Corrupt Practices Act; of the RPC, as amended;
(4) Plunder under R.A. No. 7080, as (19) Violations of Sections 4 to 6 of
amended; R.A. No. 9208, otherwise known as the
(5) Robbery and extortion under Articles Anti-trafficking in Persons Act of 2003, as
294, 295, 296, 299, 300, 301 and 302 of amended;
the RPC, as amended; (20) Violations of Sections 78 to 79 of
(6) Jueteng and Masiao punished as Chapter IV, of Presidential Decree
illegal gambling under P.D. No. 1602; No. 705, otherwise known as the Revised
(7) Piracy on the high seas under the Forestry Code of the Philippines, as
RPC, as amended, and P.D. No. 532; amended;
(8) Qualified theft under Article 310 of (21) Violations of Sections 86 to 106 of
the RPC, as amended; Chapter IV, of R.A. No. 8550, otherwise

§ X803
17.03.31
known as the Philippine Fisheries Code of known as the Securities Regulation Code
1998; of 2000; and
(22) Violations of Sections 101 to 107, (34) Felonies or offenses of a nature
and 110 of R.A. No. 7942, otherwise known similar to the aforementioned unlawful
as the Philippine Mining Act of 1995; activities that are punishable under the penal
(23) Violations of Section 27(C), (E), (F), laws of other countries.
(G) and (I), of R.A. No. 9147, otherwise In determining whether or not a felony
known as the Wildlife Resources or offense punishable under the penal laws
Conservation and Protection Act; of other countries is “of similar nature”, as
(24) Violation of Section 7(B) of to constitute an unlawful activity under the
R.A. No. 9072, otherwise known as the AMLA, the nomenclature of said felony or
National Caves and Cave Resources offense need not be identical to any of the
Management Protection Act; unlawful activities listed above.
(25) Violation of R.A. No. 6539, g. Transaction refers to any act
otherwise known as the Anti-Carnapping establishing any right or obligation or giving
Act of 2002, as amended; rise to any contractual or legal relationship
(26) Violations of Sections 1, 3 and 5 of between the parties thereto. It also includes
P.D. No. 1866, as amended, otherwise any movement of funds by any means with
known as the Decree Codifying the Laws on a covered person.
Illegal/Unlawful Possession, Manufacture, h. Proceeds refers to an amount derived
Dealing in, Acquisition or Disposition of or realized from any unlawful activity.
Firearms, Ammunition or Explosives; i. Monetary instrument or property
(27) Violation of P.D. No. 1612, related to an unlawful activity refers to:
otherwise known as the Anti-Fencing Law; (1) All proceeds of an unlawful activity;
(28) Violation of Section 6 of (2) All monetary, financial or economic
R.A. No. 8042, otherwise known as the means, devices, accounts, documents,
Migrant Workers and Overseas Filipinos Act papers, items or things used in or having
of 1995, as amended by any relation to any unlawful activity;
R.A. No. 10022; (3) All moneys, expenditures,
(29) Violation of R.A. No. 8293, payments, disbursements, costs, outlays,
otherwise known as the Intellectual Property charges, accounts, refunds and other similar
Code of the Philippines, as amended; items for the financing, operations, and
(30) Violation of Section 4 of maintenance of any unlawful activity; and
R.A. No. 9995, otherwise known as the (4) For purposes of freeze order and
Anti-photo and Video Voyeurism bank inquiry: related and materially-linked
Act of 2009; accounts.
(31) Violation of Section 4 of (a) “Related accounts” refer to those
R.A. No. 9775, otherwise known as the accounts, the funds and sources of which
Anti-child Pornography Act of 2009; originated from and/or are materially-linked
(32) Violations of Sections 5, 7, 8, 9, 10 to the monetary instruments or properties
(C), (D) and (E), 11, 12 and 14 of subject of the freeze order or an order of
R.A. No. 7610, otherwise known as the inquiry.
Special Protection of Children against (b) “Materially-linked accounts” shall
Abuse, Exploitation and Discrimination; include the following:
(33) Fraudulent practices and other (1) All accounts or monetary
violations under R.A. No. 8799, otherwise instruments under the name of the person

§ X803
17.03.31
whose accounts, monetary instruments, or regulated financial group. It can also be a

properties are the subject of the freeze order bank that (a) does not conduct business at a
or an order of inquiry; fixed address in a jurisdiction in which the
(2) All accounts or monetary shell bank is authorized to engage; (b) does
instruments held, owned, or controlled by not employ one (1) or more individuals on
the owner or holder of the accounts, a full time basis at this fixed address; (c) does
monetary instruments, or properties subject not maintain operating records at this
of the freeze order or order of inquiry, address, and (d) is not subject to inspection
whether such accounts are held, owned or by the authority that licensed it to conduct
controlled singly or jointly with another banking activities.
person; m. Beneficial owner refers to any natural
(3) All “In Trust For” accounts where person(s) who ultimately owns or controls
either the trustee or the trustor pertains to a the customer and/or on whose behalf a
person whose accounts, monetary transaction or activity is being conducted;
instruments, or properties are the subject or those who has ultimate effective control
of the freeze order or order of inquiry; over a legal person or arrangement.
(4) All accounts held for the benefit or Ultimate effective control refers to
in the interest of the person whose accounts, situation in which ownership/control is
monetary instruments, or properties are the exercised through actual or a chain of
subject of the freeze order or order of ownership or by means other than direct
inquiry; and control.
(5) All other accounts, shares, units, or n. Politically exposed person or PEP
monetary instruments that are similar, refers to an individual who is or has been
analogous, or identical to any of the entrusted with prominent public position in
foregoing. (1) the Philippines with substantial authority
j. Client/Customer refers to any person over policy, operations or the use or
or entity who keeps an account, or allocation of government-owned resources;
otherwise transacts business with a covered (2) a foreign state, or (3) an international
person. It includes the following: (1) any organization.
person or entity on whose behalf an account The term PEP shall include immediate
is maintained or a transaction is conducted, family members, and close relationships and
as well as the beneficiary of said associates that are reputedly known to have:
transactions; (2) beneficiary of a trust, an (1) Joint beneficial ownership of a legal
investment fund or a pension fund; (3) a entity or legal arrangement with the main/
company or person whose assets are principal PEP; or
managed by an asset manager; (4) a grantor (2) Sole beneficial ownership of a
of a trust; and (5) any insurance policy legal entity or legal arrangement that is
holder, whether actual or prospective. known to exist for the benefit of the main/
k. Shell company refers to a legal entity principal PEP.
which has no business substance in its own Immediate family members of PEPs refer
right but through which financial to spouse or partner, children and their
transactions may be conducted. spouses, and parents and parents-in-law;
l. Shell bank refers to a shell company Close associates of PEPs refer to persons
incorporated as a bank or made to appear who are widely and publicly known to
to be incorporated as a bank but has no maintain a particularly close relationship
physical presence and no affiliation with a with the PEP, and include persons who are

§ X803
17.03.31
in a position to conduct substantial domestic u. Beneficiary institution refers to the

and international financial transactions on entity that will pay out the money to the
behalf of the PEP. beneficiary and can either be:
o. Correspondent banking refers to the (1) A covered person as specifically
provision of banking services by one (1) defined by this Part and as generally
bank (the “correspondent bank”) to another defined by the AMLA, as amended, and
bank (the “respondent bank”). its RIRR; or
p. Payable-through account refers to a (2) An FI operating outside the
correspondent account that is used directly Philippines that is other than the covered
by third parties to transact business on their persons referred to in Item “1” but
own behalf. conducts business operations and
q. Fund/wire transfer refers to any activities similar to them.
transaction carried out on behalf of an v. Intermediary institution refers to the
originator (both natural and juridical) entity utilized by the originating and
through an FI (originating institution) by beneficiary institutions where both have
electronic means with a view to making an no correspondent banking relationship
amount of money available to a beneficiary with each other but have established
at another FI (beneficiary institution). The relationship with the intermediary
originator person and the beneficiary person institution. It can either be:
may be the same person. (1) A covered person as specifically
r. Cross border transfer refers to any defined by this Part and as generally defined
wire transfer where the originating and by the AMLA, as amended, and its RIRR; or
beneficiary institutions are located in (2) An FI operating outside the
different countries. It shall also refer to any Philippines that is other than the covered
chain of wire transfer that has at least persons referred to in Item “1” but conducts
one (1) cross border element. business operations and activities similar to
s. Domestic transfer refers to any wire them.
transfer where the originating and w. Official document refers to any of
beneficiary institutions are located in the the following identification documents:
same country. It shall refer to any chain (1) For Filipino citizens: Those issued
of wire transfers that takes place entirely by any of the following official authorities:
within the borders of a single country, (a) Government of the Republic of the
even though the system used to effect the Philippines, including its political
fund/wire transfer may be located in subdivisions, agencies, and
another country. instrumentalities;
t. Originating institution refers to the (b) Government-Owned or -Controlled
entity utilized by the originator to transfer Corporations (GOCCs); or
funds to the beneficiary and can either be: (c) Covered persons registered with
(1) a covered person as specifically and supervised or regulated by the Bangko
defined by this Part and as generally Sentral, SEC or IC;
defined by the AMLA, as amended, and (2) For foreign nationals: Passport or
its RIRR; or Alien Certificate of Registration;
(2) An FI operating outside the (3) For Filipino students: School ID
Philippines that is other than the covered signed by the school principal or head of
persons referred to in Item “1” but conducts the educational institution; and
business operations and activities similar (4) For low risk customers: Any
to them. document or information reduced in writing

§§ X803 - X805.1
17.03.31
which the covered person deems sufficient reputational, operational, and compliance
to establish the client’s identity. risks are identified, assessed, monitored,
(Circular No. 706 dated 05 January 2011, as amended by Circular mitigated and controlled, as well as to ensure
No. 950 dated 15 March 2017) effective implementation of this Part, to the
end that covered persons shall not be used
Sec. X804 Basic Principles and Policies to as a vehicle to legitimize proceeds of
Combat Money Laundering. In line with unlawful activity or to facilitate or finance
the declaration of policy, covered persons terrorism.
shall apply the following principles: The four (4) areas of sound risk
a. Conduct business in conformity management practices are adequate and
with high ethical standards in order to active board and senior management
protect its safety and soundness as well as oversight, acceptable policies and
the integrity of the national banking and procedures embodied in a money
financial system; laundering and terrorist financing prevention
b. Know sufficiently your customer at compliance program, appropriate
all times and ensure that the financially or monitoring and Management Information
socially disadvantaged are not denied System and comprehensive internal controls
access to financial services while at the and audit.
same time prevent suspicious individuals (Circular No. 706 dated 05 January 2011, as amended by Circular
or entities from opening or maintaining an No. 950 dated 15 March 2017)
account or transacting with the covered
person by himself or otherwise; § X805.1 Board and senior management
c. Adopt and effectively implement a oversight. Notwithstanding the provisions
sound AML and terrorist financing risk specifying the duties and responsibilities of
management system that identifies, the compliance office and internal audit, it
assesses, monitors and controls risks shall be the ultimate responsibility of the
associated with money laundering and board of directors to fully comply with the
terrorist financing; provisions of this Part, the AMLA, as
d. Comply fully with this Part and amended, and its RIRR. For this reason, it
existing laws aimed at combating money shall ensure that oversight on the covered
laundering and terrorist financing by person’s anti-money laundering (AML)/
making sure that officers and employees are combating the financing of terrorism (CFT)
aware of their respective responsibilities and compliance management is adequate.
carry them out in accordance with superior Senior management shall oversee the
and principled culture of compliance; and day-to-day management of the covered
e. Fully cooperate with AMLC for the person, ensure effective implementation of
effective implementation and enforcement AML/CFT policies approved by the board
of the AMLA, as amended, and its RIRR. and alignment of activities with the strategic
(Circular No. 706 dated 05 January 2011, as amended by Circular objectives, risk profile and corporate values
No. 950 dated 15 March 2017) set by the board. Senior management shall
establish a management structure that
A. RISK MANAGEMENT promotes accountability and transparency
and upholds checks and balances.
Sec. X805 Risk Management. All covered a. Compliance Office. Management of
persons shall develop sound risk the implementation of the covered person’s
management policies and practices to ensure Money Laundering and Terrorist Financing
that risks associated with ML/TF such as Prevention Program (MLPP) shall be a

§§ X805.1 - X805.2
17.03.31
primary task of the compliance office. To b. Group-wide AML/CFT compliance.

ensure the independence of the office, it shall In case a covered person has branches,
have a direct reporting line to the board of subsidiaries or offices located within and/
directors or any board-level or approved or outside the Philippines, the group-wide
committee on all matters related to AML and compliance officer or in its absence, the
TF compliance and their risk management. compliance officer of the parent entity, shall
It shall be principally responsible for the oversee the AML/CFT compliance of the
following functions among other functions entire group with reasonable authority over
that may be delegated by senior the compliance officers of said branches,
management and the board, to wit: subsidiaries or offices.
(1) Ensure compliance by all (Circular No. 706 dated 05 January 2011, as amended by Circular
responsible officers and employees with No. 950 dated 15 March 2017)
this Part, the AMLA, as amended, the RIRR
and its own MLPP. It shall conduct § X805.2 Money laundering and
periodic compliance checking which terrorist financing prevention program. All
covers, among others, evaluation of existing covered persons shall adopt a
processes, policies and procedures comprehensive and risk-based MLPP geared
including on-going monitoring of toward the promotion of high ethical and
performance by staff and officers involved professional standards and the prevention
in ML and TF prevention, reporting of the bank being used, intentionally or
channels, effectiveness of the electronic unintentionally, for money laundering and
money laundering transaction monitoring terrorism financing. The MLPP shall be
system and record retention system through consistent with the AMLA, as amended, its
sample testing and review of audit or RIRR and the provisions set out in this Part
examination reports. It shall also report and designed according to the covered
compliance findings to the board or any person’s corporate structure and risk profile.
board-level committee; It shall be in writing, approved by the board
(2) Ensure that infractions, discovered of directors or by the country/regional head
either by internally initiated audits, or by or its equivalent for local branches of
special or regular examination conducted foreign banks, and well disseminated to all
by the Bangko Sentral, or other applicable officers and staff who are obligated by law
regulators, are immediately corrected; and by their program to implement the same.
(3) Inform all responsible officers and Where a covered person has branches,
employees of all resolutions, circulars and subsidiaries, affiliates or offices located
other issuances by the Bangko Sentral and within and/or outside the Philippines, there
the AMLC in relation to matters aimed at shall be a consolidated ML/TF risk
preventing ML and TF; management system to ensure the
(4) Alert senior management, the board coordination and implementation of
of directors, or the board-level or approved policies and procedures on a group-wide
committee if it believes that the covered basis, taking into account local business
person is failing to appropriately address considerations and the requirements of the
AML/CFT issues; and host jurisdiction.
(5) Organize the timing and content of The MLPP shall also be readily available
AML training of officers and employees in user-friendly form, whether in hard or
including regular refresher trainings as soft copy. The covered person must put up
stated in Sec. X809. a procedure to ensure an audit trail

§ X805.2
17.03.31
evidencing dissemination process for new trainings to remind these individuals of their
and amended policies and procedures. The obligations and responsibilities as well as
program shall embody the following at a update them of any changes in AML laws,
minimum: rules and internal policies and procedures.
a. Detailed procedures of the covered c. An adequate screening and
person's compliance and implementation recruitment process to ensure that only
of the following major requirements of the qualified personnel who have no criminal
AMLA, as amended, its RIRR, and this Part, record/s are employed to assume sensitive
to wit: banking functions;
(1) Customer identification process d. An internal audit system in
including acceptance policies and on-going accordance with Subsec. X805.4;
monitoring processes; e. An independent audit program with
(2) Record keeping and retention; written scope of audit that will ensure the
(3) Covered transaction reporting; and completeness and accuracy of the
(4) ST reporting including the adoption information and identification documents
of a system, electronic or manual, of obtained from clients, the covered and
flagging, monitoring and reporting of suspicious transactions reports submitted to
transactions that qualify as suspicious the AMLC, and the records retained in
transactions, regardless of amount or that compliance with this Part as well as
will raise a “red flag” for purposes of adequacy and effectiveness of the training
conducting further verification or program on the prevention of money
investigation, or transactions involving laundering and terrorism financing;
amounts below the threshold to facilitate f. A mechanism that ensures all
the process of aggregating them for purposes deficiencies noted during the audit and/or
of future reporting of such transactions to Bangko Sentral regular or special
the AMLC when their aggregated amounts examination or other applicable regulator's
breach the threshold. The ST reporting shall examination are immediately corrected and
include a reporting chain under which a ST acted upon;
will be processed and the designation of a g. Cooperation with the AMLC; and
board-level or approved committee who h. Designation of an AML compliance
will ultimately decide whether or not the officer, who shall at least be at senior
covered person should file a report to the officer level, as the lead implementor of the
AMLC. If the resources of the covered program within an adequately staffed
person do not permit the designation of a compliance office. The AML compliance
committee, it may designate the compliance officer may also be the liaison between the
officer to perform this function instead: covered person, the Bangko Sentral and the
Provided, That the board of directors is AMLC in matters relating to the covered
informed of his decision. person’s AML/CFT compliance. Where
b. An effective and continuous resources of the covered person do not
AML/CFT training program for all directors, permit the hiring of an AML compliance
and responsible officers and employees, to officer, the compliance officer shall also
enable them to fully comply with their assume the responsibility of the former.
obligations and responsibilities under this i. A mechanism where information
Part, the AMLA, as amended, its RIRR and required for customer due diligence and
their internal policies and procedures as ML/TF risk management are accessible by
embodied in the MLPP. The training the parent bank/entity and information are
program shall also include refresher freely shared among branches, subsidiaries,

§§ X805.2 - X805.4
17.03.31
affiliates and offices located within and/or adopt an electronic AML system capable of
outside the Philippines. Exchange of monitoring risks associated with ML/TF as
information among branches, subsidiaries, well as generating timely reports for the
affiliates, and offices located within and/or guidance and information of its board of
outside the Philippines shall not be deemed directors and senior management, in
a violation of Rule 9, Item C of the RIRR as addition to the functionalities mentioned in
long this is done within the group. The Subsec. X807.2.
MLPP may require a potential and/or existing b. Manual monitoring. Covered persons
customer to sign a waiver on the disclosure not required to adopt an AML/CFT
of information within the group. electronic system must ensure that they
Submission of the revised and updated have the means of complying with Subsec.
MLPP. Approval by the board of directors X805.3.
or country head. Within six (6) months from (Circular No. 706 dated 05 January 2011,as amended by Circular
05 April 2017, all covered persons shall No. 950 dated 15 March 2017)
prepare and have available for inspection an
updated MLPP, approved by the board of § X805.4 Internal audit. The internal
directors, embodying the principles and audit function associated with money
provisions stated in this Part. laundering and terrorist financing should be
Henceforth, each MLPP shall be conducted by qualified personnel who are
regularly updated at least once every independent of the office being audited. It
two (2) years to incorporate changes in AML must have the support of the board of
policies and procedures, latest trends in ML directors and senior management and have
and TF typologies, and latest pertinent a direct reporting line to the board or a
Bangko Sentral issuances. Any revision or board-level audit committee.
update in the MLPP shall likewise be The internal audit shall, in addition to
approved by board of directors or the country/ those specified by this Part, be responsible
regional head or its equivalent for local branches for the periodic and independent evaluation
of foreign banks. of the risk management, degree of
(Circular No. 706 dated 05 January 2011 and M-2011-045 dated adherence to internal control mechanisms
16 August 2011, as amended by Circular No. 950 dated related to the customer identification
15 March 2017) process, such as the determination of the
existence of customers and the completeness
§ X805.3 Monitoring and reporting of the minimum information and/or
tools. All covered persons shall adopt an documents establishing the true and full
AML/CFT monitoring system that is identity of, and the extent and standard of
appropriate for their risk-profile and business due diligence applied to, customers, CT and
complexity and in accordance with this Part. ST reporting and record keeping and
The system should be capable of generating retention, as well as the adequacy and
timely, accurate and complete reports to effectiveness of other existing internal
lessen the likelihood of any reputational and controls associated with money laundering
compliance risks, and to regularly apprise and terrorist financing.
the board of directors and senior For covered persons with electronic
management on AML/CFT compliance. AML/CFT transaction monitoring system, in
a. Electronic monitoring and reporting addition to the above, the internal audit shall
systems for AML/CFT. UBs and KBs and include determination of the efficiency of
such covered persons that are considered the system’s functionalities as required by
complex pursuant to Subsec. X141.3 shall Subsecs. X805.3 and X807.2.

§§ X805.4 - X806
17.03.31
The results of the internal audit shall be developing technologies for both new and
timely communicated to the board of pre-existing products. Such risk
directors and shall be open for scrutiny by assessment should be an integral part of
Bangko Sentral examiners in the course of product or service development process and
the regular or special examination without should take place prior to the launch of the
prejudice to the conduct of its own new products, business practices or the use
evaluation whenever necessary. Results of of new or developing technologies.
the audit shall likewise be promptly Covered persons should take appropriate
communicated to the Compliance Office for measures to manage and mitigate the
appropriate monitoring of corrective actions identified risks.
taken by the different business units (Circular No. 950 dated 15 March 2017)
concerned. The Compliance Office shall
regularly submit reports to the board to B. CUSTOMER IDENTIFICATION
inform them of management’s action to PROCESS
address deficiencies noted in the audit.
(Circular No. 706 dated 05 January 2011, as amended by Sec. X806 Customer Due Diligence.
Circular No. 950 dated 15 March 2017) a. In conducting customer due
§ X805.5 Risk assessment. Consistent diligence, a risk-based approach shall be
with risk-based approach, covered persons undertaken depending on the type of
are required to identify, understand and customer, business relationship or nature of
assess their ML/TF risks, arising from the product, transaction or activity. In this
customers, countries or geographic areas of regard, a covered person shall maintain a
operations and customers, products, system that will ensure the conduct of
services, transactions or delivery channels. customer due diligence which shall include:
The assessment methodology shall be (1) Identifying the customer and
appropriate to the nature of operations and verifying the true identity of the customer
complexity of the business of the covered based on official documents or other
person. The risk assessment shall reliable, independent source documents,
(a) consider all relevant risk factors; data or information. In case of corporate and
(b) adequately document results and juridical entities, verifying their legal
findings; and (c) be updated periodically or existence and organizational structure, as
as necessary. Based on the risk assessment, well as the authority and identification of
the covered person shall take appropriate all persons purporting to act on their behalf;
measures to manage and mitigate ML/TF (2) Identifying the beneficial owner and
risks. The risk assessment shall be made taking reasonable measures to verify the
available to the Bangko Sentral during identity of the beneficial owner, such that
examination or in other circumstances the covered person shall be satisfied that it
deemed necessary as part of continuous knows who the beneficial owner is, as well
supervision. as the ownership and control structure of
New products and business practices the customer, in case of juridical entities or
risk assessment. Covered persons are also legal arrangements;
required to identify and assess the ML/TF (3) Understanding and, as appropriate,
risks that may arise in relation to the obtaining information on the purpose and
development of new products and new intended nature of the business relationship; and
business practices, including new delivery (4) Conducting ongoing due diligence
mechanisms, and the use of new or on the business relationship and scrutiny of

§§ X806 - X806.1
17.03.31
transactions undertaken throughout the the financially or socially disadvantaged are

course of the relationship to ensure that the not denied access to financial services while
transactions being conducted are consistent at the same time prevent suspicious
with the covered person’s knowledge of the individuals or entities from opening an
customer, their business and risk profile. account or establishing a relationship. A
b. A covered person shall be required covered person shall formulate a risk-based
to undertake customer due diligence when: and tiered customer acceptance,
(1) It establishes business relations with identification and retention policy that
any customer; involves reduced customer due diligence
(2) It undertakes any occasional but (CDD) for potentially low risk clients and
relevant business transaction for any enhanced CDD for higher risk accounts.
customer who has not otherwise established a. Criteria for type of
relations with the covered person; customers: low, normal and high risk;
(3) There is a suspicion of ML or TF; or Standards for applying reduced, average and
(4) There is doubt about the veracity or enhanced due diligence. Covered persons
adequacy of previously obtained customer shall specify the criteria and description of
identification data. the types of customers that are likely to pose
c. “Business relations” means the low, normal or high ML/TF risk to their
opening or maintenance of an account or operations, as well as the standards in
the provision of financial advice by the applying reduced, average and enhanced
covered person to a customer. due diligence, including a set of conditions
d. “Relevant business transaction” shall for the denial of account opening or
refer to: services.
(1) A transaction with a value exceeding Enhanced due diligence shall be applied
P100,000, except money changing or to customers that are assessed by the
remittance transactions; covered person or under this Part as high
(2) Two (2) or more transactions risk for ML/TF. For customers assessed to
believed to be linked and with an aggregate be of low risk such as small account balance
value exceeding P100,000; or and transactions, a covered person may
(3) In relation to remittance and money apply reduced due diligence. Some entities
changing transactions, any transaction or may likewise be considered as low risk
two (2) or more transactions believed to be clients, e.g., banking institutions, trust
linked, with an aggregate value exceeding entities and QBs authorized by the Bangko
P5,000.00. Sentral to operate as such and publicly listed
For this purpose, covered persons companies subject to regulatory disclosure
should have appropriate system to identify requirements.
and determine occasional customer or In designing a customer acceptance and
transaction. risk profiling policy, the following criteria
(Circular No. 706 dated 05 January 2011, as amended by relating to the product or service, the
Circular No. 950 dated 15 March 2017) customer, and geographical location, at a
minimum, shall be taken into account:
§ X806.1 Customer acceptance and (1) The nature of the service or product
identification policy. Every covered person to be availed of by the customers and the
shall develop clear, written and graduated purpose of the account or transaction;
customer acceptance and identification (2) Source of funds/nature of business
policies and procedures that will ensure that activities;

