Manual of Regulations For Non-Bank Financial Institutions

MANUAL OF REGULATIONS
FOR NON-BANK FINANCIAL

INSTITUTIONS
BANGKO SENTRAL NG PILIPINAS

Maynila, Pilipinas
FOREWORD
Soon after the establishment of the new Bangko Sentral ng Pilipinas (BSP), the Monetary
Board recognized the need to revise and regularly update the Manual of Regulations for Banks
and Other Financial Intermediaries to enable the industry to better keep pace with the anticipated
rapid regulatory changes that are unavoidable in a dynamic economic enviroment. A revised
Manual would also be able to appropriately take into account the strenghtened supervisory and
regulatory arrangements set out in the BSP's new charter.
This Manual of Regulations for Non-Bank Financial Institutions is one of the products of
that effort. It benefits from the inputs of many concerned departments of the BSP as well as the
various industry associations of non-bank financial institutions. We are hopeful that this new
Manual and its subsequent updates will be able to more effectively disseminate the regulatory
issuances of the BSP on a timely basis and provide appropriate guidance to non-bank financial
institutions.
We also believe that it will be a especially useful tool at this time when the BSP has
come up with many regulations and issuances in response to the unprecedented challenges
posed by the Asian financial crisis.
Nevertheless, we recognize that there will always be room for improvement. Our task
is therefore a continuing one of constant search for a better product to provide more responsive
services to the public.
GABRIEL C. SINGSON
Governor
PREFACE
The Manual of Regulations for Non-Bank Financial Institutions (the “New Manual”) is
not only an updated edition but also a revision of the present Manual of Regulations for Banks
and Other Financial Intermediaries, Book IV (the "Old Manual"). Its adoption was impelled by
certain considerations, namely: (1) that the Central Bank of the Philippines as the administrative
agency of the monetary, banking and credit system which promulgated the Old Manual has
been replaced by the Bangko Sentral Ng Pilipinas (BSP) as the central monetary authority and
(2) that the Old Manual was last updated as of December 31, 1989 and since that time, significant
developments in the statutory law and the financial system of the country have rendered many
of its provisions obsolete or irrelevant.
To accomplish the work of proposing revisions to the Old Manual, the Monetary Board
of the BSP, in its Resolution No. 1203 dated December 7, 1994, directed the creation of a
multi-departmental Ad Hoc Review Committee. This committee was officially constituted
under Office Order No. 2, Series of 1995 and consisted of Deputy General Counsel Melpin A.
Gonzaga (Office of the General Counsel and Legal Services, as chairman; Deputy Director
Ma. Dolores B. Yuvienco1 (Supervisory Reports and Studies Office); Deputy Director Rolando
A. Q. Agustin (Department of Commercial Banks I); Deputy Director Danilo A. Monasterio2
(Department of Rural Banks); Deputy Director Erlinda S. J. Marzan3 (Department of Thrift
Banks and Non-Bank Financial Institutions), as members; and Managing Director Fe B. Barin
(Office of the Monetary Board), as adviser. The technical staff of the Ad Hoc Committee was
composed of Atty. Magdalena D. Imperio, Bank Attorney III, as head; and Mr. Fernando B.
Caballa, Manager II; Mr. Lauro C. Abuzo, Bank Officer III, Atty. Policarpo G. Barcarse, Manager
II; Mr. Nicanor F. Rillera, Manager II; and Mr. Aristides R. Wylengco, Manager II, as members.
Deputy Governor Armando L. Suratos, the BSP General Counsel, acted as committee consultant.
Under the aforesaid office order, the Ad Hoc Committee was instructed to examine,
evaluate and review the provisions of the Old Manual for purposes of (1) deleting therefrom
provisions which are obsolete, redundant, irrelevant, superfluous or inconsistent with law, (2)
amending provisions so as to make them consistent with each other or to harmonize them
with existing statutes, executive issuances and official policies, and (3) reformulating provisions
to make them more responsive to the needs and concerns of the banking and financial
intermediation industry.
In discharging its mandated tasks, the Ad Hoc Review Committee sought the comments
of certain departments of the BSP, particularly, Treasury, Foreign Exchange, Economic Research,
Cash, Accounting, and Loans and Credit, on the proposed changes to provisions of the Old
Manual relevant to their operations. Likewise consulted were the various associations in the
non-bank financial intermediary industries. Their valuable suggestions contributed much to
the accomplishment of this project.
1
now Director, Department of Commercial Banks II
2
Retired
3
Deceased
v
The New Manual comprises substantially the regulatory issuances of the BSP, as well
as those of its predecessor agency, the Central Bank of the Philippines, as they were amended
or revised through the years, up to December 31, 1996. It shall serve as the principal source
of all substantive regulations for non-bank financial institutions issued by the Monetary Board
and the Governor of the BSP and shall be cited as the authority for enjoining compliance with
the rules and regulations embodied therein.
It is fervently hoped that the publication of this long-awaited new code of regulations
for non-bank financial institution will measure up to the expectations of these institutions.
The Bangko Sentral ng Pilipinas
vi
INSTRUCTIONS TO USERS
The Manual of Regulations for Non-Bank Financial Institutions (the “Manual”) is the
comprehensive authority on the specific subjects covered therein. New rules and amendments
to the rules shall immediately from part of the affected section or subsection of the Manual
while repealed rules shall be deleted so that the user shall no longer refer to a separate issuance,
i.e., circular or memorandum, but shall instead cite the particular section or subsection of the
Manual. Non-bank financial institutions (NBFIs) governed by the Manual shall comply with the
provisions thereof and any violation thereof shall be punishedable under the specific and/or
general provisions on sanctions.
The Manual contains the rules and regulations on NBFIs subject to supervision by the
Bangko Sentral ng Pilipinas (BSP) under the law. Specifically, these institutions are as follows:
NBFIs performing quasi-banking functions, or quasi-banks, which are subject to BSP supervision
under R.A. No. 7653, The New Central Bank Act; NBFIs performing trust and other fiduciary
activities and building and loan associations (BLAs), under R.A. No. 337, as amended; non-
stock savings and loans association (NSSLAs), under R.A. 3779; and pawnshops, under P.D.
No. 114. The regulations addressed to these institutions are grouped as follows: the Q Regulations,
which are addressed to quasi-banks; the S Regulations, which are addressed to NSSLAs; the P
Regulations, which are addressed to pawnshops; the B Regulations, which are addressed to
BLAs; and N Regulations, which are addressed to other NBFIs subject to BSP supervision.
As a code of regulations, the Manual contains the basic features of division into Parts,
further sudivided into major topic headings which intorduce the corresponding sections and
subsections making up the provisions governing a major operation of the institutions subject to
the regulations. Parts and major topic headings as well as coded setion numbers and headings
are made uniform for all the groups of regulations.
Coding of sections utilizes six (6) digits; i.e., 4123Q.44. The first digit (4 in the example)
refers to the type of financial institution (i.e., non-bank financial institutions as distinguished
from banks or banking institutions, the regulations addressed to which institutions are contained
in another Manual) to which the regulation is applicable; the second digit (1 in the example), to
the Part number, and the third and fourth digits (23 in the example), to the section number. The
other two (2) digits after the decimal point (44 in the example) refers to the subsection number.
The letters Q, S, B, P and N are appended to the pertinent code numbers of the sections to
indicate the particular category of NBFIs the regulations are addressed to, namely: quasi-banks,
NSSLAs, BLAs, pawnshops and other NBFIs subject to BSP supervision, respectively. For example,
Sections 4161Q, 4161S, 4161B and 4161P refer to provisions of reporting requirements of
quasi-banks, NSSLAs, BLAs and pawnshops, in that order.
vii
To illustrate, the code numbers 4161Q.2 indicates:
Main caption on “Records”
Subcaption on “SFAS”
4 1 6 1 Q . 2
Regulation addressed to quasi-banks
Part One on “Organization, Management and Administration"
Regulations addressed to NBFIs
The paging is by Parts, each Part beginning with page 1, and so on, corresponding to the
number of pages of the particular Part. For example, Part I, consisting of six (6) pages will start
with a first page indicated as “Part I - Page 1”, and “Part I - Page 6” as its last page. The pages for
updates will follow the same pagination, with letters added to indicate inserted pages, in the
event amendatory regulations require additional pages. Paging is further identified as to the
group of regulations the particular page belong; for example, Q Regulations.
To facilitate reference, running section headings consisting of the coded numbers of the
sections/subsections whose provisions are contained in a particular page are indicated at either
the upper right- or left-hand corner of the page preceded by the symbols § or §§. The cut-off date
is indicated immediately below the running section heads, as: 96.12.31. Thereafter, the date of
the pages affected by subsequent new issuances or amendments/repeals will be changed to the
end of the semestral period during the semestral updating which shall reflect the changes that
shall have occurred.
viii
MANUAL OF REGULATIONS FOR NON-BANK FINANCIAL INSTITUTIONS
Q REGULATIONS
(Regulations Governing Non-Bank Financial Institutions
Performing Quasi-Banking Functions)
TABLE OF CONTENTS
PART ONE - ORGANIZATION, MANAGEMENT AND

ADMINISTRATION
A. SCOPE OF AUTHORITY
SECTION 4101Q Quasi-Banking Functions

4101Q.1 Financial intermediaries
4101Q.2 Guidelines on lender count
4101Q.3 Transactions not considered quasi-banking
4101Q.4 Delivery of securities
4101Q.5 Securities custodianship operations
SECTION 4102Q Preconditions for the Exercise of Quasi-Banking Functions
SECTION 4103Q Certificate of Authority from the Bangko Sentral
SECTION 4104Q Bangko Sentral Certificate of Authority
SECTION 4105Q Licensing of an Investment House
B. CAPITALIZATION
SECTION 4106Q Minimum Capitalization
SECTION 4107Q Minimum Capital of Investment House
SECTION 4108Q Sanctions
SECTIONS 4109Q - 4110Q (Reserved)
C. MERGER/CONSOLIDATION
SECTION 4111Q Merger/Consolidation Involving Quasi-Banks
SECTION 4112Q Merger/Consolidation Incentives
ix
D. RISK-BASED CAPITAL ADEQUACY RATIO
SECTION 4116Q Minimum Ratio

4116Q.1 Qualifying capital
4116Q.2 Risk-weighted assets
4116Q.3 Definitions
4116Q.4 Required reports
4116Q.5 Sanctions
4116Q.6 Temporary relief
SECTION 4117Q Treatment of Equity Investment with Reciprocal

Stockholdings
SECTION 4118Q Sanctions on Net Worth Deficiency
E. (RESERVED)
F. STOCK, STOCKHOLDERS AND DIVIDENDS
SECTION 4126Q Dividends

4126Q.1 Definition of terms
4126Q.2 Requirements on the declaration of dividends/
net amount available for dividends
4126Q.3 Reporting and verification
4126Q.4 Recording of dividends
4126Q.5 Rules on declaration of stock dividends
G. DIRECTORS, OFFICERS AND EMPLOYEES
SECTION 4141Q Definition; Qualifications; Powers; Responsibilities and

Duties of Board of Directors and Directors
4141Q.1 Limits on the number of the members of the
board of directors
4141Q.2 Qualifications of a director
4141Q.3 Powers/responsibilities and duties of board of
directors and directors
x
4141Q.4 Confirmation of the election/appointment of
directors and officers
4141Q.5 - 4141Q.8 (Reserved)
4141Q.9 Reports required
4141Q.10 Sanctions
SECTION 4142Q Definition and Qualifications of Officers
SECTION 4143Q Disqualification of Directors and Officers

4143Q.1 Persons disqualified to become directors
4143Q.2 Persons disqualified to become officers
4143Q.3 Effect of non-possession of qualifications or
possession of disqualifications
4143Q.4 Disqualification procedures
4143Q.5 Watchlisting
4143Q.6 Prohibition against foreign officers/employees
of financing companies
SECTION 4144Q Interlocking Directorships and/or Officerships

4144Q.1 Representatives of government
SECTION 4145Q Profit Sharing of Directors, Officers and Employees
SECTION 4146Q Monetary Board Confirmation of Directors and Senior

Officers
SECTION 4147Q Compensation and Other Benefits of Directors and Officers
SECTION 4148Q (Reserved)
SECTION 4149Q Conducting Business in an Unsafe/Unsound Manner

4149Q.1 - 4149Q.8 (Reserved)
4149Q.9 Sanctions
SECTION 4150Q Reserved
H. BRANCHES AND OTHER OFFICES
SECTION 4151Q Establishment

4151Q.1 Evaluation guideposts
4151Q.2 Additional capital, if required
4151Q.3 Other requirements/factors to be considered
4151Q.4 Conditions precluding processing of
applications
xi
4151Q.5 Documentary requirements
4151Q.6 Filing of applications
4151Q.7 Period within which to submit complete
requirements
4151Q.8 Prohibition against operating without SEC
license
I. (RESERVED)
J. RECORDS AND REPORTS
SECTION 4161Q Records

4161Q.1 Uniform system of accounts
4161Q.2 Adoption of statements of financial accounting
standards
SECTION 4162Q Reports

4162Q.1 Categories and signatories of reports
4162Q.2 Manner of filing
4162Q.3 Sanctions in case of willful delay in the
submission of reports/refusal to permit
examination
K. INTERNAL CONTROL
SECTION 4171Q Internal Control Systems
SECTION 4172Q Financial Audit

4172Q.1 Posting of audited financial statements
4172Q.2 Disclosure of external auditor's adverse findings
to the Bangko Sentral; sanction
4172Q.3 Disclosure requirement in the notes to the
audited financial statements
4172Q.4 Disclosure requirements in the annual report
4172Q.5 Posting and submission of annual report
xii
SECTION 4180Q Selection, Appointment and Reporting Requirements for
External Auditors; Sanction; Effectivity
L. MISCELLANEOUS PROVISIONS
SECTION 4181Q Publication Requirements
SECTION 4182Q Management Contracts
SECTION 4191Q Compliance System; Compliance Officer

4191Q.1 Compliance system
4191Q.2 Compliance officer
4191Q.3 Compliance risk
4191Q.4 Responsibilities of the board of directors
and senior management on complaince
4191Q.5 Status
4191Q.6 Independence
4191Q.7 Role and responsibilities of the
compliance function
4191Q.8 Cross-border issues
4191Q.9 Outsourcing
SECTION 4199Q General Provision on Sanctions
PART TWO - DEPOSIT AND BORROWING OPERATIONS
A. - D. (RESERVED)
E. DEPOSIT SUBSTITUTE OPERATIONS
SECTION 4211Q Deposit Substitute Instruments

4211Q.1 Prohibition against use of certain instruments as
deposit substitutes
4211Q.2 Negotiations of promissory notes
4211Q.3 Minimum features
4211Q.4 Delivery of Securities
xiii
4211Q.5 Regulation on additional stipulation
4211Q.6 Substitution of underlying securities
4211Q.7 Call slips/tickets for 24-hour loans
4211Q.8 Requirement to state nature of underlying
securities
4211Q.9 Compliance with SEC rules
SECTION 4212Q Recording; Payment; Maturity; Renewal
SECTION 4213Q Minimum Trading Lot
SECTION 4214Q Interbank Borrowings
SECTION 4215Q Borrowings from Trust Departments or Managed Funds of

Banks or Investment Houses
SECTION 4216Q Money Market Placements of Rural Banks

4216Q.2 Conditions required on accepted placements
4216Q.3 Sanctions
SECTION 4217Q Bond Issues of NBQBs

4217Q.2 Underwriting of bonds
4217Q.3 Compliance with SEC rules
4217Q.4 Notice to Bangko Sentral
4217Q.5 Minimum features
4217Q.6 Reserve requirement
4217Q.7 Inapplicability of certain regulations
F. (RESERVED)
G. INTEREST
SECTION 4236Q Yield/Interest Rates
xiv
H. RESERVES
SECTION 4246Q Reserves Against Deposit Substitutes

4246Q.1 Composition of reserves
4246Q.2 Computation of reserve position
4246Q.3 Reserve deficiencies; sanctions
4246Q.4 Exemptions
4246Q.5 Matured and unclaimed deposit substitutes
4246Q.6 Book entry method for reserve securities
4246Q.7 Interest income on reserve deposit with
Bangko Sentral
4246Q.8 Guidelines in calculating and reporting to the
BSP the required reserves on deposit substitutes
evidenced by repurchase agreements covering
government securities
I. (RESERVED)
J. BORROWINGS FROM THE BANGKO SENTRAL
SECTION 4276Q Repurchase Agreements with the Bangko Sentral
K. OTHER BORROWINGS
SECTION 4281Q Borrowings from the Government

PART THREE - LOANS, INVESTMENTS AND SPECIAL CREDITS
SECTION 4301Q Management of Risk Assets/Minimum Guidelines

on Lending Operations
xv
4301Q.1 - 4301Q.5 (Reserved)
4301Q.6 Large exposures and credit risk concentrations
SECTION 4302Q Loan Portfolio and Other Risk Assets Review System
4302Q.1 Provisions for losses; booking
4302Q.2 Sanctions
A. LOANS IN GENERAL
SECTION 4306Q Loan Limit to a Single Borrower

4306Q.1 Exclusions from loan limit
4306Q.2 Contingent liabilities included in loan limit
4306Q.3 Sanctions
SECTION 4307Q Interest and Other Charges

4307Q.1 Rate ceilings
4307Q.2 Floating rates of interest
4307Q.3 Effect of prepayment
4307Q.4 Loan prepayment
4307Q.5 Escalation clause; when allowable
4307Q.6 Rate of interest in the absence of stipulation
4307Q.7 Accrual of interest earned on loans
SECTION 4308Q Past Due Accounts

4308Q.1 Accounts considered past due
4308Q.2 Renewal/extension
4308Q.3 Restructured loans
4308Q.4 Demand loans
4308Q.5 Write-off of loans as bad debts
SECTION 4309Q "Truth in Lending Act" Disclosure Requirement

4309Q.2 Information to be disclosed
4309Q.3 Inspection of contracts covering credit
transactions
4309Q.4 Posters
SECTION 4311Q Non-Performing Loans

4311Q.1 Accounts considered non-performing;
definitions
xvi
4311Q.2 Accrual of interest earned on loans
4311Q.3 Allowance for uncollected interest on loans
4311Q.4 Reporting requirement
B. (RESERVED)
C. UNSECURED LOANS
SECTION 4336Q Loans Against Personal Security

4336Q.1 General guidelines
4336Q.2 Proof of financial capacity of borrower
4336Q.3 Signatories
4336Q.4 Sanctions
SECTION 4337Q Credit Card Operations; General Policy

4337Q.2 Risk management system
4337Q.3 Minimum requirements
4337Q.4 Information to be disclosed
4337Q.5 Accrual of interest earned
4337Q.6 Finance charges
4337Q.7 Deferral charges
4337Q.8 Late payment/penalty fees
4337Q.9 Confidentiality of information
4337Q.10 Suspension, termination of effectivity and
reactivation
4337Q.11 Inspection of records covering credit card
transactions
4337Q.12 Offsets
4337Q.13 Handling of complaints
4337Q.14 Unfair collection practices
4337Q.15 Sanctions
D. RESTRUCTURED LOANS
SECTION 4351Q Restructured Loans; General Policy

4351Q.1 Definition; when to consider performing/non-
performing
xvii
4351Q.2 Procedural requirements
4351Q.3 Classification
E. LOANS/CREDIT ACCOMMODATIONS TO DIRECTORS,

OFFICERS, STOCKHOLDERS AND THEIR RELATED INTERESTS
SECTION 4356Q General Policy

4356Q.1 Definitions
SECTION 4357Q Transactions Covered
SECTION 4358Q Transactions Not Covered

4358Q.1 Applicability to credit card operations
SECTION 4359Q Direct or Indirect Borrowings
SECTION 4360Q Individual Ceiling; Single-Borrower Limit
SECTION 4361Q Aggregate Ceiling; Ceiling On Unsecured Loans
SECTION 4362Q Exclusions from Aggregate Ceiling
SECTION 4363Q Credit Accommodations Under Officers' Fringe Benefit Plans
SECTION 4364Q Procedural Requirements
F. (RESERVED)
G. SPECIAL TYPES OF LOANS
SECTION 4376Q Interbank Loans

4376Q.1 Systems and procedures for interbank call loan
transactions
4376Q.2 Accounting procedures
4376Q.3 Transfer of excess funds
4376Q.4 Settlement procedures
xviii
H. EQUITY INVESTMENTS
SECTION 4381Q Investment in Non-Allied Undertakings
SECTION 4382Q Investments Abroad
SECTION 4383Q Underwriting Exempted
I. (RESERVED)
J. OTHER OPERATIONS
SECTION 4391Q Purchase of Receivables and Other Obligations