§ X806.1
17.03.31
(3) Public or high profile position of the (a) In case of individual customers-
customer or its directors/trustees, (i) supporting information on the intended
stockholders, officers and/or authorized nature of the business relationship/source
signatory; of funds/source of wealth (such as financial
(4) Country of origin and residence of profile, ITR, Loan Application, Deed of
operations or the fact that a customer came Donation, Deed of Sale, etc.); (ii) reasons
from a high risk jurisdiction; for intended or performed transactions;
(5) The existence of ST indicators; (iii) list of companies where he is a
(6) Watchlist of individuals and stockholder, director, officer, or authorized
entities engaged in illegal activities or signatory; (iv) other relevant information
terrorist-related activities as circularized by available through public databases or
the Bangko Sentral, AMLC, and other internet; and (v) a list of banks where the
international entities or organizations, such as individual has maintained or is maintaining
the Office of Foreign Assets Control (OFAC) an account.
of the U.S. Department of the Treasury and (b) In case of entities - (i) prior or existing
United Nations Sanctions List; and bank references; (ii) the name, present
(7) Such other factors, e.g., the amount address, nationality, date of birth, nature of
of funds to be deposited by a customer or work, contact number and source of funds
the size of transactions, and regularity or of each of the primary officers
duration of the transaction, as the covered (e.g., President, Treasurer); (iii) volume of
person may deem reasonable or necessary assets, other information available through
to consider in assessing the risk of a public databases or internet and supporting
customer to ML/TF. information on the intended nature of the
In assessing the risk profile of customers business relationship, source of funds or
which are juridical entities, the covered source of wealth of the customer (ITR,
person should also consider the financial Audited Financial Statement, Loan
profile and other relevant information of the Application, Deed of Donation, Deed of
active authorized signatories. Sale, etc.); and (iv) reasons for intended or
The covered person shall document the performed transactions.
risk profiling results as well as how a (2) Conduct validation procedures in
specific customer was profiled and what accordance with Subsec. X806.1(c) on any
standard of CDD (reduced, average or or all of the information provided; .
enhanced) was applied. (3) Secure senior management
b. Enhanced due diligence (EDD). approval to commence or continue
Whenever EDD is applied as required by business relationship/transacting with the
this Part, or by the covered person’s customer;
customer acceptance policy, or where the (4) Conduct enhanced ongoing
risk of ML/TF are higher, the covered person monitoring of the business relationship, by,
shall do all of the following, in addition to among others, increasing the number and
profiling of customers and monitoring of timing of controls applied, and selecting
their transactions: patterns of transactions that need further
(1) Gather additional customer examination;
information and/or identification (5) Require the first payment to be
documents, other than the minimum carried out through an account in the
information and/or documents required for customer’s name with a bank subject to
the conduct of average due diligence as similar CDD standards, where applicable;
enumerated under Subsec. X806.2. and

§ X806.1
17.03.31
(6) Perform such other measures as the (3) Verifying the address through
covered person may deem reasonable or on-site visitation of the company, sending
necessary. thank you letters, or other documents
Where additional information cannot be showing address; or
obtained, or any information or document (4) Contacting the entity by phone or
provided is false or falsified, or result of the e-mail.
validation process is unsatisfactory, the d. Reduced due diligence. Where lower
covered person shall deny banking risks of ML/TF have been identified, through
relationship with the customer without an adequate analysis of risk by the covered
prejudice to the reporting of a suspicious person, reduced due diligence procedures
transaction to the AMLC when may be applied. The reduced due diligence
circumstances warrant. procedures should be commensurate with
c. Minimum validation procedures for the lower risk factors, but are not acceptable
EDD. The procedures performed must whenever there is suspicion of ML/TF, or
enable the covered person to achieve a specific higher risk scenarios apply.
reasonable confidence and assurance that Whenever reduced due diligence is
the information obtained are true and applied as provided in this Part or in the
reliable. covered person’s customer acceptance
Validation procedures for individual policy, the following rules shall apply:
customers shall include, but are not limited (1) For individual customers, a covered
to, the following: person may open an account/establish
(1) Confirming the date of birth from a relationship under the true and full name of
duly authenticated official document; the account owner/s or customers upon
(2) Verifying the address through presentation of an acceptable identification
evaluation of utility bills, bank or credit card card (ID) or official document as defined in
statement, sending thank you letters, or other this Part or other reliable, independent
documents showing address or through source documents, data or information.
on-site visitation; (2) For corporate, partnership, and sole
(3) Contacting the customer by phone proprietorship entities, a covered person
or e-mail; may open an account under the official name
(4) Determining the authenticity of the of these entities by presenting a Board
identification documents through validation Resolution duly certified by the Corporate
of its issuance by requesting a certification Secretary, or equivalent document,
from the issuing authority or by any other authorizing the signatory to sign on behalf
effective and reliable means; or of the entity, obtained at the time of account
(5) Determining the veracity of the opening.
declared source of funds. Verification of the identity of the
For corporate or juridical entities, customer, beneficial owner or authorized
verification procedures shall include, but are signatory can be made after the
not limited to, the following: establishment of the business relationship.
(1) Validating source of funds or source e. Restricted account. To promote
of wealth from reliable documents such as financial inclusion and to ensure that the
audited financial statements, ITR, bank micro-business owners and the low-income
references, etc.; households are able to manage their
(2) Inquiring from the supervising finances through the financial system,
authority the status of the entity; customers who may not be able to provide

§§ X806.1 - X806.2
17.03.31
any of the required information under relationship only in the true and full name
Subsec. X806.2 for valid reasons or any of the account/relationship owner/s.
valid identification document under Unless otherwise stated in this Part,
Subsec. X806.2 (c) may be allowed to open average customer due diligence requires that
a restricted account with a covered person, the covered person obtain from individual
provided: customers, at the time of account opening/
(1) the aggregate credits in a year shall establishing the relationship, the following
not exceed P100,000; and minimum information and confirming these
(2) the account shall not be allowed to information with the official or valid
receive/send foreign remittances. identification documents:
In lieu of a valid ID, the covered person (1) Name of customer;
shall obtain the customer’s complete name, (2) Date and place of birth;
birth date, source of funds, present and/or (3) Name, present address, date and
permanent address and nationality and place of birth, nationality, nature of work
ensure that it has in its records a clear and source of funds of beneficial owner,
photograph and signature or thumbprint of whenever applicable;
the customer. (4) Present address;
The account opening shall be subject (5) Permanent address;
to the condition that the customer shall (6) Contact number or information;
obtain a valid ID within twelve (12) months; (7) Nationality;
otherwise the account shall be closed and (8) Specimen signature or biometrics of
the remaining balance therein shall be the customer;
returned to the customer. An extension of (9) Nature of work, name of employer
another twelve (12) months may be or nature of self-employment/business;
allowed: Provided, That the customer is able (10) Source/s of funds; and
to show to the covered person a proof of (11) Tax identification number (TIN) and
application for a valid ID. Social Security System (SSS) number or
The covered person shall ensure that the Government Service Insurance System
above conditions are not breached; (GSIS) number, as may be applicable.
otherwise complete information and valid b. New corporate and juridical entities.
ID shall immediately be required or the A covered person shall develop a systematic
account shall be closed accordingly. procedure for identifying corporate,
(Circular No. 706 dated 05 January 2011, as amended by Circular partnership and sole proprietorship
No. 950 dated 15 March 2017) entities, as well as their stockholders/
partners/owners, directors, officers and
§ X806.2 Customer identification. authorized signatories. It shall open and
Covered persons shall establish and verify maintain accounts only in the true and full
the true identity of its customers based on name of the entity and shall have primary
official document as defined in this Part or responsibility to ensure that the entity has
other reliable, independent source not been, or is not in the process of being
documents, data or information. dissolved, struck-off, wound-up, terminated,
a. New individual customers. Covered or otherwise placed under receivership or
persons shall develop a systematic liquidation.
procedure for establishing the true and full Unless otherwise stated in this Part,
identity of new individual customers, and average due diligence requires that the
shall open and maintain the account/ covered person obtain the following

§ X806.2
17.03.31
minimum information and/or documents should be authenticated by the Philippine

before establishing business relationships: Consulate, company register or notary
(1) Customer Information public, where said entities are registered.
(a) Name of entity; For legal arrangement (e.g., Trust), the
(b) Name, present address, date and following must be obtained:
place of birth, nationality, nature of work (1) Name of legal arrangement and proof
and source of funds of beneficial owner or of existence;
beneficiary, if applicable, and authorized (2) Address and country of
signatories; establishment;
(c) Official address; (3) Nature, purpose and objects of the
(d) Contact numbers or information; legal arrangement;
(e) Nature of business; and (4) The names of the settlor, the trustee,
(f) Specimen signatures or biometrics of the trustor, the protector, if any, the
the authorized signatory. beneficiary and any other natural person
(2) Identification Documents exercising ultimate effective control over
(a) Certificates of Registration issued by the legal arrangement;
the Department of Trade and Industry (DTI) (5) Description of the purpose/activities
for single proprietors, or by the Securities of the legal arrangement;
and Exchange Commission (SEC) for (6) Expected use of the account; and
corporations and partnerships, and by the (7) Amount, number, type, purpose and
Bangko Sentral for money changers/foreign frequency of the transaction expected.
exchange dealers and remittance agents and c. Valid identification documents.
transfer companies; (1) Customers and the authorized
(b) Secondary license or certificate of signatory/ies of a corporate or juridical
authority issued by the supervising authority entity who engage in a financial transaction
or other government agency; with covered person for the first time shall
(c) Articles of Incorporation/ be required to present official identification
Partnership; document which shall include any of the
(d) Latest General Information Sheet official documents as defined in this Part
which lists the names of directors/trustees/ or other identification information which
partners, principal stockholders owning at can be verified from reliable, independent
least twenty percent (20%) of the outstanding source, documents, data or information,
capital stock and primary officers such as such as third-party verified customer
the President and Treasurer; information database.
(e) Board or Partners' resolution duly (2) A covered person may classify
certified by the Corporate/Partners' identification documents based on its
Secretary, or other equivalent document, reliability and ability to validate the
authorizing the signatory to sign on behalf information indicated in the identification
of the entity; and document with that provided by the
(f) For entities registered outside of the customer. Whenever it deems necessary, a
Philippines, similar documents and/or covered person may accept other IDs not
information shall be obtained, duly provided herein: Provided, That it shall not
authenticated by a senior officer or the be the sole means of identification.
designated officer of the covered person In case the identification document
assigned in the country of registration; in the presented does not bear any photo of the
absence of said officer, the documents customer or authorized signatory, or the

§ X806.2
17.03.31
photo-bearing ID or a copy thereof does not The covered person shall clearly
clearly show the face of the customer or define the instances when the conduct of
authorized signatory, a covered person may face-to-face is reasonably practicable,
utilize its own technology to take the photo depending on the product, type of business
of the customer or authorized signatory. and risk involved, or when the use of ICT
Relief in case of calamity. In case of a shall apply. Also, the covered person should
disastrous calamity and subject to a adopt policies and procedures to address
declaration by the Bangko Sentral on the any specific risks associated with deferred
applicability of this relief, any requirement or technology-aided face-to-face verification
for the presentation of valid ID shall be and personal interview.
relaxed, subject to the following conditions: e. Outsourcing of the gathering of
(1) The amount of transactions shall not minimum information and/or documents
exceed P50,000.00 per day; and face-to-face contact. Subject to existing
(2) The customer is either a permanent rules on outsourcing of specified banking
or temporary resident or who conducts activities, a covered person may, without
business in a severely affected area which prior Monetary Board approval, outsource
has been declared to be under a state of to a counterparty, which may or may not
calamity by a competent authority; be a covered person as herein defined, the
(3) The customer shall submit a written gathering of the minimum information and/
certification, which need not be notarized, or documents and face-to-face contact as
that he/she is a victim of the subject required under this Part: Provided, That the
disastrous calamity and has lost his/her valid ultimate responsibility for knowing the
IDs; and customer and for keeping the identification
(4) The customer’s account activities documents shall lie with the covered person
shall be subject to strict monitoring by the and the following conditions are complied
covered person to identify potential abuse with:
of the relaxed requirement and any STs shall For covered person counterparty:
be reported to the AMLC within the (1) There is a written service level
prescribed period. agreement approved by the board of
d. Face-to-face contact. Covered directors of both covered persons; and
persons shall conduct face-to-face contact (2) The counterparty has a reliable and
and personal interview at the acceptable customer identification system
commencement of the relationship, or as and training program in place.
reasonably practicable so as not to interrupt For non-covered person
the normal conduct of business, taking into counterparty:
account the nature of the product, type of (1) All conditions required for covered
business and the risks involved: Provided, person counterparty;
That ML/TF risks are effectively managed. (2) The covered person outsourcing the
The use of Information and activity shall ensure that the employees or
Communication Technology (ICT) in the representatives of the counterparty gathering
conduct of face-to-face contact and the required information/documents of, and/
interview may be allowed: Provided, That or conducting face-to-face contact with, the
the covered person is in possession of and customer undergo equivalent training
has verified the identification documents program as that of the covered person’s own
submitted by the prospective client prior to employees undertaking a similar activity; and
the interview and that the entire procedure (3) The covered person shall monitor
is documented. and conduct annual review of the

§§ X806.2
17.03.31
performance of the counterparty to to in Item “1” above but conducts business

determine whether or not to continue with operations and activities similar to them -
the arrangement. All the contents required in the sworn
All identification information and/or certification mentioned in Item “1” above
documents shall be turned over within a shall apply, with the additional requirement
period not exceeding ninety (90) calendar that the laws of the country where the third
days to the covered person, which shall party is operating has equal or more stringent
carefully review the documents or customer identification process requirement
information and conduct the necessary and that it has not been cited in violation
risk assessment of the customer. The thereof. It shall, in addition to performing
covered person may, however, include in normal due diligence measures, do the
the coverage of the outsourcing agreement following:
the safekeeping of the documents gathered (a) Gather sufficient information about
subject to the condition that customer the third party and the group to which it
identification documents shall be made belongs to understand fully the nature of its
available to the covered person or to the business and determine from publicly
competent authorities within three (3) available information the reputation of the
banking days from the date of request. institution and the quality of supervision,
f. Third party reliance. A covered including whether or not it has been subject
person may rely on the identification to ML or TF investigation or regulatory
process or gathering of minimum action;
information and face-to-face contact (b) Document the respective
undertaken by a third party subject to the responsibilities of each institution; and
following rules: (c) Obtain approval from senior
(1) Where the third party is a covered management at inception of relationship
person specifically defined by this Part and before relying on the third party.
as generally defined by AMLA, as amended, A Bangko Sentral-accredited custodian
and its RIRR - The covered person shall may likewise rely, in accordance with this
obtain from the third party a written sworn Part, on the face-to-face contact and
certification containing the following: gathering of minimum information
(a) The third party has conducted the performed by the seller or issuer of securities
prescribed customer identification or by the global custodian to establish the
procedures in accordance with this Part and existence and full identity of the customer:
its own MLPP, including the face-to-face Provided, That the said third party has an
contact requirement, to establish the equivalent customer identification
existence of the ultimate customer and has requirements.
in its custody all the minimum information Notwithstanding the foregoing, the
and/or documents required to be obtained ultimate responsibility for identifying the
from the customer; and customer still lies with the covered person
(b) The relying covered person shall relying on the third party.
have the ability to obtain identification In cases where the customer is assessed
documents from the third party upon request as high risk by the third party, the covered
without delay. person shall conduct its separate enhanced
(2) Where the third party is a financial due diligence procedure.
institution operating outside the Philippines g. Trustee, nominee, agent or
that is other than covered persons referred intermediary account. Where (1) an

§ X806.2
17.03.31
account is opened by; (2) relationship is accordance with Subsec. X806.1(b) and file
established through; or (3) any transaction an ST report, if warranted.
is conducted by, a trustee, nominee, agent h. Private banking/wealth management
or intermediary, either as an individual or operations. These services, which by their
through a fiduciary relationship or similar nature involve high measure of client
arrangements, the covered person shall confidentiality, are more open to the
establish and record the true and full identity elements of reputational risk especially if the
and existence of both the (1) trustee, customer identification process is not
nominee, agent or intermediary; and diligently followed. Covered persons shall
(2) trustor, principal, beneficial owner or therefore establish and record the true and
person on whose behalf the account/ full identify and take reasonable measures
relationship/transaction is being opened/ to establish the source of wealth and source
established/conducted. The covered person of funds, of the customer and beneficial
shall determine the true nature of the parties’ owners, if any, and establish a policy on
capacities and duties by obtaining a copy what standard of due diligence will apply
of the written document evidencing their to them. They shall also require approval
relationship and apply the same standards by a senior officer other than the private
for assessing the risk profile and determining banking/wealth management/similar activity
the standard of due diligence to be applied relationship officer or the like for acceptance
to both. of customers of private banking, wealth
In case of several trustors, principals, management and similar activities.
beneficial owners, or persons on whose i. PEP. Covered persons shall
behalf the account is being opened/ establish and record the true and full
relationship is being established, where the identity of PEPs, as well as their immediate
trustee, nominee, agent or intermediary family members and entities related to
opens a single account but keeps therein them.
sub-accounts that may be attributable to (1) In case of domestic PEPs or
each trustor, principal, or beneficial owner, persons who have been entrusted with a
the covered person shall, at the minimum, prominent function by an international
obtain the true and full name, place and date organization, or their immediate family
of birth or date of registration, as the case members or close associates, in addition
may be, present address, nature of work or to performing the applicable due diligence
business and source of funds as if the measures, covered persons shall:
account was opened by them separately. (a) Take reasonable measures to
Where the covered person is required to determine whether a customer or the
report a CT or circumstances warrant the beneficial owner is a PEP; and
filing of an ST, it shall obtain such (b) In cases when there is a higher risk
information on every trustor, principal, business relationship, adopt measures under
beneficial owner, or person on whose paragraphs (2)(b) to (2)(d) below.
behalf the account is being opened in order (2) In relation to foreign PEPs or their
that a complete and accurate report may be immediate family members or close
filed with the AMLC. associates, in addition to performing the
In case a covered person entertains applicable customer due diligence measures,
doubts as to whether the trustee, nominee, covered persons shall:
agent, or intermediary is being used as a (a) Put in place risk management
dummy in circumvention of existing laws, systems to determine whether a customer
it shall apply enhanced due diligence in or the beneficial owner is a PEP;

§ X806.2
17.03.31
(b) Obtain senior management approval (a) Has performed customer due
before establishing (or continuing, for diligence obligations on its customers that
existing customers) such business have direct access to the accounts of the
relationship; correspondent bank; and
(c) Take reasonable measures to (b) Is able to provide relevant customer
establish the source of wealth and the source due diligence information upon request to
of funds of customers and beneficial owners the correspondent bank.
identified as PEPs; and Covered persons are prohibited from
(d) Conduct enhanced ongoing entering into, or continuing, correspondent
monitoring on that relationship. banking relationships with shell banks and
j. Correspondent banking. Covered should have measures to satisfy themselves
persons shall adopt policies and procedures that respondent financial institutions do not
to prevent correspondent banking activities permit their accounts to be used by shell
from being utilized for ML/TF activities, and banks.
designate an officer responsible in ensuring k. Fund/Wire transfer. Because of the
compliance with these regulations and the risk associated with dealing with fund/
covered person’s policies and procedures. wire transfers, where a covered person
A covered person may rely on the may unknowingly transmit proceeds of
customer identification process undertaken unlawful activities or funds intended to
by the respondent bank and apply the rules finance terrorist activities, it shall
on third party reliance under establish policies and procedures
Subsec. X806.2(f), treating the respondent designed to prevent it from being utilized
bank as the third party. The correspondent for that purpose which shall include, but
bank shall: not limited to, the following:
(1) In relation to cross border (1) The beneficiary institution shall not
correspondent banking and other similar accept instructions to pay-out fund transfers
relationship - to non-customer beneficiary, unless it has
(a) Gather sufficient information about conducted the necessary customer due
the respondent institution to understand fully diligence to establish the true and full
the nature of the respondent’s business, and identity and existence of said beneficiary.
to determine from publicly available Should the originator and beneficiary be the
information the reputation of the institution same person, the beneficiary institution may
and the quality of supervision, including rely on the customer due diligence
whether it has been subject to ML/TF conducted by the originating institution
investigation or regulatory action; provided the rules on third party reliance
(b) Assess the respondent institution’s under Subsec. X806.2(f) are met, treating
AML/CFT controls; the originating institution as third party as
(c) Obtain approval from senior therein defined;
management before establishing new (2) The originating institution shall not
correspondent relationships; and accept instructions to fund/wire transfer
(d) Clearly understand and document from a non-customer originator, unless it
the respective AML/CFT responsibilities of has conducted the necessary customer due
each institution. diligence to establish the true and full
(2) With respect to “payable-through identity and existence of said originator;
accounts,” satisfy themselves that the (3) In cross border transfers, if the
respondent bank: originator is a high risk customer as herein

§ X806.2
17.03.31
described, the beneficiary institution shall with limited and controlled staff access
conduct enhanced due diligence on the which permits visual monitoring. If
beneficiary and the originator. Where monitoring is not possible, the device must
additional information cannot be obtained, be secured or programmed to receive
or any information or document provided messages into a password protected
is false or falsified, or result of the validation memory.
process is unsatisfactory, the beneficiary MIFT transactions below a certain
institution shall refuse to effect the fund/wire threshold [approved by the President/
transfer or the pay-out of funds without Country Manager (for branches of foreign
prejudice to the reporting of a suspicious banks) or Business Risk Manager] may be
transaction to the AMLC when processed with the mandatory procedure
circumstances warrant; described above and an enhanced security
(4) Whenever possible, manually procedure such as (a) a recorded
initiated funds transfer (MIFT) instructions callback to the customer to confirm the
should not be the primary delivery method. transaction instructions and/or (b) test
Every effort shall be made to provide client word arrangement/verification, and/or
with an electronic banking solution. Where (c) utilization of secured forms that
MIFT is utilized, the following validation incorporate verifiable security procedures
procedures shall apply: such as watermarks or codes, and/or
(i) Prior to the bank accepting from a (d) transmission encryption.
customer a manually initiated funds transfer (iv) Telephone callback numbers and
request, the customer must execute and sign contacts must be securely controlled. The
an agreement which preferably is part of confirmation callback is to be recorded and
the account opening documentation, made to the signatory/(ies) of the customer’s
wherein are outlined the manual instruction individual account(s). For commercial and
procedures with related security procedures company accounts the callback will be
including customer agreement to accept made to the signatory/(ies) of the account
responsibility for fraudulent or erroneous or, if so authorized, another person
instructions provided the bank has complied designated by the customer in the MIFT
with the stated security procedures. agreement. The party called is to be
(ii) It is mandatory that written MIFT documented on the instructions. The
instructions are signature verified. In callback must be made by someone other
addition, one (1) of the following primary than (a) the person receiving the original
security procedures must be applied: a instructions and (b) effecting the signature
recorded callback to the customer to confirm verification.
the transaction instructions, or testword (5) Cross border and domestic fund/wire
arrangement/verification. The callback or transfers and related message not exceeding
test word requirement may be substituted P50,000.00 or its equivalent in foreign
by any of the following validity checks: use currency, shall include accurate and
of a controlled PIN or other pre-established meaningful originator and beneficiary
code; sequential numbering control of information. The following information
messages; pre-established verifiable forms; shall remain with the transfer or related
same as prior transmissions; standing/ message through the payment chain:
pre-defined instructions; or value for value (a) Name of the originator;
transactions. (b) Name of the beneficiary; and
(iii) It is mandatory that MIFT (c) Account number of the originator
instructions are signature verified and the and beneficiary, or in its absence, a unique
device be located in a secured environment reference number.

§ X806.2
17.03.31
(6) For cross border and domestic fund/ institution or intermediary institution. It
wire transfers and related message shall likewise apply enhanced due diligence
amounting to P50,000.00 or more, or its to establish the true and full identity and
equivalent in foreign currency, the following existence of the beneficiary. Where
information shall be obtained and additional information cannot be obtained,
accompany the wire transfer: or any information or document provided
(a) Name of the originator; is false or falsified, or result of the validation
(b) Originator account number where process is unsatisfactory, the beneficiary
such an account is used to process the institution shall refuse to effect the fund/wire
transaction or a unique transaction reference transfer or the pay-out of funds without
number which permits traceability of the prejudice to the reporting of an ST to the
transaction; AMLC when circumstances warrant.
(c) Originator’s address, or national l. Buyers of cashier’s, manager’s or
identity number, or customer identification certified checks. A covered person may sell
number, or date and place of birth; cashier’s, manager’s or certified checks only
(d) Name of the beneficiary; and to its existing customers and shall maintain
(e) Beneficiary account number where a register of said checks indicating the
such an account is used to process the following information:
transaction, or unique transaction reference (1) True and full name of the buyer or
number which permits traceability of the the applicant if buying on behalf of an entity;
transaction. (2) Account number;
For domestic wire transfers, the (3) Date of issuance and the number of
originating institution should ensure that the the check;
required information accompanies the wire (4) Name of the payee;
transfers, unless this information can be (5) Amount; and
made available to the beneficiary institution (6) Purpose of such transaction.
and relevant authorities by other effective (a) Buyers of cashier’s, manager’s or
means. In the latter case, the ordering certified checks other than its existing
institution shall include only the account customer. Where an individual or an entity
number or a unique identifier within the other than an existing customer applies for
message or payment form which will allow the issuance of cashier’s, manager’s or
the transaction to be traced back to the certified checks, the covered person shall,
originator or beneficiary. Originating in addition to the information required in
institutions are required to provide the Subsec. X806.2(l), obtain all the
information within three (3) working days identification documents and minimum
from receiving the request either from the information required under this Part to
beneficiary institution or from relevant establish the true and full identity and
authorities or agencies. existence of the applicant. In no case shall
(7) Should any wire/fund transfer reduced due diligence be applied to the
amounting to P50,000.00 or more or its applicant and, where circumstances
equivalent be unaccompanied by the warrant, enhanced due diligence should be
required originator information, the applied.
beneficiary institution shall exert all efforts (b) Buyers of cashier’s, manager’s or
to establish the true and full identity and certified checks in blank or payable to cash,
existence of the originator by requiring bearer or numbered account. A covered
additional information from the originating person may issue cashier’s, manager’s or

§ X806.2
17.03.31
certified checks or other similar instruments full identity of the first endorser shall be
in blank or payable to cash, bearer or established and the record of the
numbered account subject to the following identification shall also be kept for five (5)
conditions: years.
(i) The amount of each check shall not n. Foreign exchange dealers/money
exceed P10,000; changers/remittance and transfer
(ii) The buyer of the check is properly companies. A covered person shall require
identified in accordance with its customer its customers who are remittance and
acceptance and identification policies and transfer companies, foreign exchange
as required under Subsec. X806.2(l) and dealers and money changers to submit proof
Subsec. X806.2(l)(a); of registration with the Bangko Sentral as
(iii) A register of said checks indicating part of their customer identification
all the information required under document, and shall only deal with these
Subsec. X806.2(l); entities if they are duly registered as such.
(iv) A covered person which issues as Also, these customers shall be required to
well as those which accepts as deposits, use company accounts for their remitting,
said cashier’s, manager’s or certified checks foreign exchange dealing and money
or other similar instruments issued in blank changing business.
or payable to cash, bearer or numbered Remittance and transfer companies,
account shall take such measure(s) as may foreign exchange dealers and money
be necessary to ensure that said instruments changers presenting greater risk shall be
are not being used/resorted to by the buyer subject to enhanced due diligence, which
or depositor in furtherance of an ML activity; includes, among others, requiring proof of
(v) The deposit of said instruments shall registration with the AMLC, reviewing and
be subject to the same requirements of assessing their AML/CFT program to have
scrutiny applicable to cash deposits; and reasonable assurance on their AML
(vi) Transactions involving said compliance, obtaining additional
instruments should be accordingly reported information and securing senior
to the AMLC if there is reasonable ground management approval for establishing
to suspect that said transactions are being business relationship.
used to launder funds of illegitimate origin. o. Other high risk customer. A
m. Second-endorsed checks. A covered customer from a foreign jurisdiction that is
person shall enforce stricter guidelines in recognized as having inadequate
the acceptance of second-endorsed checks internationally accepted AML standards, or
including the application of enhanced due presents greater risk for ML/TF or its
diligence to ensure that they are not being associated unlawful activities, shall be
used as instruments for money laundering subject to enhanced customer due diligence.
or other illegal activities. Information relative to these are available
For this purpose, a covered person shall from publicly available information such as
limit the acceptance of second-endorsed the websites of FATF, FATF Style Regional
checks from properly identified customers Bodies (FSRB) like the Asia Pacific Group
and only after establishing that the nature on Money Laundering and the Egmont
of the business of said customer justifies, Group, national authorities like the OFAC
or at least makes practical, the deposit of of the U.S. Department of the Treasury, or
second-endorsed check. In case of isolated other reliable third parties such as regulators
transactions involving deposits of second- or exchanges, which shall be a component
endorsed checks by customer who are not of a covered person’s customer
engaged in trade or business, the true and identification process.

§§ X806.2 - X806.3
17.03.31
p. Shell company/shell bank/bearer full name of the account owner. The

share entities. A covered person shall provisions of existing law to the contrary
undertake banking relationship with a shell notwithstanding, anonymous accounts,
company with extreme caution and always accounts under fictitious names, numbered
apply enhanced due diligence on both the checking accounts and all other similar
entity and its beneficial owner/s. accounts shall be absolutely prohibited.
No shell bank shall be allowed to (Circular No. 706 dated 05 January 2011, as amended by
operate or be established in the Philippines. Circular No. 950 dated 15 March 2017)
Covered persons shall refuse to deal, enter
into, or continue, correspondent banking § X806.3 On-going monitoring of
relationship with shell banks. They shall customers, accounts and transactions.
likewise guard against establishing relations a. Covered persons shall ensure that
with foreign financial institutions that permit they have established the true and full
their accounts to be used by shell banks. identity of their customers and shall, on
Bearer share entities refer to those the basis of materiality and risk, update,
juridical entities where the ownership is no later than once every three (3) years,
accorded to those who possess the bearer all customer identification information
share certificate. A covered person dealing and documents, including photo, required
with bearer share entities shall conduct to be obtained under the AMLA, as
enhanced due diligence on said entities and amended, its RIRR and this Part, unless
their existing stockholders and/or beneficial enhanced ongoing monitoring is
owners at the time of opening of the account. warranted.
These entities shall be subject to ongoing Covered persons shall establish a
monitoring at all times and the list of system that will enable them to
stockholders and/or beneficial owners shall understand the normal and reasonable
be updated within thirty (30) days after every account or business activity of customers
transfer of ownership and the appropriate to ensure that the customers’ accounts
enhanced due diligence shall be applied to and transactions are consistent with their
the new stockholders and/or beneficial knowledge of the customers, and the
owners. latter’s commercial activities, risk profile,
q. Numbered accounts. No peso and and source of funds and detect unusual or
foreign currency non-checking numbered suspicious patterns of account activity.
accounts shall be allowed without Thus, a risk-and-materiality-based on-going
establishing the true and full identity and monitoring of customer’s accounts and
existence of customers and applying transactions should be part of a covered
enhanced due diligence in accordance with person’s customer due diligence.
Subsec. X806.1(b). b. Enhanced due diligence. Covered
Peso and foreign currency non-checking persons shall examine the background and
numbered accounts existing prior to purpose of all complex, unusually large
17 October 2001 shall continue to exist but transactions, all unusual patterns of
the covered person shall establish the true transactions, which have no apparent
and full identity and existence of the economic or lawful purpose, and other
beneficial owners of such accounts and transactions that may be considered
apply enhanced due diligence in accordance suspicious. Covered persons shall apply
with Subsec. X806.1(b). enhanced due diligence on the customer
r. Prohibited accounts. A covered person in accordance with Subsec. X806.1(b) if
shall maintain accounts only in the true and they acquire information in the course of

§§ X806.3 - X807
17.03.31
customer account or transaction monitoring persons access to the covered person’s

that: services. In this regard, covered persons
(1) Raises doubt as to the accuracy of shall have appropriate policies and
any information or document provided or procedures to ensure non-discrimination
the ownership of the entity; against certain customer types when
(2) Justifies reclassification of the implementing AML/CFT regulations.
customer from low or normal risk to high Covered persons who will commit said
risk pursuant to this Part or by their own discriminatory act shall be subject to
criteria; or appropriate sanctions provided under
(3) Indicates that any of the existing laws and regulations.
circumstances for the filing of an ST report (Circular No. 950 dated 15 March 2017)
exists such as but not limited to the
following: C. COVERED AND SUSPICIOUS
(a) Transacting without any underlying TRANSACTION REPORTING
legal or trade obligation, purpose or
economic justification; Sec. X807 Covered and Suspicious
(b) Transacting an amount that is not Transaction Reporting. Covered persons
commensurate with the business or shall report to the AMLC all covered and
financial capacity of the customer or STs within five (5) working days, unless the
deviates from his profile; AMLC prescribes a different period not
(c) Structuring of transactions in order exceeding fifteen (15) working days, from
to avoid being the subject of covered the occurrence thereof.
transaction reporting; or For STs, “occurrence” refers to the date
(d) Knowing that a customer was or is of determination of the suspicious nature
engaged in any unlawful activity as herein of the transaction, which determination
defined. should be made not exceeding ten (10)
If the covered person: calendar days from the date of transaction.
(1) fails to satisfactorily complete the However, if the transaction is in any way
enhanced due diligence procedures; or related to, or the person transacting is
(2) reasonably believes that performing involved in or connected to, an unlawful
the enhanced due diligence process will activity or money laundering offense, the
tip-off the customer, ten (10)-day period for determination shall
it shall file a ST report, and closely monitor be reckoned from the date the covered
the account and review the business person knew or should have known the
relationship. suspicious transaction indicator.
(Circular No. 706 dated 05 January 2011, as amended by Circular Should a transaction be determined to
be both a covered and suspicious
transaction, the covered person shall be
§ X806.4 Non-discrimination against
required to report the same as an ST.
certain types of customers. The provisions
Covered persons shall ensure the accuracy
of this Part shall not be construed or
and completeness of covered and ST report,
implemented in a manner that will
which shall be filed in the forms prescribed
discriminate against certain customer types,
by the AMLC and submitted in a secured
such as PEPs, as well as their relatives, or
manner to the AMLC in electronic form.
against a certain religion, race or ethnic
(Circular No. 706 dated 05 January 2011, as amended by
origin, or such other attributes or profiles Circular No. 950 dated 15 March 2017 and CL-078 dated
when used as the only basis to deny these 11 October 2011)

§§ X807.1 - X807.4
17.03.31
§ X807.1 Deferred reporting of certain f. Capable of aggregating activities of a

covered transactions. Covered persons customer with multiple accounts on a
shall refer to the issuances of the AMLC from consolidated basis for monitoring and
time to time on transactions that are reporting purposes; and
considered as “non-cash, no/low risk g. Has the capability to record all STs
covered transactions”, hence subject to and support the investigation of alerts
deferred reporting. generated by the system and brought to the
The Bangko Sentral may consider other attention of senior management whether or
transactions as “no/low risk covered not a report was filed with the AMLC.
transactions” and propose to the AMLC that Covered persons with existing
they be likewise subject to deferred electronic system of flagging and monitoring
reporting by covered persons. transactions already in place shall ensure
(Circular No. 706 dated 05 January 2011, as amended by that their existing system is updated to be
Circular No. 950 dated 15 March 2017 and CL-2011-035 dated fully compliant with functionalities as those
25 May 2011)
required herein.
(Circular No. 706 dated 05 January 2011, as amended by Circular
§ X807.2 Electronic monitoring systems No. 950 dated 15 March 2017)
for AML/CFT. Covered persons required
under Subsec. X805.3 (a) to have an § X807.3 Manual monitoring.
electronic monitoring system for AML/CFT Covered persons which are not required,
should ensure that the system, at a minimum, under this Part, to have an electronic system
shall detect and raise to the covered of flagging and monitoring transactions
person’s attention, transaction and/or shall ensure that they have the means of
accounts that qualify either as CT or ST as flagging and monitoring the transactions
herein defined. The covered person shall mentioned in Subsec. X807.2. They shall
endeavor to interface the electronic maintain a register of all STs that have been
monitoring system with the systems of its brought to the attention of senior
branches, subsidiaries and affiliates, management whether or not the same was
if any, for group-wide AML/CFT monitoring. reported to the AMLC.
The system must have at least the (Circular No. 706 dated 05 January 2011,as amended by
following automated functionalities: Circular No. 950 dated 15 March 2017)
a. Covered and suspicious transaction
monitoring – performs statistical analysis, § X807.4 Electronic submission of
profiling and able to detect unusual patterns reports. The CTR and STR shall be
of account activity; submitted to the AMLC in a secured
b. Watch list monitoring – checks manner, in electronic form and in
transfer parties (originator, beneficiary, and accordance with the reporting procedures
narrative fields) and the existing customer prescribed by the AMLC. The covered
database for any listed undesirable persons shall provide complete and
individual or corporation; accurate information of all the mandatory
c. Investigation – checks for given fields required in the report. In order to
names throughout the history of payment provide accurate information, the covered
stored in the system; person shall regularly update customer
d. Can generate all the CTRs of the identification information at least once
covered person accurately and every three (3) years.
completely with all the mandatory field For the purpose of reporting in a secured
properly filled up; manner, all covered persons shall register
e. Must provide a complete audit trail; with the AMLC within ninety (90) days from

§§ X807.4 - X808
17.03.31
27 January 2011 by directly coordinating information in relation thereto. Any

with that office for the proper assignment information about such reporting shall not
of their institution code and facilitation of be published or aired, in any manner or
the reporting process. All covered form, by the mass media, or through
institutions that have previously registered electronic mail, or other similar devices. In
need not re-register. case of violation thereof, the concerned
Only their respective compliance director, officer and employee of the covered
officers shall electronically sign their person shall be criminally liable.
CTRs and STRs. (Circular No. 706 dated 05 January 2011, as amended by Circular
Electronic copies of CTRs and STRs shall No. 950 dated 15 March 2017)
be preserved and safely stored for at least
§ X807.7 Safe harbor provision.
five (5) years from the dates the same were
No administrative, criminal or civil
reported to the AMLC.
(Circular No. 706 dated 05 January 2011, as amended by
proceedings shall lie against any person for
Circular No. 950 dated 15 April 2017 and CL-2011-078 dated having made a CTR or an STR in the regular
11 October 2011) performance of his duties in good faith,
whether or not such reporting results in any
§ X807.5 Exemption from bank secrecy criminal prosecution under the AMLA, as
laws. When reporting covered or amended, its RIRR or any other law.
suspicious transactions to the AMLC, (Circular No. 706 dated 05 January 2011)
covered persons and their officers and
employees shall not be deemed to have D. RECORD KEEPING
violated R.A. No. 1405, as amended, R.A. AND RETENTION
No. 6426, as amended, R.A. No. 8791 and
other similar laws, but are prohibited from Sec. X808 Record Keeping. All customer
communicating, directly or indirectly, in any identification records of covered persons
manner or by any means, to any person, shall be maintained and safely stored as
the fact that a covered or suspicious long as the account exists. All transaction
transaction report was made, the contents records and documents of covered persons
thereof, or any other information in relation shall be maintained and safely stored for
thereto. In case of violation thereof, the five (5) years from the date of transaction.
concerned officer and employee of the Said records and files shall contain the
covered person shall be criminally liable in full and true identity of the owners or
accordance with the provision of the AMLA, holders of the accounts involved in the
as amended. transactions such as the ID card and photo
(Circular No. 706 dated 05 January 2011, as amended by Circular of individual customers and the documents
No. 950 dated 15 March 2017) mentioned in Subsec. X806.2(b) for entities,
customer information file, signature card of
§ X807.6 Confidentiality provision. authorized signatory/ies, and all other
When reporting CTs and STs to the AMLC, pertinent customer identification documents
covered persons, their directors, officers as well as all factual circumstances and
and employees, are prohibited from records involved in the transaction. Covered
communicating, directly or indirectly, in any persons shall undertake the necessary
manner or by any means, to any person or adequate security measures to ensure the
entity, or the media, the fact that a covered confidentiality of such file. Covered persons
or suspicious transaction report was made, shall prepare and maintain documentation,
the contents thereof, or any other in accordance with the aforementioned

§§ X808 - X809
17.03.31
client identification requirements, on their E-Commerce Act and its implementing rules
customer accounts relationships and and regulations, and the applicable rules
transactions such that any account, promulgated by the Supreme Court.
relationship or transaction can be Covered persons shall, likewise, keep
reconstructed as to enable the AMLC, and/ the electronic copies of all CTRs and STRs
or the courts to establish an audit trail for for at least five (5) years from the dates of
money laundering. submission to the AMLC.
(Circular No. 706 dated 05 January 2011, as amended by Circular For low risk customers, it is sufficient
No. 950 dated 15 March 2017) that covered persons shall maintain and
store, in whatever form, a record of customer
§ X808.1 Closed accounts. Covered
information and transactions.
persons shall maintain and safely store all
records of customer identification, and No. 950 dated 15 March 2017)
transaction documents for at least five (5)
years from the date the account was closed. E. TRAINING PROGRAM
No. 950 dated 15 March 2017) Sec. X809 AML Training Program.
Covered persons shall formulate an annual
§ X808.2 Retention of records where
AML training program aimed at providing
the account or customer is the subject of a
all their responsible officers and personnel
case. If a money laundering case has been
with efficient, adequate and continuous
filed in court involving the account or
education program to enable them to fully
customer, records must be retained and
and consistently comply with all their
safely kept beyond the five (5)-year retention
obligations under this Part, the AMLA, as
period, until it is officially confirmed by the
amended, and its RIRR.
AMLC Secretariat that the case has been
Trainings of officers and employees
resolved, decided or terminated with finality.
(Circular No. 706 dated 05 January 2011, as amended by Circular shall include awareness of their respective
No. 950 dated 15 March 2017) duties and responsibilities under the MLPP
particularly in relation to the customer
§ X808.3 Safekeeping of records and identification process, record keeping
documents. The covered person shall requirements and CT and ST reporting and
designate at least two (2) officers who will ample understanding of the internal
be jointly responsible and accountable in processes including the chain of command
the safekeeping of all records and for the reporting and investigation of
documents required to be retained by the suspicious and money laundering activities.
AMLA, as amended, its RIRR and this Part. The program shall be designed in a
They shall have the obligation to make these manner that will comprise of various
documents and records readily available focuses for new staff, front-line staff,
without delay during Bangko Sentral regular compliance office staff, internal audit staff,
or special examinations. officers, senior management, directors and
(Circular No. 706 dated 05 January 2011, as amended by Circular stockholders. Regular refresher trainings
shall likewise be provided in order to
§ X808.4 Form of records. Covered guarantee that officers and staff are informed
persons shall retain all records as originals of new developments and issuances related
or in such forms as are admissible in court to the prevention of money laundering and
pursuant to existing laws, such as the terrorism financing as well as reminded of

§§ X809 - X811
17.03.31
their respective responsibilities vis-à-vis the Sentral relative to covered and suspicious
covered person’s processes, policies and transaction reports filed with the AMLC.
procedures. (Circular No. 706 dated 05 January 2011, as amended by Circular
Covered person’s annual AML No. 950 dated 15 March 2017)
training program and records of all AML
seminars and trainings conducted by the Sec. X811 Sanctions and Penalties. In line
covered institution and/or attended by its with the objective of ensuring that covered
personnel (internal or external), including persons maintain high AML/CFT standards
copies of AML seminar/training materials, in order to protect its safety and soundness
shall be appropriately kept by the as well as protecting the integrity of the
compliance office/unit/department, and national banking and financial system,
should be made available during periodic violation of this Part shall constitute a major
or special Bangko Sentral examination. violation subject to the following
(Circular No. 706 dated 05 January 2011, as amended by Circular enforcement actions against the board of
No. 950 dated 15 March 2017) directors, senior management and line
officers, not necessarily according to priority
F. BANGKO SENTRAL AUTHORITY and whenever applicable:
AND ENFORCEMENT ACTIONS a. Written reprimand;
b. Restriction on certain licenses/
Sec. X810 Bangko Sentral Authority to
product, as appropriate;
Check Compliance with the AMLA, as
c. Suspension or removal from the office
amended. In the course of a periodic or
they are currently holding; and/or
special examination, the Bangko Sentral
d. Disqualification from holding any
may inquire into or examine bank
position in any covered institution.
accounts or investments, including
customer identification, account opening, In addition to the non-monetary
and transaction documents, for the sanctions stated above, the Bangko Sentral
purpose of checking compliance by may also impose monetary penalties
covered persons under its supervision or computed in accordance with existing
regulation with the requirements of the regulations and in coordination with the AMLC.
AMLA, as amended, its RIRR, other AMLC Enforcement action shall be imposed on
issuances and this Part. the basis of the overall assessment of the
The Bangko Sentral may likewise covered person’s AML risk management
conduct annual testing solely limited to system. Whenever a covered person’s AML
the determination of the existence and true compliance system is found to be grossly
identity of the owners of numbered and inadequate, this may be considered as
similar accounts. unsafe and unsound banking practice that
In the course of the periodic and special may warrant initiation of prompt corrective
examination for purposes of complying action.
with the provisions of the AMLA, as To implement the enforcement action
amended, its RIRR, and this Part, the provision of this Part along with the AML
covered person, their officers and Risk Rating System (ARRS), the following
employees, and the Bangko Sentral, shall rules shall apply:
not be deemed to have violated the 1. An AML Composite rating of 4 and 3
provisions of R. A. No. 1405, as amended, will require no enforcement action.
R.A. No. 6426, as amended, R.A. No. 8791 2. An AML Composite rating of 2 or 1
and other similar laws, and Subsec. X807.6 will require submission by the covered
when disclosing information to Bangko person to the appropriate department of the

§ X811
17.03.31
SES, of a written action plan duly approved penalty matrix A or B, respectively shall be
by the BOD aimed at correcting the noted used. If the over-all rating is “3” and “4”, no
inefficiency in BOD and SM oversight, monetary penalty shall be imposed.
inadequacy in AML and TF policies and 2. Second step is to establish the asset
procedures, weakness in internal controls size of the Bangko Sentral covered
and audit, and/or ineffective implementation institution as of the cut-off period of
within a reasonable period of time. examination;
The appropriate department of the SES 3. Third step is to identify the aggravating
shall assess the viability of the plan and shall and mitigating factors. If the aggravating
monitor the covered person's performance. factors are more than the mitigating factors,
In the event of non-submission of an then the maximum range shall be used. On
acceptable plan within the deadline or the other hand, if the mitigating factors are
failure to implement its action plan, the more than the aggravating factors, then the
appropriate department of the SES shall minimum range shall be applied. In case
recommend appropriate enforcement action there are no aggravating and mitigating
on the covered person and its responsible factors or there is a tie, the medium range
officers including monetary penalties to be shall be used.
computed on a daily basis until 4. For Composite ratings of 1 and 2
improvements are satisfactorily where the covered institution concerned
implemented. was required to submit within a reasonable
3. An AML rating of 1 shall also be period of time an acceptance plan,
considered as an unsafe and unsound non-submission of the plan within the
banking practice. For this reason, prompt deadline or failure to implement the action
corrective action shall be initiated on the plan shall be a basis for imposition of
covered person. monetary penalties computed on a daily and
Escalation of enforcement action. In continuing basis from the time the covered
cases of heightened AML/CFT supervisory institutions is notified until corrective
concern as reflected in the overall AML risk measures are satisfactorily effected. The
rating over a certain period of time, the penalty may be imposed on the covered
Bangko Sentral shall impose escalated institution itself or directly on the Board of
enforcement action which shall include Directors as a body, or the individual
corrective action, sanction and/or additional directors who have direct oversight, or the
supervisory enforcement action, consistent with line officers involved in the management of
Sec. X009 on supervisory enforcement policy. money laundering and terrorist financing
Monetary penalty guidelines. These prevention.
guidelines are divided into three (3) parts. Part III – Aggravating and mitigating
Part I – Monetary penalty matrices. The factors.
monetary penalty matrices, where monetary a. Aggravating factors
penalties are categorized based on the (1) Frequency of the commissions or
(1) Composite rating and (2) Asset size of omissions of specific violation- Majority of
the Bangko Sentral covered institution. the following violations were noted:
Part II – Guiding principles. (a) Deficient Know Your Customer
1. The first step is to determine the process
over-all risk rating of the Bangko Sentral (b) Unsatisfactory Covered Transaction
covered institution for purposes of reporting system
identifying which penalty matrix will be (c) Non-reporting of and Improper
used. If the Composite rating is “1” or “2”, Suspicious Transaction reporting

§§ X811 - X899
17.03.31
(d) Non-compliance with the Record Concealment may be apparent when a

keeping requirement covered institution’s personnel purposely
(e) Inadequate AML Training Program complicate the transaction to make it
(f) Deficient AML Electronic system difficult to uncover or refuse to provide
(2) Duration of violations prior to information and/or document that would
notification- This pertains to the length of support the violation/offense committed.
time prior to the latest notification on the (5) Loss or risk of loss to bank- In
violation. Violations that have been asserting this factor, “potential loss” refers
existing for a long time before it was to any time at which the covered institution
revealed/discovered in the examination or was in danger of sustaining a loss.
are under the evaluation for a long time b. Mitigating factors
due to pending requests or (1) Good faith - is the absence of
correspondences from covered intention to violate on the part of the erring
institutions on whether a violation has individual/entity.
actually occurred shall be dealt with (2) Full cooperation- covered person’s
through this criterion. Violations personnel or the covered institution
outstanding for more than one (1) year immediately took action to correct the
prior to notification, at the minimum, will violation after it is brought to its attention
qualify as violations outstanding for a long either verbally or in writing.
time. (3) With positive measures- covered
(3) Continuation of offense or omission person’s personnel or the covered institution
after notification- This pertains to the commits to undertake concrete action to
persistence of an act or omission after the correct the violation but is being restrained
latest notification on the existence of the by valid reasons to take immediate action.
violation, either from the appropriate SES (4) Voluntary disclosure of offense
Group, Department or from the Monetary covered person’s personnel or the covered
Board and/or Deputy Governor, in cases person disclosed the violation before it is
where the violation has been elevated discovered in the course of a regular or
accordingly. This covers the period after the special examination or off-site monitoring.
final notification of the existence of the (Circular No. 706 dated 05 January 2011, as amended by Circular
violation until such time that the violation No. 950 dated 15 March 2017)
has been corrected and/or remedied. The
corrective action shall be reckoned with Sec. X812 (Reserved)
from the date of notification.
(4) Concealment- This factor pertains to Sec. X813 Separability Clause. If any
the cover up of a violation. In evaluating provision, sections of this Part, or its
this factor, one shall consider the intention application to any person or circumstance
of the party/ies involved and whether is held invalid, the other provisions or
pecuniary benefit may accrue accordingly. sections of this Part, and the application of
The act of concealing an act or omission such provision or section to other persons
constituting the violation carries with it the or circumstance shall not be affected
intention to defraud regulators. Moreover, thereby.
the amount of pecuniary benefit, which may
or may not accrue from the offense or
omission, shall also be considered under Secs. X814 - X899 (Reserved)
this factor.