4391Q.1 Yield on purchase of receivables
4391Q.2 Purchase of commercial paper
4391Q.3 Investments in debt and marketable equity
securities
SECTION 4392Q Reverse Repurchase Agreements with the Bangko Sentral
SECTION 4394Q Acquired Assets in Settlement of Loans

4394Q.1 Booking
4394Q.2 Sales contract receivable
K. MISCELLANEOUS PROVISIONS
SECTION 4396Q Transfer/sale of non-performing assets to a special purpose

vehicle or to an individual
xix
PART FOUR - TRUST, OTHER FIDUCIARY BUSINESS AND
INVESTMENT MANAGEMENT ACTIVITIES
SECTION 4401Q Statement of Principles
SECTION 4402Q Scope of Regulations
SECTION 4403Q Definitions
A. TRUST AND OTHER FIDUCIARY BUSINESS
SECTION 4404Q Authority to Perform Trust and Other Fiduciary Business

4404Q.1 Prerequisites for engaging in trust and other
fiduciary business
4404Q.2 Pre-operating requirements
SECTION 4405Q Security for the Faithful Performance of Trust and Other
Fiduciary Business
4405Q.1 Basic security deposit
4405Q.2 Eligible securities
4405Q.3 Valuation of securities and basis of computation
of the basic security deposit requirement
4405Q.4 Compliance period; sanctions
4405Q.5 Reserves against peso-denominated Common
Trust Funds (CTFs) and Trust and Other
Fiduciary Accounts (TOFA) - Others
4405Q.6 Composition of reserves
4405Q.7 Computation of reserve position
4405Q.8 Reserve deficiencies; sanctions
4405Q.9 Report of compliance
SECTION 4406Q Organization and Management

4406Q.1 Organization
4406Q.2 Composition of trust committee
4406Q.3 Qualifications of committee members, officers
and staff
4406Q.4 Responsibilities of administration
SECTION 4407Q Non-Trust, Non-Fiduciary and/or Non-Investment

Management Activities
SECTION 4408Q Unsafe and Unsound Practices

4408Q.1 - 4408Q.8 (Reserved)
4408Q.9 Sanctions
xx
SECTION 4409Q Trust and Other Fiduciary Business
4409Q.1 Minimum documentary requirements
4409Q.2 Lending and investment disposition
4409Q.3 Transactions requiring prior authority
4409Q.4 Ceilings on loans
4409Q.5 Funds awaiting investment or distribution
4409Q.6 Other applicable regulations on loans and
investments
4409Q.7 Operating and accounting methodology
4409Q.8 - 4409Q.15 (Reserved)
4409Q.16 Qualification and accreditation of quasi-banks
acting as trustee on any mortgage or bond
issuance by any municipality, government-
owned or controlled corporation, or any body
politic
SECTION 4410Q Unit Investment Trust Funds/Common Trust Funds

4410Q.1 Definition
4410Q.2 Establishment of a unit investment trust fund
4410Q.3 Administration of a unit investment trust fund
4410Q.4 Relationship of trustee with unit investment
trust fund
4410Q.6 Plan rules
4410Q.7 Minimum disclosure requirements
4410Q.8 Exposure limit to single person/entity
4410Q.9 Allowable investments and valuation
4410Q.10 Other related guidelines on valuation of
allowable investments
4410Q.11 Unit investment trust fund administration
support
4410Q.12 Counterparties
4410Q.13 Foreign currency-denominated unit investment
trust funds
4410Q.14 Exemptions from statutory and liquidity
reserves, single borrowers limit, DOSRI
SECTION 4411Q Investment Management Activities

4411Q.1 Minimum documentary requirements
4411Q.2 Minimum size of each investment management
account
4411Q.3 Commingling of funds
4411Q.4 Lending and investment disposition
xxi
4411Q.5 Transactions requiring prior authority
4411Q.6 Title to securities and other properties
4411Q.7 Ceilings on loans
SECTION 4413Q Required Retained Earnings Appropriation
B. INVESTMENT MANAGEMENT ACTIVITIES
SECTION 4414Q Authority to Perform Investment Management

4414Q.1 Prerequisites for engaging in investment
management activities
4414Q.2 Pre-operating requirements
SECTION 4415Q Security for the Faithful Performance of Investment

Management Activities
4415Q.2 Eligible securities
4415Q.3 Valuation of securities and basis of computa-
tion of the basic security deposit requirement
4415Q.4 Compliance period; sanctions
SECTION 4416Q Organization and Management
SECTION 4417Q Non-Investment Management Activities

SECTION 4418Q Unsound Practices
SECTION 4419Q Conduct of Investment Management Activities
SECTION 4420Q Required Retained Earnings Appropriation
C. GENERAL PROVISIONS
SECTION 4421Q Books and Records
SECTION 4422Q Custody of Assets
SECTION 4423Q Fees and Commissions
SECTION 4424Q Taxes
xxii
SECTION 4425Q Reports Required
4425Q.1 To trustor, beneficiary, principal
4425Q.2 To the Bangko Sentral
SECTION 4426Q Audits

4426Q.1 Internal audit
4426Q.2 External audit
4426Q.3 Board action
SECTION 4427Q Authority Resulting from Merger or Consolidation
SECTION 4428Q Receivership
SECTION 4429Q Surrender of Trust or Investment Management License
SECTION 4441Q Securities Custodianship and Securities Registry Operations

4441Q.1 Statement of policy
4441Q.2 Applicability of this regulation
4441Q.3 Prior Bangko Sentral
4441Q.4 Application for authority
4441Q.5 Pre-qualification requirements for a securities
custodian/registry
4441Q.6 Functions and responsibilities of a securities
custodian
4441Q.7 Functions and responsibilities of a securities
registry
4441Q.8 Protection of securities of the customer
4441Q.9 Independence of the registry and custodian
4441Q.10 Registry of scripless securities of the Bureau of
the Treasury
4441Q.11 Confidentiality
4441Q.12 Compliance with anti-money laundering laws/
regulations
4441Q.14 Reportorial requirements
4441Q.15 - 4441Q.28 (Reserved)
4441Q.29 Sanctions
xxiii
PART FIVE - FOREIGN EXCHANGE OPERATIONS
SECTION 4501Q Authority; Coverage
SECTION 4502Q Specific Foreign Exchange Activities
SECTION 4503Q Separate Department
SECTION 4504Q Applicability of Pertinent Bangko Sentral Rules
SECTION 4505Q Aggregate Ceiling on Issuance of Guarantees
PART SIX - MISCELLANEOUS
A. OTHER OPERATIONS
SECTION 4601Q Open Market Operations
4601Q.1 Settlement procedures
SECTION 4602Q Repurchase Agreements with the Bangko Sentral

4602Q.1 Reverse repurchase agreements with
Bangko Sentral
SECTION 4603Q Derivatives

4603Q.1 Scope and pre-qualification requirements
4603Q.2 Transactions between parent and subsidiary
4603Q.3 Renewals
4603Q.4 Risk management guidelines
4603Q.5 Accounting guidelines
4603Q.6 Reporting requirements
4603Q.7 Sanctions
4603Q.8 - 4603Q.13 (Reserved)
4603Q.14 Forward and swap transactions
4603Q.16 Documentation
xxiv
4603Q.17 Tenor/maturity of FX forward or swap
4603Q.18 Cancellations, roll-overs or non-delivery of FX
forward contracts
4603Q.19 Non-deliverable forward contracts with non-
residents
4603Q.20 Compliance with Anti-Money Laundering rules
4603Q.21 Reporting requirements
4603Q.22 - 4603Q.25 (Reserved)
4603Q.26 Sanctions
SECTION 4604Q Underwriting by Investment Houses
SECTION 4626Q Asset-Backed Securities

4626Q.2 Authority
4626Q.3 Management oversight
4626Q.4 Minimum documents required
4626Q.5 Minimum features of ABS
4626Q.6 Disclosures
4626Q.7 Conveyance of assets
4626Q.8 Representations and warranties
4626Q.9 Third party review
4626Q.10 Originator and seller
4626Q.11 Trustee and issuer
4626Q.12 Servicer
4626Q.13 Underwriter
4626Q.14 Guarantor
4626Q.15 Credit enhancement
4626Q.16 Clean-up call
4626Q.17 Prohibited activities
4626Q.18 Amendment
4626Q.19 Miscellaneous provision
4626Q.20 Report to Bangko Sentral
B. SUNDRY PROVISIONS
SECTION 4651Q NBQB Premises and Other Fixed Assets

4651Q.1 Appreciation or increase in book value of
NBQB premises and other fixed assets
xxv
4651Q.2 (Reserved)
4651Q.3 Reclassification of real and other properties
owned or acquired as NBQB premises
4651Q.4 - 4651Q.8 (Reserved)
4651Q.9 Batas Pambansa Blg. 344 - An Act To Enhance
The Mobility Of Disabled Persons By Requiring
Certain Buildings, Institutions, Establishments
And Public Utilities To Install Facilities And
Other Devices
SECTION 4652Q Annual Fees on Quasi-Banks
SECTION 4653Q Payment of Fines and Other Charges

4653Q.1 Payment of fines
4653Q.2 Check/demand draft payments to the
Bangko Sentral
SECTION 4654Q Examination by the Bangko Sentral

4654Q.1 Definitions
SECTION 4655Q Applicability of Expanded Commercial Banking Rules on

NBQBs
SECTION 4656Q Basic Laws Governing Investment Houses and Financing

Companies
SECTION 4657Q Recognition and Derecognition of Domestic Credit Rating

Agencies for Bank Supervisory Purposes
4657Q.1 Statement of policy
4657Q.2 Minimum eligibility criteria
4657Q.3 Pre-qualification requirements
4657Q.4 Inclusion in BSP list
4657Q.5 Derecognition of credit rating agencies
4657Q.6 Recognition of PhilRatings as domestic credit
rating agency for bank supervisory purposes
SECTION 4661Q Examination by the BSP
xxvi
SECTION 4691Q Anti-Money Laundering Regulations
4691Q.1 - 4691Q.8 (Reserved)
4691Q.9 Sanctions and Penalties
xxvii
04.12.31
LIST OF APPENDICES
No. SUBJECT MATTER
Q-1 Guidelines to Evaluate Investment Houses
Q-2 Determination of Amount of Additional Capital the Entity Must Put

Up
Q-3 List of Reports Required from NBQBs

Annex Q-3-a Information on One-Year Borrowing-Investment
Program to be Submitted by NBQBs
Annex Q-3-b Guidelines Governing the Consolidation of Financial
Satements of Financial Intermediaries and their Allied
Undertakings/Subsidiaries/Affiliates
Annex Q-3-c Reporting Guidelines on Crimes/Losses
Annex Q-3-d Documentary Requirements on Directors/Officers/
Major Individual Stockholders
Annex Q-3-e Documents/Information on Organizational Structure
and Operational Policies
Annex Q-3-f Guidelines on Calculating Additional Information
Required in Published statement of Condition
Q-4 Guidelines on Prescribed Reports Signatories and Signatory Authori-

zation
Annex Q-4-a Format of Resolution for Signatories of Category A-1
Reports
Annex Q-4-b Format of Resolution for Signatories of Category A-2
Reports
Annex Q-4-c Format of Resolution for Signatories of Categories A-3
and B Reports
Q-5 Minimum Internal Control Standards for NBQBs
Q-6 Standardized Deposit Substitute Instruments
Q-7 New Rules on Registration of Short-Term Commercial Papers
Q-8 New Rules on Registration of Long-Term Commercial Papers
Q-9 List of Reserve - Eligible and Non-Eligible Securities
Manual of Regulations for Non-Bank Financial Institutions Q Regulations

Appendices - Page 1
List of Appendices
04.12.31
No. SUBJECT MATTER
Q -10 Guidelines in Identifying and Monitoring Problem Loans and Other

Risk Assets and Setting Up of Allowance for Probable Losses
Q - 11 Format-Disclosure Statement of Loan/Credit Transaction
Q - 12 Abstract of "Truth in Lending Act" (Republic Act No. 3765)
Q - 13 Agreement for the Enhanced Interbank Call Loan Funds Transfer

System
App. Q-13-a Settlement Procedures for Interbank Loan Transactions
and Purchase and Sale of Government Securities
under Repurchase Agreements with the Bangko
Sentral
App. Q-13-b Intraday Liquidity Facility for the Implementation of
App. Q-13-a on the Improved Interbank Call Loan
Funds Transfer System (MIPS 2)
Q - 14 Sample Investment Management Agreement
Q - 15 Risk Management Guidelines for Derivatives
Q - 16 Risk Disclosure Statement for Derivatives Activities
Q - 17 Accounting Guidelines for Derivatives
Q - 18 SEC Basic Rules and Regulations to Implement the Provisions of

Presidential Decree No. 129, Otherwise Known as "The Investment
Houses Law"
Q - 19 New Rules and Regulations to Implement the Provisions of Republic

Act No. 5980 (The Financing Company Act), As Amended
Q - 20 Classification, Accounting Procedures, Valuation and Sales and

Transfers of Investments in Debt Securities and Marketable Equity
Securities
App. Q-20-a Establishing the Market Benchmarks/Reference Prices
and Computation Method Used to Mark-to-Market
Debt and Marketable Equity Securities
Q Regulations Manual of Regulations for Non-Bank Financial Institutions

Appendices - Page 2
List of Appendices
04.12.31
No. SUBJECT MATTER
Q - 21 Guidelines on the Use of Scripless (RoSS) Securities as Security De-

posit for the Faithful Performance of Trust Duties
Q - 22 Proforma Payment Form
Q - 23 Anti-Money Laundering Regulations

Annex Q-23-a Certification of Compliance with Anti-Money Laun-
dering Regulations
Annex Q-23-b Rules on Submission of Covered Transaction Reports
and Suspicious Transaction Reports by Covered
Institutions
Annex Q-23-c Customer Due Diligence for Banks and Non-Bank
Financial Intermediaries Performing Quasi-Banking
Functions (NBQBs)
Annex Q-23-c-1 General Identification Requirements
Annex Q-23-d General Guide to Account Opening and Customer
Identification
Q - 24 Activities Which May Be Considered Unsafe and Unsound Practices
Q - 25 Revised Implementing Rules and Regulations - R.A. No. 9160, as

Amended by R.A. No. 9194
Q - 26 Investment Houses and Financing Companies (IH/FC) with Quasi-

Banking Functions - Reverse Repurchase Agreements with BSP Pro-
forma Accounting Entries
Q - 27 Details on the Computation of Quarterly Interest Payments Credited

to the Demand Deposit Accounts (DDAs) of Quasi-Banks' Legal
Reserve Deposits with BSP
Q - 28 Transfer/Sale of Non-Performing Assets to a Special Purpose Vehicle

or to an Individual
App. Q-28-a Accounting Guidelines on the Sale of Non-Perform-
ing Assets to Special Purpose Vehicles and to
Qualified Individuals for Housing Under "The
Special Purpose Vehicle (SPV) Act of 2002"
Annex Q-28-a-1 Illustrative Accounting Entries to Record Sale of
NPAs to SPV under the SPV Law of 2002
Annex Q-28-a-2 Pro-Forma Disclosure Requirement

Appendices - Page 3
List of Appendices
04.12.31
No. SUBJECT MATTER
Q - 29 Guidelines and Minimum Documentary Requirements for Foreign

Exchange (FX) Forward and Swap Transactions
Q - 30 Guidelines to Govern the Selection, Appointment and the Reporting

Requirement for External Auditors of Quasi-Banks
Q - 31 Qualifications Requirements for a Bank/NBFI Applying for Accredita-

tion to Act as Trustee on any Mortgage or Bond Issued by any
Municipality, Government-Owned or Controlled Corporation, or
any Body Politic
Q - 32 Rules and Regulations on Common Trust Funds
Q - 33 Checklist of BSP Requirements in the Submission of Audited

Financial Statements and Annual Report
App. Q-33-a Comparison of Audited Financial Statements and
Submitted Consolidated Statement of Condition
and Income and Expenses
Q - 34 Quarterly Investment Disclosure Statement

Appendices - Page 4
§§ 4101Q - 4101Q.1
96.12.31
PART ONE
ORGANIZATION, MANAGEMENT AND ADMINISTRATION
A. SCOPE OF AUTHORITY claims collectible in money, including

interbank borrowings or borrowings between
financial institutions, or of securities, of any
Section 4101Q Quasi-Banking Functions amount and maturity, from domestic or
Quasi-banking functions consist of the foreign sources.
following: Relending shall refer to the extension
a. Borrowing funds for the borrower's of loans by an institution with antecedent
own account; borrowing transactions. Relending shall be
b. Twenty (20) or more lenders at any presumed in the absence of express
one time; stipulation, when the institution is regularly
c. Methods of borrowing: issuance, engaged in lending.
endorsement, or acceptance of debt Regularly engaged in lending shall refer
instruments of any kind, other than deposits, to the practice of extending loans, advances,
such as: discounts or rediscounts as a matter of
(1) acceptances; business, i.e., continuous or consistent
(2) promissory notes; lending as distinguished from isolated
(3) participations; lending transactions.
(4) certificates of assignment or
similar instruments with recourse; § 4101Q.1 Financial intermediaries
(5) trust certificates; Financial intermediaries shall mean persons
(6) repurchase agreements; and or entities whose principal functions include
(7) such other instruments as the the lending, investing or placement of funds
Monetary Board may determine; and or evidences of indebtedness or equity
d. Purpose: deposited with them, acquired by them, or
(1) relending; or otherwise coursed through them either for
(2) purchasing receivables or other their own account or for the account of
obligations. others.
As used in the definition of quasi- Principal shall mean chief, main, most
banking functions, the following terms and considerable or important, of first
phrases shall be understood, as follows: importance, leading, primary, foremost,
Borrowing shall refer to all forms of dominant or preponderant, as distinguished
obtaining or raising funds through any of from secondary or incidental.
the methods and for any of the purposes Functions shall mean actions, activities
provided in c and d above, whether the or operations of a person or entity by which
borrower's liability thereby is treated as real his/its business or purpose is fulfilled or
or contingent. carried out. The business or purpose of a
For the borrower's own account shall person or entity may be determined from
refer to the assumption of liability in one's the purpose clause in its articles of
own capacity and not in representation, or incorporation/partnership, and from the
as an agent or trustee, of another. nature of the business indicated in his/its
Purchasing of receivables or other application for registration of business filed
obligations shall refer to the acquisition of with the appropriate government agency.