§§ X901 - X902
16.03.31
PART NINE
OTHER BANKING REGULATIONS
A. BANKING FEES/CHARGES Securities held under custodianship

shall be exempt from annual fees.
Section X901 (2008 - X608) Assessment Annual fees to be collected from
Fees on Banks. Banks shall contribute to banks shall be debited from their
the Bangko Sentral an annual fee to help respective deposit accounts with the
defray the cost of maintaining the Bangko Sentral by the Comptrollership
appropriate department of the SES in Department upon receipt of the notice of
accordance with the following guidelines. the assessment from the appropriate
(M-2012-010 dated 17 February 2012, M-2011-029 dated department of the SES.
26 May 2011) Where the deposit account is
§ X901.1 (2008 - X608.1) Annual fees insufficient to cover the assessment fee, the
on banks. For purposes of computing the Comptrollership Department shall bill the
annual fees chargeable against banks, the bank for the full amount of the annual fee
term “Total Assessable Assets” shall be or for the balance thereof not covered by its
the amount referred to as the total assets deposit account, as the case may be.
under Section 28 of R. A. No. 7653 (end- Within thirty (30) calendar days from
of-month total assets per balance sheet, receipt of the bill, the bank shall make the
after deducting cash on hand and amounts corresponding remittance to the Bangko
due from banks, including the Bangko Sentral Accounting Department. Failure to
Sentral and banks abroad), plus Trust pay the bill within the prescribed period
Department accounts and personal equity shall subject the bank to administrative
and retirement accounts (PERA) sanctions.
administered by the bank. The guidelines in the collection of the
Average Assessable Assets shall be the annual supervisory fees for the year 2013
summation of the end-of-month total are provided in Appendix 88.
assessable assets divided by the number of (As amended by Circular No. 903 dated 29 February 2016,
months in operation during a particular M-2016-001 dated 24 February 2016, Circular Nos. 890 dated
assessment period. 02 November 2015, 878 dated 22 May 2015, M-2015-022
Beginning assessable year 2013, the dated 06 May 2015, M-2014-014 dated 20 March 2014, Circular
No. 791 dated 03 April 2013, M-2013-015 dated 18 April 2013,
rates of annual fees for banks for the current M-2012-010 dated 17 February 2012, M-2011-029 dated 26 May
year shall be, as follows: 2011, Circular No. 714 dated 10 March 2011, M-2010 -013
a. UBs/KBs - 1/28 of 1% dated 31 May 2010, Circular No. 687 dated 21 May 2010,
b. TBs - 1/28 of 1% M-2009-046 dated 17 November 2009, M-2009-004 dated 12
c. RBs/Coop Banks - 1/40 of 1% February 2009 and Circular No. 643 dated 10 February 2009)
multiplied by the Average Assessable Assets Sec. X902 (2008 - X609) Collection of
of the preceding year: Provided, That the Fines and Other Charges from Banks. The
applicable rates for future assessable years following regulations shall govern the
shall be subject to review1. payment of fines and other charges by banks.
1
Manual of Regulations for Banks Part IX - Page 1

§ X902.1
09.12.31
§ X902.1 (2008 - X609.1) Guidelines day”, “per business day”, “per day” and/or
on the imposition of monetary penalties. “a day” as used in this Manual, and other
The following are the guidelines on the Bangko Sentral rules and regulations shall
imposition of monetary penalties on banks, mean “per calendar day” and/or “calendar
their directors and/or officers: day” as the case may be.
a. Definition of terms. For purposes of c. Additional charge for late payment
the imposition of monetary penalties, the of monetary penalty. Late payment of
following definitions are adopted: monetary penalty shall be subject to an
(1) Continuing offenses/violations are additional charge of six percent (6%) per
acts, omissions or transactions entered into, annum to be reckoned from the banking day
in violation of laws, Bangko Sentral rules immediately following the said penalty
and regulations, Monetary Board directives, becomes due and payable up to the day of
and orders of the Governor which persist actual payment. The penalty shall become
from the time the particular acts were due and payable fifteen (15) calendar days
committed or omitted or the transactions from receipt of the Statement of Account
were entered into until the same were from the Bangko Sentral. For banks which
corrected/rectified by subsequent acts or maintain DDA with the Bangko Sentral,
transactions. They shall be penalized on a penalties which remain unpaid after the
per calendar day basis from the time the acts lapse of the fifteen-day period shall be
were committed/omitted or the transactions automatically debited against their
were effected up to the time they were corresponding DDA on the following
corrected/rectified. banking day without additional charge. If
(2) Transactional offenses/violations the balance of the concerned bank’s DDA
are acts, omissions or transactions is insufficient to cover the amount of the
entered into in violation of laws, penalty, said penalty shall already be subject
Bangko Sentral rules and regulations, to an additional charge of six percent (6%)
Monetary Board directives, and orders per annum to be reckoned from the banking
of the Governor which cannot be day immediately following the end of said
corrected/rectified by subsequent acts fifteen (15)-day period up to the day of actual
or transactions. They shall be meted payment.
with one-time monetary penalty on a per d. Appeal or request for
transaction basis. reconsideration. A one time appeal or
(3) Continuing penalty refers to the request for reconsideration on the monetary
monetary penalty imposed on continuing penalty approved by the Governor/
offenses/violations on a per calendar day Monetary Board to be imposed on the bank,
basis reckoned from the time the offense/ its directors and/or officers shall be allowed:
violation occurred or was committed until Provided, That the same is filed with the
the same was corrected/rectified. appropriate department of the SES within
(4) Transactional penalty refers to a fifteen (15) calendar days from receipt of
one-time penalty imposed on a transactional the Statement of Account/billing letter. The
offense/violation. appropriate department of the SES shall
b. Basis for the computation of the evaluate the appeal or request for
period or duration of penalty. The reconsideration of the bank/individual and
computation of the period or duration of all make recommendations thereon within
penalties shall be based on calendar days. thirty (30) calendar days from receipt
For this purpose the terms “per banking thereof. The appeal or request
Part IX - Page 2 Manual of Regulations for Banks

§§ X902.1 - X903.1
09.12.31
for reconsideration on the monetary (15) days will be debited against the bank’s
penalty approved by the Governor/ corresponding demand deposit account with
Monetary Board shall be elevated to the the BSP. A debit advice showing invoices
Monetary Board for resolution/decision. paid shall be sent to the head office of the
The running of the penalty period in case bank concerned.
of continuing penalty and/or the period (As amended by Circular No. 585 dated 15 October 2007)
for computing additional charge shall be
interrupted from the time the appeal or § X902.4 (2008 - X609.4) Check/
request for reconsideration was received by demand draft payments to the Bangko
the appropriate department of the SES up to Sentral of thrift, cooperative and rural
the time that the notice of the Monetary banks. TBs, Coop Banks and RBs shall make
Board decision was received by the bank/ all check and demand draft payments for
individual concerned. transactions other than those required to be
(As amended by Circular Nos. 662 dated 09 September 2009 paid through the banks DDA either to the
and 585 dated 15 October 2007) BSP Cash Department or to BSP Regional
Offices and Branches. Such payments shall
§ X902.2 (2008 - X609.2) Payment of be accompanied by appropriate payment
fines by banks. Banks shall pay the fines form as shown in Appendix 35. Payments
within fifteen (15) calendar days from receipt not accompanied by the required payment
of the statement of account from the BSP. forms shall be presumed to be additions to
For banks which maintain demand reserves and shall be credited to the demand
deposit account with the BSP, fines which deposit account of the paying bank.
are unpaid after the lapse of the fifteen (15)- Check payments shall be value dated
day period shall be automatically debited when the check is cleared.
against the corresponding demand deposit (As amended by Circular Nos. 662 dated 09 September 2009
account of the bank concerned: Provided, and 585 dated 15 October 2007)
That if the balance of the bank’s account is
insufficient to cover the fines due, such fines B. BANK AS COLLECTION/
shall be paid not later than the following REMITTANCE AGENTS
banking day. For the purpose of this
Subsection, banking day means a day on Sec. X903 (2008 - X604) Collection of
which the BSP head office and the head Customs Duties/Taxes/Levies and Other
office of the bank are open for business. Revenues. The following regulations shall
For uniform implementation of the govern the collection and reporting of
above regulations, the procedural guidelines customs duties, taxes, levies and other
embodied in Appendix 29 shall be revenues through the banking system.
observed.
(As amended by Circular Nos. 662 dated 09 September 2009 § X903.1 (2008 - X604.1) Coverage
and 585 dated 15 October 2007) All presently accredited agent banks with
demand deposit accounts with the BSP and
§ X902.3 (2008 - X609.3) Cost of checks government banks are authorized to collect
and documentary stamps. Banks are given (a) customs duties, taxes and other levies,
fifteen (15) days from receipt of invoice to (b) import processing fees, and (c) export/
settle their accounts with the BSP Security premium duties: Provided, however, That
Printing Plant for transactions representing the collection of taxes from GOCCs shall
the cost of printed checks and documentary be made only through banking offices of
stamps. Accounts not settled within fifteen government banks.

§§ X903.2 - X903.4
08.12.31
§ X903.2 (2008 - X604.2) Collection of Payment (OPs), ORs, Release Certificates

and reporting of internal revenue taxes (RCs) and commercial invoices on the same
Banks which are duly accredited by the BIR day to the offices indicated in the form; and
to accept payment of internal revenue taxes e. The Head Office of the participating
shall be governed by the relevant BIR banks shall consolidate all reports of
Revenue Regulations. collections with those of its branches and
Deposits of the BIR shall be limited to submit the original of the Consolidated
those arising from tax collection. Report on Daily Collections of Customs
The Authorized Agent Banks (AABs) Duties, Taxes and Other Levies (RC 82-005)
shall transfer the deposit collection to the to the Comptrollership Department, BSP,
account of the Treasurer of the Philippines Manila on the 10th calendar day following
with the BSP on the sixth day from the day the date of collection. Simultaneously, the
of deposit of the BIR collections. remaining copies shall be distributed to the
offices indicated in the form.
§ X903.3 (2008 - X604.3) Collection Deposits of the BOC shall be limited to
and reporting of customs duties and import those arising from customs collection.
processing fees. Participating banks are The AABs shall transfer the deposit
authorized to accept payment of customs collection to the account of the Treasurer
duties, taxes and other levies, and import of the Philippines with the BSP on the
processing fees under the following eleventh day from the day of deposit of the
procedures: BOC collections.
a. The collecting bank shall
acknowledge receipt of payments of § X903.4 (2008 - X604.4) Collection
customs duties, taxes and other levies, and and reporting of export/premium duties
import processing fees by issuing Official Participating banks are authorized to accept
Receipts (ORs) in forms to be requisitioned payment of export premium duties under
by the Head Office from the General the following procedures:
Services Division, Bureau of Customs, a. The collecting bank shall deduct
Manila; from the export proceeds the estimated
b. The collecting bank shall book all amount of export/premium duties due
such collections and credit the same to the from the export shipment upon negotiation
special account “Due to BSP - Bureau of of the shipping documents but shall
Customs”; collect the exact and correct amount of
c. The branch shall report by such duties upon presentation of the OP
telephone, telex or other means to its Head issued by the Export Coordinating
Office, at the end of each day, total Division, Bureau of Customs (For Port of
collections for the day and the inclusive Manila) or the Collector of Customs
serial numbers of ORs issued, to be used as concerned;
basis for the preparation by the Head Office b. The collecting bank shall issue the
of the Consolidated Report of Daily corresponding ORs in forms to be
Collections of Customs Duties, Taxes and requisitioned by the Head Office from the
Other Levies (RC 82-005); General Services Division, Bureau of
d. The Head Office and its branches Customs, Manila;
shall accomplish the Abstract of Daily c. The collecting bank shall book all
Collections of Customs Duties, Taxes and such collections and credit the same to the
Other Levies (RC 82-006) and submit the special account “Due to BSP-Export/
same, duly supported with copies of Orders Premium Duty”;

§§ X903.4 - X903.8
08.12.31
d. The branch/extension office/agency on the 10th calendar day from the date of
shall: collection (based on either forms RC 82-005,
(1) Report by telephone, telex or other RC 82-007 or RC 82-011). Said Department
means to its Head Office, at the end of each shall also credit on the same day the account
day, total collections for the day and the of the Treasurer of the Philippines for all
inclusive serial numbers of ORs issued, to such remittances of tax collections, duties,
be used as basis for the preparation by the fees and other levies.
Head Office of the Consolidated Report on Copies of debit/credit advices to AABs
Daily Collections of Export/Premium Duty shall be furnished by the Comptrollership
(RC 82-007); and Department, BSP.
(2) A c c o m p l i s h t h e A b s t r a c t o f
Daily Collections of Export/Premium § X903.6 (2008 - X604.6) Reconciliation
Duty (RC 82-008) and submit the same, of revenue collections. The Bureau of
duly supported with copies of OPs and Customs shall report to the appropriate
ORs, within ten (10) calendar days from department of the SES, BSP, Manila, any
date of collection to the offices indicated unreported collection or other discrepancies
in the form. discovered for proper examination. The BSP
e. The Head Office of the collecting shall take appropriate action, through the
bank shall: Comptrollership Department, either by
(1) Consolidate its report of collection debiting or crediting the DDA of the bank
with those of its branches/extension offices/ concerned, upon advice by the appropriate
agencies and submit to the Bureau of department of the SES on the results of the
Customs the Consolidated Report of Daily investigation.
Collections of Export/Premium Duty
(RC 82-009) on the day following the date § X903.7 (2008 - X604.7) Penalty for
of collection; and willful delay on the reporting of
(2) Consolidate the Abstract of Daily collections/remittances. In the event
Collections of Export/Premium Duty the Bureau of Customs shall discover,
(RC 82-010) with those received from in the course of its verification, any
branches/extension offices/agencies. The willful delay in the reporting of collections
original of the Consolidated Abstract of and remittances by banks, said Bureau
Collection of Export/Premium Duty shall advise the Comptrollership
(RC 82-011) shall be submitted to the Department of the BSP to debit the DDA
Comptrollership Department, BSP, Manila, of the bank concerned with the
on the 10th calendar day following the date corresponding penalty therefor, in
of collection. accordance with Subsec. X903.8.
Simultaneously, the remaining
copies, with the supporting OPs and § X903.8 (2008 - X604.8) Fines for
ORs, shall be submitted to the Bureau delayed reports/remittances of collections
of Customs. Any bank authorized to collect customs
duties, taxes and other levies and export/
§ X903.5 (2008 - X604.5) Remittances premium duty, which shall willfully delay
thru debit/credit advices. The the submission of reports and remittance
Comptrollership Department, BSP, of its collection to the BSP within the
Manila, shall debit the DDAs of the period prescribed thereon, shall pay fines
banks concerned for the total daily in accordance with the following
collection, which is due for remittance schedule:

§§ X903.8 - X903.10
09.12.31
Per delay in For delay in covering imports, collect from the

submission remittance applicant/importer a deposit equivalent to
of report of collection
a. Per day of P 60 plus 1/30 of 1% on the full amount of import duties due on
default for the amount of the importation covered by such LC. The
the first 5 delayed deposit shall not be withdrawable and
days of remittance
default shall be utilized only by crediting the
same to the import duties due on the
b. Per day of P 90 plus 1/15 of 1% on
importation.
default for the the amount
next 5 days of delayed
b. Amount of import duties. The import
of default remittance duties due shall be determined and declared
by the applicant for the LC subject to the
c. Per day of P 120 plus 1/10 of 1% on penalties prescribed under the Tariff and
default for the amount of Customs Code.
the succeeding delayed c. Other payment arrangements. The
days of default remittance
requirement of a deposit shall likewise apply
Provided, That: even if the importation is effected under
(1) Fines imposed above shall not be in other types of payment arrangements or on
excess of P30,000 a day; a deferred payment basis. The deposit
(2) The default shall start to run on the should be made upon presentation of the
day following the last day required for import documents to the agent bank.
submission of the report or remittance, as d. Validation of official receipt. Such
the case may be. However, should the last deposits shall be validated by official
day of filing fall on a non-banking day in receipts of the FIs concerned and shall be
the locality where the reporting bank is credited in the final computation of the
situated, the default shall start on the day import duties, taxes and other charges due
following the next banking day; and on the importation, upon the filing of the
(3) The manner of payment or collection corresponding import entry.
of fines enumerated under Subsec. X902.1 e. Collection of deficiency and refund
shall apply. of excess deposits. Any deficiency in the
(As amended by Circular No. 585 dated 15 October 2007) deposit made as against the actual import
duties, taxes and other charges due on the
§ X903.9 (2008 - X604.9) Liquidity floor importation shall be collected by the
requirement on revenue collections Bureau of Customs from the importer
Revenue collections of AABs shall be prior to the release or withdrawal of the
subject to the liquidity floor requirement shipment. Any excess deposit shall be
under Subsec. X240.6. refunded by the Bureau of Customs to the
importer.
§ X903.10 (2008 - X604.10) Collection f. Remittance of collection. The BSP
of import duties at the time of opening of DDA of the FIs concerned shall be debited
letters of credit. The following rules and for the deposits collected, in accordance
regulations shall govern the collection of with Subsec. X903.5
import duties at the time of opening of letters Under e2m ports
of credit (LC) covering imports and for other a. Collection of deposits of import
purposes: duties. All FIs shall, prior to opening of the
Under Non-e2m ports LC covering imports, collect from the
a. Collection of deposits of import applicant/importer a deposit equivalent to
duties. All FIs shall, upon opening of the LC the full amount of advance import duties

§ X903.10
09.12.31
due on the importation covered by such LC. applicant a sworn statement to the effect that
The deposit which shall be effected through it is duty-exempt and citing the specific basis/
an electronic Import Entry Declaration (IED) authority of such exemption, supported by
lodged thru a Value Added Service Provider a copy of the applicable certification/
(VASP), shall not be withdrawable and shall approval/letter of authority of the
be utilized only by crediting the same to government agency concerned.
the import duties due on the importation. d. Transmittal of the ADPI to the AABs.
b. Amount of advance deposit. The The ADPI shall be transmitted by the BOC
import duties due shall be computed by the to the PCHC Payment Gateway which shall
Electronic to Mobile (e2m) system based on have responsibility for forwarding the same
the applicant’s declared descriptions, to the AAB concerned.
ASEAN Harmonized Tariff Nomenclature e. Collection by debit from designated
(AHTN), quantities and values in the IED. bank account. The collection of the advance
The LC applicant must ensure that the deposit as well as of the final duties, taxes
particulars of the LC application and the and other charges payable on the
supporting pro-forma invoice correspond to importation shall be by debit from the
those declared in the IED and any applicant’s bank account designated in the
undervaluation, misclassification and ADPI or in the Final Payment Instruction
misdeclaration in the IED shall subject the (FPI) and credited to the BOC’s account.
LC applicant to the penalties prescribed f. Validation of advance deposits.
under Section 2503 of the Tariff and Payment of advance deposits shall be
Customs Code, as amended. The amount validated by official receipts, such as
payable to the AAB, which shall be the full electronic Advance Payment Confirmations
advance duty payable on the importation (APC) prepared and transmitted by the AAB
taking into account exemptions obtained, using the payment subsystem of the e2m
shall be notified to the AAB thru an system via the PCHC Payment Gateway.
electronic Advance Deposit Payment g. Other payment arrangements. The
Instruction (ADPI). requirement of a deposit as stated in
The net amount payable must be paid Item “a” hereof shall likewise apply even if
within the IED validity period which is the importation is effected under other types
reckoned as seven (7) calendar days from of payment arrangements or on a deferred
date the payment instruction is generated payment basis. The deposit should be made
by the e2m system. Beyond the validity upon presentation of the import documents
period, the IED status will be indicated as to the AAB.
expired. For expired lEDs, AABs shall not h. Confirmation of advance duties
accept payment. Importers will have to file collected. The e2m system shall provide the
a new IED. importer’s VASP the APC. The VASP shall
c. Duty exempt imports. If the importer/ in turn notify the importer by e-mail of its
applicant declares in the IED that the receipt of the APC and provide the importer
importation is exempt from duties, such a printed copy thereof upon request.
claim shall be taken at face value in the i. Collection of final duties and tax
determination by the Bureau of Customs payable. The final duties and tax payable as
(BOC) of the amount of advance deposit. computed by the e2m system shall be
However, AABs shall, as a requirement for notified to the AAB concerned thru an
the opening of the LC, require from the electronic FPI. After collecting the amount

§§ X903.10 - X906
17.03.31
in the FPI, the AAP shall transmit to BOC deposits shall be subject to the reserve
via the PCHC Payment Gateway a Final requirements and the liquidity floor
Payment Confirmation (FPC). requirements on government deposits.
j. Statement of duties and taxes (As amended by Circular Nos. 831 dated 02 May 2014 and 722
availment (SDTA). Upon receipt of the FPC dated 17 May 2011)
from the AAB, the BOC shall provide the
importer electronically an SDTA which shall Sec. X905 (2008 - X605.3) Collection
be his proof of having settled all duties, Agents of PhilHealth. Banks are authorized
taxes, and other charges on the importation. to act as collecting agents of the Philippine
k. Phased implementation. The e2m Health Insurance Corporation (PhilHealth)
system shall be rolled out nationwide in under which agency:
phases. Importations to be cleared thru a. PhilHealth members may pay their
Customs Collection Districts already premium contributions to PhilHealth
operating the e2m system shall be paid thru through the said banks and the funds thus
payment system prescribed under this collected shall be remitted to PhilHealth in
Section. However, importations to be accordance with PhilHealth’s agreed
cleared thru non-e2m customs ports shall remittance schedule which in no case shall
follow the old payment system during the exceed thirty (30) days from receipt thereof;
migration period. b. During the period that such premium
Violations. Any violation of the contributions are in the custody of banks,
provisions of this Subsection shall be such funds shall not earn interest; and
penalized under the pertinent provisions of c. The banks shall not collect from
the Tariff and Customs Code of the PhilHealth any service charge for such agency.
Philippines, as amended, and/or under The funds collected by the banks shall
Section 37 of R.A. No. 7653. be handled by the operating departments
(As amended by Circular No.638 dated 09 January 2009) (cash departments) of the banks concerned
and not their trust operations: Provided,
Sec. X904 Collection Agents of the Social however, That such funds shall be subject to
Security System. Banks duly accredited by the reserve requirement on deposits and to
the SSS are authorized to act as collection the liquidity floor on government deposits.
agents under which agency, members of the
SSS may pay their contributions for social Sec. X906 (2008 - X660) Disclosure of
security and employees compensation to the Remittance Charges and Other Relevant
SSS through the said banks. Such banks are Information.1 It is the policy of the Bangko
also authorized to receive from SSS members Sentral to promote the efficient delivery of
amortization payments for loans granted by competitively-priced remittance services by
the SSS and such other payments due to SSS. banks and other remittance service
The funds thus collected shall be providers by promoting competition and the
remitted to the SSS within the period use of innovative payment systems,
prescribed by the SSS. Any form of business/ strengthening the financial infrastructure,
compensation arrangement to the collection enhancing access to formal remittance
agents shall be in accordance with the terms channels in the source and destination
and conditions agreed upon by the parties. countries, deepening the financial literacy
The funds collected by banks shall be of consumers, and improving transparency
handled by the bank proper and not the trust in remittance transactions, consistent with
department: Provided, however, That such sound banking practices.
1
The BSFIs shall have until 27 April 2017 to comply with the provision of this Section.

§§ X906 - X907.2
17.03.31
Towards this end, banks providing sender/remitter and a beneficiary who are
overseas remittance services shall disclose both within the Philippines, or between
to the remittance sender and to the recipient/ two (2) accounts within the Philippines.
beneficiary, the following minimum items (Circular No. 534 dated 26 June 2006, as amended by Circular
of information regarding remittance No. 952 dated 22 March 2017)
transactions, as defined herein:
C. SECURITIES BROKERING
a. Transfer/remittance fee - charge for
ACTIVITIES OF BANKS
processing/sending the remittance from the
country of origin to the country of
Sec. X907 Segregation of Customer Funds
destination and/or charge for receiving the
and Securities Received by Banks in the
remittance at the country of destination;
Performance of their Securities Brokering
b. Exchange rate - rate of conversion
Functions.
from foreign currency to local currency,
e.g., peso-dollar rate;
§ X907.1 Statement of policy. Pursuant
c. Exchange rate differential/spread -
to the Bangko Sentral’s policy of promoting
foreign exchange mark-up or the difference
the development of domestic capital markets
between the prevailing Bangko Sentral
by upholding investor protection and
reference/guiding rate and the exchange/
transparency in securities transactions,
conversion rate;
following are the guidelines relating to the
d. Other currency conversion charges -
segregation, handling and reporting of
commissions or service fees, if any;
customer funds and securities received by
e. Other related charges - e.g., surcharges,
banks in the performance of their securities
postage, text message or telegram;
brokering functions.
f. Amount/currency paid out in the
The limited coverage of the guidelines
recipient country - exact amount of money
shall not relieve the bank acting as securities
the recipient should receive in local currency
broker of its obligation to comply with other
or foreign currency; and
requirements of the Securities Regulation
g. Delivery time to recipients/
Code (SRC) and its Implementing Rules and
beneficiaries - delivery period of remittance
Regulations (IRR).
to beneficiary stated in number of days, (Circular No. 885 dated 14 August 2015)
hours or minutes.
Banks shall likewise post said § X907.2 Definition of terms.
information in their respective websites and a. Securities brokering- A securities
display them prominently in conspicuous brokering transaction refers to the act of
places within their premises and/or buying and selling evidences of
remittance/service centers. indebtedness, shares and all types of
In case of domestic remittance securities by order of and for the account of
transactions, all fees to the transactions shall customers.
be charged upfront by banks from the b. Securities broker – A securities broker
sender/remitter’s end, with appropriate refers to an entity which is duly-registered
disclosure to the sender/remitter of the by the SEC to engage in securities brokering
components of the fees being charged. This transactions.
does not preclude the bank and/or other c. Customer – A customer refers to any
participants to the domestic remittance person from whom, or on whose behalf, a
transaction from charging service fees. securities broker receives, acquires or holds
Domestic remittance transaction, for this funds or securities for the account of such
purpose, is a transfer of funds between a person.
Manual of Regulations for Banks Part IX - Page 8a

§§ X907.2 - X907.4
15.10.31
d. Customer securities – Customer prevention of conflict of interest situations

securities refer to (1) securities received by that may arise in the conduct of securities
a securities broker in behalf of any brokering activities within the bank.
customer; (2) securities carried long by a (Circular No. 885 dated 14 August 2015)
securities broker for the account of any
customer; (3) securities sold to, or bought § X907.4 Accounting and record
for, a customer, by a securities broker. keeping. A bank shall make and keep
e. Customer funds- This shall refer to current books and records relating to
funds received from a customer by a broker customer funds and securities which shall
under a securities brokering arrangement. be maintained in the principal office of the
f. Broker customer account for bank.
settlement of customer trades- This shall a. Customer funds received by banks in
refer to the separate cash account and its brokering activities shall be recorded in
margin account of the customer which shall the liability account “Broker Customer
be used exclusively for the settlement of Account for Settlement of Customer
securities brokering transactions. Trades.” This account shall be governed by
g. Broker customer securities account- the following guidelines:
This shall refer to customer securities held (1) All funds under this account are held
in accordance with securities brokering by the bank in a fiduciary capacity.
agreements such as securities held as margin (2) It shall be free from any and all liens
and/or prior to the settlement of a customer on the bank’s assets and shall not be held
securities transaction. to answer for any liability of the bank.
(Circular No. 885 dated 14 August 2015) (3) It shall not earn interest and will not
be included under the coverage of an
§ X907.3 Segregation of customer funds insured deposit under R.A. No. 3591, as
and securities. A bank which receives amended.
customer funds and securities in the (4) It shall also be excluded from the
performance of their securities brokering monies/assets for which the Bangko Sentral
transactions shall keep these funds and requires reserves.
securities separate from its own assets and b. Securities received by banks in its
liabilities. brokering activities such as securities held
a. For securities brokering purposes, as margin and/or held prior to the settlement
separate accounts, shall be opened and of customer securities transaction shall be
maintained by/for the customers, designated recorded as an off-balance sheet item under
as follows: the “Broker Customer Securities Account”
(1) “Broker Customer Account for in the books of the bank proper. This
Settlement of Customer Trades” where all account shall be governed by the following
funds pertinent to securities brokering guidelines:
transactions shall be lodged; and (1) All securities under this account are
(2) “Broker Customer Securities held by the bank in a fiduciary capacity.
Account” where all securities pertinent to (2) This shall be free from any and all
securities brokering transaction of the liens on the bank’s assets and shall not be
customers shall be lodged. held to answer for any liability of the bank.
b. The bank must institute adequate risk (3) This shall also be excluded from the
management systems and controls to ensure monies/assets for which the Bangko Sentral
protection of customer funds and securities, provides reserve requirements.
proper segregation of functions and (Circular No. 885 dated 14 August 2015)
Part IX - Page 8b Manual of Regulations for Banks

§§ X907.5 - X931.2
16.03.31
§ X907.5 Receivership. Whenever a from 30 September 2015 upon due notice

receiver is appointed by the Monetary to the banks concerned.
Board for a bank which is authorized to (Circular No. 885 dated 14 August 2015, as amended by
engage in securities brokering activities, M-2015-034 dated 14 September 2015 and Circular No. 903
the receiver shall, pursuant to the dated 29 February 2016)
instructions of the Monetary Board,
proceed to close the securities business Secs. X908 - X930 (Reserved)
promptly and arrange for another
Exchange Member, where such bank is a D. CREDIT RATING AGENCIES
member of an Exchange, to take over any
outstanding contracts and inform the Sec. X931 (2008 - X654) Recognition and
affected customers in writing that their Derecognition of Domestic Credit Rating
accounts have been transferred. Agencies for Bank Supervisory Purposes.
Where the bank is not a member of an The following regulations shall govern the
Exchange, the receiver pursuant to the recognition and derecognition of domestic
instructions of the Monetary Board, shall credit rating agencies (CRAs) for bank
notify the affected customers, if any, of the supervisory purposes.
placement of such bank under receivership
and require that they transfer their accounts § X931.1 (2008 - X654.1) Statement of
to another broker. policy. The introduction in the financial
(Circular No. 885 dated 14 August 2015) market of new and innovative products
create increasing demand for and reliance
§ X907.6 Reportorial requirements. All on CRAs by the industry players and
banks with securities brokering license shall regulators as well. As a matter of policy, the
submit to the appropriate unit of the SES on Bangko Sentral wants to ensure that the
a monthly basis an additional report listed reliance on credit ratings is not misplaced.
in Appendix 6. This report shall be The following rules and regulations that shall
considered a Category A-1 report and shall
govern the recognition/derecognition of
contain the end-of-week balances of cash
domestic CRAs for bank supervisory
and securities that are held in accordance
purposes.
with the securities brokering arrangement
with its clients.
Transitory provisions. Banks acting as § X931.2 (2008 - X654.2) Minimum
securities brokers shall report their securities eligibility criteria. Only ratings issued by
brokering transactions in the FRP report CRAs recognized by the Bangko Sentral
format (both solo and consolidated basis) shall be considered for Bangko Sentral bank
listed in Appendix 6, beginning with the supervisory purposes. The Bangko Sentral,
reporting period ending 30 September 2015. through the Monetary Board, may officially
The submission of the additional report recognize a credit rating agency upon
required shall commence from the reporting satisfaction of the following requirements:
period ending 30 September 2015. This a. Organizational structure
report shall be submitted every 15th banking (1) A domestic CRA must be a duly
day after end of reference month. The registered company under the SEC; and
additional report shall be considered a (2) A domestic CRA must have at least
provisional report template which may be five (5) years track record in the issuance of
revised by the Bangko Sentral six (6) months reliable and credible ratings. In the case of
Manual of Regulations for Banks Part IX - Page 8c

§ X931.2
08.12.31
new entrants, a probationary status may be assessed/rated entities as a routine

granted: Provided, That the CRA employs component of the surveillance process;
professional analytical staff with experience (c) The CRA shall establish a Rating
in the credit rating business. Committee composed of adequately
b. Resources qualified and knowledgeable individuals in
(1) Human Resources the rating business, majority of whom must
(a) The size and quality of the CRA’s have at least five (5) years experience in
credit rating business;
professional analytical staff must have the
(d) The directors of the CRA must possess
capability to thoroughly and competently a high degree of competency equipped with
evaluate the assessed/rated entity’s the appropriate education and relevant
creditworthiness; experience in the rating business;
(b) The size of the CRA’s professional (e) The directors, officers, members of
analytical staff must be sufficient to allow the rating committee and professional
substantial on-going contact with senior analytical staff of the CRA have not at any
management and operational levels of time been convicted of any offense
(Next page is Part IX - Page 9)
Part IX - Page 8d Manual of Regulations for Banks

§ X931.2
08.12.31
involving moral turpitude or violation of e. Transparency

the Securities Regulation Code; and (1) A general statement of the
(f) The directors, officers, members of assessment methodology used by the CRA
the rating committee and professional should be publicly available;
analytical staff of the CRA are not currently (2) The CRA shall disseminate to the
involved as a defendant in any litigation public thru a well-circularized publication,
connected with violations of the Securities all assigned ratings disclosing whether the
Regulation Code nor included in the BSP rating issued is solicited or unsolicited;
watchlist. (3) The rationale of ratings issued and
(2) Financial resources risk factors considered in the assessment
(a) The CRA must have the financial should be made available to the public;
capability to invest in the necessary (4) The ratings issued by the CRA
technological infrastructure to ensure should be available both to domestic and
speedy acquisition and processing of data/ foreign institutions with legitimate
information and timely release of reliable interest; and
and credible ratings; and (5) Publication of changes in ratings
(b) The CRA must have financial together with the basis for the change
independence that will allow it to should be done on a timely basis.
operate free from economic and political f. Disclosure requirements
pressures. (1) Qualitative disclosures
c. Objectivity (a) Definition of ratings along with
(1) The CRA must use a rigorous and corresponding symbols;
systematic assessment methodology that (b) Definition of what constitutes a
has been established for at least one (1) default, time horizon within which a
year; however, a three (3)-year period is default is considered and measure of loss
preferable; given a default; and
(2) The assessment methodology of (c) Material changes within the CRA
the CRA must be based both on qualitative (i.e., changes in management or
and quantitative approaches; and organizational structure, rating personnel,
(3) The CRA must use an assessment modifications of rating practices, financial
methodology that is subject to on-going deterioration) that may affect its ability to
review and is responsive to changes in the provide reliable and credible ratings.
operations of assessed/rated entities. (2) Quantitative disclosures
d. Independence (a) Actual default rates experienced in
(1) The CRA must be free from control each rating category; and
of and undue influence by the entities it (b) Rating transitions of assessed/
assesses/rates; rated entities over time (i.e., likelihood
(2) The assessment process must be of an AAA credit rating transiting to AA
free from ownership pressures to allow etc. over time).
management to exercise independent g. Credibility
professional judgement; (1) The CRA must have a general
(3) Persons directly involved in the reputation of high standards of integrity
assessment process of the CRA are free and fairness in dealing with its clients and
from conflicts of interest with assessed/ conducts its business in an ethical
rated entities; and manner;
(4) The CRA does not assess/rate an (2) The CRA is generally accepted by
associate entity. predominant users in the market

§§ X931.2 - X931.3
08.12.31
(i.e., issuers, investors, bankers, financial § X931.3 (2008 - X654.3) Pre-

institutions, securities traders); and qualification requirements
(3) The CRA must carry out its rating The application of a domestic CRA
activities with due diligence to ensure for BSP recognition shall be submitted
ratings are fair and appropriate. to the appropriate department of the SES
For purposes of this Section, a of the BSP together with the following
subsidiary refers to a corporation, more information/documents:
than fifty percent (50%) of the voting stock a. An undertaking
of which is owned or controlled directly or (1) That the CRA shall comply with
indirectly by the CRA while an affiliate regulations, directives and instructions
refers to a corporation, not more than fifty which the BSP or other regulatory
percent (50%) but not less than ten percent agency/body may issue from time to
(10%) of the voting stock of which is owned time; and
or controlled directly or indirectly by the (2) That the CRA shall notify the BSP
CRA. in writing of any material changes within
“Control” exists when the parent the organization (i.e., changes in
owns directly or indirectly through management or organizational structure,
subsidiaries more than one-half of the rating personnel, modifications of its rating
voting power of an enterprise unless, in practices, financial deterioration) that may
exceptional circumstance, it can be affect its ability to provide reliable and
clearly demonstrated that such credible ratings.
ownership does not constitute control. b. Other documents/information:
Control may also exist even when (1) Brief history of the CRA, major
ownership is one-half or less of the voting rating activities handled including
power of an enterprise when there is: information on the name of the client,
(a) power over more than one-half of type of instruments rated, size and year
the voting rights by virtue of an agreement of issue;
with other stockholders; (2) Audited financial statements for
(b) power to govern the financial and the past three (3) years and such other
operating policies of the enterprise under information as the Monetary Board
a statute or an agreement; may consider necessary for selection
(c) power to appoint or remove the purposes;
majority of the members of the board of (3) For new entrants, employment of
directors or equivalent governing body; professional analytical staff with
(d) power to cast the majority votes at experience in the credit rating business;
meetings of the board of directors or (4) List of major stockholders/partners
equivalent governing body; or (owning at least ten percent (10%) of the
(e) any other arrangement similar to voting stocks of the CRA directly or along
any of the above. with relatives within the 1st degree of
h. Internal compliance procedures consanguinity or affinity);
(1) The CRA must have the necessary (5) List of directors, officers,
internal procedures to prevent misuse or members of the rating committee and
unauthorized disclosure of confidential/ professional analytical staff of the CRA;
non-public information; and including their qualifications, experience
(2) The CRA must have rules and related to rating activities, directorship
regulations that prevent insider trading and and shareholdings in the CRA and in
other conflict of interest situations. other companies, if any;

§§ X931.3 - X932.1
08.12.31
(6) List of subsidiaries and affiliates b. Procedure for derecognition. A CRA

including their line of business and the shall only be derecognized upon prior notice
nature of interest of the CRA in these and after being given the opportunity to
companies; defend itself.
(7) Details of the denial of a previous
request for recognition, if any § X931.6 (2008 - X654.6) Recognition
(i.e., application date, date of denial, reason of PhilRatings as domestic credit rating
for denial etc.); and agency for bank supervisory purposes
(8) Details of all settled and pending Credit ratings assigned by Philippine
litigations connected with the securities Rating Services Corporation (PhilRatings)
market against the CRA, its directors, may be used, among others, for
officers, stockholders, members of the rating determining appropriate risk weights in
committee and professional analytical staff, ascertaining compliance with existing
if any. rules and regulations on risk-based capital
requirements.
§ X931.4 (2008 - X654.4) Inclusion in
Bangko Sentral list. The BSP will regularly Sec. X932 (2008 - X659) Internationally
circularize to all banks and NBFIs an Accepted Credit Rating Agencies
updated list of recognized CRAs. The BSP, Internationally accepted CRAs are
however, shall not be liable for any damage recognized for bank supervisory purposes
or loss that may arise from its recognition to undertake local and national ratings:
of CRAs to be engaged by users. Provided, That said CRAs shall have at least
a representative office in the Philippines.
§ X931.5 (2008 - X654.5) Derecognition Accordingly, credit ratings assigned by said
of credit rating agencies CRAs may be used, among others, as basis
a. Grounds for derecognition. Credit for determining appropriate risk weights in
rating agencies may be derecognized from ascertaining compliance with existing rules
the list of BSP recognized CRAs under the and regulations on risk-based capital
following circumstances: requirements.
(1) Failure to maintain compliance
with the requirements under Subsec. § X932.1 (2008 - X659.6) Recognition
X931.2 or any willful misrepresentation in of Fitch Singapore Pte., Ltd. as International
the information/documents required under credit rating agency for bank supervisory
Subsec. X931.3; purposes. The national or domestic credit
(2) Involvement in illegal activities such ratings of Fitch Singapore Pte. Ltd., a BSP-
as ratings blackmail; creation of a false recognized international credit rating agency
market or insider trading; divulging any with representative office in the Philippines,
confidential information about a client is hereby recognized by the BSP for bank
without prior consent to a third party supervisory purposes. Accordingly, national
without legitimate interest; indulging in or domestic credit ratings assigned by Fitch
unfair competition (i.e., luring clients of Singapore Pte. Ltd. may be used, among
another rating agency by assuring higher others, as basis for determining appropriate
ratings etc.); and risk weights in ascertaining compliance
(3) Any violations of applicable laws, with existing rules and regulations on risk-
rules and regulations. based capital requirements.

§§ X933 - § X934.3
10.12.31
Sec. X933 (Reserved) 1. Brief history of the MIRA, major

rating activities handled including
Sec. X934 Recognition and Derecognition of information on the name of the client, type
Microfinance Institution Rating Agencies of instruments rated, size and year of
The following regulations shall govern the issue;
recognition and derecognition of 2. Audited financial statements for
Microfinance Institution Rating Agencies the past three (3) years and such other
(MIRA) that provide ratings for banks with information that may be considered
microfinance operation. relevant for selection purposes;
(Circular No. 685 dated 07 April 2010) 3. List of major stockholders/partners
(owning at least ten percent (10%) of the
§ X934.1 Statement of policy. Third- voting stocks of the MIRA directly or
party ratings of FIs provide an independent together with relatives within the 1st degree
assessment which will ultimately benefit of consanguinity or affinity);
stakeholders, including the management of 4. List of directors, officers, members
the covered FI. For microfinance institutions, of the rating committee and professional
the enhanced transparency and independent analytical staff of the MIRA; including their
assessment can materially improve access qualifications, experience related to rating
to capital of qualified institutions and activities, directorship and shareholdings in
generate a useful benchmark vis-à-vis other the MIRA and in other companies, if any;
microfinance institutions. As a matter of 5. List of subsidiaries and affiliates
policy, the BSP supports an enabling including their line of business and the
environment for the appropriate use of nature of interest of the MIRA in these
objective, credible and competent third-party companies;
ratings of microfinance institutions. 6. Details of the denial of a previous
(Circular No. 685 dated 07 April 2010) request for recognition, if any (such as
application data, date of denial, reason for
§ X934.2 Pre-qualification requirements denial, etc.); and
The application of a MIRA for BSP 7. Details of all previous and pending
recognition shall be submitted to the litigations connected with the securities
appropriate department of the SES together market against the MIRA, its directors,
with the following information/documents: officers, stockholders, members of the rating
a. An undertaking that: committee and professional analytical staff,
1. the MIRA shall comply with if any.
regulations, directives and instructions which (Circular No. 685 dated 07 April 2010)
the BSP may issue from time to time; and
2. the MIRA shall notify the BSP in § X934.3 Minimum eligibility criteria
writing of any material changes within the The BSP will review the application based
organization (such as but not limited to on the following basic principles:
changes in management or organizational 1. The proposed rating framework that
structure, rating personnel, modifications of will be used by the applicant-MIRA reflects
its rating practices and financial all the material facets of microfinance
deterioration) that may affect its ability to operations, its attendant risks and
provide reliable and credible ratings. operational challenges; and
b. Other documents/information: 2. The applicant-MIRA demonstrates

§§ X934.3
10.12.31
the technical capability, experience and (d) The directors of the MIRA must
organization to provide microfinance ratings possess a high degree of competency
that are objective, credible and transparent. equipped with the appropriate education
Based on the above principles, the BSP, and relevant experience in the rating
through the Monetary Board, may officially business;
recognize a MIRA upon satisfaction of the (e) The directors, officers, members of
following requirements. The official the Rating Committee and professional
recognition shall be valid for a period of analytical staff of the MIRA have not at any
three (3) years and may be renewed upon time been convicted of any offense involving
assessment that the following requirements moral turpitude or violation of the Securities
are satisfied. Regulation Code; and
a. Organizational structure ( f ) The directors, officers, members of
1. A MIRA must be duly registered the Rating Committee and professional
with the SEC and have the necessary permits analytical staff of the MIRA are not currently
to operate; involved as a defendant in any litigation
2. A MIRA must have at least five (5) connected with violations of the Securities
years track record in the issuance of reliable Regulation Code nor included in the BSP
and credible ratings with particular watchlist.
experience in microfinance; and 2. Financial resources
3. An international MIRA that will (a) The MIRA must have financial
undertake local ratings shall have a capability to support viable operations such
representative office in the Philippines. as, but not limited to, the necessary
b. Resources technology and infrastructure to ensure the
1. Human resources effective processing of data/information and
(a) A MIRA must be staffed by full-time the timely release of reliable and credible
analysts who have the demonstrated ratings; and
capability to competently assess the credit- (b) The MIRA must have financial
worthiness of a microfinance institution independence that will allow it to operate
(MFI). The analysts referred herein preclude free from economic and political pressures.
support staff engaged in other functions such c. Objectivity
as, but not limited to, marketing and 1. The MIRA must employ an
administration; assessment methodology which is accepted
(b) A MIRA must have a sufficient as a global standard. Where the MIRA uses
number of analyst so as to allow substantive its own proprietary framework, said
interaction with the senior management and methodology must have been in market use
operating units of the assessed/rated entities for at least three (3) years with demonstrable
as a routine component of the surveillance credibility;
process; 2. The assessment methodology used
(c) The MIRA shall establish a Rating by the MIRA must be based both on
Committee, independent of its analysts, qualitative and quantitative approaches; and
whose members have unquestionable 3. Said assessment methodology must
expertise in the rating business, majority of be subjected to periodic review to ensure
whom must have at least five (5) years direct that it is responsive to changes in the
professional experience in rating operations of assessed/rated entities.
institutions; d. Independence
Manual of Regulations for Banks Part IX - Page 12a

§§ X934.3
10.12.31
1. The MIRA must be free from control v. any other arrangement similar to
of and undue influence by the entities it any of the above.
assesses/rates; e. Transparency
2. The assessment process must be 1. A general statement of the
free from ownership pressures to allow the assessment methodology used by the MIRA
management of the MIRA to exercise should be publicly available;
independent professional judgment; 2. The rationale of ratings issued and
3. Persons directly involved in the risk factors considered in the assessment
assessment process of the MIRA are free should be made available to the public; and
from conflicts of interest with assessed/rated 3. The ratings issued by the MIRA
entities; and should be available both to domestic and
4. The MIRA cannot assess/rate its foreign institutions with legitimate interest.
affiliate or subsidiary or any other entity in f. Disclosure Requirements
which the MIRA has control. 1. Qualitative Disclosures
For purposes of this section, a subsidiary (a) Definition of ratings along with
refers to a corporation, more than fifty corresponding symbols; and
percent (50%) of the voting stock of which (b) Material changes within the MIRA
is owned or controlled directly or indirectly (such as but not limited to changes in
by the MIRA, while an affiliate refers to a management or organizational structure,
corporation, not more than fifty percent rating personnel, modification of rating
(50%) but not less than ten percent (10%) practices, financial deterioration) that may
of the voting stock of which is owned or affect its ability to provide reliable and
controlled directly or indirectly by the MIRA. credible ratings.
“Control” exists when the parent owns 2. Quantitative Disclosures. Rating
directly or indirectly through subsidiaries transitions of assessed/rated entities over
more than one half (1/2) of the voting power time, i.e., the likelihood that the current
of an enterprise unless, in exceptional rating of an entity will change to another
circumstance,; It can be clearly rating (either higher or lower) over time.
demonstrated that such ownership does not g. Credibility
constitute control. Control may also exist 1. The MIRA must have a general
even when ownership is one half(1/2) or less reputation of high standards of integrity and
of the voting power of an enterprise when fairness in dealing with its clients and
there is: conducts its business in ethical manner;
i. power over more than one half 2. The MIRA is generally accepted by
(1/2) of the voting rights by virtue of an predominant users in the market (i.e.,
agreement with other stockholders; issuers, investors, bankers, FIs, securities
ii. power to govern the financial and traders); and
operating policies of the enterprise under a 3. The MIRA must carry out its rating
statute or an agreement; activities with due diligence to ensure
iii. power to appoint or remove the ratings are fair and appropriate.
majority of the members of the board of h. Internal compliance procedures
directors or equivalent governing body; 1. The MIRA must have the necessary
iv. power to cast the majority votes at internal procedures to prevent misuse or
meeting of the board of directors or unauthorized disclosure of confidential/non-
equivalent governing body; or public information; and
Part IX - Page 12b Manual of Regulations for Banks