Part I - Page 1
§§ 4101Q.1 - 4101Q.2
96.12.31
To be considered a financial engaged in the function(s) where financial

intermediary, a person or entity must perform intermediation is implied.
any of the following functions on a regular (3) A person or entity performing any
and recurring, not on an isolated basis: of the functions enumerated in Items a to e
a. Receive funds from one (1) group of this Subsection.
of persons, irrespective of number, through
traditional deposits, or issuance of debt or § 4101Q.2 Guidelines on lender count
equity securities; and make available/lend The following guidelines shall govern lender
these funds to another person or entity, and count on borrowings or funds mobilized by
in the process acquire debt or equity non-bank financial intermediaries:
securities; a. For purposes of ascertaining the
b. Use principally the funds received number of lenders/placers to determine
for acquiring various types of debt or equity whether or not a non-bank financial
securities; intermediary is engaged in quasi-banking
c. Borrow against, or lend on, or buy functions, the names of payees on the face
or sell debt or equity securities; of each debt instrument shall serve as the
d. Hold assets consisting principally of primary basis for counting the lenders/placers
debt or equity securities such as promissory except when proof to the contrary is adduced
notes, bills of exchange, mortgages, stocks, such as the official receipts or documents
bonds, and commercial papers; other than the debt instrument itself. In such
e. Realize regular income in the nature case the actual/real lenders/placers as
of, but need not be limited to, interest, appearing in such proof, shall be the basis
discounts, capital gains, underwriting fees, for counting the number of lenders/placers.
guarantees, fees, commissions, and service In a debt instrument issued to two (2)
fees, principally from transactions in debt or or more named payees under an and/or and
equity securities or by being an intermediary or arrangement, the number of payees
between suppliers and users of funds. appearing on the instrument shall be the basis
Non-banking financial intermediaries for counting the number of lenders/placers:
shall include the following: Provided, however, That a debt instrument
(1) A person or entity licensed and/or issued in the name of a husband and wife
registered with any government regulatory followed by the word spouses, whether under
body as a non-bank financial intermediary, an and, and/or or or arrangement or in the
such as investment house, investment name of a designated payee under an in trust
company, financing company, securities for (ITF) arrangement, shall be counted as one
dealer/broker, lending investor, pawnshop, (1) borrowing/placement.
money broker, fund manager, cooperative, b. Each debt instrument payable to
insurance company, non-stock savings and bearer shall be counted as one (1) lender/
loan association and building and loan placer except when the non-bank financial
association. intermediary can prove that there is only one
(2) A person or entity which holds itself (1) owner for several debt instruments so
out as a non-banking financial intermediary, payable.
such as by the use of a business name, which c. Two (2) or more debt instruments
includes the term financing, finance, issued to the same payee, irrespective of the
investment, lending and/or any word/phrase date and amount shall be counted as one (1)
of similar import which connotes financial borrowing or placement.
intermediation, or an entity which advertises d. Debt instruments underwritten by
itself as a financial intermediary and is investment houses or traded by securities

Part I - Page 2
§§ 4101Q.2 - 4101Q.4
04.12.31
dealers/brokers whether on a firm, standby as on the confirmation of sale, the phrase

or best efforts basis shall be counted on the without recourse or sans recourse and the
basis of the number of purchasers thereof following statement:
and shall not be treated as having been (Name of non-bank) assumes
issued solely to the underwriter or trader: no liability for the payment,
Provided, however, That in case of unsold directly or indirectly, of
debt instruments in a firm commitment this instrument.
underwriting, the underwriter shall be (2) In the absence of the phrase without
counted as a lender. recourse or sans recourse and the above-
e. Each buyer, assignee, and/or required accompanying statement, the
indorsee shall be counted in determining instrument so issued, endorsed or accepted
the number of lenders/placers of funds shall automatically be considered as falling
mobilized through sale, assignment, and/or within the purview of the rules on quasi-
indorsement of securities, or receivables on banking.
a without recourse basis, whenever the Provided, further, That any of the
terms and/or attendant documentation, following practices or practices similar and/
practice, or circumstances indicate that the or tantamount thereto in connection with a
sale, assignment, and/or indorsement thereof without recourse transaction renders such
legally obligates the non-bank financial transaction as with recourse and within the
intermediary to repurchase or reacquire the purview of the rules on quasi-banking.
securities/receivables sold, assigned, i. Issuance of postdated checks by a
indorsed or to pay the buyer, assignee, or financial intermediary, whether for its own
indorsee at some subsequent time. account or as an agent of the debt instrument
f. Funds obtained by way of advances issuer, in payment of the debt instrument
from stockholders, directors, officers, sold, assigned or transferred without
regardless of nature, shall be considered recourse;
borrowed funds or funds mobilized and such ii. Issuance by a financial intermediary
stockholders, directors or officers shall be of any form of guaranty on sale transactions
counted in determining the number of or on negotiations or assignment of debt
lenders/placers. instruments without recourse; or
iii. Payment with the funds of the
§ 4101Q.3 Transactions not financial intermediary which assigned, sold
considered quasi-banking. The following or transferred the debt instrument without
shall not constitute quasi-banking: recourse, unless the financial intermediary
a. Borrowing by commercial, can show that the issuer has with the said
industrial and other non-financial companies, financial intermediary funds corresponding
through the means listed in Sec. 4101Q for to the amount of the obligation.
the limited purpose of financing their own Any investment house violating the
needs or the needs of their agents or dealers; provisions of this Subsection shall be subject
and to the sanctions provided in Sections 12 and
b. The mere buying and selling 16 of P.D. No. 129, as amended.
without recourse of instruments mentioned
in Sec. 4101Q: Provided, That: § 4101Q.4 Delivery of securities1
(1) The institution selling without a. Securities sold on a without recourse
recourse shall indicate or stamp in basis allowed under Subsec. 4101Q.3(b)
conspicuous print on the instrument/s, as well shall be delivered physically to the purchaser,
-----------------------------------------------------------------------------
1
Effective 16 November 2004 under Circular 450 dated 06 September 2004.

Part I - Page 3
§§ 4101Q.4 - 4101Q.5
04.12.31
or to his designated custodian duly (d) Suspension or revocation of the

accredited by the BSP, if certificated, or by authority to engage in trust and other
means of book-entry transfer to the fiduciary business.
appropriate securities account of the
purchaser or his designated BSP accredited § 4101Q.5 Securities custodianship
custodian in a registry for said securities, if operations
immobilized or dematerialized, while the a. Securities sold on a without recourse
confirmation of sale or document of basis shall be delivered to the purchaser, or
conveyance by the seller shall be physically to his designated custodian duly accredited
delivered to the purchaser. The custodian by the BSP: Provided, That a bank/other entity
shall hold the securities in the name of the authorized by the BSP to perform
buyer: Provided, That an NBQB/other entity custodianship function may not be allowed
authorized by the BSP to perform to be custodian of securities issued or sold
custodianship function may not be allowed on a without recourse basis by said NBQB/
to be custodian of securities issued or sold entity, its subsidiaries or affiliates, or of
on a without recourse basis by said NBFI, its securities in bearer form. Existing securities
subsidiaries or affiliates, or of securities in being held under custodianship by NBQBs/
bearer form. other entities under BSP supervision, which
The delivery shall be effected upon are not in accordance with said regulation,
payment and shall be evidenced by a must therefore, be delivered to a BSP
securities delivery receipt duly signed by the accredited third party custodian. However,
authorized officer of the custodian and banks and other financial institutions under
delivered to the purchaser. BSP supervision may maintain custody of
b. Sanctions. Violation of any provision existing securities of their clients who are
of this Subsection shall be subject to the unable or unwilling to take delivery pursuant
following sanctions/penalties: to the provisions of this Subsection but who
(1) Monetary penalties declined to deliver their existing securities
First offense – Fine of P10,000 a day for to a BSP accredited third party custodian
each violation reckoned from the date the subject to the following conditions:
violation was committed up to the date it was (1) the custody arrangements with
corrected. clients have been in existence prior to 05
Subsequent offenses – Fine of P20,000 November 2004 (effectivity date of Circular
a day for each violation reckoned from the 457 dated 14 October 2004);
date the violation was committed up to the (2) the dealing bank/NBFI under BSP
date it was corrected. supervision had been informed in writing by
(2) Other sanctions the client that he is not willing to have his
First offense – Reprimand for the existing securities delivered to a third party
directors/officers responsible for the custodian;
violation. (3) any BSP regulated institution shall not
Subsequent offense – enter into securities transactions with a client
(a) Suspension for ninety (90) days who has outstanding securities not delivered
without pay of directors/officers responsible to a BSP accredited third party custodian; and
for the violation; (4) it shall be the responsibility of any
(b) Suspension or revocation of the BSP regulated institution to satisfy itself that
accreditation to perform custodianship the person purchasing securities from it has
function; no outstanding securities holdings which
(c) Suspension or revocation of the were not delivered to a BSP accredited third
authority to engage in quasi-banking party custodian.
function; and/or

Part I - Page 4
§§ 4101Q.5 - 4102Q
04.12.31
b. Sanctions. Without prejudice to the b. It has generally complied with

penal and administrative sanctions provided applicable laws, rules and regulations, orders
for under Sections 36 and 37, respectively, or instructions of appropriate authority,
of the R.A. No. 7653, violation of any including the Monetary Board and/or BSP
provision of this Subsection shall be subject Management where applicable;
to the following sanctions/penalties: c. Its accounting records, systems and
(1) First Offense – procedures as well as internal control systems
(a) Fine of up to P10,000 a day for the are satisfactorily maintained;
institution for each violation reckoned from d. It does not have float items
the date the violation was committed up to outstanding for more than sixty (60) calendar
the date it was corrected; and days in the “Due From/To Head Office/
(b) Reprimand for the directors/officers Branches/Offices” accounts exceeding one
responsible for the violation. percent (1%) of the total resources as of end
(2) Second Offense - of preceding month;
(a) Fine of up to P20,000 a day for the e. It has no past due obligation with any
institution for each violation reckoned from financial institution as of date of application;
the date the violation was committed up to f. The officers who will be in-charge of
the date it was corrected; and the QB operations have actual experience of
(b) Suspension for ninety (90) days at least two (2) years in a bank or quasi-bank
without pay of directors/officers responsible as in-charge (or at least as assistant in-charge).
for the violation. The directors of the NBFI, officer-in-charge
(3) Subsequent Offenses – of the QB operations and the managerial staff
(a) Fine of up to P30,000 a day for the must comply with the fit and proper rule
institution for each violation from the date prescribed under existing law/rules and
the violation was committed up to the date it regulations;
was corrected; g. The NBFI has elected at least two (2)
(b) Suspension or revocation of the independent directors and all its directors
authority to act as securities custodian and/ have attended the required seminar for
or registry; and directors of banks/quasi-banks conducted or
(c) Suspension for one hundred twenty accredited by the BSP.
(120) days without pay of the directors/ h. It has not engaged in unsafe and
officers responsible for the violation. unsound practices during the past six (6)
months immediately preceding the date of
Sec. 4102Q Preconditions for the Exercise application where applicable;
of Quasi-Banking Functions. No person or i. It must have in place a
entity shall engage in quasi-banking functions comprehensive risk management system
without authority from the BSP. Only a duly approved by its board of directors appropriate
incorporated non-bank financial institution to its operations characterized by a clear
(NBFI) organized as stock corporation may delineation of responsibility for risk
undertake or perform quasi-banking management, adequate risk measurement
functions as defined in Sec. 4101Q. An NBFI systems, appropriately structured risk limits,
securing BSP authority to engage in quasi- effective internal control and complete,
banking functions must meet the following timely and efficient risk reporting systems. In
requirements: this connection, a manual of operations and
a. It must have complied with the other related documents embodying the risk
minimum adjusted capital accounts of at least management system must be submitted to the
P650 million or such amounts as may be appropriate supervising and examining
required by the Monetary Board in the future; department of the BSP at the time of

Part I - Page 4a
§§ 4102Q - 4104Q
04.12.31
application for authority and within thirty (30) (b) interest rates; and
days from updates. (c) domestic or foreign sources whether
institutional or personal.
Sec. 4103Q Certificate of Authority from NBFI’s authorized to engage and are
the Bangko Sentral. An NBFI securing BSP’s actually performing quasi-banking functions
Certificate of Authority to engage in quasi- but do not meet the new capital requirement
banking functions shall file an application are hereby given a period of two (2) years
with the appropriate supervising and reckoned from 11 November 2004 within
examining department of the BSP. The which to comply with the minimum capital
application shall be signed by the NBFI requirement in Sec. 4102Q(a): Provided,
president or officer of equivalent rank and That this may be substituted by a capital
shall be accompanied by the following build-up program for a period of not more
documents: than five (5) years and which must be
1. Certified true copy of the resolution approved by the Monetary Board. Such
of the NBFI’s board of directors authorizing capital build-up program shall be in equal
the application. annual or diminishing amounts and shall be
a. A certification signed by the president submitted to the appropriate supervising and
or the officer of equivalent rank that the examining department within three (3)
institution has complied with all conditions/ months from 11 November 2004. NBFIs
prerequisites for the grant of authority to which fail to comply with the required
engage in quasi-banking functions; capitalization upon expiration of said two (2)
b. An information sheet; year period given them or those which fail
c. Bio-data signed under oath, of the to comply with approved capital build-up
members of the managerial staff who will program shall liquidate their quasi-banking
undertake quasi-banking operations; and operations within one (1) year and shall be
d. Borrowing-investment program for considered revoked/cancelled.
one (1) year which should include at the
minimum: Sec. 4104Q Bangko Sentral Certificate of
(1) planned distribution of portfolios to – Authority. The BSP shall issue a Certificate
(a) underwriting; of Authority upon proof that the applicant
(b) commercial paper markets; has complied with the requirements of Secs.
(c) stocks and bonds; 4102Q and 4103Q and of pertinent laws and
(d) government securities; regulations.
(e) receivables financing, discounting In the case of a merger or consolidation
and factoring; of two (2) or more NBQBs, the authority
(f) leasing; and shall continue to have full force and effect.
(g) direct loans; For documentation purposes, in the case of
(2) expected sources of funds to support a merger, the Certificate of Authority of the
investment program classified as to – absorbing corporation shall be maintained;
(a) maturity: short, medium and long- and with respect to consolidation, a new
term;
(Next page is Part I - Page 5)

Part I - Page 4b
§§ 4104Q - 4111Q
02.12.31
certificate shall be issued to the new resulting from the revaluation shall form part
corporation. The Certificate of Authority of of capital for purposes of determining single
the absorbed corporation in a merger and the borrower’s limit and capital-to-risk assets
certificates of the consolidated corporations ratio.
in a consolidation shall be surrendered to Any foreign equity shall be registered
the appropriate department of the BSP. with and approved by the Board of
Investments and the appropriate department
Sec. 4105Q Licensing of an Investment of the BSP.
House. Applications for license as an
investment house referred to the BSP by the Sec. 4107Q Minimum Capital of Investment
Securities and Exchange Commission (SEC) House. The minimum paid-in capital
pursuant to P.D. No. 129 shall be evaluated requirement for an investment house shall
in accordance with the Guidelines to be P300 million pursuant to R.A. No. 129,
Evaluate Investment Houses prescribed in as amended by R.A. No. 8366.
Appendix Q-1.
Sec. 4108Q Sanctions. Any or all of the
following sanctions may be imposed on any
B. CAPITALIZATION NBQB which fails to maintain at least the
applicable minimum capital under Secs.
Sec. 4106Q Minimum Capitalization. An 4106Q and 4107Q:
NBQB shall have a minimum combined (1) Suspension of authority to engage
capital accounts of P50 million. in quasi-banking functions;
Combined capital accounts shall mean (2) Suspension of authority to engage
the total of capital stock, retained earnings in trust/investment management activities (in
and profit and loss summary, net of (a) such the case of an investment house);
unbooked valuation reserves and other (3) Cease-and-desist order (in the case
capital adjustments as may be required by of an investment house);
the BSP and (b) total outstanding unsecured (4) No new/renewal/extension of credit
credit accommodations, both direct and accommodations to DOSRI;
indirect, to directors, officers, all stockholders (5) Prohibition against declaration of
and their related interests (DOSRI). With cash dividends;
respect to Item (b) hereof, the provisions of (6) Suspension of the privilege to
Sec. 4356Q shall apply except that in the establish and/or open approved branches,
definition of stockholders in said Section, the agencies, offices, etc.; and
qualification that his stockholdings, (7) Other sanctions as may be imposed
individually and/or together with his related by the Monetary Board.
interests in the lending NBQB, amount to ten
percent (10%) or more of the total subscribed Secs. 4109Q - 4110Q (Reserved)
capital stock of the NBQB, shall not apply for
purposes of this Item. Any appraisal surplus
or appreciation credit as a result of C. MERGER/CONSOLIDATION
appreciation or an increase in book value of
the assets of the NBQB shall be excluded, Sec. 4111Q Merger/Consolidation Involving
except in the case of merger and Quasi-Banks. The merger/ consolidation of
consolidation, where the appraisal increment NBQBs is encouraged to meet minimum

Part I - Page 5
§§ 4111Q - 4112Q
02.12.31
capital requirements and to develop larger subject to BSP approval, avail themselves of
and stronger financial institutions. NBQBs any or all of the following incentives:
which are investment houses are likewise a. Revaluation of premises, improve-
encouraged to merge with banks to obtain ments and equipment of the institutions:
authority to perform expanded commercial Provided, That such revaluation shall be
banking functions. based on fair valuation of the property
Mergers/consolidations involving conducted by a reputable appraisal company
NBQBs shall comply with the provisions of which shall be subject to review and
applicable law and shall be subject to approval by the BSP;
approval by the BSP. The following rules shall govern the
For purposes of merger and revaluation of assets:
consolidation of NBQBs , the following (1) The revaluation of the NBQB’s
definitions shall apply: premises, improvements and equipment shall
a. Merger is the absorption of one (1) be allowed only to all institutions
or more corporations by another existing participating in a merger/consolidation if all
corporation, which retains its identity and of them belong to the same category, or at
takes over the rights, privileges, franchises, least two (2) of them belong to the highest
and properties, and assumes all the liabilities category among the merging/consolidating
and obligations of the absorbed corpo- institutions.
ration(s) in the same manner as if it had itself (2) In case the merging/consolidating
incurred such liabilities or obligations. The institutions do not belong to the same
absorbing corporation continues its existence category or only one (1) of them falls under
while the life or lives of the other the highest category, all of them may be
corporation(s) is/are terminated. allowed to revalue their premises,
b. Consolidation is the union of two improvements and equipment: Provided,
(2) or more corporations into a single new That the amount of appraisal increment
corporation, called the consolidated resulting from such revaluation shall be
corporation, all the constituent corporations limited to the amount of the total resources
thereby ceasing to exist as separate entities. of the institution belonging to the lower
The consolidated corporation shall thereupon category or categories.
and thereafter possess all the rights, privileges, (3) The appraisal increment resulting
immunities, franchises and properties, and from the revaluation shall form part of capital
assume all the liabilities and obligations of for purposes of determining the single
each of the constituent corporations in the borrower’s limit and capital-to-risk assets
same manner as if it had itself incurred such ratio. The use of appraisal increment for cash
liabilities or obligations. dividend shall be governed by the provisions
of the Corporation Code.
Sec. 4112Q Merger/Consolidation (4) The revaluation of premises,
Incentives. In pursuance of the policy to improvements, and equipment of the
promote mergers and consolidations among institution as well as the recognition of
banks and other financial intermediaries as a goodwill as an incentive to mergers/
means to develop larger and stronger consolidations shall only be allowed if the
financial institutions, constituent entities may, following conditions are met:

Part I - Page 6
§ 4112Q
02.12.31
(i) The surviving or consolidated entity c. If by reason of merger/

will meet the existing capital requirements consolidation, the resulting NBQB is unable
after all adjustments are taken up in the books to comply fully with the prescribed net worth-
of accounts of the merging/consolidating to-risk assets ratio, the Monetary Board may,
entities but before considering appraisal at its discretion, temporarily relieve the NBQB
increments and goodwill, or there will be from full compliance with this requirement
infusion of fresh capital to meet said existing under such conditions as it may prescribe;
capital requirements; and In the case of purchase or acquisition
(ii) The merger/consolidation will result of majority or all of the outstanding shares of
in a more viable financial institution as a an NBQB by a bank/another NBQB , the
result of cost savings and improve revaluation of assets and the booking of the
competitive position. required valuation reserves based upon
In case of purchase or acquisition of examination by the BSP over a period of five
the majority or all of the outstanding shares (5) years shall be allowed only if such
of stock of an NBQB, the same conditions purchase or acquisition is for the purpose of
must be satisfied. rehabilitating the former NBQB: Provided,
b. Unbooked valuation reserves based That the revaluation of assets and staggered
upon BSP examination and other capital booking of reserves shall be allowed in full
adjustments resulting from the merger/ only if the purchaser is another NBQB and
consolidation may be booked on staggered both the NBQBs belong to the same category.
basis over a maximum period of five (5) years. Otherwise, only the NBQB being acquired/
The following guidelines shall govern rehabilitated shall be allowed to recognize
the staggered booking of valuation reserves: in full the appraisal increment resulting from
(1) The booking on staggered basis revaluation of assets and to book valuation
over a maximum period of five (5) years of reserves on a staggered basis, while in the
unbooked valuation reserves based upon case of the acquiring bank/NBQB , the
examination by the BSP may be allowed to appraisal increment resulting from
all institutions participating in a merger/ revaluation of assets and the privilege of
consolidation if all of them belong to the staggered booking of valuation reserves shall
same category, or at least two (2) of them each be limited to the amount of the total
belong to the highest category among the resources of the NBQB being acquired/
merging/consolidating institutions. rehabilitated.
(2) In case the merging/consolidating d. Conversion or upgrading of the
institutions do not belong to the same existing head offices, branches and/or other
category or only one (1) of them falls under offices of the merged/absorbed institutions
the highest category, all of them may be into branches of the new or surviving
allowed to book the required valuation financial institution;
reserves based upon examination by the BSP e. Amortization of goodwill up to a
on a staggered basis over a maximum period maximum period of forty (40) years if there
of five (5) years: Provided, That the aggregate are compelling reasons to extend for this
amount of the required valuation reserves long, otherwise the amortization shall not be
shall be limited to the amount of the total longer than ten (10) years;
resources of the institution belonging to the The recognition of goodwill as an
lower category or categories. incentive to mergers/consolidations shall