§§ X934.3 - X950
15.12.31
2. The MIRA must have rules and branches as outlets and/or selling such
regulations that prevent insider trading and financial products without prior Bangko
other conflict of interest situations. Sentral approval.
(Circular No. 685 dated 07 April 2010)
Sec. 1948 (2008 - 1650) Offering in the
§ X934.4 Derecognition of MIRA. Philippines of Products by Parent Bank and
a. Grounds for derecognition. MIRAs Branches Abroad of the Parent Bank.
may be derecognized, upon evaluation of Philippine branches and subsidiaries of
the appropriate department of the SES, under foreign banks shall:
the following circumstances: a. Inform/notify the Bangko Sentral if
1. Any willful misrepresentation and/ their parent bank and/or branches abroad
or falsification of information/documents of their parent bank offer or market products
required under this Section. in the Philippines, either through electronic
2. Failure to maintain compliance with means (website) or through its local desks
the requirements under this Section. (within bank premises); and
3. Involvement in illegal activities such b. In cases when there are products
as ratings blackmail; creation of a false being offered, to submit to the appropriate
market or insider trading; divulging any department of the SES within ten (10)
confidential information about a client banking days from receipt of Circular Letter
without prior consent to a third party dated 12 April 2005, the list of products
without legitimate interest; indulging in offered/marketed, the corresponding
unfair competition (such as luring clients of manuals containing the policies and
another rating agency by assuring higher procedures, the flow chart of transaction and
ratings, etc.) the risk management system for each
4. Failure to deliver credible, objective particular product.
and transparent ratings as prescribed in this
Section; and Sec. 2948 (Reserved)
5. Any violation of applicable laws,
rules and regulations. Sec. 3948 (Reserved)
b. Procedure for derecognition. A
MIRA shall only be derecognized upon prior Sec. X949 (Reserved)
notice and after being given the opportunity
to defend itself. E. PHILIPPINE & FOREIGN
(Circular No. 685 dated 07 April 2010) CURRENCY NOTES & COINS
Secs. X935 - X946 (Reserved) Sec. X950 (2008 - X610) Philippine and
Foreign Currency Notes and Coins. The
Sec. X947 (2008 - X632) Prohibition on the following rules and regulations shall govern
Sale of Foreign-Based Mutual Funds by the treatment and disposition of counterfeit
Banks. Criminal and administrative Philippine and foreign currency notes and
sanctions prescribed under Sections 36 and coins, the reproduction and/or use of
37, respectively, of R.A. No. 7653 (The facsimiles of legal tender Philippine
New Central Bank Act) shall be imposed currency notes and coins, the replacement
on banks marketing/selling foreign-based and redemption of legal tender Philippine
mutual funds using any or all of their currency notes and coins considered

§§ X950 - X950.2
15.12.31
mutilated or unfit for circulation, and the § X950.2 (2008 - X610.2) Treatment
treatment and disposition of Philippine and disposition of counterfeit Philippine
currency notes and coins called in for and foreign currency notes and coins.
replacement. Any person or entity, public or private,
The guidelines and procedures governing who receives or takes hold of a note or
currency deposits and withdrawals of banks coin which is counterfeit or whose
for credit to and debit from their DDAs with genuineness is questionable, whether
the Bangko Sentral is provided in Appendix 80. Philippine or foreign currency, shall issue
(As amended by Circular Nos. 890 dated 02 November 2015, a temporary receipt to its owner/holder
829 dated 13 March 2014 and M-2009-021 dated 16 June 2009) and must indicate therein his name,
address and community tax certificate
§ X950.1 (2008 - X610.1) Definition number or a reference number sourced
of terms. For purposes of this Section, the from any Philippine government-issued ID
following terms are defined: or passport number, or in case of a
a. Legal Tender Philippine Currency foreigner, the date of receipt, the
- Notes and coins issued and circulating denomination, serial number of the note
in accordance with R.A No. 265, as or the coin series as the case may be. The
amended, and/or R.A. No. 7653, which owner/holder shall be required to
when offered for the payment of public countersign the receipt and in case of
or private debt must be accepted. refusal, the reason shall be stated in the
b. Counterfeit Note - An imitation of receipt.
a legal and genuine note intended to Any person or entity, public or private,
deceive or to be taken for that which is who receives, takes hold or has in his
original, legal and genuine. possession a note or a coin which is
c. Counterfeit Coin - An imitation or counterfeit or whose genuineness is
forged design of a genuine and legal coin questionable, whether Philippine or
regardless of its intrinsic value or metallic foreign currency, shall forward the same
composition, intended to deceive or pass within five (5) working days from date
for the genuine coin. of receipt/possession thereof, together
d. Unauthorized Reproduction of with a copy of the temporary receipt
Legal Tender Philippine Note - A required herein for examination to:
reproduction of a facsimile or any
illustration or object bearing the likeness THE CURRENCY ISSUE AND
or similitude of legal tender Philippine INTEGRITY OFFICE
currency note or any part thereof, without Security Plant Complex
prior authority from the Governor of Bangko Sentral ng Pilipinas
Bangko Sentral or his duly authorized East Avenue, Diliman
representative. 1101 Quezon City
e. Unauthorized Reproduction of
Legal Tender Philippine Coin - A In cases where personal delivery to
reproduction of a facsimile or any object the Currency Issue and Integrity Office
in metal form bearing the likeness or (CIIO), Bangko Sentral ng Pilipinas,
similitude of legal tender Philippine Quezon City, is not feasible, delivery of
currency coin or any part thereof, without the aforestated notes or coins may be
prior authority from the Governor of made through any of the following
Bangko Sentral or his duly authorized agencies:
representative. (1) The Bangko Sentral Regional
(As amended by Circular Nos. 890 dated 02 November 2015 Offices/Branches; or

§§ X950.2 - X950.3
15.12.31
(2) Any banking institution under the The Bangko Sentral shall extend
supervision of the Bangko Sentral. assistance as may be requested of it in the
Any law enforcement agency which investigation, apprehension and/or
conducted any seizure of notes and coins, prosecution of person/s responsible for
whether Philippine or foreign, which are counterfeiting of notes and coins, both
counterfeits or suspected to be counterfeit Philippine or foreign.
currency, shall within five (5) working days (As amended by Circular Nos. 890 dated 02 November 2015
from date of seizure, advise in writing the and 829 dated 13 March 2014)
CIIO, Bangko Sentral ng Pilipinas, Quezon
City of said seizure enclosing therewith a § X950.3 (2008 - X610.3) Reproduction
copy of the receipt and inventory taken on and/or use of facsimiles of legal tender
the seized items. All seized notes or coins Philippine currency notes. No person or
which are not or no longer needed as entity, public or private, shall design,
engrave, print, make or execute in any other
evidence in any investigation/legal
manner, or utter, issue, distribute, circulate
proceedings shall be immediately turned
or use any handbill, advertisement, placard,
over to the CIIO, Bangko Sentral ng
circular, card, or any other object
Pilipinas, for proper disposition.
whatsoever bearing the facsimile, likeness
The CIIO, Bangko Sentral ng Pilipinas,
or similitude of any legal tender Philippine
after examining all notes and coins, whether
currency note, or any part thereof, whether
Philippine or foreign, submitted to it for
in black and white or any color or
examination and/or determination as to its combination of colors, without prior
genuineness, shall: authority therefor having been secured from
(a) Issue a corresponding certification the Governor, Bangko Sentral or his duly
for the currency examined, if needed; authorized representative.
(b) Stamp the word “COUNTERFEIT” on The reproduction and/or use of
both the front and the back of each note facsimiles or any illustration bearing the
found to be counterfeit; and likeness or similitude of legal tender
(c) Return to the owner/holder, and/or Philippine currency notes referred to above
sender the Philippine or foreign currency may be authorized by the Governor, Bangko
notes or coins found to be genuine in Sentral, or his duly authorized
accordance with existing accounting and representative, for printed illustrations in
auditing regulations. articles, books, journals, newspapers, or
All notes and coins, whether Philippine other similar materials and strictly for
or foreign, determined by the CIIO, Bangko numismatic, educational, historical,
Sentral ng Pilipinas, to be counterfeit newsworthy or other purposes which will
currency, shall not be returned to the maintain, promote or enhance the integrity
owner/holder, but shall be retained and later and dignity of said note: Provided, however,
disposed of in accordance with such That any such facsimile or illustration shall
guidelines as may be adopted by the Bangko be of a size less than three-fifths (3/5) or
Sentral, except those which will be used as more than one and one-half (1-1/2) times in
evidence in an investigation or legal size of the currency note being illustrated
proceedings, in which case, the same shall and that there will be no deviation from the
be retained and preserved by the Bangko purpose for which the notes will be used.
Sentral for evidentiary purposes. (As amended by Circular Nos. 890 dated 02 November 2015

§§ X950.4 - X950.6
16.12.31
§ X950.4 (2008 - X610.4) Reproduction Quezon City. Cost of shipment and other
and/or use of facsimiles of legal tender related expenses to be incurred shall be
Philippine currency coins. No person or solely for the account of the bank
entity, public or private, shall design, concerned.
engrave, make or execute in any other Coins submitted by banks to Bangko
manner, or use, issue, distribute any Sentral for deposit/determination of
object whatsoever bearing the likeness or redemption value shall be packed/bagged
similitude as to design, color or the in accordance with the following
inscription thereon of any legal tender procedure:
Philippine currency coin or any part a. Coins shall be free from adhesive
thereof, in metal form, irrespective of size tapes;
and metallic composition, without prior b. Coins shall be sorted into fit, unfit
authority from the Governor, Bangko or mutilated, per denomination and per
Sentral or his duly authorized series;
representative.
c. Each bag of coins shall contain the
The reproduction and/or use of
following standard number of pieces and
facsimiles or of any object bearing the
amount per denomination:
likeness or similitude of legal tender
Philippine currency coins referred to
above may be authorized by the Governor, Denomination Pieces Amount
Per Bag Per Bag
Bangko Sentral, or his duly authorized 10-piso 1,200 12,000.00
representative, strictly for numismatic, 5-piso 1,500 7,500.00
educational, historical and other purposes 1-piso 2,000 2,000.00
which will maintain, promote or enhance 25-sentimo 3,000 750.00
the integrity and dignity of said coins. 10-sentimo 4,500 450.00
5-sentimo 5,000 250.00
1-sentimo 5,000 50.00
Provided, however, That in the case of

§ X950.5 (2008 - X610.5) Clean note unfit or mutilated coins, these could be
and coin policy. As part of banks’ duties to packed in amounts of One Thousand Pesos
effect an expeditious withdrawal from (P1,000.00) for denomination 10-,5-, and
circulation of unfit Philippine currency notes 1-piso; and fifty pesos (P50.00) for 25-,
classified under Subsec. X950.6, banks and 10-, 5-, and 1-sentimo.
their branches shall observe the guidelines The CD and the Regional Offices/
and procedures governing currency deposits Branches of Bangko Sentral may refuse
and withdrawals of banks provided in acceptance of cash deposits that do not
Appendix 80. conform to these guidelines and procedures.
Provincial branches of banks may (As amended by Circular Nos. 931 dated 09 December 2016,
make direct deposits of currency notes, 897 dated 06 January 2016 and 829 dated 13 March 2014)
duly identified and sorted, with the
nearest Bangko Sentral Regional Office/ § X950.6 (2008 - X610.6) Replacement
Branch. In areas where there are no and redemption of legal tender Philippine
Bangko Sentral Regional Offices/Branches, currency notes and coins considered
provincial branches of banks shall arrange mutilated or unfit for circulation.
with their respective Head Offices the a. Unfit currency note. A currency note
shipment of their unfit or dirty notes for shall be considered unfit for circulation
deposit with the CD, Bangko Sentral in when:

§ X950.6
15.12.31
(1) It contains heavy creases which and/or denomination cannot be readily and
break the fiber of the paper and indicate that clearly identified.
disintegration has begun; or e. Currency notes and coins considered
(2) It is badly soiled/contaminated and/ unfit for circulation shall not be re-
or with writings even if it has proper life or circulated, but may be presented for
sizing; or exchange to or deposited with any bank.
(3) It presents a limp or raglike f. Banks shall accept from the public
appearance and/or it can not sustain its mutilated notes and coins for referral/
upright position when held at the mid transmittal to CIIO, Bangko Sentral –
portion of one of the shorter borders. Quezon City or any of the Bangko Sentral
b. Mutilated currency note. A currency Regional Offices/Branches for determination
note shall be considered mutilated when: of redemption value. Banks may charge
(1) Torn parts of banknote are joined reasonable handling fees from clients and/
together with adhesive tape aimed at or the general public relative to the handling/
preserving as nearly as possible the original
transporting to Bangko Sentral of mutilated
design and size of the note; or
notes and coins.
(2) The original size of the note has been
g. The Bangko Sentral shall replace or
reduced/lost through wear and tear or has
redeem notes and coins considered unfit for
been otherwise torn, damaged, defaced or
circulation or mutilated except under the
perforated through action of insects,
chemicals or other causes; or following conditions:
(3) It is scorched or burned to such an (1) Identification of notes and coins is
extent that although recognizable as such, impossible; or
it has become frail and brittle as to render (2) Coins that show signs of filing,
further handling thereof impossible without clipping or perforations; or
disintegration or breaking; or (3) Notes which have lost more than
(4) It is split edgewise; or two-fifths (2/5) of their surface or all of the
(5) It has lost all the signatures inscribed signatures inscribed thereon; or
thereon; or (4) Notes which are split edgewise
(6) The Embedded Security Thread or resulting in the loss of the whole of or part
Windowed Security Thread placed on the of, either the face or back portion of the
banknote is lost. banknote paper; or
c. Unfit currency coin. A currency coin (5) Notes where the Embedded Security
shall be considered unfit for circulation when: Thread or Windowed Security Thread
(1) It is bent or twisted out of shape or placed thereon is completely lost except
defaced, but its genuineness and/or when the damage appears to be caused by
denomination can still be readily and clearly wear and tear, accidental burning, action
determined/identified; or of water or chemical or bites of rodents/
(2) It has been considerably reduced in insects and the likes.
weight by natural abrasion/wear and tear. Notes and coins falling under any of the
d. Mutilated currency coin. A currency classifications mentioned under Item “g”
coin shall be considered mutilated when: above shall be withdrawn from circulation
(1) It shows signs of filing, clipping or and demonetized without compensation to
perforation; or the owner/bearer.
(2) It shows signs of having been burned (As amended by Circular Nos. 890 dated 02 November 2015
or has been so defaced, that its genuineness and 829 dated 13 March 2014)

§§ X950.7 - X954.1
16.12.31
§ X950.7 (2008 - X610.7) Treatment less than five (5) years, but not more than
and disposition of Philippine currency notes ten (10) years. In case the Revised Penal
and coins called in for replacement. Any Code provides for a greater penalty, then
person or entity, public or private, who that penalty shall be imposed.
receives, takes, holds or has in his (As amended by Circular Nos. 930 dated 18 November 2016,
possession Philippine currency notes and 897 dated 06 January 2016 and 829 dated 13 March 2014)
coins called in for replacement shall
forward the same during the redemption Secs. X951 - X953 (Reserved)
period to:
a. Any authorized agent banks of the Sec. X954 Service Fee for Transactions with
Bangko Sental when the notes are still the Bangko Sentral. The succeeding
considered legal tender, within one (1) year subsections provide the guidelines on the
from the date of call; or imposition of service fee on transactions of
b. The CD or Regional Offices/Branches banks with the Cash Department (CD),
of the Bangko Sentral, within the redemption Currency Management Sub-Sector (CMSS)
period as may be determined by the and the Regional Offices and Branches,
Monetary Board. Regional Monetary Affairs Sub-Sector
The CD or Regional Offices/Branches (RMASS). The guidelines and procedures
of the Bangko Sentral shall exchange the governing currency deposits and
notes/coins called in for replacement if withdrawals of banks are provided in
presented to the Bangko Sentral within the Appendix 80.
redemption period as determined by the (M-2009-044 dated 09 November 2009, as amended by Circular
Nos. 931 dated 09 December 2016, 890 dated 02 November
Monetary Board and subsequently dispose 2015, M-2014-021 dated 03 May 2014 and M-2010-030 dated 22
the same in accordance with Bangko Sentral September 2010)
procedures for disposal.
(As amended by Circular Nos. 890 dated 02 November 2015 §X954.1 Fee structure under the
and 829 dated 13 March 2014) Enhanced Cash Management (ECM) services
offered by the CD, CMSS. The following
§ X950.8 (2008 - X610.8) Enforcement shall govern the transactions of banks with
action. Consistent with Sec. X009, the the CD, CMSS, covered under the ECM
Bangko Sentral may deploy enforcement services:
actions to promote adherence to the a. Service fees applicable to cash
requirements set forth in Sec. X950 and its transactions are, as follows:
Subsections, and bring about timely
corrective actions. The Bangko Sentral may Type of transaction Applicable Service
issue directives or impose sanctions on the Fees (per bundle)
New/Fit banknote P100.00
bank, for violation of the provisions of
deposits
Sec. X950 and its Subsections, which may Unfit banknote None
include, among others, restrictions or deposits
prohibitions from certain authorities/ Mixed banknote deposits P120.00
activities. Sanctions may likewise be Fit banknotes found P100.00
inserted in unfit
imposed on bank directors, officers and banknote deposits
employees concerned. verified
Further, any violation of the provisions Withdrawals None
of Subsecs. X950.3 and X950.4, shall (new/verified/
unverified1 fit
subject the offender to imprisonment of not
banknotes
1
As a matter of policy, the Bangko Sentral verifies deposits of banks. In certain instances, the Bangko Sentral
allows withdrawals by bank of unverified fit notes.

§§ X954.1 - X955
16.12.31
Deposits classified as fit banknotes but which will serve as the basis for the
found to include unfit banknotes shall be imposition of applicable service fees for fit
reclassified as mixed banknotes and notes.
accordingly charged a fee of P120.00 per d. The Bangko Sentral Regional Offices
bundle. and Branches shall accept deposit of
b. Banks shall issue a letter of authority bundled fit notes packed in sealed plastic
in favor of the Bangko Sentral, through the containers in uniform quantity of twenty (20)
CMSS, to debit their respective DDA bundles of one (1) or various denominations.
maintained with the Bangko Sentral, for the (Circular No. 931 dated 09 December 2016)
service fee on their transactions on the day
of deposit based on the deposit slip/s. Sec. X955 Adoption of Clean Note and
c. Banks shall continue to prepare Coin Policy. The board of directors shall
separate deposit slip/s for new/fit, mixed and adopt a Clean Note and Coin Policy consistent
unfit notes which will serve as basis for the with the principles and guidelines issued by
imposition of applicable service fees for the Bangko Sentral. The board of directors shall
new/fit and mixed notes. ensure that the policy takes a holistic approach
(Circular No. 931 dated 09 December 2016) to avoid biases in implementation in favor of
certain areas or regions.
§ X954.2 Fee structure for transactions The Clean Note and Coin Policy shall
with the Bangko Sentral regional offices include, among others, the following:
and branches, RMASS. The following shall a. Coverage. This shall emphasize that
govern the transaction of banks with the the policy shall be implemented bank-wide
Bangko Sentral Regional Offices and covering all branches.
Branches, RMASS: b. Criteria to determine when a note/
a. Service fees applicable to cash coin is to be pulled out of circulation. This
transactions are as follows: shall provide the conditions under which a
currency is to be withdrawn from
Type of transaction Applicable Service circulation as well as the system for properly
Fees (per bundle) segregating fit notes/coins from unfit notes/
Fit banknote deposits P100.00
Unfit banknote None coins. This shall also cover the quality of
deposits notes to be loaded in automated teller
Fit banknotes inserted/ P100.00 machines.
mixed-in with unfit c. Guidelines in ensuring that the life of
banknote deposits
currency notes/coins is extended. This shall
Withdrawals (new/ None
verified/unverified1 identify measures that deter unacceptable
fit banknotes) practices, such as, among others, stapling
and writing on currencies, and excessive
b. Banks shall issue a letter of authority folding.
in favor of the Bangko Sentral, through d. Deposit and/or exchange on a regular
RMASS, to debit their respective DDA basis of unfit notes/coins with the Bangko
maintained with the Bangko Sentral for the Sentral. This shall include safeguards that
service fee on their transactions on the day will ensure compliance with the guidelines
of deposit based on the deposit slip/s. set by the Bangko Sentral when making cash
c. Banks shall continue to prepare deposits with the Cash Department or any
separate deposit slip/s for fit and unfit notes, of the Regional Offices/Branches. Said policy
1
As a matter of policy, the Bangko Sentral verifies deposits of banks. In certain instances, the Bangko Sentral
allows withdrawals by bank of unverified fit notes.

§§ X955 - X960.1
16.12.31
shall include guidelines that aim to facilitate promote adherence to the requirements set
regular deposit and/or exchange with the forth in Sec. X955 and its Subsections and
various Bangko Sentral cash units of unfit bring about timely corrective actions and
notes/coins. compliance with the Bangko Sentral
The board of directors shall ensure that directives. The Bangko Sentral may issue
on a periodic basis, consistent adherence directives or impose sanctions on the bank,
to the Clean Note and Coin Policy is for violation of the provisions of Sec. X955
assessed, and that the continuing relevance and its Subsections, which may include,
and effectiveness of said policy is reviewed. among others, restrictions or prohibitions
(Circular No. 931 dated 09 December 2016) from certain authorities/activities. Sanctions
may likewise be imposed on bank directors,
§ X955.1 Compliance program. The officers, and employees concerned.
Clean Note and Coin Policy shall be (Circular No. 931 dated 09 December 2016)
included in the Compliance Program. In this
regard, the compliance function shall Secs. X956 - X959 (Reserved)
conduct periodic compliance testing to
assess compliance with internal policies as Sec. X960 Personal Equity and Retirement
well as with the principles and guidelines Account (PERA) Market Participants and
issued by the Bangko Sentral. Coverage of PERA Investment Products. The following
such testing shall include the head office and are the guidelines on the qualification/
branches. Further, the compliance function accreditation of PERA Market Participants
shall periodically assess the risk of non- and PERA Investment Products which are
compliance with the said policy. being issued pursuant to R.A. No. 9505,
(Circular No. 931 dated 09 December 2016) also known as the PERA Act of 2008 (PERA
Act), and its implementing Rules and
§ X955.2 Internal audit. The internal Regulations (the PERA Rules).
audit function shall provide an independent The operational guidelines on the
assurance on the effectiveness of administration of the personal equity
governance, risk management, and internal and retirement account are found in
controls with respect to the bank’s Appendix 109.
compliance with the Clean Note and Coin (Circular No. 860 dated 28 November 2014, as amended by
Policy. It shall conduct an independent Circular No. 890 dated 02 November 2015 and M-2014-045
review of operations to assess whether dated 02 December 2014)
policies, procedures, and control processes
are being effectively implemented or are still § X960.1 Applicability. These
relevant considering the size, risk profile, guidelines apply to banks, trust entities1 and
and complexity of operations of the bank. other entities determined by the Bangko
The internal audit function shall ensure that Sentral as eligible that seek to be qualified/
the scope of audit shall cover the head office accredited and are qualified/accredited as
and the branches. PERA Market Participants, and to PERA
(Circular No. 931 dated 09 December 2016) Investment Products that are considered
eligible by the Bangko Sentral for
X955.3 Supervisory enforcement PERA purposes.
action. The Bangko Sentral reserves the right (Circular No. 860 dated 28 November 2014, as amended by
to deploy its range of supervisory tools to Circular No. 890 dated 02 November 2015)
1
Trust entity shall refer to a (a) bank or non-bank financial institution, through its specifically designated
business unit to perform trust functions, or (b) trust corporation, authorized by the Bangko Sentral ng Pilipinas
to engage in trust and other fiduciary business under Section 79 of R.A. No. 8791 (the General Banking
Law of 2000) or to perform investment management services under Section 53 of R.A. No. 8791.
Part IX - Page 19a Manual of Regulations for Banks

§ X960.2
15.12.31
§ X960.2 Eligibility criteria. That with respect to Items “1” and “2”
a. PERA investment products. The below, they are issued by Bangko
following PERA investment products are Sentral-supervised entities with CAMELS
considered to be Bangko Sentral-eligible rating of not lower than “3” or its
PERA investment products: Provided, equivalent, to wit:
(Next page is Part IX - Page 20)
Manual of Regulations for Banks Part IX - Page 19b

§§ X960.2 - X960.3
15.12.31
(1) Unit investment trust fund (UITF); Net worth shall refer to the combined
(2) Debt-instruments such as, but not capital accounts of the Administrator which
limited to, long term negotiable certificate shall mean the total of the unimpaired paid-
of deposits and unsecured subordinated debt; in capital, surplus and undivided profits, less:
(3) Deposits; and (a) The one percent (1%) of the book
(4) Government-issued securities. value of the total volume of PERA assets
In the case of UITF, the existing approval administered and other capital adjustments
process shall be observed. The Bangko as may be required by the Bangko Sentral;
Sentral may allow other category of (b) Total outstanding unsecured credit
investment products or outlets for PERA accommodations, both direct and indirect,
purposes: Provided, That the product is non- extended by the Administrator to DOSRI; and
speculative, readily marketable, and with a (c) Appraisal surplus or appreciation
track record of regular income payments to credit as a result of appreciation or an
investors. increase in the book value of the assets of
b. PERA market participants the Administrator.
PERA Market Eligible Entities
Participants
DOSRI cited in Item "1(b)" above shall
Administrator Banks, trust entities and refer to that provided in Subsec. X326.1:
other entities as may be Provided, That for purposes of this
determined by the Bangko provision, references to a bank as an entity
Sentral as eligible to act
as PERA
shall be understood to include references
Administrator to any other type of entity acting as
Investment Trust entities and other Administrator.
Manager entities as may be (2) It has adopted a Manual of
determined by the Bangko
Sentral as having the
Corporate Governance approved by the
qualifications to be Bangko Sentral, and is in full compliance
accredited as PERA therewith.
Investment Manager (3) It has a clear and sufficient
Cash Custodian Banks organization plan or structure of its
Securities Banks and trust entities
Custodian personnel who will perform the PERA
Investment Any Bangko Sentral- administration functions, stating the
Product Provider supervised entity that definition of the duties and responsibilities
wishes to offer as well as the line and staff functional
PERA Investment Product
relationships.
to Contributors
(Circular No. 860 dated 28 November 2014, as amended by (4) It possesses adequate systems and
Circular No. 890 dated 02 November 2015) technological capabilities, and the
necessary technical expertise and personnel
§X960.3 Qualification/Accreditation to administer all types of PERA investment
requirements. products, ensure the proper recording and
a. As an Administrator. The Bangko tracking of a contributor’s PERA, and
Sentral shall issue a Qualification Certificate perform the other required functions of an
as Administrator to an entity upon Administrator.
compliance with the following (5) It has sufficient personnel who
requirements: have undergone the requisite training
(1) The applicant maintains a net worth prescribed by the Bangko Sentral to educate
of at least Php100 million at all times. the contributor on:

§ X960.3
15.12.31
(a) The nature of a PERA; (2) Proof of at least five (5) years of
(b) Privileges, conditions and experience in professional investment
requirements of a PERA; management;
(c) The risks and benefits of each type (3) Certified true copy of educational,
of PERA investment products; and professional/technical or other academic
(d) Respective roles of the Administrator, qualifications of its principal officers;
Investment Manager and Custodian. (4) Copy of its form contract to be
(6) It has adopted the following forms that utilized. The agreement between the
the Administrator shall use in dealing with the contributor and the Investment Manager
Contributor and his PERA: shall contain the following minimum
(a) Pre-Acceptance Disclosure Policy contents:
described in PERA Rule 6.A.2.a; (a) Overall investment philosophy,
(b) Client Suitability Assessment standards and practices of the Investment
Questionnaire referred to in PERA Rule Manager; and
6.A.2.b(i); (b) Validation of contributor’s Client
(c) Risk Disclosure Statement, which Suitability Assessment and Investment
shall include the standard minimum Policy Statement made by contributor’s
information referred to in PERA Rule 6.A.2.d; Administrator referred to in PERA Rule
and 6.A.2.b (i) and (ii); and
(d) Contract between the Contributor and (5) A schedule of commission charges
the Administrator referred to in PERA Rule and/or other fees it will charge for its
6.A.2.c. services.
(7) It has a board-approved policy on c. As a Custodian
fees and charges to be imposed for its Cash custodian. In addition to the
services as Administrator which shall be standard pre-qualification requirements for
subject to Bangko Sentral approval. the grant of banking authorities enumerated
Failure to satisfy any of the above in Appendix 5, banks applying for authority
requirements shall be a ground for the denial to act as cash custodian for PERA shall also
of the application, without prejudice to the comply with the following conditions:
re-filing of an application. (1) The applicant bank must have
An Administrator who has been issued complied with the minimum capital required
with a “Qualification Certificate” shall then under Subsec. X111.1; and
file an application for accreditation with the (2) The Bank’s CAMELS composite
PERA Processing Office of the BIR to rating in its latest examination is not lower
complete its application process to become than “3” with Management component score
a PERA Administrator. of not lower than “3”.
b. As an Investment Manager. The Securities custodian. Only banks and
Bangko Sentral shall accredit an entity as an other entities with trust license which have
Investment Manager upon submission of a complied with the requirements under
written application certified by the Chief Subsec. X441.5 may be accredited as
Executive Officer (CEO) together with the securities custodian.
following documentary requirements: For purposes of this Subsection, the
(1) Written supervision and control Bangko Sentral may provide for such other
procedures for the conduct of the investment requirements or qualifications as it may
management functions; deem necessary for the qualification/

§§ X960.3 - X960.5
15.12.31
accreditation of a supervised entity as a PERA the book value of the total volume of PERA
Market Participant. assets administered, earmarked in favor of
(Circular No. 860 dated 28 November 2014, as amended by the Bangko Sentral: Provided, That the
Circular No. 890 dated 02 November 2015) Administrator shall issue an authorization
in favor of the Bangko Sentral to withdraw,
§X960.4 Application for qualification/ dispose and disburse the proceeds thereof
accreditation. An eligible supervised entity to settle any claims arising from the breach
seeking qualification/accreditation as PERA of its duties as evidenced by a final and
Market Participant (Administrator, executory court order: Provided, further,
Investment Manager, Cash Custodian or That the Administrator shall not withdraw,
Securities Custodian) shall file an transfer or replace such earmarked securities
application for qualification/accreditation without prior written instruction from the
with the appropriate department of the SES. Bangko Sentral. The security for the faithful
The application shall be signed by the CEO performance of the Administrator’s duties
and shall be accompanied by the following shall be in addition to and shall be treated
documents: separately from the capital, surplus, and
a. Certified true copy of the resolution undivided profits of the Administrator.
of the entity’s board of directors authorizing For this purpose, eligible government
the application; securities shall consist of evidences of
b. Certification signed by the CEO that indebtedness of the Republic of the
the entity has complied with all the relevant Philippines and of the Bangko Sentral and
qualification/accreditation requirements any other evidences of indebtedness or
enumerated under Subsec. X960.3 and an obligations the servicing and repayment of
undertaking to comply with the which are fully guaranteed by the Republic of
aforementioned requirements while it acts the Philippines and such other kinds of
as an Administrator, Investment Manager, securities which may be declared eligible by
Cash Custodian and/or Securities the Monetary Board: Provided, That, such
Custodian; and securities shall be free, unencumbered, and
c. Relevant PERA forms, Board- not utilized for any other purpose: Provided
approved policy on fees and charges, and further, That such securities shall have
proof of compliance with Subsec. remaining maturities of not more than
X960.3.a.(5) insofar as the application of the three (3) years from the date the securities have
Administrator is concerned. been earmarked in favor of the Bangko Sentral.
The qualification/accreditation of PERA a. Valuation of securities and basis of
Market Participants and accreditation of computation of the basic security deposit
PERA Investment Products granted by the requirement. For purposes of determining
Bangko Sentral shall be valid until revoked. compliance with the security for the faithful
(Circular No. 860 dated 28 November 2014, as amended by performance of Administrators under the
Circular No. 890 dated 02 November 2015) PERA Act, the amount of securities so
earmarked shall be based on their book
§X960.5 Security for the faithful value, that is, cost as increased or decreased
performance of Administrators. As a by the corresponding discount or premium
security for the faithful performance of its amortization. The base amount for the
duties under the PERA Act, an Administrator security shall be the average of the month-
shall hold eligible government securities, end balances of administered assets for the
equivalent to at least one percent (1%) of quarter.

§§ X960.5 - X960.6
15.12.31
b. Compliance period; Sanctions. The c. Willfully made or caused to be

Administrator shall have one (1) week from made a materially false or misleading
the end of every calendar quarter within statement in the application for
which to replenish any deficiency in the qualification/ accreditation or report filed
security requirements as abovementioned. with the Bangko Sentral, or has willfully
Any non-compliance with the security omitted to state any material fact that is
requirements shall be subject to Sections required to be stated therein or necessary
36 and 37 of R.A. No. 7653 also known as to make the statement therein not
the New Central Bank Act without prejudice misleading;
to the imposition of other sanctions as the d. Failed to maintain the qualifications
Monetary Board may consider warranted or requirements for accreditation
under the circumstances that may include prescribed under the PERA Rules, these
the suspension or revocation of the entity’s guidelines or has failed to maintain
authority to engage in PERA administration, compliance with any of them;
and such other sanctions as may be provided e. Failed to carry on and manage its
by law. PERA-related business and activities in a
(Circular No. 860 dated 28 November 2014, as amended by proper, diligent and efficient manner to
Circular No. 890 dated 02 November 2015) the prejudice of the Contributor;
f. Been subject to regulatory
§X960.6 Grounds for suspension or sanctions for (a) violations, which the
revocation of qualification/accreditation of Bangko Sentral determines to affect its
administrator, investment manager or operating conditions and ability as a PERA
custodian. The qualification of an Market Participant, such as but not limited
Administrator, and the accreditation of an to violations affecting required
Investment Manager and Custodian may be capitalization and/or solvency, or (b) any
refused, restricted, suspended or revoked act or behavior prejudicial to the PERA
by the Bangko Sentral if, after due notice Contributors;
and hearing, the Bangko Sentral determines g. Been enjoined or restrained by a
that the applicant or licensee has: competent body from engaging in
a. Willfully violated any provision of securities, banking or insurance activities;
the PERA Act, the PERA Rules or any h. Failed to enforce or monitor PERA
regulations and issuances by the Bangko contribution limits entitled to tax
Sentral made pursuant thereto, or any other incentives; or
law administered by the Bangko Sentral i. Failed to manage or adequately
relevant to its function as a PERA Market address conflicts of interest in the
Participant, or providing prudential performance of its functions, which may
standards for asset management or has be identified by the Bangko Sentral as
aided, abetted, counseled, commanded, prejudicial to the interests of the PERA
induced or procured such violation; Contributor.
b. Failed to supervise, with a view to For purposes of this subsection, the
preventing such violation, a person term “competent body” shall include a
associated to the applicant or licensee by foreign court of competent jurisdiction and
virtue of an agreement or other types of a foreign financial regulator.
arrangement and who commits such violation; (Circular No. 860 dated 28 November 2014, as amended by

§§ X960.7 - X999
15.12.31
§X960.7 Penalty. A fine of not less than and regulations issued by the Bangko
Php50 thousand nor more than Php200 Sentral or other terms and conditions of
thousand or imprisonment of not less than the authority to act as Administrator,
six (6) years and one (1) day to not more Custodian or Investment Manager may be
than twelve (12) years or both, such fine and subject to the administrative sanctions
imprisonment at the discretion of the court, provided for in applicable laws such as
shall be imposed upon any person, those set forth in Section 37 of R.A. No.
association, partnership or corporation, its 7653.
officer, employee or agent, who, acting
The above penalties shall be without
alone or in connivance with others, shall:
prejudice to whatever civil and criminal
a. Act as Administrator, Custodian or
Investment Manager without being properly liability provided for under applicable
qualified or without being granted prior laws for the same act or omission such as
accreditation by the Bangko Sentral; those set forth in Sections 35 and 36 of
b. Invest the contribution without R.A. No. 7653.
written or electronically authenticated (Circular No. 860 dated 28 November 2014, as amended by
authority from the Contributor, or invest the Circular No. 890 dated 02 November 2015)
contribution in contravention of the
instructions of the Contributor; § X960.8 Reportorial requirements.
c. Knowingly and willfully make any An entity qualified/accredited by the
statement in any application, report, or Bangko Sentral to be a PERA Market
document required to be filed under the Participant shall comply with the
PERA Act, which statement is false or reportorial requirements that may be
misleading with respect to any material fact; prescribed by the Bangko Sentral.
d. Misappropriate or convert, to the (Circular No. 860 dated 28 November 2014, as amended by
prejudice of the Contributor, contributions Circular No. 890 dated 02 November 2015)
to and investments or income from the PERA;
e. By gross negligence, cause any loss, Secs. X961 - X998 (Reserved)
conversion, or misappropriation of the
contributions to, or investments from the Sec. X999 (2008 - X199) General Provision
PERA; or on Sanctions. Except as otherwise provided,
f. Violate any provision of the PERA any violation of the provisions of this Part
Act or rules and regulations issued pursuant shall be subject to Sections 36 and 37 of
to the PERA Act. R.A. No. 7653.
Notwithstanding the foregoing, any The guidelines for the imposition of
willful violation by the accredited monetary penalty for violations/offenses
Administrator, Custodian or Investment with sanctions falling under Section 37 of
Manager of any of the provisions of the R. A. No. 7653 on banks, their directors
PERA Act, the PERA Rules, relevant rules and/or officers are shown in Appendix 67.

§§ X1001 - X1001.2
15.12.31
PART TEN
BSP REGULATIONS ON FINANCIAL CONSUMER PROTECTION
A. CONSUMER PROTECTION responsibilities to senior management and/

OVERSIGHT FUNCTION or committees created for the purpose but
not the function of overseeing compliance
Section X1001 Consumer Protection with the Bangko Sentral-prescribed
Oversight Function. The Board of Directors Consumer Protection Framework and the
(Board) of BSP-Supervised Financial BSFI's own Consumer Protection Framework.
Institutions (BSFI) is ultimately responsible (Circular No. 857 dated 21 November 2014, as amended by
in ensuring that consumer protection Circular No. 890 dated 02 November 2015))
practices are embedded in the BSFI's
§ X1001.2 Consumer protection risk
business operations. BSFIs must adhere to
management system (CPRMS). All BSFIs,
the highest service standards and embrace
regardless of size, should have a CPRMS that
a culture of fair and responsible dealings in
is part of the corporate-wide risk
the conduct of their business through the
management system. The CPRMS is a means
adoption of a bank's Financial Consumer
by which a BSFI identifies, measures,
Protection Framework that is appropriate to
monitors, and controls consumer protection
the BSFI's corporate structure, operations,
risks inherent in its operations. These
and risk profile. The BSFI's Financial
include both risks to the financial consumer
Consumer Protection Framework shall be
and the BSFI. The CPRMS should be directly
embodied in its Board-approved Financial
proportionate to the BSFI's asset size,
Consumer Protection Manual.
(Circular No. 857 dated 21 November 2014, as amended by structure, and complexity of operatiom. A
Circular No. 890 dated 02 November 2015) carefully devised, implemented, and
monitored CPRMS provides the
§ X1001.1 Role and responsibility of foundation for ensuring a bank's
the board and senior management. The adherence to consumer protection
board and senior management are standards of conduct and compliance with
responsible for developing the BSFI's consumer protection laws, rules and
consumer protection strategy and regulations, thus ensuring that the BSFI's
establishing an effective oversight over the consumer protection practices address
BSFI's consumer protection programs. The and prevent identified risks to the bank and
board shall be primarily responsible for associated risk of financial harm or loss to
approving and overseeing the consumers.
implementation of the BSFI's consumer a. Board and senior management
protection policies as well as the oversight. The board is responsible for
mechanism to ensure compliance with developing and maintaining a sound
said policies. While senior management CPRMS that is integrated into the overall
is responsible for the implementation of framework for the entire product and
the consumer protection policies approved service life-cycle. The board and senior
by the board, the latter shall be responsible management should periodically review
for monitoring and overseeing the the effectiveness of the CPRMS, including
performance of senior management in how findings are reported and whether
managing the day to day consumer the audit mechanisms in place enable
protection activities of the BSFI. The board adequate oversight. The quality and
may also delegate other duties and timeliness of the information provided to
Manual of Regulations for Banks Part X - Page 1

§§ X1001.2 - X1002
15.12.31
the board and senior management regarding d. Internal audit function. Independent
the BSFI's CPRMS are especially important for of the compliance function, the BSFI’s audit
assessing the program's effectiveness. The function should review its consumer
board and senior management must also protection practices, adherence to internal
ensure that sufficient resources have been policies and procedures, and compliance
devoted to the program. The ability to achieve with existing laws, rules and regulations.
the consumer protection objectives depends, The BSFI’s internal audit of the different
in large part, on the authority and business units/functions should include the
independence of the individuals directly consumer protection audit program. A
responsible for implementing the CPRMS and well-designed and implemented consumer
for performing audit/review activities, and the protection audit program ensures that the
support provided by the board and senior board or its designated committee shall be
management. The board and senior able to make an assessment on the
management must also make certain that effectiveness of implementation as well as
CPRMS weaknesses are addressed and adequacy of approved policies and
corrective actions are taken in a timely manner. standards in meeting the established
b. Compliance program. A Consumer consumer protection objectives.
Protection 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 policies and procedures is essential to
of the over-all Compliance System and maintaining a sound consumer protection
should be in accordance with the Revised compliance program. BSFIs should ensure
Compliance Framework for Banks under that all relevant personnel specifically those
Sec. X180. A well planned, implemented, whose roles and responsibilities have
and maintained Consumer Protection customer interface, receive specific and
Compliance Program should prevent or comprehensive training that reinforces and
helps implement written policies and
reduce regulatory violations and protect
procedures on consumer protection. The
consumers from non-compliance and
BSFI should institute a consumer protection
associated harms and loss.
training program that is appropriate to its
c. Policies and procedures. An effective
organization structure and the activities it
CPRMS should have consumer protection
engages. The training program should be
policies and procedures in place, approved
able to address changes in consumer
by the Board. A comprehensive and fully
protection laws, rules and regulations and
implemented policies help to communicate
to policies and procedures and should be
the board’s and senior management’s
provided in a timely manner.
commitment to compliance as well as (Circular No. 857 dated 21 November 2014, as amended by
expectations. Overall, policies and procedures Circular No. 890 dated 02 November 2015)
should a) be consistent with consumer
protection policies approved by the board; B. CONSUMER PROTECTION
b) ensure that consumer protection practices STANDARDS OF CONDUCT FOR BSFIs
are embedded in the BSFI’s business
operations; 3) address compliance with Sec. X1002 Consumer Protection
consumer protection laws, rules, and Standards. The following consumer
regulations; and 4) reviewed periodically protection standards reflect the core
and kept-to-date as it serve as reference for principles, which BSFIs are expected to
employees in their day-to-day activities. observe at all times in their dealings with
Part X - Page 2 Manual of Regulations for Banks

§§ X1002 - X1002.1
15.12.31
financial consumers. These should be warranted, reference to the T&C should be

embedded into the corporate culture of the made while transacting with the consumer
BSFI, enhancing further its defined and before consummating the transaction,
governance framework while addressing if such reference is material to the
conflicts that are inimical to the interests of understanding of the consumer of the nature
the financial consumer. of the product or service, as well as its
(Circular No. 857 dated 21 November 2014, as amended by benefits and risks.
Circular No. 890 dated 02 November 2015) As a written document, the T&C must
be complete but concise, easily
§ X1002.1 Disclosure and understandable, accurate, and presented in
transparency. BSFIs must take affirmative
a manner that facilitates the consumer’s
action to ensure that their consumers have
comprehension. The latter is taken to mean
a reasonable holistic understanding of the
that the text of the document should be
products and services, which they may be
according to Subsec. X320.4 (Amended
acquiring or availing. In this context, full
Regulations to Enhance Consumer
disclosure and utmost transparency are the
Protection in the Credit Card Operations of
critical elements that empower the
Banks and Their Subsidiary or Affiliate
consumer to make informed financial
Credit Card Companies).
decisions. This is made possible by
The T&C should include at least the
providing the consumer with ready access
following:
to information that accurately represents the
(a) The full price or cost to the customer
nature and structure of the product or
including all interest, fees, charges, and
service, its terms and conditions, as well as
penalties. The T&C must clearly state
its fundamental benefits and risks.
whether interest, fees, charges, and
The BSFI demonstrates the competencies
penalties can change over time. The method
required of this principle if it complies with
for computing said interest, fees, charges,
the following:
and penalties shall be presented in
a. Key information
(1) Ensures that offering documents of accordance with Subsec. X305.5;
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 handling procedure.
of the terms and conditions (T&C) that (3) Advises customers to read and
apply to a product or service. The contents understand the applicable T&C, when
of the T&C must be fully disclosed and considering a product or service.
explained to financial customers before (4) Ensures that its staff communicates
initiating a transaction. Where and when in such a manner that clients can understand

§ X1002.1
15.12.31
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 (11) Offers enhanced disclosure for
language). more complex products, highlighting the
(5) Provides customers adequate time to costs and risks involved for the customer.
review the T&C of the product or service, For structured investment products, a
asks questions and receives additional Product Highlight Sheet (PHS) is required.
information prior to signing contracts or The PHS should be clear, concise, and
executing the transaction. The staff of the easily understandable by individual
BSFI should be available to answer the customers. It should contain information
questions and clarifications from the that empowers the customer to appreciate
financial customer. the key features of the product and its
(6) Ensures that staff assigned to deal risks. It is prepared in a format that
directly with customers, or who prepare facilitates comparison with other
advertisement materials (or other material products. The PHS should be available
of the BSFI for external distribution) or who at no cost to the public and made available
markets any product or service should be to consumers upon request. Before
fully knowledgeable about these products signing any contract, the BSFI should
and services, including statutory and ensure that the customer has freely signed
regulatory requirements, and are able to a statement to the effect that the customer
explain the nuances to the consumer. has duly received, read, and understood
(7)Uses a variety of communication 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
public domains (e.g., websites). the right to exit the contract without
(9) Updates customers with relevant penalty, provided such right is exercised
information, free of charge in a clear, within a reasonable period. The customer
understandable, comprehensive, and should be informed of this right whenever
transparent manner, for the duration of the a notice of change is made.
contract. Such information covers the (13) Provides customers with a proof
characteristics and the risks of the products of the transaction immediately after the
sold by the BSFI and their authorized transaction has been completed. The
agents. customer should be given a hard copy of
(10) Imparts targeted information to the each of the documents signed by the
specific groups of clients to whom specific clients (including, but not limited to the
products are being marketed, with a contract) with all terms and conditions.
particular consideration for vulnerable The BSFI ensures that documents signed

§§ X1002.1 - X1002.2
15.12.31
by the customer are completely filled and the BSFI or its staff has an interest in a
that there are no blank terms. direct/cross transaction with a consumer.
(14) Regularly provides customers with (2) Discloses the limited availability
clear and accurate information regarding of products to consumers when the BSFI
their accounts (e.g., Statement of accounts only recommends products which are
that includes, among others, covering issued by their related companies,
period, opening balance/value of particularly when commissions or rebates
transactions, all kinds of interest, fees and are the primary basis for recommending
charges, closing balance, inquiries for the particular product to consumers.
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
(1) Ensures that advertising and which advice may have been given merely
marketing materials do not make false, to meet sales targets, or may be driven by
misleading, or deceptive statements that financial or other incentives).
may materially and/or adversely affect the
decision of the customer to avail of a service
or acquire a product. § X1002.2 Protection of client
(2) Ensures that advertising and information. Financial consumers have
promotional materials are easily readable the 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.
or service. It should be balanced/ Towards this end, BSFIs must ensure that
proportional (reflecting both advantages and they have well-articulated information
risks of the product or service); visible/ security guidelines, well-defined
audible; key information is prominent and protocols, a secure database, and
not obscured; print is of sufficient size and periodically re-validated procedures in
clearly legible. handling the personal information of their
(3) Ensures that promotional materials financial consumers. This should be an
are targeted according to the specific groups end-to-end process that should cover,
of consumers to whom products are among others, the array of information that
marketed and the communication channels will be pre-identified and collected, the
employed for marketing financial services. purpose of gathering each information,
(4) Ensures that all advertising and how these will be sourced from the client,
promotional materials disclose the fact that it the IT-security infrastructure of the BSFI,
is a regulated entity and that the name and and the protocols for disclosure, both
contact details of the regulator are indicated. within the BSFI and especially to third
c. Conflict of interest parties.
(1) Discloses properly to the consumer The BSFI demonstrates the ability to
prior to the execution of the transaction that protect client information if it is able to:

§ X1002.2
15.12.31
a. Confidentiality and security of client changes in the firm’s business or operations,

information or the results of security testing and
(1) Have a written privacy policy to monitoring.
safeguard its customers’ personal (4) Have appropriate policies and
information. This policy should govern the practices for employee management and
gathering, processing, use, distribution, training to assess and address the risks to
storage, and eventual disposal of client customer information. These include:
information. The BSFI should ensure that (a) Checking references and doing
privacy policies and sanctions for violations background checks before hiring employees
are implemented and strictly enforced. who will have access to customer
(2) Ensure that privacy policies are information.
regularly communicated throughout the (b) Asking new employees to sign an
organization. Opportunities include agreement to follow BSFI confidentiality and
employees’ initial training sessions, regular security standards for handling customer
organization-wide training programs, information.
employee handbooks, posters and posted (c) Limiting access to customer
signs, company intranet and internet information to employees who have a
websites, and brochures available to clients. business reason to see it.
(3) Have appropriate systems in place (d) Controlling access to sensitive
to protect the confidentiality and security information by requiring employees to use
of the personal data of its customers “strong” passwords that must be changed
against any threat or hazard to the security on a regular basis.
or integrity of the information and against (e) Using automatic time-out or log-off
unauthorized access. This includes a controls to lock employee computers after
written information security plan that a period of inactivity.
describes its program to protect customer (f) Training employees to take basic
personal information. The plan must be steps to maintain the security,
appropriate to its size and complexity, confidentiality, and integrity of customer
nature and scope of its activities, and the information. These may include locking
sensitivity of customer information it rooms and file cabinets where records are
kept; ensuring that employee passwords are
handles. As part of its plan, the BSFI must:
not posted in work areas; encrypting
(a) Designate employee accountable
sensitive customer information when
to coordinate its Information Security
transmitted electronically via public
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 BSFI
of the BSFI operation, and evaluate the 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 (g) Regularly reminding all employees
safeguards program, and regularly monitor of company policy to keep customer
and test it. information secure and confidential.
(d) Select service providers that can (h) Imposing strong disciplinary
maintain appropriate safeguards. measures for security policy violations.
(e) Evaluate and adjust the program in (i) Preventing terminated employees
light of relevant circumstances, including from accessing customer information by