Part I - Page 7
§§ 4112Q - 4116Q.1
03.12.31
only be allowed subject to the conditions in D. RISK-BASED

Item “a(4)”. CAPITAL ADEQUACY RATIO
f. Relocation of branches/offices may
be allowed within one (1) year from date of Sec. 4116Q Minimum Ratio. The risk-based
merger/consolidation in cases where the capital ratio of a quasi-bank, expressed as a
merger/consolidation resulted in duplication percentage of qualifying capital to risk-
of branches/offices in a service area, or in weighted assets, shall not be less than ten
such other cases/circumstances as the percent (10%) for both solo basis (head of-
Monetary Board may prescribe; fice plus branches) and consolidated basis
g. Outstanding penalties in legal (parent quasi-bank plus subsidiary financial
reserve deficiencies and interest on overdrafts allied undertakings, but excluding insurance
with the BSP as of the date of merger/ companies).
consolidation may be paid in installments The ratio shall be maintained daily. This
over a period of one (1) year; shall be effective January 1, 2004.
h. Restructuring/plan of payment of
past due obligations of the proponents with § 4116Q.1 Qualifying capital. The quali-
the BSP as of the date of merger/consolidation fying capital shall be the sum of –
over a period not exceeding ten (10) years; a. Tier 1 (core) capital -
i. Subject to approval of the Monetary (1) Paid-up common stock;
Board, concurrent officerships between a (2) Paid-up perpetual and non-
merged/consolidated bank/financial cumulative preferred stock;
institution and another bank/financial (3) Common stock dividends
institution may be allowed; and distributable;
j. Any right or privilege granted a (4) Perpetual and non-cumulative
merging bank under a rehabilitation program preferred stock dividends distributable;
previously approved by the Monetary Board (5) Surplus;
or under any special authority previously (6) Surplus reserves;
granted by the Monetary Board shall continue (7) Undivided profits; and
to be in effect. (8) Minority interest in the equity of
The revaluation of assets and staggered subsidiary financial allied undertakings
booking of valuation reserves shall be which are less than wholly-owned: Provided,
available for a period of two (2) years from That a quasi-bank shall not use minority
February 19, 1999 while the rest of the interests in the equity accounts of
incentives enumerated under Sec. 4112Q consolidated subsidiaries as avenue for
shall be available for a period of three (3) introducing into its capital structure elements
years from August 31, 1998. that might not otherwise qualify as Tier 1
The foregoing incentives may also be capital or that would, in effect, result in an
granted in cases of purchases or acquisitions excessive reliance on preferred stock within
of majority or all of the outstanding shares of Tier 1:
stock of an NBQB. Provided, further, That the following
items shall be deducted from the total of Tier
Secs. 4113Q - 4115Q (Reserved) 1 capital:

Part I - Page 8
§ 4116Q.1
03.12.31
(a) Common stock treasury shares; ii. It must be subordinated in the right
(b) Perpetual and non-cumulative of payment of principal and interest to all
preferred stock treasury shares; creditors of the quasi-bank, except those
(c) Net unrealized losses on creditors expressed to rank equally with, or
underwritten listed equity securities behind holders of the debt. Subordinated
purchased (for IH); creditors must waive their right to set off any
(d) Unbooked valuation reserves and amounts they owe the quasi-bank against
other capital adjustments based on the latest subordinated amounts owed to them by the
report of examination as approved by the quasi-bank. The issue documentation must
Monetary Board; clearly state that the debt is subordinated;
(e) Total outstanding unsecured credit iii. It must be fully paid-up. Only the net
accommodations, both direct and indirect, proceeds actually received from debt issues
to DOSRI; can be included as capital. If the debt is is-
(f) Deferred income tax; and sued at a premium, the premium cannot be
(g) Goodwill; and counted as part of capital;
b. Tier 2 (supplementary) capital which iv. It must not be redeemable at the ini-
shall be the sum of – tiative of the holder;
(1) Upper Tier 2 capital - v. It must not contain any clause which
(a) Paid-up perpetual and cumulative requires acceleration of payment of princi-
preferred stock; pal, except in the event of insolvency;
(b) Perpetual and cumulative preferred vi. It must not be repayable prior to ma-
stock dividends distributable; turity without the prior consent of the BSP:
(c) Appraisal increment reserve – quasi- Provided, That repayment may be allowed
bank premises, as authorized by the in connection with call option only after a
Monetary Board; minimum of five (5) years from issue date
(d) Net unrealized gains on underwritten and only if – (1) the quasi-bank’s capital ra-
listed equity securities purchased: Provided, tio is at least equal to the required minimum
That the amount thereof that may be included capital ratio; and (2) the debt is simulta-
in upper Tier 2 capital shall be subject to a neously replaced with issues of new capital
fifty-five percent (55%) discount (for IH); which is neither smaller in size nor of lower
(e) General loan loss provision: quality than the original issue;
Provided, That the amount thereof that may vii. It may allow a moderate step-up in
be included in upper Tier 2 capital shall be the interest rate in conjunction with a call
limited to a maximum of one and twenty- option, only if the step-up occurs at a mini-
five hundredths percent (1.25%) of gross risk- mum of ten (10) years after the issue date
weighted assets, and any amount in excess and if it results in an increase over the initial
thereof shall be deducted from the total risk- rate that is not more than 100 basis points:
weighted assets in computing the Provided, That only one (1) rate step up shall
denominator of the risk-based capital ratio; be allowed over the life of the instrument;
(f) With prior BSP approval, unsecured viii. It must provide for possible conver-
subordinated debt with a minimum original sion into common shares or preferred shares
maturity of at least ten (10) years, subject to or possible deferral of payment of principal
the following conditions: and interest if the quasi-bank’s capital ratio
i. It must not be secured nor covered becomes less than the required minimum
by a guarantee of the issuer or related party; capital ratio;

Part I - Page 8a
§ 4116Q.1
03.12.31
ix. It must provide for the principal and (h) Deposit for perpetual and non-
interest on the debt to absorb losses where cumulative preferred stock subscription:
the quasi-bank would not otherwise be Provided, That the following items shall
solvent; be deducted from the total of upper Tier 2
x. It must allow deferment of interest capital:
payment on the debt in the event of, and at i. Perpetual and cumulative preferred
the same time as, the elimination of dividends stock treasury shares;
on all outstanding common or preferred stock (2) Lower Tier 2 capital –
of the issuer. It is acceptable for the deferred (a) Paid-up limited life redeemable
interest to bear interest, but the interest rate preferred stock: Provided, That these shall be
payable on deferred interest should not subject to a cumulative discount factor of
exceed market rates; twenty percent (20%) per year during the last
xi. It must be underwritten by a third five (5) years to maturity [i.e., twenty percent
party not related to the issuer quasi-bank nor (20%) if the remaining life is four (4) years to
acting in reciprocity for and in behalf of the less than five (5) years, forty percent (40%) if
issuer quasi-bank; the remaining life is three (3) years to less
xii. It must be issued in minimum than four (4) years, etc.];
denominations of at least P500,000 or its (b) Limited life redeemable preferred
equivalent; and stock dividends distributable;
xiii.It must clearly state on its face that it (c) With prior BSP approval, unsecured
is not a deposit and is not insured by the subordinated debt with a minimum original
Philippine Deposit Insurance Corporation maturity of at least five (5) years, subject to
(PDIC): the following conditions:
Provided, That it shall be subject to a i. It must not be secured nor covered
cumulative discount factor of twenty percent by a guarantee of the issuer or related party;
(20%) per year during the last five (5) years ii. It must be subordinated in the right
to maturity [i.e., twenty percent (20%) if the of payment of principal and interest to all
remaining life is four (4) years to less than creditors of the quasi-bank, except those
five (5) years, forty percent (40%) if the creditors expressed to rank equally with, or
remaining life is three (3) years to less than behind holders of the debt. Subordinated
four (4) years, etc.]: Provided, further, That creditors must waive their right to set off any
where it is denominated in a foreign amounts they owe the quasi-bank against
currency, it shall be revalued periodically (at subordinated amounts owed to them by the
least monthly) in Philippine peso at prevailing quasi-bank. The issue documentation must
exchange rate using the same exchange rate clearly state that the debt is subordinated;
used for revaluation of foreign currency- iii. It must be fully paid-up. Only the net
denominated assets, liabilities and forward proceeds actually received from debt issues
contracts under existing regulations: can be included as capital. If the debt is issued
Provided, furthermore, That, for purposes of at a premium, the premium cannot be
reserve requirement regulation, it shall not counted as part of capital;
be treated as a deposit substitute liability or iv. It must not be redeemable at the
other forms of borrowings; initiative of the holder;
(g) Deposit for common stock v. It must not contain any clause which
subscription; and requires acceleration of payment of principal,
except in the event of insolvency;

Part I - Page 8b
§ 4116Q.1
03.12.31
vi. It must not be repayable prior to existing regulations: Provided, finally, That,
maturity without the prior consent of the BSP: for purposes of reserve requirement
Provided, That repayment may be allowed regulation, it shall not be treated as equivalent
in connection with call option only after a to a deposit substitute liability or other forms
minimum of five (5) years from issue date and of borrowings; and
only if – (1) the quasi-bank’s capital ratio is (d) Deposit for perpetual and cumulative
at least equal to the required minimum capital preferred stock subscription;
ratio; and (2) the debt is simultaneously Provided, That the following items shall
replaced with issues of new capital which is be deducted from the total of Lower Tier 2
neither smaller in size nor of lower quality capital:
than the original issue; (1) Limited life redeemable preferred
vii. It may allow a moderate step-up in stock treasury shares; and
the interest rate in conjunction with a call (2) Sinking fund for redemption of
option, only if the step-up occurs at a limited life redeemable preferred stock:
minimum of five (5) years after the issue date Provided, That the amount to be deducted
and if it results in an increase over the initial shall be limited to the balance of redeemable
rate that is not more than 100 basis points or preferred stock after applying the cumulative
fifty percent (50%) of the initial credit spread, discount factor:
at the option of the bank: Provided, That only Provided, further, That the total amount
one (1) rate step up shall be allowed over the of lower Tier 2 capital that may be included
life of the instrument; in the Tier 2 capital shall be a maximum of
viii. It must be underwritten by a third fifty percent (50%) of total Tier 1 capital (net
party not related to the issuer quasi-bank nor of deductions therefrom): Provided,
acting in reciprocity for and in behalf of the furthermore, That the total amount of upper
issuer quasi-bank; and lower Tier 2 capital that may be included
ix. It must be issued in minimum in the qualifying capital shall be a maximum
denominations of at least P500,000 or its of 100% of total Tier 1 capital (net of
equivalent; and deductions therefrom);
x. It must clearly state on its face that it c. Less deductions from the total of Tier
is not a deposit and is not insured by the 1 and Tier 2 capital, as follows:
PDIC: (1) Investments in equity of
Provided, That it shall be subject to a unconsolidated subsidiary banks and other
cumulative discount factor of twenty percent subsidiary financial allied undertakings, but
(20%) per year during the last five (5) years excluding insurance companies (for solo
to maturity [i.e., twenty percent (20%) if the basis);
remaining life is four (4) years to less than (2) Investments in debt capital
five (5) years, forty percent (40%) if the instruments of unconsolidated subsidiary
remaining life is three (3) years to less than banks (for solo basis);
four (4) years, etc.]: Provided, further, That (3) Investments in equity of subsidiary
where it is denominated in a foreign insurance companies and subsidiary non-
currency, it shall be revalued periodically (at financial allied undertakings;
least monthly) in Philippine peso using the (4) Reciprocal investments in equity of
same exchange rate used for revaluation of other banks/enterprises; and
foreign currency-denominated assets, (5) Reciprocal investments in unsecured
liabilities and forward contracts under subordinated term debt instruments of other

Part I - Page 8c
§§ 4116Q.1 - 4116Q.2
03.12.31
banks/quasi-banks in excess of the lower of (d) Portions of loans covered by

(i) an aggregate ceiling of five percent (5%) Industrial Guarantee and Loan Fund (IGLF)
of total Tier 1 capital of the quasi-bank; or (ii) guarantee;
ten percent (10%) of the total outstanding (e) Real estate mortgage loans to the
unsecured subordinated term debt issuance extent guaranteed by the Home Guaranty
of the other bank/quasi-bank: Corporation (HGC);
Provided, That any asset deducted from (f) Loans to the extent guaranteed by the
the qualifying capital in computing the Trade and Investment Development
numerator of the risk-based capital ratio shall Corporation of the Philippines (TIDCORP);
not be included in the risk-weighted assets (g) Residual value of leased equipment
in computing the denominator of the ratio. to the extent covered by deposits on lease
contracts (for FCs);
§ 4116Q.2 Risk-weighted assets. The (h) Lease contract receivables to the
risk-weighted assets shall be determined by extent covered by the excess of deposits on
assigning risk weights to amounts of on- lease contracts over residual value of leased
balance sheet assets and to credit equivalent equipment (for FCs); and
amounts of off-balance sheet items (inclusive (i) Foreign currency notes and coins on
of derivative contracts): Provided, That the hand acceptable as international reserves;
following shall be deducted from the total (2) Twenty percent (20%) risk weight -
risk-weighted assets: (1) general loan loss (a) Checks and other cash items (COCIs);
provision (in excess of the amount permitted (b) Claims on or portions of claims
to be included in upper Tier 2 capital); and guaranteed by or collateralized by securities
(2) unbooked valuation reserves and other issued by non-central government public
capital adjustments affecting asset accounts sector entities of foreign countries with the
based on the latest report of examination as highest credit quality as defined in Subsec.
approved by the Monetary Board. 4116Q.3;
a. On-balance sheet assets. The risk- (c) Claims on or portions of claims
weighted amount shall be the product of the guaranteed by Philippine incorporated banks/
book value of the asset multiplied by the risk quasi-banks with the highest credit quality
weight associated with that asset, as follows: as defined in Subsec. 4116Q.3;
(1) Zero percent (0%) risk weight - (d) Claims on or portions of claims
(a) Cash on hand; guaranteed by foreign incorporated banks
(b) Claims on or portions of claims with the highest credit quality as defined in
guaranteed by or collateralized by securities Subsec. 4116Q.3;
issued by - (e) Claims on or portions of claims
i. Philippine national government and guaranteed by or collateralized by securities
BSP; and issued by multilateral development banks;
ii. Central governments and central (f) Loans to exporters to the extent
banks of foreign countries with the highest guaranteed by Small Business Guarantee and
credit quality as defined in Subsec. 4116Q.3; Finance Corporation (SBGFC); and
(c) Loans to the extent covered by hold- (g) Foreign currency checks and other
out on, or assignment of deposit substitutes cash items denominated in currencies
maintained with the lending quasi-bank; acceptable as international reserves;

Part I - Page 8d
§ 4116Q.2
03.12.31
(3) Fifty percent (50%) risk weight – (m) Appraisal increment – Quasi-bank
(a) Loans for housing purpose, fully premises, furniture, fixtures and equipment
secured by first mortgage on residential (net);
property that is or will be occupied or leased (n) Real and other properties owned or
out by the borrower; and acquired (net);
(b) Local government unit (LGU) bonds (o) Foreign currency notes and coins on
which are covered by deed of assignment of hand not acceptable as international
Internal Revenue Allotment of the LGU and reserves; and
guaranteed by the LGU Guarantee (p) Foreign currency checks and other
Corporation; cash items not denominated in foreign
(4) One hundred percent (100%) risk currencies acceptable as international
weight – reserves, except those which are deducted
All other assets including, among others, from capital, as follows:
the following: (i) Unsecured credit accommodations,
(a) Claims on central governments and both direct and indirect, to DOSRI;
central banks of foreign countries other than (ii) Deferred income tax;
those with the highest credit quality; (iii) Goodwill;
(b) Claims on Philippine local (iv) Sinking fund for redemption of
government units; limited life redeemable preferred stock;
(c) Claims on non-central government (v) Equity investments in unconsolidated
public sector entities of foreign countries subsidiary banks and other subsidiary
other than those with the highest credit financial allied undertakings, but excluding
quality; insurance companies;
(d) Claims on government-owned or (vi) Investments in debt capital
controlled commercial corporations; instruments of unconsolidated subsidiary
(e) Claims on Philippine incorporated banks;
banks/quasi-banks other than those with the (vii) Equity investments in subsidiary
highest credit quality; insurance companies and subsidiary non-
(f) Claims on foreign incorporated banks financial allied undertakings,
other than those with the highest credit (viii)Reciprocal investments in equity of
quality; other banks/enterprises; and
(g) Loans to companies engaged in (ix) Reciprocal investments in unsecured
speculative residential building or property subordinated term debt instruments of other
development; banks/quasi-banks, in excess of the lower of
(h) Claims on the private sector (except (i) an aggregate ceiling of five percent (5%)
those deducted from capital); of total Tier 1 capital of the quasi-bank; or (ii)
(i) Equity investments (except those ten percent (10%) of the total outstanding
deducted from capital); unsecured subordinated term debt issuance
(j) Equipment and other real estate for of the other bank/quasi-bank;
lease (for FCs); b. Off-balance sheet items. The risk-
(k) Real estate for sale/lease; weighted amount shall be calculated using a
(l) Quasi-bank premises, furniture, two (2)-step process.
fixtures and equipment (net);

Part I - Page 8e
§ 4116Q.2
03.12.31
First, the credit equivalent amount of an Second, the credit equivalent amount
off-balance sheet item shall be determined shall be treated like any on-balance sheet
by multiplying its notional principal amount asset and shall be assigned the appropriate
by the appropriate credit conversion factor, risk weight, i.e., according to the obligor, or
as follows: if relevant, the qualified guarantor or the
(1) One hundred percent (100%) credit nature of collateral.
conversion factor - c. Derivative contracts. The credit
This shall apply to direct credit substitutes, equivalent amount shall be the sum of the
e.g. general guarantees of indebtedness and current credit exposure (or replacement cost)
acceptances (including endorsements with and an estimate of the potential future credit
the character of acceptances), and shall exposure (or add-on): Provided, That the
include – following shall not be included in the
(a) Outstanding guarantees issued computation:
This shall also apply to sale and (1) Instruments which are traded on
repurchase agreements and asset sales with exchange where they are subject to daily re-
recourse where the credit risk remains with ceipt and payment of cash variation margin;
the quasi-bank (to the extent not included in and
the balance sheet), as well as to forward asset (2) Exchange rate contracts with origi-
purchases, and partly-paid shares and nal maturity of fourteen (14) calendar days
securities, which represent commitments with or less.
certain drawdown: Provided, That these items The current credit exposure shall be the
shall be weighted according to the type of positive mark-to-market value of the contract
asset and not according to the type of (or zero if the mark-to-market value is zero
counterparty with whom the transaction has or negative). The potential future credit
been entered into. exposure shall be the product of the notional
(2) Fifty percent (50%) credit conversion principal amount of the contract multiplied
factor – This shall apply to – by the appropriate potential future credit
(a) Note issuance facilities and revolv- conversion factor, as indicated below:
ing underwriting facilities (for IHs); and
(b) Other commitments, e.g., formal Residual Interest Exchange
Maturity Rate Rate
standby facilities and credit lines with an origi- Contract Contract
nal maturity of more than one (1) year. This
shall include– One (1) 0.0% 1.0%
(i) Underwritten accounts unsold (for year or less
IHs).
(3) Zero percent (0%) credit conversion Over one 0.5% 5.0%
(1) year to
factor – five (5) years
This shall apply to commitments with an
original maturity of up to one (1) year. Over five 1.5% 7.5%
This shall also apply to those not (5) years
involving credit risk, and shall include –
(a) Items held for safekeeping/custodi- Provided, That for contracts with
anship; multiple exchanges of principal, the factors
(b) Trust department accounts; are to be multiplied by the number of
(c) Items held as collaterals; etc. remaining payments in the contract:

Part I - Page 8f
§§ 4116Q.2 - 4116Q.3
03.12.31
Provided, further, That for contracts that are c. Quasi-bank premises, furniture,
structured to settle outstanding exposure fixtures and equipment net of depreciation.
following specified payment dates and where This refers to the cost of land and
the terms are reset such that the market value improvements used as the quasi-bank
of the contract is zero on these specified premises, and furniture, fixtures and
dates, the residual maturity would be set equipment owned by the quasi-bank.
equal to the time until the next reset date, d. Cash on hand. This refers to total
and in the case of interest rate contracts with cash held by the quasi-bank consisting of
remaining maturities of more than one (1) both notes and coins in Philippine currency.
year that meet these criteria, the potential e. Central government of a foreign
future credit conversion factor is subject to a country. This refers to the central government
floor of five tenths percent (0.5%): Provided, which is regarded as such by a recognized
furthermore, That no potential future credit banking supervisory authority in that country.
exposure shall be calculated for single f. Claims. This refer to loans or debt
currency floating/floating interest rate swaps, obligations of the entity on whom the claim
i.e., the credit exposure on these contracts is held, and shall include, but shall not be
would be evaluated solely on the basis of limited to, the following accounts, inclusive
their mark-to-market value. of accumulated market gains/(losses) and
The credit equivalent amount shall be accumulated bond discount/(premium
treated like any on-balance sheet asset, and amortization), and net of specific allowance
shall be assigned the appropriate risk weight, for probable losses:
i.e., according to the obligor, or if relevant, (1) Due from BSP;
the qualified guarantor or the nature of (2) Due from other banks;
collateral: Provided, That a fifty percent (50%) (3) Interbank loans receivable;
risk weight shall be applied in respect of (4) Loans and discounts, including lease
obligors which would otherwise attract a contract receivables, net of advance leasing
100% risk weight. income received and receivables financed
The extent to which a claim is (for FCs);
guaranteed/collateralized shall be (5) Restructured loans;
determined by the amount of guarantee (6) Trading account securities – loans;
coverage/current market value of securities (7) Underwriting accounts - debt
pledged, in comparison with the book value securities (for IHs);
of the on-balance sheet asset or the notional (8) Underwriting accounts - equity
principal amount of the off-balance sheet securities (for IHs);
exposure, except for derivative contracts for (9) Trading account securities – debt
which determination is generally made in securities;
relation to credit equivalent amount. (10) Trading account securities – equity
securities (for IHs);
§ 4116Q.3 Definitions (11) Available for sale securities;
a. Amount due from the BSP. This refers (12) Investments in bonds and other debt
to all deposits of the reporting quasi-bank instruments; and
with the BSP. (13) Others, e.g., accounts receivable and
b. Appraisal increment reserve. This accrued interest receivable.
shall form part of capital only if authorized Accruals on a claim shall be classified and
by the Monetary Board. risk weighted in the same way as the claim.

Part I - Page 8g
§ 4116Q.3
03.12.31
g. Consolidated basis. This refers to Rating Agency Highest Rating

combined statement of condition of parent
quasi-bank and subsidiary financial allied (1) Moody’s “Aa3” and above
(2) Standard and “AA-” and above
undertakings, but excluding insurance Poor's
companies. (3) Fitch IBCA “AA-” and above
h. Debt capital instruments. This refers (4) Others as may
to unsecured subordinated term debt be approved by
the Monetary
instruments qualifying as capital of banks.
Board
i. Equity investments. This refers to m. Forward asset purchases. This refers
investments in capital stock of companies, to a commitment to purchase a loan, security
firms or enterprises, made for purposes of or other asset at a specified future date,
control, affiliation or other continuing usually on pre-arranged terms.
business advantage. n. Goodwill. This refers to an intangible
j. Exchange rate contracts. This asset that represents the excess of the
includes cross-currency interest rate swaps, purchase price over the fair market value of
forward foreign exchange contracts, currency identifiable assets acquired less liabilities
futures, currency options purchased and assumed in acquisitions accounted for under
similar instruments. the purchase method of accounting.
k. Financial allied undertakings. This o. Interest rate contracts. This includes
refers to enterprises or firms with single-currency interest rate swaps, basis
homogenous or similar activities/business/ swaps, forward rate agreements, interest rate
functions with the financial intermediary and futures, interest rate options purchased and
may include but not limited to leasing similar instruments.
companies, banks, IHs, FCs, credit card p. Loans for housing purpose, fully
companies, FIs catering to small and medium secured by first mortgage on residential
scale industries (including venture capital property that is or will be occupied or leased
corporations), companies engaged in stock out by the borrower. This shall not include
brokerage/securities dealership, companies loans to companies engaged in speculative
engaged in foreign exchange dealership/ residential building or property development.
brokerage, holding companies, and such q. Loans to the extent covered by hold-
other similar activities as the Monetary Board out on, or assignment of deposit substitutes
may declare as appropriate from time to time, maintained in the lending quasi-bank. A loan
but excluding insurance companies. shall be considered as secured by a hold-out
l. Foreign country/foreign incorporated on, or assignment of deposit substitute only
bank and Philippine incorporated bank/ if such deposit substitute account is covered
quasi-bank with the highest credit quality. by a hold-out agreement or deed of
This refers to a foreign country/foreign assignment signed by the investor/placer in
incorporated bank and Philippine favor of the quasi-bank. This shall not include
incorporated bank/quasi-bank given the loans transferred to/carried by the quasi-
highest credit rating of any two (2) of the bank’s trust department secured by deposit
following internationally accepted rating substitute hold-out/assignment.
agencies:

Part I - Page 8h
§ 4116Q.3
03.12.31
r. Multilateral development banks. future redemption of the issue. Consistent

This refers to International Bank for with these provisions, any perpetual preferred
Reconstruction and Development (IBRD), stock with a feature permitting redemption
Inter-American Development Bank, Asian at the option of the issuer may qualify as
Development Bank (ADB), African capital only if the redemption is subject to
Development Bank, European Investment prior approval of the BSP.
Bank and European Bank for Reconstruction y. Philippine local government units.
and Development. This refers to the Philippine government units
s. Non-central government public below the level of national government, such
sector entity of a foreign country. This refers as city, provincial, and municipal
to entities which are regarded as such by a governments.
recognized banking supervisory authority in z. Philippine national government. This
the country in which they are incorporated. shall refer to the Philippine national
t. Note issuance facilities and revolving government and their agencies such as
underwriting facilities. This refers to an departments, bureaus, offices, and
arrangement whereby a borrower may draw instrumentalities, but excluding government-
down funds up to a prescribed limit over an owned and controlled commercial
extended period by repeated issues to the corporations.
market of promissory notes which the quasi- aa. Private sector. This refers to entities
bank committed to underwrite. other than banks, quasi-banks and
u. Other commitments. This includes governments. This shall also include
undrawn portion of any binding commercial companies owned by the public
arrangements which obligate the quasi-bank sector, such as government-owned or
to provide funds at some future date. controlled commercial corporations.
v. Other commitments with an original bb. Redeemable preferred stock. This
maturity of up to one (1) year. This includes refers to preferred stock which may be
any revolving or undated open-ended redeemed at the specific dates or periods
commitments, e.g., unused credit lines: fixed for redemption.
Provided, That these can be unconditionally cc. Sale and repurchase agreements and
cancelled at any time and are subject to credit asset sales with recourse. This refers to
revision at least annually. arrangements whereby a quasi-bank sells a
w. Partly-paid shares and securities. loan, security or fixed asset to a third party
This arises where only a part of the issue price with a commitment to repurchase the asset
or nominal face value of a security purchased after a certain time, or in the event of a certain
has been subscribed and the issuer may call contingency.
for the outstanding balance (or a further dd. Solo basis. This refers to combined
installment), either on a date predetermined statement of condition of head office and
at the time of issue, or at an unspecified future branches.
date. ee. Subsidiary. This refers to a
x. Perpetual preferred stock . This refers corporation or firm more than fifty percent
to preferred stock that does not have a (50%) of the outstanding voting stock of
maturity date, that cannot be redeemed at which is directly or indirectly owned,
the option of the holder of the instrument, controlled or held with the power to vote by
and that has no provision that will require a quasi-bank.

Part I - Page 8i
§§ 4116Q.3 - 4118Q
03.12.31
ff. Treasury shares. This refers to the been met. The Monetary Board may restrict
quasi-bank’s own shares of stock that have or prohibit the making of new investments
been issued and fully paid for, subsequently of any sort by the quasi-bank, with the
re-acquired through purchase or donations exception of purchases of readily marketable
and have not been cancelled or reissued. evidences of indebtedness issued by the
This also refers to shares of a parent quasi- Philippine national government and BSP
bank held by a subsidiary financial allied included in Item “a(1)(b)i” of Subsec.
undertaking in a consolidated statement of 4116Q.2, until the minimum required capital
condition. ratio has been restored.
§ 4116Q.4 Required reports. Quasi- § 4116Q.6 Temporary relief. In case of

banks shall submit a report of their risk-based quasi-bank merger or consolidation, or when
capital adequacy ratio on a solo basis (head a quasi-bank is under rehabilitation under a
office plus branches) and on a consolidated program approved by the BSP, the Monetary
basis (parent quasi-bank plus subsidiary Board may temporarily relieve the surviving
financial allied undertakings, but excluding quasi-bank, consolidated quasi-bank, or con-
insurance companies) quarterly to the stituent quasi-bank or corporations under
appropriate supervising and examining rehabilitation from full compliance with the
department of the BSP in the prescribed forms required capital ratio for a maximum period
within the deadlines, i.e., fifteen (15) business of one (1) year.
days and thirty (30) business days after the
end of reference quarter, respectively. Only Sec. 4117Q Treatment of Equity Investment
quasi-banks with subsidiary financial allied with Reciprocal Stockholdings. For purposes
undertakings (excluding insurance of computing the prescribed ratio of net
companies) which under existing regulations worth (or combined capital accounts) to risk
are required to prepare consolidated assets, equity investments of an NBQB in
statements of condition on a line-by-line basis another NBQB shall be deducted from its
shall be required to submit report on net worth if the investee NBQB has a
consolidated basis. The above-mentioned reciprocal equity investment in the investing
reports shall be classified as Category A-2 NBQB, in which case the investment of the
reports. NBQB or the reciprocal investment of the
other NBQB, whichever is lower, shall be
§ 4116Q.5 Sanctions. Whenever the deducted from the net worth of the NBQBs.
capital accounts of a quasi-bank are deficient
with respect to the prescribed capital Sec. 4118Q Sanctions on Net Worth
adequacy ratio, the Monetary Board after Deficiency
considering a report of the appropriate a. Any NBQB which is deficient in the
supervising and examining department of the capital requirement under Sec. 4116Q shall
BSP on the state of solvency of the institution be liable to the following sanctions:
concerned, shall limit or prohibit the (1) In case of capital deficiency for five
distribution of the net profits and shall require (5) or more times within a reporting period:
that part or all of net profits be used to (a) For the first offense - a fine of P3,000.
increase the capital accounts of the quasi- (b) For the second consecutive offense -
bank until the minimum requirement has prohibition from extending new loans or

Part I - Page 8j
§ 4118Q
03.12.31
making new investments for a period of thirty (b) For every consecutive reporting
(30) calendar days. period, the suspension shall extend for
New loans and new investments shall another thirty (30) calendar days.
refer to any loan or investment involving (c) The suspension shall be auto-
disbursement of funds, except government matically lifted if on the final reporting period
securities. of the period of suspension, the entity
(c) For the third consecutive offense - maintains the minimum capital required
extension of the penalty under the preceding under Sec. 4116Q for every day of such
paragraph for another thirty (30) calendar reporting period.
days. (3) In all of the cases above-mentioned,
(d) For the fourth consecutive offense - establishment of branches, agencies,
suspension of the Certificate of Authority to extension offices, etc., shall be suspended.
engage in quasi-banking functions for a b. For improperly accomplished report,
period of thirty (30) calendar days. The NBQBs shall pay P600 per business day for
suspension shall be automatically be lifted every business day the report is not corrected,
if in the final reporting period of the period counted as of the date the error is brought to
of suspension, the entity maintains the its attention until the corrected report is
minimum capital required under Sec. 4116Q submitted.
for every day of such reporting period. c. For willfully making false statements
(2) In case of continuous capital in the report or submitting a false report, the
deficiency: Certificate of Authority for quasi-banking
(a) For two (2) consecutive reporting functions shall be suspended/revoked.
periods - suspension of the Certificate of d. The Monetary Board may impose
Authority to engage in quasi-banking additional sanctions on the entity engaged
functions for a period of thirty (30) calendar in quasi-banking functions by:
days.

Part I - Page 8k
§§ 4118Q - 4126Q.1
04.12.31
(1) Revoking the Certificate of in the process of collection shall be

Authority to engage in quasi-banking considered bad debts within the
functions; and contemplation of this Section.
(2) Such other sanctions as the BSP b. Well secured - A debt shall be
may deem necessary. considered well secured (or fully secured) if
it is covered by collateral in the form of a
Secs. 4119Q - 4120Q (Reserved) duly constituted mortgage, pledge, or lien on
real or personal properties, including
E. (RESERVED) securities. The outstanding debt, accrued
interest and other pertinent fees and
Secs. 4121Q - 4125Q (Reserved) expenses thereon shall not be in excess of
seventy percent (70%) of the appraised value
F. STOCK, STOCKHOLDERS
of real estate, or fifty percent (50%) of the
AND DIVIDENDS
other personal properties offered as lien.
Sec. 4126Q Dividends. Pursuant to Section c. In process of collection - A debt due
57 of R.A. No. 8791, no quasi-bank shall to an NBQB shall be considered in process
declare dividends greater than its of collection when it is the subject of
accumulated net profits then on hand, continuing extrajudicial or judicial
deducting therefrom its losses and bad debts. proceedings aimed towards its full settlement
Neither shall the quasi-bank declare or liquidation, or otherwise to place it in
dividends if, at the time of declaration, it has current status.
not complied with the provisions of Subsec. The extrajudicial proceedings, such as
4126Q.2. the writing of collection or demand letters,
must have been initiated by the NBQB and/
or its lawyers before the interest or
§ 4126Q.1 Definition of terms. For installments or amortizations on the debt
purposes of this Section, the following become past due and unpaid for a period of
definitions shall apply: six (6) months.
a. Bad debts shall include any debt on The debt shall continue to be
which interest is past due for a period of six considered in process of collection for a
(6) months, unless it is well secured and in period of six (6) months counted from date
process of collection. of the first collection or demand letter and if,
A loan payable in installment with an within this period, the debtor fails to make a
automatic acceleration clause shall be payment of at least twenty percent (20%) of
considered a bad debt within the the outstanding balance of the principal on
contemplation of this Section where his account, plus all interests which may
installments or amortizations have become have accrued thereon, the same shall
past due for a period of six (6) months, unless automatically be classified as bad debt unless
the loan is well secured and in process of judicial proceedings are instituted.
collection. For a loan payable in installments The debt shall continue to be
without an acceleration clause, only the considered in process of collection during
installments or amortizations that have the pendency of the judicial proceedings.
become past due for a period of six (6) When judgment against the debtor has been
months and which are not well secured and obtained, the NBQB must be active in

Part I - Page 9
§§ 4126Q.1 - 4126Q.3
04.12.31
enforcing the judgment for the debt to accounting. Said accumulated profits shall
continue to be considered in process of likewise be deducted for purposes of
collection. computing the amount available for stock
dividends;
§ 4126Q.2 Requirements on the (5) Accrued interest as required to be
declaration of dividends/net amount excluded pursuant to Item “d” of Subsec.
available for dividends 4307Q.7, net of booked valuation reserves
a. Requirements on the declaration of on accrued interest receivable or allowance
dividends. At the time of declaration, quasi- for uncollectible interest on loans; and
banks shall have complied with the (6) Foreign exchange profit arising from
following: revaluation of foreign exchange denominated
(1) Clearing account with the BSP is not accounts.
overdrawn;
(2) Liquidity floor requirement for § 4126Q.3 Reporting and verification
government funds; Declaration of cash dividend shall be
(3) Minimum capitalization requirement reported by the NBQB concerned to the
and risk-based capital ratio; appropriate supervising and examining
(4) Statutory and liquidity reserves department of the BSP within ten (10)
requirement; and business days from date of approval of the
(5) No major violations as may be declaration by the NBQB's board of directors,
determined by the BSP. in the prescribed form.
For purposes of this Subsection, the Pending verification of above-mentioned
prescribed duration of compliance shall be report by the appropriate supervising and
reckoned from the last eight (8) weeks examining department of the
immediately preceding the date of the BSP, the NBQB concerned shall not
dividend declaration up to the record date make any announcement or communication
of said dividends. on the declaration of cash dividends nor shall
b. Amount available. The net amount any payment be made thereon.
available for dividends shall be the amount In any case, the declaration may be
of unrestricted or free retained earnings less: announced and the dividends paid, if, after
(1) Bad debts against which valuation thirty (30) business days from the date the
reserves are not required by the BSP to be report required herein shall have been
set up; received by the BSP, no advice against such
(2) Unbooked valuation reserves, and declaration has been received by the NBQB
other unbooked capital adjustments required concerned, subject to the condition that the
by the BSP, whether or not allowed to be set record date for such dividends cannot be set
up on a staggered basis; earlier than thirty (30) business days after
(3) Deferred income tax as defined declaration.
under Item “i” of Subsection 4116Q.1; NBQBs whose shares are listed with
(4) Accumulated profits not yet received any domestic stock exchange may give
but already recorded by the quasi-bank notice of cash dividend declaration in
representing its share in profits of its accordance with pertinent rules of the SEC:
subsidiaries under the equity method of Provided, That no record date is fixed for

Part I - Page 10
§§ 4126Q.3 - 4141Q.1
04.12.31
such cash dividend, pending verification of responsibilities and duties of the board of
the report on such declaration by the directors and directors.
appropriate supervising and examining
department of the BSP. § 4141Q.1 Limits on the number of the
members of the board of directors. Pursuant
§ 4126Q.4 Recording of dividends. The to Sections 15 and 17 of R.A. No. 8791, there
liability for cash dividends declared shall be shall be at least five (5), and a maximum of
taken up in the books upon receipt of BSP fifteen (15) members of the board of directors
approval thereof, or if no such approval is of a quasi-bank/trust entity two (2) of whom
received, after thirty (30) business days from shall be independent directors: Provided,
the date required report on cash dividend That in case of a quasi-bank/trust entity
declaration was received by the appropriate merger or consolidation, the number of
supervising and examining department of the directors may be increased up to twenty-one (21).
BSP, whichever comes earlier. A An independent director shall mean a
memorandum entry may be made to record person who –
the dividend declaration on the date of (1) Is not or has not been an officer or
approval by the board of directors and for employee of the quasi-bank/trust entity, its
full disclosure purposes. The cash dividends subsidiaries or affiliates or related interests
may be disclosed in the financial statements during the past three (3) years counted from
by means of a footnote which should include the date of his election;
a statement to the effect that the dividend (2) Is not a director or officer of the
declaration is subject to review by the BSP. related companies of the institution’s majority
Dividends of all kinds, whether on stockholder;
common or on preferred shares of stock, shall (3) Is not a majority stockholder of the
not be treated as interest expense, institution, any of its related companies, or
considering that as a general policy only of its majority shareholders;
irredeemable stock may be issued by (4) Is not a relative within the fourth
NBQBs. degree of consanguinity or affinity, legitimate
or common-law of any director, officer or
§ 4126Q.5 Rules on declaration of stock majority shareholder of the quasi-bank/trust
dividends. The declaration of stock dividends entity or any of its related companies;
shall be subject to the preceding regulations (5) Is not acting as a nominee or
on declaration of cash dividends. Additional representative of any director or substantial
paid-in capital may be included in the shareholder of the quasi-bank/trust entity, any
amount available for stock dividends. of its related companies or any of its
substantial shareholders; and
Secs. 4127Q - 4140Q (Reserved) (6) Is not retained as professional
adviser, consultant, agent or counsel of the
G. DIRECTORS, OFFICERS institution, any of its related companies or
AND EMPLOYEES any of its substantial shareholders, either in
his personal capacity or through his firm; is
Sec. 4141Q Definition; Qualifications; independent of management and free from
Powers; Responsibilities and Duties of Board any business or other relationship, has not
of Directors and Directors. The following engaged and does not engage in any
shall be the definition, qualifications, powers, transaction with the institution or with any