§§ X1002.2 - X1002.3
16.12.31
immediately deactivating their passwords completeness of the information and have

and user names and taking other measures. these amended as appropriate.
(5) Have a strong IT System in place to (4) Appropriate penalties should be
protect the confidentiality, security, imposed by the BSFI to erring employees
accuracy, and integrity of customer’s for exposing or revealing client data to third
personal information. This includes parties without prior written consent from
network and software design, and client.
information processing, storage, (Circular No. 857 dated 21 November 2014, as amended by
transmission, retrieval, and disposal. Circular No. 890 dated 02 November 2015)
Maintaining security throughout the life-
cycle of customer information, from data § X1002.3 Fair treatment. Fair
treatment ensures that financial consumers
entry to disposal, includes:
are treated fairly, honestly, professionally
(a) Knowing where sensitive customer
and are not sold inappropriate and harmful
information is stored and storing it securely.
financial products and services. BSFIs
Make sure only authorized employees have
should ensure they have the necessary
access. resources and procedures in place, internal
(b) Taking steps to ensure the secure monitoring, and control mechanisms, for
transmission of customer information. safeguarding the best interest of their
(c) Disposing customer information in customers. These include general rules,
a secure way. such as those addressing ethical staff
(d) Maintaining up-to-date and behavior, acceptable selling practices as well
appropriate programs and controls to as regulating products and practices where
prevent unauthorized access. customers are more likely to be offered
(e) Using appropriate oversight or audit services that are inappropriate for their
procedures to detect the improper disclosure 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 product
b. Sharing of customer information 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
(2) Obtain the customers’ written the BSFI to offer an appropriate product
consent, unless in situations allowed as an or service to the customer. The
exception by law or BSP-issued regulations information gathered should be
on confidentiality of customer’s commensurate to the nature and
information, before sharing customers’ complexity of the product or service either
personal information with third parties such being proposed to or sought by the
as credit bureau, collection agencies, customer and should enable the BSFI to
marketing and promotional partners, and 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,

§ X1002.3
16.12.31
time horizons, needs, priorities, risk (9) Have a system in place for approval
affordability, and risk profile. when selling high-risk instruments to
(b) Offer products or services that are consumers.
in line with the needs/risk profile of the b. Prevention of over-indebtedness
consumer. The BSFI should provide for (1) Have appropriate policies for good
and allow the customer to choose from a repayment capacity analysis. The loan
range of available products and services approval does not rely solely on guarantees
that can meet his needs and requirements. (co-signers or collateral) as a substitute for
Sufficient and right information on the good capacity analysis.
product or service should enable the (2) Properly assess the creditworthiness
customer to select the most suitable and and conduct appropriate client repayment
affordable product or service. capacity analysis when offering a new credit
(2) Inform or warn the customers that product or service significantly increasing
if they do not provide sufficient the amount of debt assumed by the customer.
information regarding their financial (3) Ensure to have an appropriate
knowledge and experience, the BSFI is not system in place for credit analysis and
in a position to accurately determine decisions including appropriate criteria to
whether the product or service is limit the amount of credit.
appropriate to them, given the limited (4) Monitor enforcement of policies to
information available. This information prevent over-indebtedness. The board and
or warning may be provided in a senior management of the BSFIs should be
standardized format. aware of and concerned about the risks of
(3) Ensure that the customer certifies over-indebtedness of its customers.
in writing the accuracy of the personal (5) Draw the customer’s attention to the
information provided. consequences of signing a contract that may
(4) Ensure to offer market-based affect his financial position and his collateral
pricing. in case of default in payment of a loan/
(5) Design products that are obligation.
appropriate to the varying needs and (6) Prepare and submit appropriate
interests of different types of consumers, reports (e.g., loan quality, write-offs,
particularly the more vulnerable restructured loans) to management.
consumers. Adequate product approval (7) Ensure that corrective measures are
should be in place. Processes should be in place for poor long-term quality of loan
proper to ensure that products and portfolio linked to over-indebtedness.
services are fit for the targeted consumer. (8) Have specific procedures to
(6) Do not engage in abusive or actively work out solutions (i.e., through
deceptive acts or practices. workout plan) for restructured loans/
(7) Seek customer feedback for product refinancing/writing-off on exceptional
design and delivery and use this feedback basis for clients in default who have the
to enhance product development and “willingness” but without the capacity to
improve existing products. Likewise, repay, prior to seizing the assets.
investigate reasons for client drop out. c. Cooling-off period1
(8) Do not use high pressure/ (1) As may be appropriate, provide the
aggressive sales techniques and do not customer with a “cooling-off” period of a
force clients to 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.

§ X1002.3
16.12.31
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
with a long-term savings component or client.
those subject to high pressure sales contract. (4) Ensure that the customer’s suitability
Cooling-off shall be applicable to a and affordability are assessed against
customer who is a natural person and to specific risks of the investment products:
financial instruments whose remaining term (a) Financial Needs Analysis (FNA) and
is equal to or beyond one (1) year. Client Suitability - to assess the customer’s
(2) Permit the customer to cancel the risk profile and suitability of the product.
agreement without penalty to the customer (b) Customer’s Declaration Form - to
of any kind on his or her written notice to confirm his acceptance and understanding
the BSFI during the cooling-off period. The of the highlighted features of the product.
BSFI may however collect or recover (c) FNA, Client Suitability and
reasonable amount of processing fees. It is Declaration Form should be duly
further recognized that there may be a need completed to make sure that the product
for some qualification to an automatic right sold is suitable and affordable for the
of cooling off. For example, the right shall customer.
not apply where there has been a e. Institutional culture of fair and
drawdown of a credit facility and a BSFI responsible treatment of clients
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 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 Code, the BSFI is required to implement
prevent the statement from being false or measures to determine whether the
misleading. principles of consumer protection are
(2) Present a balanced view when observed, the clients’ concerns are
selling a product or service. While the appropriately addressed and problems are
BSFI highlights the advantages of a resolved in a timely manner. These may
product/service, the customer’s attention include among others, the regular conduct
should also be drawn to its disadvantages of customer satisfaction survey.
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 who
documented. If the requested products are interact directly with customers, receive
of higher risk rating than a customer’s risk adequate training suitable for the complexity
tolerance assessment results, the BSFI should of the products or services they sell.
draw to the customer’s attention that the (4) Ensure that collection practices are
product may not be suitable for him in view covered during the initial training of all staff

§§ X1002.3 - X1002.4
16.12.31
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 controls so that sales staff are not
the specific standards of professional remunerated based solely on sales
conduct that are expected of all staff involved performance but that other factors, including
in collection (including outsourced staff). customer’s satisfaction (in terms of number
(6) Institute policy that guarantees that of customer complaints served/settled) and
clients receive a fair price for any foreclosed compliance with regulatory requirements,
assets and has procedures to ensure that best practices guidelines, and Code of
collateral seizing is respectful of clients’ Conduct in which certain principles are
rights. related to best interest of customers,
(7) Ensure that managers and supervisors satisfactory audit/compliance review results
review ethical behavior, professional and complaint investigation results, are
conduct, and quality of interaction with taken into account.
customers as part of staff performance (Circular No. 857 dated 21 November 2014, as amended by
Circular Nos. 930 dated 18 November 2016, 898 dated
evaluations. 14 January 2016 and 890 dated 02 November 2015)
(8) Have a system or internal processes
in place to detect and respond to customer § X1002.4 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
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 bank 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 110 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;

§§ X1002.4 - X1002.5
15.12.31
(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
bank’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
prefers to receive financial information.
handle financial consumer complaints
These may include:
efficiently and effectively. Staff handling
(1) Delivering public awareness
complaints should have appropriate
campaigns and information resources that
experience, knowledge, and expertise.
would teach consumers on certain aspects
Depending on the BSFI’s size and
of their financial lives particularly, budgeting,
complexity of operation, a senior staff
financial planning, saving, investing,
member should be appointed to be in borrowing, retirement planning, and self-
charge of the complaint handling process. protection against fraud.
(2) Developing financial education
tools or information materials that are
updated and readily understood and
§ X1002.5 Financial education and
transparent such as customized advice
awareness. Financial education initiatives
and guidance (face to face training);
give consumers the knowledge, skills, and
printed brochures, flyers, posters, training
confidence to understand and evaluate the videos (e.g., about money management,
information they receive and empower them debt management, saving), and
to make informed financial decisions. newsletters; websites, and interactive
Because BSFIs deal directly with financial calculators that deliver key messages and
consumers, they have the reach, expertise, “call to action” concerning better money
and established relationships necessary to management (e.g., protect your money,
deliver financial education. Financial know your product, read and understand
education should be integral to the good the T&C, check your statements, pay credit
governance of the BSFIs. card bills on time, safeguard your Personal
The BSFI demonstrates this principle Identification Number, understand fees
through various means and in particular: and charges) and consumer responsibility
a. Have a clear and defined financial to ask the right questions.
education and awareness program as part (3) Distributing to customers, at the point
of a wider financial consumer protection of sale, a pamphlet on questions, which
and education strategy and corporate customers need to ask before accepting a
governance. It is an integral component of financial product or service.

§§ X1002.5 - X1003
15.12.31
c. Clearly distinguish between financial (4) Bangko Sentral consumer assistance

education from commercial advice. Any mechanism
financial advice for business purposes c. The following enforcement action
should be transparent. Disclose clearly any may be taken depending on:
commercial nature where it is also being (1) Rating-based enforcement actions
promoted as a financial education initiative. for on-site periodic assessment. To
It should train staff on financial education implement the foregoing enforcement
and develop codes of conduct for the actions, the following rules shall apply:
provision of general advice about (a) A Consumer Protection Rating (CPR)
investments and borrowings, not linked to of 4 will require no enforcement action.
the supply of a specific product. (b) A CPR of 3 will require issuance of
d. Provide via the internet or through a written reminder on consumer protection
printed publications unbiased and inde- areas that may lead to weaknesses in the
pendent information to consumers BSFI’s Consumer Protection Framework.
through comparative information about (c) A CPR of 2 will require a written
the price and other key features, benefits Action Plan in response to the written
and risks, and associated fees and charges reminder issued by the Bangko Sentral. The
of products and services. written Action Plan shall be duly approved
e. Regularly track, monitor, and assess by the board. It shall aim to correct the
campaigns and programs and use the results identified weaknesses in the BSFI’s
of the evaluation for continuous Consumer Protection Framework or the
improvement. noted violations of the Bangko Sentral
(As amended by Circular No. 890 dated 02 November 2015) Regulations on Consumer Protection.
Financial Consumer Protection Department
C. ENFORCEMENT ACTIONS (FCPD) shall assess the viability of the plan
and shall monitor the bank’s performance.
Sec. X1003 Enforcement Actions. (d) A CPR of 1 shall also be considered
a. Enforcement is the implementation of as poor/grossly inadequate Financial
corrective measures and imposition of Consumer Protection Framework. For this
sanctions to BSFIs to: reason, a written action plan fully
(1) Ensure compliance with the Bangko executable within ninety (90) days shall be
Sentral regulations on consumer protection prepared. The action plan shall be duly
and consumer protection laws and approved by the board aimed at instituting
regulations; immediate and strong measures to restore
(2) Inform the management of the BSFIs the BSFI to acceptable consumer protection
of the consequences of their decisions and operating condition, where it does not pose
actions; any risk of financial loss or harm to the
(3) Instill discipline to the BSFIs; and financial consumers.
(4) Serve as deterrent to the commission In the event of non-submission of the
of violations. written Action Plan within the deadline or
b. The bases for enforcement actions are failure to implement its action plan, FCPD
the results of the: shall recommend appropriate enforcement
(1) On-site consumer protection actions on the BSFI and its responsible officers
framework assessment; including monetary penalties to be computed
(2) Off-site surveillance; on a daily basis until improvements are
(3) Market monitoring; and satisfactorily implemented.

§§ X1003 - X1099
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/suspendingoperations/

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
determined by the Monetary Board to be
appropriate; Secs. X1004 - X1099 (Reserved)

§§ X1101 - X1101.1
17.03.31
PART ELEVEN
BANGKO SENTRAL POLICY AND REGULATIONS ON LICENSING
Section X1101 Statement of Policy and risk-focused supervision function is applied

Objectives. Consistent with the mandate of to the licensing process. This enhanced
the Bangko Sentral to promote a safe and licensing policy aims to ensure that licenses
sound banking system, the licensing and authorities are granted only to
process on permissible activities of bank is applicants that comply with the standards
enhanced to align the process with set.
international standards and best practices It is also the thrust of these enhanced
such as the "Core Principles for Effective policy guidelines on granting licenses/
Supervision" issued by the Basel Committee authorities to establish Bangko Sentral’s
on Banking Supervision. The Bangko Sentral accountability and promote transparency on
will not restrict the scope of risk-taking the licensing process which are consistent
activities of banks consequent of the licenses with its commitment to deliver prompt and
and/or authorities granted: Provided, That efficient service.
these licenses and/or authorities are in line (Circular No. 947 dated 15 February 2017)
with their business model and strategic
direction: Provided, further, That these § X1101.1 Scope. Applications for
banks demonstrate the capacity to licenses and/or authorities shall be
implement these strategies and the ability categorized as follows:
to manage risks. a. Type "A" - applications for licenses
The enhanced policy guidelines set forth and/or authorities where compliance with
the expectations and criteria of the Bangko the defined prudential requirements/criteria
Sentral with respect to granting of licenses described in Subsec. X1101.2 is a pre-condition
and authorities as well as its right to reject for applicants to be considered eligible;
applications if the criteria set forth are not b. Type "B" - applications for licenses
met by the applicant bank (“applicants”) and/or authorities processed regardless of
or if the information provided is not risk profile; and
adequate. The Bangko Sentral also reserves c. Type "C" - activities which no longer
the right to withdraw or revoke the license require submission of applications and
and/or authority or enforce appropriate processing but shall be subject to
actions when an institution no longer meets submission of reports/certification/
the criteria or standards required to be met notification within stated deadlines.
for the exercise of the license and/or However, compliance with pre-qualification
authority. requirements is subject to post verification
These criteria are intended to and any false information and/or
incorporate the licensing process into misrepresentation may be a basis for the
Bangko Sentral’s enforcement regime that imposition of appropriate enforcement
is anchored on good governance, sound risk actions described in Subsec. X1101.3. The
management system and effective control Bangko Sentral shall use this information to
systems. Further, these criteria aim to continuously tailor its supervisory strategy
provide more consistency on how the for the supervised entities and to maintain
Manual of Regulations for Banks Part XI - Page 1

§§ X1101.1 - X1101.2
17.03.31
and continuously update its institutional environment, and (d) effective risk
database. monitoring and management information
(Circular No. 947 dated 15 February 2017) systems.
Applicants should not be found
§ X1101.2 Prudential criteria. The
engaging in an activity which may be
prudential criteria set forth in this Subsection
considered as conducting business in an
shall be used in determining the eligibility
unsafe and unsound manner. In cases
of applicants to the licenses and/or
where weaknesses, violations of law, policy
authorities granted by the Bangko Sentral.
and/or regulation exists, other than those
Accordingly, the following minimum
considered unsafe or unsound practices,
conditions must be met:
these should not be material to the safety
a. Applicant domestic banks must have
and soundness of the institution, can be
a CAMELS composite rating of at least "3"
reasonably managed, and are being
and a "Management" rating of not lower
adequately addressed.
than "3", branches of foreign banks must
Quality of corporate governance shall
have a ROCA rating of at least "3", and BSFIs
must have a RAS rating of at least be assessed based on the principles and
"Acceptable". Whenever applicable, ratings framework set forth in the Guidelines in
equivalent to cited minimum rating grade Assessing the Quality of Corporate
requirements under appropriate rating Governance in banks.
systems (i.e., IT Rating Systems, Trust Rating (2) Risk management system and internal
Systems, among others) shall apply for controls
certain licenses and/or authorities; Applicants shall have a comprehensive
b. Applicants have no major supervisory risk management system approved by its
concerns in governance, risk management board of directors (or equivalent
systems, and internal controls and management committee in the case of
compliance system, and characterize/ foreign bank branches) to identify, measure,
demonstrate the following: evaluate, report and control or mitigate all
(1) Governance material risks on a timely basis and to assess
Applicants must display a culture of the adequacy of their capital in relation to
good corporate governance appropriate to their risk profile and market and
its size, risk profile and complexity of macroeconomic conditions and whose
operations. Board of directors and sophistication are commensurate to the risks
management, in their respective roles, being monitored and controlled. The risk
provide an appropriate level and quality of management system must be characterized
oversight and support to all of the by a clear delineation of responsibility for
institution’s activities. Sound management risk management, adequate risk
practices are observed and demonstrated measurement systems, appropriate risk
through (a) active oversight and satisfactory limits structure, effective internal controls
performance by the board of directors and and complete, timely and efficient risk
senior management, (b) appropriate policies, reporting systems.
processes, and controls relative to the Likewise, applicants shall have an
institution’s size, complexity and risk profile, effective and adequate system of internal
(c) maintenance of an independent and controls for the conduct of their business
effective internal audit and compliance taking into account their risk profile. These
program as well as a sound internal control controls deal with organizational structure,
Part XI - Page 2 Manual of Regulations for Banks

§§ X1101.2 - X1101.3
17.03.31
accounting policies and processes, checks and have addressed any outstanding explicit
and balances, safeguarding of assets and directives from the Bangko Sentral and/or
investments and appropriate and effective other relevant regulatory bodies, prohibiting
internal audit and compliance functions. the conduct of activities related to the
Standards and principles as well as the licenses and/or authorities being applied, as
Bangko Sentral’s expectations governing of the date of application. Applicants with
internal controls and audit under existing specific prohibitions to conduct certain
regulations shall apply in assessing the activities shall not be eligible to apply for
quality and effectiveness of the internal that particular license and/or authority.
control systems of an applicant; and No application shall be accepted until
(3) Compliance system such time that enforcement actions are
Applicants shall have a compliance formally lifted by the Bangko Sentral and/or
system, appropriate to its size, risk profile other relevant regulatory bodies after
and complexity of operations, designed to applicants have demonstrated to the Bangko
specifically identify and mitigate business Sentral that safety and soundness concerns
risks1 which may erode the franchise value are satisfactorily addressed and/or until such
of the institution. Compliance policies and time applicants become eligible.
procedures embodied in a Compliance Applications of banks under
Policy Manual should be sound and rehabilitation and/or enhanced supervision
effectively implemented. Likewise, status2 shall be dealt with in accordance with
compliance monitoring and testing as well the eligibility test described in Section II.1(a)
as review process should be robust to of Appendix 118.
ensure bank conducts its business/ Banks granted with licenses/authorities
operations in accordance with banking shall continuously comply with the
laws, rules and regulation and other laws abovementioned standards and
relevant to banking such as securities laws requirements even after the license/authority
and regulations. Banks should not have has been granted; otherwise, any deviation
been found significantly non-compliant with or non-compliance may be a basis for the
prudential requirements such as SBL, DOSRI imposition of appropriate enforcement
limits, capital adequacy ratio requirements, actions described in Sec. X1101.3.
among others. The specific guidelines and procedures
Standards and principles set forth in the on the Bangko Sentral's licensing framework
Compliance Rating System framework shall are shown in Appendix 118.
apply in assessing the quality of bank’s (Circular No. 947 dated 15 February 2017)
compliance system; and
c. Applicants have complied with § X1101.3 Enforcement actions. In line
directives and/or are not subject of specific with the thrust of the Bangko Sentral to
directives and/or enforcement actions by the incorporate the licensing process into its
Bangko Sentral. enforcement regime, the Bangko Sentral
Applicants shall have corrected any reserves the right to deploy, as may be
findings of unsafe and unsound practices warranted, an adequate range of
1
As defined under Subsec. X180.1, business risk refers to conditions which may be detrimental to the institution’s
business model and its ability to generate returns from operations, which in turn erodes its franchise value.
Business risk includes reputation, compliance, market conduct and legal risks.
2
Rehabilitation includes banks under the Prompt Corrective Action (PCA), Rehabilitation Program, Letter of
Commitment and any other similar cases where banks are expected to comply specific terms and conditions
to restore eligibility (safety and sound) status.
Manual of Regulations for Banks Part XI - Page 3

§ X1101.3
17.03.31
supervisory tools to ensure that grantees of (b) Revocation of licenses/authorities.

licenses/authorities are and remain qualified The license/authority granted may be revoked
to possess the same, bring about timely in cases where violation, non-compliance with
corrective actions and compliance to Bangko criteria/standards and/or false information
Sentral directives, and provide safety to are noted which affects the safety and
depositors, creditors, other stakeholders as soundness of banks’ operations; and/or
well as the public in general. (c) Administrative sanctions. The
Enforcement actions that may be responsible directors/officers who approve
imposed include, but are not limited to: transactions and/or decisions that resulted
a. Corrective action in violations of laws, rules and regulations,
Corrective actions are measures orders, and directives issued by the
intended to primarily require banks with Monetary Board or the Governor may be
approved licenses/authorities to rectify any subject to reprimand, temporary
deviations from the standards, principles suspension, and/or disqualification of
and conditions expected for the exercise of directors/officers.
the license and/or authority. Corrective The Monetary Board is not precluded
actions may include, but are not limited to, to impose non-monetary sanctions other
issuance of directives and warnings. than those identified from Items "(a)" to "(c)";
b. Sanctions and/or
The Monetary Board may impose any (2) Monetary
of the sanctions enumerated hereunder or a Monetary penalties may be imposed for
combination thereof. any acts, omissions or transactions that are
(1) Non-monetary outside the permissible activities of the
(a) Suspension of activities. The conduct licenses/authorities granted or are in
of activities related to the licenses/authorities violation of laws, Bangko Sentral rules and
regulations, orders and directives issued by
granted may be suspended if the Bangko
the Bangko Sentral.
Sentral determines that the concerned
(Circular No. 947 dated 15 February 2017)
bank no longer meets the criteria or
standards set; or Secs. X1102 - X1199 (Reserved)
Part XI - Page 4 Manual of Regulations for Banks

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FOREWORD

The Manual of Regulations for Banks (MORB) is designed to be an authoritative

NESTOR A. ESPENILLA, JR.

rules and regulations embodied therein.

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 MORB in coordination

with the Economic and Financial Learning Center and Corporate

21 September 2015 is composed of:

Adviser - Chuchi G. Fonacier

Chairman - Jose Recon S. Tano

Vice Chairman - Atty. Asma A. Panda

Ma. Belinda G. Caraan Betty Christine C. Bunyi

Hazel C. Pajutagana Rhodora M. Brazil- De Vera

Atty. Florabelle S. Madrid Amelia B. Damian

Atty. Ma. Corazon Bilgera-Cordero Celedina P. Garbosa

Atty. Vanessa P. Tabernero-Bunag Concepcion A. Garcia

Ronaldo B. Ramos Pol Joseph G. Panao

(ASO) II, OSPD, and two (2) other personnel.

The Bangko Sentral ng Pilipinas

Thus, to illustrate, Subsection X143.1 and Section 1381 would indicate

Main Section - “Disqualification of Directors/Trustees and Officers”

Subsection - “Persons disqualified to become officers”

Part One on “Organization, Management and Administration”

Manual of Regulations for Banks (Common provision)

Main Section - “Investment in Non-Allied Undertakings”

Part Three - “Loans, Investments and Special Credits”

Manual of Regulations for Banks (special provision for UBs/KBs)

POWER OF THE BANGKO SENTRAL

SECTION X001 Examination by the Bangko Sentral

SECTIONS X002 - X008 (Reserved)

SECTION X009 Supervisory Enforcement Policy

PART ONE - ORGANIZATION, MANAGEMENT AND ADMINISTRATION

A. CLASSIFICATIONS AND POWERS OF BANKS

SECTION X101 Classifications, Powers and Scope of Authorities of Banks

B. ESTABLISHMENT AND ORGANIZATION

SECTION X102 Basic Guidelines in Establishing Banks

SECTION X104 Business Name

SECTION X105 Liberalized Entry and Scope of Operations of Foreign Banks

SECTIONS X106 - X107 (Reserved)

C. MERGER AND CONSOLIDATION

SECTION X108 Merger or Consolidation to Meet Minimum Capital

SECTIONS X109 Consolidation Program for Rural Banks (CPRB)

SECTIONS X110 (Reserved)

SECTION X111 Minimum Required Capital

SECTIONS X112 - X114 (Reserved)

SECTION X115 Basel III Risk-Based Capital

SECTION X117 Internal Capital Adequacy Assessment Process and Supervisory

SECTION X118 Revised Risk-Based Capital Adequacy Framework for

SECTION X119 Unsecured Subordinated Debt

SECTION X120 Interim Tier 1 Capital for Banks Under Rehabilitation

SECTIONS X121 - X125 (Reserved)

G. STOCK, STOCKHOLDERS AND DIVIDENDS

SECTION X126 Shares of Stock of Banks

SECTION 1127 Shares of Stock of Universal/Commercial Banks

SECTION 2127 Shares of Stock of Thrift Banks

SECTION 3127 Shares of Stock of Rural Banks and Cooperative Banks

SECTION X128 Deposits for Stock Subscription

SECTIONS X129 - X135 (Reserved)