Part I - Page 11
§ 4141Q.1
04.12.31
of its related companies or with any of its it can be clearly demonstrated that such
substantial shareholders, whether by himself ownership does not constitute control.
or with other persons or through a firm of Control may also exist even when ownership
which he is a partner or a company of which is one-half or less of the voting power of an
he is a director or substantial shareholder, enterprise when there is:
other than transactions which are conducted i. power over more than one-half of the
at arms length and could not materially voting rights by virtue of an agreement with
interfere with or influence the exercise of his other stockholders; or
judgment. ii. power to govern the financial and
An independent director of a quasi-bank/ operating policies of the enterprise under a
trust entity can be elected as an independent statute or an agreement; or
director of its: (a) parent or holding company; iii. power to appoint or remove the
(b) subsidiary or affiliate; (c) substantial majority of the members of the board of
shareholder; or (d) other related companies, directors or equivalent governing body; or
or vice-versa: Provided, That he is not a iv. power to cast the majority votes at
substantial shareholder of the quasi-bank/trust meetings of the board of directors or
entity or any of the said concerned entities. equivalent governing body; or
The terms and phrases used in Items “(1)” v. any other arrangement similar to any
to “(6)” shall have the following meaning: of the above.
(a) Parent is a corporation which has (f) Related company means another
control over another corporation directly or company which is: (a) its parent or holding
indirectly through one (1) or more company; (b) its subsidiary or affiliate; or (c)
intermediaries. a corporation where a quasi-bank/trust entity
(b) Subsidiary means a corporation more or its majority stockholder own such number
than fifty percent (50%) of the voting stock of shares that will allow/enable him to elect
of which is owned or controlled directly or at least one (1) member of the board of
indirectly through one (1) or more directors or a partnership where such
intermediaries by a quasi-bank/trust entity. majority stockholder is a partner.
(c) Affiliate is a juridical person that (g) Substantial or major shareholder
directly or indirectly, through one (1) or more shall mean a person, whether natural or
intermediaries, is controlled by, or is under juridical, owning such number of shares that
common control with the quasi-bank/trust will allow him to elect at least one (1)
entity or its affiliates. member of the board of directors of a quasi-
(d) Related interests as defined under bank/trust entity or who is directly or
Sections 12 and 13 of R.A. No. 8791 shall indirectly the registered or beneficial owner
mean individuals related to each other within of more than ten percent (10%) of any class
the fourth degree of consanguinity or affinity, of its equity security.
legitimate or common law, and two (2) or (h) Majority stockholder or majority
more corporations owned or controlled by a shareholder means a person, whether natural
single individual or by the same family group or juridical, owning more than fifty percent
or the same group of persons. (50%) of the voting stock of a quasi-bank/
(e) Control exists when the parent owns trust entity.
directly or indirectly through subsidiaries Non-Filipino citizens may become
more than one-half of the voting power of an members of the board of directors of a quasi-
enterprise unless, in exceptional circumstance, bank/trust entity to the extent of the foreign

Part I - Page 12
§§ 4141Q.1 - 4141Q.3
04.12.31
participation in the equity of said quasi-bank/ c. He must have attended a special

trust entity: Provided, That pursuant to seminar for board of directors conducted or
Section 23 of the Corporation Code of the accredited by the BSP: Provided, That
Philippines (BP Blg. 68), a majority of the incumbent directors as well as those elected
directors must be residents of the Philippines. after September 17, 2001 must attend said
The meetings of the board of directors seminar on or before December 31, 2002 or
may be conducted through modern within a period of six (6) months from date
technologies such as, but not limited to, of election for those elected after December
teleconferencing and videoconferencing as 31, 2002, as the case may be; and
long as the director who is taking part in said d. He must be fit and proper for the
meetings can actively participate in the position of a director of the NBQB/trust entity.
deliberations on matters taken up therein: In determining whether a person is fit and
Provided, That every member of the board proper for the position of a director, the
shall participate in at least fifty percent (50%) following matters must be considered:
and shall physically attend at least twenty- integrity/probity, competence, education,
five percent (25%) of all board meetings every diligence and experience/training.
year: Provided further, That in the case of a The foregoing qualifications for directors
director who is unable to physically attend shall be in addition to those required or
or participate in board meetings via prescribed under R.A. No. 8791 and other
teleconferencing or videoconferencing, the existing applicable laws and regulations.
corporate secretary shall execute a notarized
certification attesting that said director was § 4141Q.3 Powers/responsibilities and
given the agenda materials prior to the duties of board of directors and directors
meeting and that his/her comments/decisions a. Powers of the board of directors. The
thereon were submitted for deliberation/ corporate powers of an NBQB/trust entity
discussion and were taken up in the actual shall be exercised, its business conducted and
board meeting, and that the submission of all its property shall be controlled and held
said certification shall be considered by its board of directors. The powers of the
compliance with the required fifty percent board of directors as conferred by law are
(50%) minimum attendance in board original and cannot be revoked by the
meetings. stockholders. The directors hold their office
charged with the duty to act for the NBQB/
§ 4141Q.2 Qualifications of a director trust entity in accordance with their best
A director shall have the following minimum judgment.
qualifications: b. General responsibility of the board
a. He shall be at least twenty-five (25) of directors. The position of an NBQB/trust
years of age at the time of his election or entity director is a position of trust. A director
appointment; assumes certain responsibilities to different
b. He shall be at least a college graduate constituencies or stakeholders, i.e., the
or have at least five (5) years experience in NBQB/trust entity itself, its stockholders, its
business;

Part I - Page 13
§ 4141Q.3
04.12.31
clients and other creditors, its management business plans should be established to direct
and employees, and the public at large. its on-going activities. The board should
These constituencies or stakeholders have the ensure that performance against plan is
right to expect that the institution is being run regularly reviewed, with corrective action
in a prudent and sound manner. taken as needed.
The board of directors is primarily (3) To conduct the affairs of the
responsible for the corporate governance of institution with high degree of integrity.
the NBQB/trust entity. To ensure good Since reputation is a very valuable asset, it is
governance of the NBQB/trust entity, the in the institution’s best interest that in
board of directors should establish strategic dealings with the public, it observes a high
objectives, policies and procedures that will standard of integrity. The board of directors
guide and direct the activities of the NBQB/ should prescribe corporate values, codes of
trust entity and the means to attain the same conduct and other standards of appropriate
as well as the mechanism for monitoring behaviour for itself, the senior management
management’s performance. While the and other employees. Among others,
management of the day-to-day affairs of the activities and transactions that could result
institution is the responsibility of the or potentially result in conflict of interest,
management team, the board of directors is, personal gain at the expense of the institution,
however, responsible for monitoring and or unethical conduct shall be strictly
overseeing management action. prohibited. It should provide policies that will
c. Specific duties and responsibilities of prevent the use of the facilities of the NBQB/
the board of directors trust entity in furtherance of criminal and
(1) To select and appoint officers who other illegal activities.
are qualified to administer the NBQB’s/trust (4) To establish and ensure compliance
entity’s affairs effectively and soundly and to with sound written policies. The board
establish adequate selection process for all should adopt written policies on all major
personnel. It is the primary responsibility of business activities, i.e., investments, loans,
the board of directors to appoint competent asset and liability management, business
management team at all times. The board of planning and budgeting. A mechanism to
directors should apply fit and proper ensure compliance with said policies shall
standards on key personnel. Integrity, also be provided.
technical expertise and experience in the (5) To prescribe a clear assignment of
institution’s business, either current responsibilities and decision-making
or planned, should be the key considerations authorities, incorporating a hierarchy of
in the selection process. And because mutual required approvals from individuals to the
trust and a close working relationship are board of directors. The board should
important, the board’s choice should share establish in writing the limits of the
its general operating philosophy and vision discretionary powers of each officer,
for the institution. The board of directors shall committee, sub-committee and such other
establish an appropriate compensation group for the purpose of lending, investing
package for all personnel which shall be or committing the NBQB/trust entity to any
consistent with the interest of all stakeholders. financial undertaking or exposure to risk at
(2) To establish objectives and draw up any time. The board should have a schedule
a business strategy for achieving them. of matters and authorities reserved to it for
Consistent with the institution’s objectives, decision, such as: major capital

Part I - Page 14
§ 4141Q.3
04.12.31
expenditures, equity investments and (c) a clear delineation of lines of

divestments. responsibilities for managing risk;
(6) To effectively supervise the NBQB’s/ (d) an adequate system for measuring
trust entity's affairs. As NBQBs/trust entities risk; and
are entrusted with the handling and (e) effective internal controls and a
investment of public funds, the supervision comprehensive risk-reporting process.
required from the board involves a higher The board may constitute a committee
degree of wisdom, prudence, good business for this purpose.
judgment and competence than that of (9) To constitute the following
directors of ordinary companies. Although committees:1
directors may delegate certain authority to (a) Audit committee. The audit
senior officers, it is their responsibility to committee shall be composed of members
supervise and be responsible for the of the board of directors, at least two (2) of
institution’s sound management, as well as whom shall be independent directors,
its problems. The board of directors should including the chairman, preferably with
establish a system of checks and balances accounting, auditing, or related financial
which applies in the first instance to the board management expertise or experience. The
itself. Among the members of the board, an audit committee provides oversight of the
effective system of checks and balances must institution’s financial reporting and control
exist. The system should also provide a and internal and external audit functions. It
mechanism for effective check and controlby shall be responsible for the setting up of the
the board over the chief executive officer and internal audit department and for the
key managers and by the latter over the line appointment of the internal auditor as well
officers of the NBQB/trust entity. as the independent external auditor who
(7) To monitor, assess and control the shall both report directly to the audit
performance of management. The board committee. It shall monitor and evaluate the
shall put in place an appropriate reporting adequacy and effectiveness of the internal
system so that it is provided with relevant control system.
and timely information to be able to Upon setting up the audit committee, the
effectively assess the performance of board of directors shall draw up a written
management. For this purpose, it may charter or terms of reference which clearly
constitute a governance committee. sets out the audit committee’s authority and
(8) To adopt and maintain adequate risk duties, as well as the reporting relationship
management policy. The board of directors with the board of directors. This charter shall
shall be responsible for the formulation and be approved by the board of directors and
maintenance of written policies and reviewed and updated periodically.
procedures relating to the management of The audit committee shall have explicit
risks throughout the institution. The risk authority to investigate any matter within its
management policy shall include: terms of reference, full access to and
(a) a comprehensive risk management cooperation by management and full
approach; discretion to invite any director or executive
(b) a detailed structure of limits, officer to attend its meetings, and adequate
guidelines and other parameters used to resources to enable it to effectively discharge
govern risk-taking; its functions.
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1
Effective 01 January 2005 under Circular 456 dated 04 October 2004.

Part I - Page 15
§ 4141Q.3
04.12.31
The audit committee shall ensure that a board members and senior officers, and their
review of the effectiveness of the institution’s remuneration commensurate with corporate
internal controls, including financial, and individual performance.
operational and compliance controls, and risk The corporate governance committee
management, is conducted at least annually. shall decide the manner by which the board’s
(b) Corporate governance committee. performance may be evaluated and propose
The corporate governance committee shall an objective performance criteria approved
assist the board of directors in fulfilling its by the board. Such performance indicators
corporate governance responsibilities. It shall shall address how the board has enhanced
review and evaluate the qualifications of all long term shareholders’ value.
persons nominated to the board as well as (c) Risk management committee. The
those nominated to other positions requiring risk management committee shall be
appointment by the board of directors. The responsible for the development and
committee shall be composed of at least three oversight of the institution’s risk management
(3) members of the board of directors, two program. The committee shall be composed
(2) of whom shall be independent directors. of at least three (3) members of the board of
The corporate governance committee directors who shall possess a range of
shall have a written charter that describes the expertise as well as adequate knowledge of
duties and responsibilities of its members. the institution’s risk exposures to be able to
This charter shall be approved by the board develop appropriate strategies for preventing
of directors and reviewed and updated at least losses and minimizing the impact of losses
annually. when they occur. It shall oversee the system
The committee shall be responsible for of limits to discretionary authority that the
ensuring the board’s effectiveness and due board delegates to management, ensure that
observance of corporate governance the system remains effective, that the limits
principles and guidelines. It shall oversee the are observed and that immediate corrective
periodic performance evaluation of the board actions are taken whenever limits are
and its committees and executive breached.
management; and shall also conduct an The risk management committee shall
annual self-evaluation of its performance. The have a written charter that defines the duties
committee shall also decide whether or not and responsibilities of its members. The
a director is able to and has been adequately charter shall be approved by the board of
carrying out his/her duties as director bearing directors and reviewed and refined
in mind the director’s contribution and periodically.
performance (e.g., competence, candor, The core responsibility of the risk
attendance, preparedness and participation). management committee are:
Internal guidelines shall be adopted that (1) Identify and evaluate exposures. The
address the competing time commitments committee shall assess the probability of each
that are faced when directors serve on risk becoming reality and shall estimate its
multiple boards. possible effect and cost. Priority areas of
The committee shall make concern are those risks that are the most likely
recommendations to the board regarding the to occur and are costly when they happen.
continuing education of directors, assignment (2) Develop risk management strategies.
to board committees, succession plan for the The risk management committee shall

Part I - Page 16
§ 4141Q.3
04.12.31
develop a written plan defining the strategies technologies such as, but not limited to,
for managing and controlling the major risks. teleconferencing and video-conferencing as
It shall identify practical strategies to reduce long as the director who is taking part in said
the chance of harm and failure or minimize meetings can actively participate in the
losses if the risk becomes real. deliberations on matters taken up therein:
(3) Implement the risk management Provided, That every member of the board
plan. The risk management committee shall shall be physically present in at least fifty
communicate the risk management plan and percent (50%) of all board meetings in every
loss control procedures to affected parties. year.
The committee shall conduct regular (11) To keep the individual members of
discussions on the institution’s current risk the board and the shareholders informed. It
exposure based on regular management is the duty of the board to present to all its
reports and direct concerned units or offices members and to the shareholders a balanced
on how to reduce these risks. and understandable assessment of the
(4) Review and revise the plan as NBQB’s/trust entity’s performance and
needed. The committee shall evaluate the financial condition. It should also provide
risk management plan to ensure its continued appropriate information that flows internally
relevancy, comprehensiveness, and and to the public. All members of the board
effectiveness. It shall revisit strategies, look shall have reasonable access to any
for emerging or changing exposures, and stay information about the institution.
abreast of developments that affect the (12) To ensure that the NBQB/trust
likelihood of harm or loss. The committee entity has beneficial influence on the
shall report regularly to the board of directors economy. The board has a continuing
the entity’s over-all risk exposure, actions responsibility to provide those services and
taken to reduce the risks, and recommend facilities which will be supportive of the
further action or plans as necessary. national economy.
(d) Nomination committee. The (13) To assess at least annually its
nomination committee shall be composed performance and effectiveness as a body, as
of at least three (3) members of the board of well as its various committees, the chief
directors, preferably all independent executive officer and the NBQB/trust entity
members. It shall review and evaluate the itself. The composition of the board shall also
qualifications of all persons nominated to the be reviewed regularly with the end in view
board as well as those nominated to other of having a balanced membership. Towards
positions requiring appointment by the board this end, a system and procedure for
of directors. evaluation shall be adopted which may
(10) To meet regularly. To properly include, but not limited to, the setting of
discharge its function, the board of directors benchmark and peer group analysis.
shall meet regularly. Independent views in (14) To keep their authority within the
board meetings shall be given full powers of the institution as prescribed in the
consideration and all such meetings shall be articles of incorporation, charter, by-laws and
duly minuted. in existing laws, rules and regulations. To
The meetings of the board of directors conduct and maintain the affairs of the
may be conducted through modern institution within the scope of its authority

Part I - Page 17
§ 4141Q.3
04.12.31
as prescribed in its charter and in existing the care which an ordinarily prudent man
laws, rules and regulations, the board shall would exercise under similar circumstances.
appoint a compliance officer who shall be While a director should always strive to
responsible for coordinating, monitoring and promote the interest of all stockholders, he
facilitating compliance with existing laws, should also give due regard to the rights and
rules and regulations. The compliance interests of other stakeholders.
officer shall be vested with appropriate (3) To devote time and attention
authority and provided with appropriate necessary to properly discharge his duties and
support and resources. It may also constitute responsibilities. A director should devote
a compliance committee. sufficient time to familiarize himself with the
If the directors carry the institution into institution’s business. He must be constantly
a transaction outside the scope of the aware of the institution’s condition and be
business agreed upon in the articles, with knowledgeable enough to contribute
resulting loss to the institution, they may be meaningfully to the board’s work. He must
called upon to reimburse the institution for attend and actively participate in board and
that loss. If directors willfully do an act, committee meetings, request and review
which they know or ought to know to be meeting materials, ask questions, and request
unauthorized, they are clearly liable to the explanations and be familiar with audits and
institution for resulting damages. supervisory communications. If a person
d. Specific duties and responsibilities cannot give sufficient time and attention to
of a director the affairs of the institution, he should neither
(1) To conduct fair business transactions accept his nomination nor run for election as
with the NBQB/trust entity and to ensure that member of the board.
personal interest does not bias board (4) To act judiciously. Before deciding
decisions. A director should, whenever on any matter brought before the board of
possible, avoid situations that would give rise directors, every director should thoroughly
to a conflict of interest. If transactions with evaluate the issues, ask questions and seek
the institution cannot be avoided, it should clarifications when necessary.
be done in the regular course of business and (5) To exercise independent judgment.
upon terms not less favorable to the A director should view each problem/
institution than those offered to others. The situation objectively. When a disagreement
basic principle to be observed is that a with others occurs, he should carefully
director should not use his position to make evaluate the situation and state his position.
profit or to acquire benefit or advantage for He should not be afraid to take a position
himself and/or his related interests. He even though it might be unpopular.
should avoid situations that would Corollarily, he should support plans and
compromise his impartiality. ideas that he thinks will be beneficial to the
(2) To act honestly and in good faith, institution.
with loyalty and in the best interest of the (6) To be generally informed of both the
institution, its stockholders, regardless of the NBQB’s/trust entity’s business environment
amount of their stockholdings, and other and legal and regulatory framework
stakeholders such as its investors, borrowers, controlling its activities. A director should
other clients and the general public. A have a working knowledge of the statutory
director must always act in good faith, with and regulatory requirements affecting the

Part I - Page 18
§§ 4141Q.3 - 4142Q
04.12.31
institution, including the content of its articles The election/appointment of all

of incorporation and by-laws, the incumbent directors and officers of quasi-
requirements of the BSP and where banks/trust entities as of September 17, 2001
applicable, the requirements of other not previously approved/confirmed by the
regulatory agencies and must exercise care Monetary Board shall be submitted to the BSP
to see that these are not violated. He should through the appropriate supervising and
also keep himself informed of the industry examining departments for confirmation.
developments and business trends in order
to safeguard the institution's competitiveness. §§ 4141Q.5 - 4141Q.8 (Reserved)
(7) To observe confidentiality. A director
must observe the confidentiality of non- § 4141Q.9 Reports required. NBQBs/
public information acquired by reason of his trust entities shall furnish all of their directors
position as director. He may not disclose said with a copy of the specific duties and
information to any other person without the responsibilities of the board of directors
authority of the board. prescribed under Items “b” and “c” of Subsec.
4141Q.3 within thirty (30) business days from
§ 4141Q.4 Confirmation of the election/ May 17, 2001 in cases of incumbent directors
appointment of directors and officers. The and at the time of election in cases of directors
election/appointment of directors and elected after such date.
officers of quasi-banks/trust entities shall be The directors concerned shall each be
subject to confirmation by the: required to acknowledge receipt of the copies
of such specific duties and responsibilities
Confirming Position Level and shall certify that they fully understand
Authority the same.
a. Monetary Board Director, President, Copies of the acknowledgment and
Chief Executive Officer, certification herein required shall be
Chief Operating Officer, submitted in accordance with Appendix Q-3.
Senior Vice President or
equivalent rank of quasi-
§ 4141Q.10 Sanctions. Without
banks/trust entities
with total assets of at prejudice to the other sanctions prescribed
least P1 billion. under Section 37 of R.A. No. 7653 and to
the provisions of Section 16 of R.A. No. 8791,
b. A Committee Director, Senior Vice any director of an NBQB/trust entity who
to be composed President and above or
of: equivalent rank of quasi- violates or fails to observe and/or perform any
· The Deputy banks/trust entities of the above responsibilities and duties shall
Governor - SES whose election/ for each violation or offense, be penalized
· Managing Directors appointment is not for P15,000.
of SE I and II subject to confirmation
· Directors of the by the Monetary Board Sec. 4142Q Definition and Qualifications
concerned supervising and
examining of Officers. Officers shall include the
department President, Vice-President, General Manager,
of SES Treasurer, Secretary, and others mentioned
as officers of the NBQB, or those whose
duties as such are defined in the by-laws, or

Part I - Page 19
§§ 4142Q - 4143Q.1
04.12.31
are generally known to be the officers of the Sec. 4143Q Disqualification of Directors
NBQB (or any of its branches and offices and Officers. The following regulations shall
other than the head office) either through govern the disqualification of NBQB/trust
announcement, representation, publication entity directors and officers.
or any kind of communication made by
the financial intermediary: Provided, That a § 4143Q.1 Persons disqualified to
person holding the position of Chairman or become directors. Without prejudice to
Vice-Chairman of the Board or another specific provisions of law prescribing
position in the board shall not be considered disqualifications for directors, the following
as an officer unless the duties of his position are disqualified from becoming directors:
in the board include functions of a. Permanently disqualified
management such as those ordinarily Directors/officers/employees
performed by regular officers: Provided, permanently disqualified by the Monetary
further, That members of a group or Board from holding a director position:
committee, including sub-groups or sub- (1) Persons who have been convicted by
committees, whose duties include functions final judgment of the court for offenses
of management such as those ordinarily involving dishonesty or breach of trust such
performed by regular officers, and are not as estafa, embezzlement, extortion,
purely recommendatory or advisory, shall forgery,malversation, swindling and theft;
likewise be considered as officers. (2) Persons who have been convicted by
An officer shall have the following final judgment of the court for violation of
minimum qualifications: banking laws;
a. He shall be at least twenty-one (21) (3) Persons who have been judicially
years of age; declared insolvent, spendthrift or
b. He shall be at least a college incapacitated to contract; or
graduate, or have at least five (5) years (4) Directors, officers or employees of
creditable experience or training in financial closed NBQBs/trust entities who were
management or related activities, or in a field responsible for such institutions’ closure as
related to his position and responsibilities; determined by the Monetary Board.
and b. Temporarily disqualified
c. He must be fit and proper for the Directors/officers/employees disqualified
position he is being proposed/appointed to. by the Monetary Board from holding a
In determining whether a person is fit and director position for a specific/indefinite
proper for a particular position, the following period of time. Included are:
matters must be considered: integrity/probity, (1) Persons who refuse to fully disclose
competence, education, diligence and the extent of their business interest to the
experience/training. appropriate supervising and examining
The foregoing qualifications for officers department when required pursuant to a
shall be in addition to those required or provision of law or of a circular,
prescribed under R.A. No. 8791 and other memorandum or rule or regulation of the
existing applicable laws and regulations. BSP. This disqualification shall be in effect
as long as the refusal persists;

Part I - Page 20
§ 4143Q.1
04.12.31
(2) Directors who have been absent or (iv) A partnership of which a director or
who have not participated for whatever officer, or his spouse is the managing partner
reasons in more than fifty percent (50%) of or a general partner owning a controlling
all meetings, both regular and special, of the interest in the partnership; and
board of directors during their incumbency, (v) A corporation, association or firm
or any twelve (12) month period during said wholly-owned or majority of the capital of
incumbency and directors who failed to which is owned by any or a group of persons
physically attend for whatever reasons in at mentioned in the foregoing Items “(i)”, “(ii)”
least twenty-five percent (25%) of all board and “(iv)”;
meetings in any year, except that when a This disqualification shall be in effect as
notarized certification executed by the long as the delinquency persists.
Corporate Secretary has been submitted (4) Persons convicted for offenses
attesting that said directors were given the involving dishonesty, breach of trust or
agenda materials prior to the meeting and violation of banking laws but whose
that their comments/decisions thereon were conviction has not yet become final and
submitted for deliberation/discussion and executory;
were taken up in the actual board meeting, (5) Directors and officers of closed
said directors shall be considered present in NBQBs/trust entities pending their clearance
the board meeting. by the Monetary Board;
(3) Persons who are delinquent in the (6) Directors disqualified for failure to
payment of their obligations as defined observe/discharge their duties and
hereunder: responsibilities prescribed under existing
(a) Delinquency in the payment of regulations. This disqualification applies until
obligations means that an obligation of a the lapse of the specific period of
person with an NBQB/trust entity where he disqualification or upon approval by the
is a director or officer, or at least two (2) Monetary Board on recommendation by the
obligations with other NBQBs/trust entities/ appropriate supervising and examining
financial institutions, under different credit department of such directors’ election/re-
lines or loan contracts, are past due pursuant election;
to Secs. X306, 4308Q, 4306S and 4303P; (7) Directors who failed to attend the
(b) Obligations shall include all special seminar for board of directors
borrowings from an NBQB/trust entity/ required under Item “c” of Subsec. 4141Q.2.
financial institution obtained by: This disqualification applies until the director
(i) A director or officer for his own concerned had attended such seminar;
account or as the representative or agent of (8) Persons dismissed/terminated from
others or where he acts as a guarantor, employment for cause. This disqualification
indorser or surety for loans from such shall be in effect until they have cleared
financial institutions; themselves of involvement in the alleged
(ii) The spouse or child under parental irregularity;
authority of the director or officer; (9) Those under preventive suspension;
(iii) Any person whose borrowings or and
loan proceeds were credited to the account (10) Persons with derogatory records with
of, or used for the benefit of, a director or the NBI, court, police, interpol and monetary
officer; authority (central bank) of other countries (for

Part I - Page 21
§ 4143Q.1 - 4143Q.4
04.12.31
foreign directors and officers) involving which he/she was elected or appointed.
violation of any law, rule or regulation of the Directors/officers possessing any of the
Government or any of its instrumentalities disqualifications as enumerated herein shall
adversely affecting the integrity and/or ability be subject to the disqualification procedures
to discharge the duties of a bank/NBQB/trust provided under Subsec. 4143Q.4.
entity director/officer. This disqualification
applies until they have cleared themselves § 4143Q.4 Disqualification procedures
of involvement in the alleged irregularity. a. The board of directors and
management of every institution shall be
§ 4143Q.2 Persons disqualified to responsible for determining the existence of
become officers the ground for disqualification of the
a. The disqualifications for directors institution’s director/officer or employee and
mentioned in Subsec. 4143Q.1 shall likewise for reporting the same to the BSP. While the
apply to officers, except those stated in Items concerned institution may conduct its own
“b(2)” and “b(7)”. investigation and impose appropriate
b. Except as may be authorized by the sanction/s as are allowable, this shall be
Monetary Board or the Governor, the spouse without prejudice to the authority of the
or a relative within the second degree of Monetary Board to disqualify a director/
consanguinity or affinity of any person officer/employee from being elected/
holding the position of Chairman, President, appointed as director/officer in any financial
Executive Vice President or any position of institution under the supervision of the BSP.
equivalent rank, General Manager, Treasurer, Grounds for disqualification made known to
Chief Cashier or Chief Accountant is the institution, shall be reported to the
disqualified from holding or being elected appropriate supervising and examining
or appointed to any of said positions in the department of the BSP within seventy-two
same NBQB/trust entity; and the spouse or (72) hours from knowledge thereof.
relative within the second degree of b. On the basis of knowledge and
consanguinity or affinity of any person evidence on the existence of any of the
holding the position of Manager, Cashier, or grounds for disqualification mentioned in
Accountant of a branch or office of an NBQB/ Subsecs. 4143Q.1 and 4143Q.2, the director
trust entity is disqualified from holding or or officer concerned shall be notified through
being appointed to any of said positions in registered mail with registry return receipt
the same branch or office. card at his/her last known address by the
§ 4143Q.3 Effect of non-possession of department of the BSP of the existence of the
qualifications or possession of ground for his/her disqualification and shall
disqualifications. Directors/officers elected be allowed to submit within fifteen (15) days
or appointed without possessing the from receipt of such notice an explanation
qualifications mentioned under Subsec. on why he/she should not be disqualified and
4141Q.2 and the last paragraph of Sec. included in the watchlisted file. The head of
4142Q shall not be confirmed by the said department may allow an extension on
confirming authority provided under Subsec. meritorious ground.
4141Q.4 and may be removed from office c. The director/officer concerned shall
even if he/she has assumed the position to thus be afforded the opportunity to defend/

Part I - Page 22
§§ 4143Q.4 - 4143Q.5
04.12.31
clear himself/herself and to submit evidence approved by the Monetary Board and shall
in support of his/her position to the be directed to act thereon not later than the
appropriate supervising and examining following board meeting. Within seventy-two
department which shall then evaluate the (72) hours thereafter, the corporate secretary
case and submit the recommendations to the shall report to the Governor of the BSP
Monetary Board. through the appropriate supervising and
d. Failure of the director/officer examining department the action taken by
concerned to reply within the prescribed the board on the director/officer involved.
period shall be considered a waiver and the i. Persons who are elected or
supervising and examining department shall appointed as director or officer in any of the
proceed to evaluate the case and submit BSP-supervised institutions for the first time
recommendations to the Monetary Board. but are subject to any of the grounds for
e. If the ground for disqualification is disqualification provided for under Subsecs.
delinquency in the payment of obligation, 4143Q.1 and 4143Q.2 shall be afforded the
the concerned director or officer shall be procedural due process prescribed above.
given a period of thirty (30) days within which j. Whenever a director/officer is
to settle said obligation or, restore it to its cleared in the process mentioned under Item
current status or, to explain why he/she “c” above or, when the ground for
should not be disqualified and included in disqualification ceases to exist, he/she would
the watchlisted file, before the evaluation on be eligible to become director or officer of
his disqualification and watchlisting is any bank, quasi-bank, trust entity or any
elevated to the Monetary Board. institution under the supervision of the BSP
f. If the disqualification is based on any only upon prior approval by the Monetary
of the grounds for permanent disqualification Board. It shall be the responsibility of the
enumerated under Items “(1)” to “(4)” of concerned supervising and examining
Subsec. 4143Q.1(a), the disqualification and department of the BSP to elevate to the
watchlisting of the concerned director/officer Monetary Board the lifting of the
shall be elevated to the Monetary Board for disqualification of the concerned director/
approval subject to the same procedures officer and his/her delisting from the master
provided in Items “a”, “b” and “c” above. list of watchlisted persons.
g. Upon approval by the Monetary
Board, the concerned director/officer shall be § 4143Q.5 Watchlisting. To provide the
informed by the appropriate supervising and BSP with a central information file to be used
examining department through registered as reference in passing upon and reviewing
mail with registry return receipt card, at his/ the qualifications of persons elected or
her last known address of his/her appointed as director or officer of a bank,
disqualification from being elected/appointed quasi-bank or trust entity, the SES shall
as director/officer in any financial institution maintain a watchlist of persons disqualified
under the supervision of BSP and/or of his/ to be a director or officer of such entities
her inclusion in the master list of watchlisted under its supervision under the following
persons so disqualified. procedures:
h. The board of directors of the a. Watchlist categories. Watchlisting
concerned institution shall be immediately shall be categorized as follows:
informed of cases of disqualification (1) Disqualification File “A” (Permanent)

Part I - Page 23
§§ 4143Q.5 - 4144Q
04.12.31
– Directors/officers/employees permanently Directors/officers/employees delisted

disqualified by the Monetary Board from from the Watchlist – Disqualification File “B”
holding a director/officer position. other than those upgraded to Watchlist –
(2) Disqualification File “B” (Temporary) Disqualification File “A” shall be eligible for
– Directors/officers/employees temporarily re-employment with any bank, quasi-bank or
disqualified by the Monetary Board from trust entity.
holding a director/officer position.
b. Inclusion of directors/ officers/ § 4143Q.6 Prohibition against foreign
employees in the watchlist. Directors/officers/ officers/employees of financing companies
employees disqualified under Subsec. Except in the case of technical personnel
4143Q.4 included in the watchlist whose employment may be specifically
disqualification files “A” or “B”. authorized by the Secretary of Justice,
c. Confidentiality. Watchlist files shall foreigners cannot be officers or employees
be for internal use only of the BSP and may of financing companies.
not be accessed or queried upon by outside
parties including banks, quasi-banks and trust Sec. 4144Q Interlocking Directorships and/
entities except with the authority of the person or Officerships. In order to safeguard against
concerned and with the approval of the the exercise by the same person or group of
Deputy Governor, SES or the Governor or persons of undue influence over the policy-
the Monetary Board. making and/or management functions of
d. Delisting. All delistings shall be similar financial institutions that could have
approved by the Monetary Board upon an adverse effect on competition or which
recommendation of the operating could result in conflict of interest situations
departments of SES except in cases of persons to the detriment of others, the following
known to be dead where delisting shall be regulations shall govern interlocking
automatic upon proof of death and need not directorships and/or officerships within the
be elevated to the Monetary Board. Delisting financial system.
may be approved by the Monetary Board in a. Interlocking directorships
the following cases: (1) Except as may be authorized by the
(1) Watchlist - Disqualification File “B” Monetary Board or as otherwise provided
(Temporary) - hereunder, there shall be no concurrent
(a) After the lapse of the specific period directorships between NBQBs or between an
of disqualification; NBQB and a bank performing quasi-banking
(b) When the conviction by the court for functions; and
crimes involving dishonesty, breach of trust (2) Without the need for prior approval
and/or violation of banking law becomes final of the Monetary Board, concurrent
and executory, in which case the director/ directorships between entities not involving
officer/ employee is relisted to Watchlist – an investment house shall be allowed in the
Disqualification File “A” (Permanent); and following cases:
(c) Upon favorable decision or clearance (a) a bank not performing quasi-banking
by the appropriate body, i.e., court, NBI, BSP, functions and an NBQB; and
bank, quasi-bank, trust entity or such other (b) a bank and its subsidiary NBQBs.
agency/body where the concerned individual For purposes of the foregoing, a husband
had derogatory record. and his wife shall be considered as one (1)
person.

Part I - Page 24
§§ 4144Q - 4144Q.1
04.12.31
b. Interlocking directorships and Aforementioned concurrent officerships

officerships may be allowed, subject to the following
(1) Except as may be authorized by the conditions:
Monetary Board or as otherwise provided (a) that the positions do not involve any
hereunder, there shall be no concurrent functional conflict of interests;
directorship and officership between NBQBs (b) that the positions of president, chief
or an NBQB and a bank. executive officer, chief operating officer and
(2) Without need for prior approval of chief financial officer or their equivalent may
the Monetary Board, concurrent directorship not be held concurrently;
and officership in a bank and a subsidiary (c) that the officer involved, or his
NBQB, other than an investment house, shall spouse or any of his relatives within the first
be allowed. degree of consanguinity or affinity or by legal
c. Interlocking officerships adoption, or a corporation, association or firm
As a general rule, there shall be no wholly- or majority-owned or controlled by
concurrent officerships between quasi-banks such officer or his relatives enumerated
or between a quasi-bank and non-bank above, does not own in his/its own capacity
financial intermediary, whether or not more than twenty percent (20%) of the
performing quasi-banking functions, except subscribed capital of the entities in which the
as follows: bank has equity investments; and
(1) With prior approval of the Monetary (d) that where any of the positions
Board, concurrent officerships may be involved is held on full-time basis, adequate
allowed: justification shall be submitted to the
(a) Between a quasi-bank and not more Monetary Board.
than two (2) of its subsidiary financial Transitory provision. Officers
institutions; or concurrently holding the positions of
(b) Between two (2) quasi-banks and one president, chief executive officer, chief
(1) of their subsidiary non-bank financial operating officer and chief financial officer
intermediaries. or their equivalent in two (2) or more financial
(2) With prior approval of the Monetary institutions under BSP supervision shall be
Board, concurrent officerships may also be given one (1) year from 02 April 2004 within
allowed between quasi-banks, between a which to comply with the aforementioned
bank and a non-bank financial intermediary regulation.
other than an investment house, or between For purposes of this Section, members of a
a quasi-bank and a non-bank financial group or committee, including sub-groups or
intermediary: Provided, That at least twenty sub-committees, whose duties include
percent (20%) but less than majority of the functions of management such as those
equity of each of the quasi-banks and non- ordinarily performed by regular officers, shall
bank financial intermediaries is owned by a likewise be considered as officers.
holding company or a quasi-bank and the
interlocking arrangement is necessary for the § 4144Q.1 Representatives of
holding company or the bank to provide government. The provisions of this Section
technical expertise or managerial assistance shall not apply to persons appointed to such
to its affiliates. positions as representatives of the government
or government-owned or -controlled entities.

Part I - Page 24a
§ 4145Q - 4147Q
04.12.31
Sec. 4145Q Profit Sharing of Directors, Provided, That in no case shall profit sharing
Officers and Employees. Profit sharing take precedence over any of the items in the
programs adopted in favor of directors, preceding paragraph.
officers and employees shall be reflected in
the by-laws of NBQBs, subject to the Sec. 4146Q Monetary Board Confirmation
following guidelines: of Directors and Senior Officers. The
a. The base in any profit sharing election/appointment of directors and officers
program shall be the net income for the year with the rank of Senior Vice-President and
of the NBQB, as shown in its Consolidated up shall require confirmation by the Monetary
Statement of Income and Expenses for the Board.
year, net of the following: The election/appointment of the
(1) All cumulative dividends accruing to directors and such officers shall be deemed
preferred stock to the extent not covered by to have been confirmed by the Monetary
earned surplus; Board if after sixty (60) business days from
(2) Accrued interest receivable credited receipt of the reports required in Appendix
to income but not yet collected, net of Q-3 by the BSP, no advice against said
reserves already set up for uncollected election/appointment has been received by
interest on loans; the NBQB concerned.
(3) Unbooked valuation reserves on If the Monetary Board finds grounds for
loans or an amount required to update disqualification, the director/officer so
valuation reserves in accordance with the elected/appointed may be removed from
schedule approved by the Monetary Board, office even if he/she has assumed the position
as well as all amortizations due on deferred to which he/she was elected/appointed
charges; pursuant to Section 9-A of R.A. No. 337, as
(4) Provisions for the current year's amended.
taxes;
(5) Income tax deferred for the year: Sec. 4147Q Compensation and Other
Provided, however, That in case of reversal Benefits of Directors and Officers. To protect
of deferred income taxes excluded from net the funds of creditors, the Monetary Board
income in previous years' profit sharings, the may regulate/restrict the payment by the
deferred income tax reversed to expense shall NBQB/trust entity of compensation,
be added back to net income to arrive at the allowances, fees, bonuses, stock options,
basis for profit sharing for the year during profit sharing and fringe benefits to its
which the reversal is made; directors and officers in exceptional cases and
(6) Accumulated profits not yet received when the circumstances warrant, such as, but
but already recorded by an NBQB not limited to, the following:
representing its share in profits of its a. When the NBQB/trust entity is under
subsidiaries under the equity method of controllership, conservatorship or when it has
accounting; and outstanding emergency loans and advances
(7) (Deleted by Cir. 321 dated 2.19.02). and such other forms of credit
b. The NBQB may provide in its by- accommodation from the BSP which are
laws for other priorities in the computation intended to provide it with liquidity in times
of net profits for purposes of profit sharing: of need;

Part I - Page 24b
§§ 4147Q - 4149Q
04.12.31
b. When the institution is found by the The foregoing provisions founded on

Monetary Board to be conducting business Section 18 of R.A. No. 8791 shall be deemed
in an unsafe or unsound manner; and part of the benefits and compensation
c. When it is found by the Monetary programs of NBQBs/trust entities.
Board to be in an unsatisfactory financial
condition such as, but not limited to, the Sec. 4148Q (Reserved)
following cases:
(1) Its capital is impaired; Sec. 4149Q Conducting Business in an
(2) It has suffered continuous losses from Unsafe/Unsound Manner. Whether a
operations for the past three (3) years; particular activity may be considered as
(3) Its composite CAMEL(S) rating in the conducting business in an unsafe or unsound
latest examination is below “3”; and manner, all relevant facts must be
(4) It is under rehabilitation by the BSP/ considered. An analysis of the impact thereof
PDIC which rehabilitation may include debt- on the NBQB’s/trust entity’s operations and
to-equity conversion, etc. financial conditions must be undertaken,
In the presence of any one (1) or more including evaluation of capital position, asset
of the circumstances mentioned above, the condition, management, earnings posture
Monetary Board may impose the following and liquidity position.
restrictions in the compensation and other In determining whether a particular act
benefits of directors and officers: or omission, which is not otherwise
a. In the case of profit sharing, the prohibited by any law, rule or regulation
provision of Sec. 4145Q shall be observed affecting NBQBs/trust entities, may be
except that for purposes of this Section, the deemed as conducting business in an unsafe
total amount of unbooked valuation reserves or unsound manner, the Monetary Board,
and deferred charges shall be deducted from upon report of the head of the supervising
the net income. or examining department based on findings
b. Except for the financial assistance to in an examination or a complaint, shall
meet expenses for the medical, maternity, consider any of the following circumstances:
education and other emergency needs of the a. The act or omission has resulted or
directors or officers or their immediate family, may result in material loss or damage, or
the other forms of financial assistance may abnormal risk or danger to the safety, stability,
be suspended. liquidity or solvency of the institution;
c. When the total compensation b. The act or omission has resulted or
package including salaries, allowances, fees may result in material loss or damage or
and bonuses of directors and officers are abnormal risk to the institutions, creditors,
significantly excessive as compared with peer investors, stockholders, or to the BSP, or to
group averages, the Monetary Board may the public in general;
order their reduction to reasonable levels: c. The act or omission has caused any
Provided, That even if an NBQB/trust entity undue injury, or has given unwarranted
is in financial trouble, it may nevertheless be benefits, advantage or preference to the
allowed to grant relatively higher salary NBQB/trust entity or any party in the
packages in order to attract competent discharge by the director or officer of his
officers and quality staff as part of its duties and responsibilities through manifest
rehabilitation program. partiality, evident bad faith or gross
inexcusable negligence; or

Part I - Page 24c
§§ 4149Q - 4151Q.1
04.12.31
d. The act or omission involves entering e. Revocation of quasi-banking license

into any contract or transaction manifestly and/or trust authority; and/or
and grossly disadvantageous to the NBQB/ f. Receivership and liquidation under
trust entity, whether or not the director or Section 30 of R.A. No. 7653.
officer profited or will profit thereby. All other provisions of Sections 30 and
The list of activities which may be 37 of R.A. No. 7653, whenever appropriate,
considered unsafe and unsound is shown in shall also be applicable on the conduct of
Appendix Q-24. business in an unsafe or unsound manner.
The imposition of the above sanctions is
§§ 4149Q.1 - 4149Q.8 (Reserved) without prejudice to the filing of appropriate
criminal charges against culpable persons as
§ 4149Q.9 Sanctions. The Monetary provided in Sections 34, 35 and 36 of R.A.
Board may, at its discretion and based on No. 7653.
the seriousness and materiality of the acts or
omissions, impose any or all of the following Sec. 4150Q (Reserved)
sanctions provided under Section 37 of R.A.
No. 7653 and Section 56 of R.A. No. 8791, H. BRANCHES AND
whenever an NBQB/trust entity conducts OTHER OFFICES
business in an unsafe and unsound manner:
a. Issue an order requiring the quasi- Sec. 4151Q Establishment. Prior BSP
bank/trust entity to cease and desist from authority shall be obtained before
conducting business in an unsafe and operating a branch, extension office or
unsound manner and may further order that agency, including any arrangement whereby
immediate action be taken to correct the another person or entity is authorized to act
conditions resulting from such unsafe or as an agent for solicitation, issuance or
unsound practice; servicing of deposit substitutes for the
b. Fines in amounts as may be NBQB.
determined by the Monetary Board to be Agency arrangements shall refer to all
appropriate, but in no case to exceed or any type of services to be performed by
P30,000 a day on a per transaction basis another party as an agent other than
taking into consideration the attendant collection agency for loans payable in
circumstances, such as the gravity of the act installments/amortization, and paying agency
or omission and the size of the quasi-bank/ under a definite and specific period for
trust entity, to be imposed on the quasi-bank/ purposes of redeeming long-term notes and/
trust entity, their directors and/or responsible or bonds.
officers;
c. Suspension of lending or foreign § 4151Q.1 Evaluation guideposts. The
exchange operations or authority to accept rate at which branches, agencies, extension
new deposit substitutes and/or new trust offices, etc. are to be established shall depend
accounts or to make new investments; upon the ability of the company to conduct
d. Suspension of responsible directors operations from the head office, as well as
and/or officers; correspondent/banking arrangements.

Part I - Page 24d
§ 4151Q.2
02.12.31
§ 4151Q.2 Additional capital, if BSP, based on criteria which consider

required. An applicant NBQB may be expected growth of risk assets and capital
required to put up additional capital in an accounts and for this purpose, the methods
amount to be determined by the appropriate of computing such additional capital, as
supervising and examining department of the shown in Appendix Q-2, shall be used.

Part I - Page 24e
§§ 4151Q.3 - 4151Q.8
04.12.31
§ 4151Q.3 Other requirements/ d. Services to be offered, as well as

factors to be considered. Other any extension offices, etc. to be opened;
requirements/factors to be considered are the e. Days and hours to be observed;
applicant NBQB's general compliance with f. Areas to be served;
laws, rules, and regulations, and policies of g. Bio-data of the proposed branch
the BSP, such as: manager and organizational chart;
a. Capital adequacy and solvency; h. Business and/or economic
b. Profitability and capacity to absorb justifications (including data) for the
losses; and establishment of the branch; and
c. Reserve and liquidity position. i. Number of financial institutions in
the area (banks, investment houses, finance
§ 4151Q.4 Conditions precluding companies and pawnshops).
processing of applications. The existence
of any of the following conditions shall § 4151Q.6 Filing of applications
preclude/suspend the processing of the Applications for a certificate of authority to
application: operate a branch, an extension office or an
a. The applicant has not complied agency shall be filed with the SEC, which
with the ceilings on credit accommodations office shall refer the same to the appropriate
to DOSRI during the last sixty (60) days supervising and examining department of the
immediately preceding the date of BSP for comments and recommendations. A
application; copy of the application filed with the SEC,
b. The net worth of the applicant is with the pertinent documents, shall
found to be deficient during the last sixty (60) simultaneously be furnished the appropriate
days immediately preceding the date of supervising and examining department of the
application; and BSP for advance verification of the NBQB's
c. The applicant has incurred net compliance with the requirements under the
deficiencies in reserves against deposit provisions of Sec. 4151Q.
substitute liabilities during the last eight (8)
weeks immediately preceding the date of § 4151Q.7 Period within which to
application. submit complete requirements. The
applicant NBQB shall have one (1) month
§ 4151Q.5 Documentary requirements from notice of the receipt of the SEC referral
All applications shall be supported by the by the appropriate supervising and examining
following documents: department of the BSP within which to
a. Ability to conduct operations from submit/complete the requirements under this
the head office as not to be a cause for Section, after which the non-submission of
delayed submission of reports to the BSP and/ complete documents shall cause the return
or recording of transactions in the head office; of the application for the NBQB's lack of
b. Correspondent banking and audit interest to pursue the same.
arrangements between the branch and the
head office to ensure effective and efficient § 4151Q.8 Prohibition against
cash/money transactions; operating without SEC license. No branch,
c. Certified true copy of the board extension office or agency shall start
resolution authorizing the establishment of operations unless the appropriate SEC license,
a branch; which likewise serves as authorization for the

Part I - Page 25
§§ 4151Q.8 - 4162Q.2
02.12.31
branch/extension office/agency to perform by the SFAS, the option or limit prescribed

quasi-banking functions, has been issued. by BSP regulations shall be adopted by
NBQBs.
Secs. 4152Q - 4155Q (Reserved) For purposes hereof, the SFAS shall refer
to the issuances of the Accounting Standards
I. (RESERVED) Council (ASC) and approved by the
Professional Regulation Commission (PRC).
Secs. 4156Q - 4160Q (Reserved)
Sec. 4162Q Reports. NBQBs shall submit
to the appropriate supervising and examining
J. RECORDS AND REPORTS department of the BSP the reports listed in
Appendix Q-3 in the forms as may be
Sec. 4161Q Records. NBQBs shall have a prescribed by the Deputy Governor,
true and accurate account, record or Supervision and Examination Sector, BSP.
statement of their daily transactions. The Any change in, or amendment to, the
making of any false entry or the willful articles of incorporation, by-laws or material
omission of entries relevant to any transaction documents required to be submitted to the
is a ground for the imposition of BSP shall be reported by submitting copies
administrative sanctions under Section 37 of of the amended articles of incorporation, by-
R.A. No. 7653, without prejudice to the laws, or material documents to the
criminal liability of the director or officer appropriate supervising and examining
responsible therefor under Sections 35 and department of the BSP within fifteen (15) days
36 of R.A. No. 7653 and/or the applicable following such change.
provisions of the Revised Penal Code.
Records shall be up-to-date and shall contain § 4162Q.1 Categories and signatories
sufficient detail so that an audit trail is of reports. Reports required to be submitted
established. to the BSP are classified into Categories A-1,
A-2, A-3 and B reports as indicated in the list
§ 4161Q.1 Uniform System of of reports required to be submitted to the BSP
Accounts. NBQBs shall strictly adopt/ in Appendix Q-3.
implement the Uniform System of Accounts Appendix Q-4 prescribes the signatories
prescribed for NBQBs in the recording of daily for each report category and the requirements
transactions including reportorial and on signatory authorization. Reports
publication requirements. submitted by NBQBs in computer media shall
be subject to the same requirements.
§ 4161Q.2 Adoption of Statements of A report submitted to the BSP under the
Financial Accounting Standards. NBQBs signature of an officer who is not authorized
shall adopt the Statements of Financial in accordance with the requirements in this
Accounting Standards (SFAS) in their financial Subsection shall be considered as not having
statements and reports to the BSP. However, been submitted.
in cases where there are differences between
BSP regulations and SFAS as when more than § 4162Q.2 Manner of filing. The
one (1) option are allowed or certain submission of the reports shall be effected
maximum or minimum limits are prescribed by filing them personally with the appropriate

Part I - Page 26
§§ 4162Q.2 - 4162Q.3
02.12.31
supervising and examining department of the as fire and other natural calamities and public
BSP or with the BSP Regional Offices/Units, disorders, including strike or lockout affecting
or by sending them by registered mail or an NBQB as defined in the Labor Code or
special delivery through private couriers national emergency affecting operations of
unless otherwise specified in the circular or NBQBs, shall not be considered as willful
memorandum of the BSP. delay.
Where the reports are prescribed by the (3) Examination shall include, but
BSP to be submitted through electronic mail, need not be limited to, the verification,
the original notarized affidavit/last page of review, audit, investigation and inspection
each report, hard copy of the covering control of the books and records, business affairs,
prooflist, or any other related documents administration and financial condition of any
required to be submitted shall be filed in the NBQB including the reproduction of its
manner prescribed in the preceding records, as well as the taking possession of
paragraph. the books and records and keeping them
In line with the policy direction of R.A. under the BSP's custody after giving proper
No. 8792 (E-Commerce Act), the BSP is receipt therefor. It shall also include the
strongly encouraging NBQBs to submit their interview of the directors and personnel of
regular reports to the BSP in electronic form. the NBQB including its Electronic Data
However, the BSP cannot presently Processing (EDP) servicer. Books and records
guarantee the security/confidentiality of data shall include, but not limited to, data and
in the course of transmitting electronic reports information stored in magnetic tapes, disks,
to BSP. BSP recommends that sensitive or printouts, logbooks and manuals kept and
confidential information be provided by maintained by the NBQB or the EDP servicer,
ordinary post or courier. The BSP will accept necessary and incidental to the use of EDP
no responsibility for electronic messages/ systems by the NBQB.
reports/information that may be hacked or (4) Refusal to permit examination
cracked, intercepted, copied or disclosed shall mean any act or omission which
outside BSP’s information system. impedes, delays, or obstructs the duly
authorized BSP officer/examiner/employee
§ 4162Q.3 Sanctions in case of willful from conducting an examination, including
delay in the submission of reports/refusal to the act of refusing to accept or honor a letter
permit examination of authority to examine presented by any
a. Definition of terms. For purposes officer/examiner/employee of the BSP.
of this Subsection, the following definitions b. Fines for willful delay in
shall apply: submission of reports. NBQBs incurring
(1) Report shall refer to any report or willful delay in the submission of required
statement required of an NBQB to be reports shall pay a fine in accordance with
submitted to the BSP periodically or within a the following schedule:
specified period.
(2) Willful delay in the submission of I. For Categories A-1, A-2 and A-3
reports shall refer to the failure of an NBQB reports
to submit a report on time. Failure to submit Per business day of default
a report on time due to fortuitous events, such until the report is filed P600

Part I - Page 27
§§ 4162Q.3 - 4171Q
02.12.31
II. For Category B reports examination to the head of the

Per business day of default appropriate supervising and examining
until the report is filed P120 department, who shall forthwith make a
written demand upon the NBQB concerned
Delay or default shall start to run on the for such examination. If the NBQB continues
day following the last day required for the to refuse said examination without any
submission of reports. However, should the satisfactory explanation therefor, the BSP
last day of filing fall on a non-working day in officer/examiner/employee concerned shall
the locality where the reporting financial submit a report to that effect to the said
institution is situated, delay or default shall department head.
start to run on the day following the next (b) The fine shall be imposed starting on
working day. The due date/deadline for the day following the receipt by the said
submission of reports to BSP as prescribed department of the written report submitted
under Section 4162Q governing the by the BSP officer/examiner/employee
frequency and deadlines indicated in concerned regarding the continued refusal
Appendix Q-3 shall be automatically moved of the NBQB to permit the desired
to the next business day whenever a half-day examination.
suspension of business operations in d. Manner of payment or collection of
government offices is declared due to an fines - The regulations embodied in Sec.
emergency such as typhoon, floods, etc. 4653Q shall be observed in the collection
For purposes of establishing delay or of the fines from NBQBs.
default, the date of acknowledgment by the e. Other penalties - The imposition of
appropriate supervising and examining the foregoing penalties shall be without
department of the BSP or the BSP Regional prejudice to the imposition of the other
Offices/Units appearing on the copies of such administrative sanctions and to the filing of a
reports filed or submitted, the date of mailing criminal case as provided for in other
postmarked on the envelope/the date of provisions of law.
registry/special delivery receipt, as the case f. Appeal to the Monetary Board - Any
may be, or the date of the acknowledgment aggrieved NBQB may appeal to the Monetary
receipt issued by the appropriate office of the Board a ruling of the appropriate supervising
BSP if the reports were submitted through and examining department of the BSP
electronic mail, shall be considered as the imposing a fine.
date of filing by the NBQB.
Delayed schedules/attachments and Secs. 4163Q - 4170Q (Reserved)
amendments shall be considered late
reporting subject to the above penalties.
c. Fines for refusal to permit K. INTERNAL CONTROL
examination
(1) Amount of fine - Any NBQB which Sec. 4171Q Internal Control Systems. The
shall willfully refuse to permit examination minimum internal control standards
shall pay a fine of P3,000 daily from the day established in Appendix Q-5 shall guide all
of refusal and for as long as such refusal lasts. NBQBs. The following records/data shall be
(2) Procedures in imposing the fine- compiled and made available for the
(a) The BSP officer/examiner/employee inspection of BSP examiners.
shall report the refusal of the NBQB to permit

Part I - Page 28
§§ 4171Q - 4172Q.2
03.12.31
a. Records showing compliance with show, among other things, the name of the
independent balancing procedures. These directors present and absent, and the action(s)
records should indicate the accounts and the taken on the findings and recommendations.
periodic balancing procedures performed. In consonance with the aforementioned
b. Statements of actual duties of persons regulations, quasi-banks are to be guided with
assigned to handle cash and securities. the checklist of BSP requirements in the
c. All internal control audit reports or submission of AFS and Annual Report as
their equivalent. shown in Appendix Q-33.
d. Information/data on the direct and/ Delayed submission of certification of the
or indirect equity holdings and/or connection external auditor, schedules/ attachments and
with any firm, partnership or corporation amendments in the required reports shall be
organized for profit, of all the institution's considered late reporting, subject to the
directors, officers, and major stockholders, as penalties under Subsec. 4162Q.3bII.
defined under Secs. 4141Q and 4142Q.
e. Information/data pertaining to § 4172Q.1 Posting of audited financial
electronic data processing (EDP) department statements. The audited financial statements
or service bureau of the NBQB particularly of the NBQB shall be posted in a conspicuous
on organization, input control, processing place in the premises of the NBQB and in its
control, output control, software, program branches/other offices. Specifically, the
and documentation standards, logs on the NBQB shall post in its premises the (a)
operations of mainframes and peripherals, audited statement of condition; (b) audited
hardware control and such other EDP control statement of income and expenses; (c) notes
standards prescribed by the BSP in separate to financial statements, which shall include,
rules and regulations. among others, disclosure of the volume of
past due loans as well as loan-loss provisions;
Sec. 4172Q Financial Audit. NBQBs shall and (d) auditor's certificate.
cause an annual financial audit to be
conducted not later than thirty (30) days after § 4172Q.2 Disclosure of external
the close of the calendar year or the fiscal auditor’s adverse findings to the Bangko
year adopted by the NBQBs. Reports of such Sentral; sanction
audits shall be made and submitted to the a. Findings to be disclosed. NBQBs
board of directors and the appropriate shall require their external auditors to report
supervising and examining department of the to the BSP any matter adversely affecting the
BSP not later than ninety (90) days after the condition or soundness of the bank, such as,
start of such audit. but not limited to:
The board of directors, in a regular or (1) Any serious irregularity, including
special meeting, shall consider and act on those involving fraud or dishonesty, that may
the financial audit report and shall submit, jeopardize the interest of creditors;
within thirty (30) days after receipt of the (2) Losses incurred which substantially
report, a copy of its resolution together with reduce the capital funds of the NBQB; and
a copy of the auditor's letter of comments/ (3) Inability of the auditor to confirm that
findings and recommendations to the the claims of creditors are still covered by
appropriate supervising and examining the NBQB’s assets.
department of the BSP. The resolution shall

Part I - Page 29
§§ 4172Q.2 - 4172Q.3
04.12.31
The disclosure of information by the f. Nature and amount of

external auditor to the BSP shall not be a contingencies and commitments arising from
ground for civil, criminal or disciplinary off-balance sheet items [include direct credit
proceedings against the former. substitutes (e.g., export LCs confirmed,
NBQB management shall be present underwritten accounts unsold), transaction-
during discussions or at least be informed of related contingencies (e.g., performance
the adverse findings in order to preserve the bonds, bid bonds, standby LCs), short-term
concerns of the supervisory authority and self-liquidating trade-related contingencies
external auditors regarding the confidentiality arising from the movement of goods (e.g.,
of information. sight/usance domestic LCs, sight/usance
b. Sanction. The auditing firm(s) shall import LCs), sale and repurchase agreements
be blacklisted by the Monetary Board for a not recognized in the balance sheet; interest
period as the Board may deem appropriate and foreign exchange rate related items; and
for their failure to perform their duty of other commitments];
reporting to the BSP any matter adversely g. Provisions and allowances for losses
affecting the condition or soundness of the and how these are determined;
NBQB. NBQBs shall not be allowed to engage h. Aggregate amount of secured
the services of the blacklisted auditing firm. liabilities and assets pledged as security; and
i. Accounting policies which shall
§ 4172Q.3 Disclosure requirement in include, but shall not be limited to, general
the notes to the audited financial statements accounting principles, changes in accounting
NBQBs shall require their external auditors policies/practices, principles of consolidation,
to include the following additional informa- policies and methods for determining when
tion in the notes to financial statements: assets are impaired, recognizing income on
a. Basic quantitative indicators of impaired assets and losses on non-performing
financial performance such as return on credits, income recognition, valuation
average equity, return on average assets and policies and accounting policies on
net interest margin; securitizations, foreign currency translations,
b. Capital-to-risk assets ratio under Sec. loan fees, premiums and discounts,
4116Q; repurchase agreements, premises/fixed
c. Concentration of credit as to indus- assets, income taxes, derivatives, etc.
try/economic sector where concentration is For purposes of computing the
said to exist when total loan exposures to a indicators in Item “a” above, the following
particular industry/economic sector exceeds formulas shall be used:
thirty percent (30%) of total loan portfolio;
d. Breakdown of total loans as to a. Return on Average = Net Income (or Loss) after
Equity (%) Income Tax x 100
secured and unsecured and breakdown of Average Total Capital Accounts
secured loans as to type of security;
e. Total outstanding loans to NBQB’s Where:
Average Total = Sum of Total Capital Accounts as of
DOSRI, percent of DOSRI loans to total loan Capital Accounts the 12 month-ends in the calendar/
portfolio, percent of unsecured DOSRI loans fiscal year adopted by the NBQB
12
to total DOSRI loans, percent of past due
DOSRI loans to total DOSRI loans and percent b. Return on Average = Net Income (or Loss) after
of non-performing DOSRI loans to total DOSRI Assets (%) Income Tax x 100
Average Total Assets
loans;

Part I - Page 30
§§ 4172Q.3 - 4180Q
04.12.31
Where: conspicuous place in its head office, all its

Average Total = Sum of Total Assets as of the 12 month-
Assets ends in the calendar/fiscal year adopted branches and other offices.
by the NBQB The deadline for the submission of the
12 annual report to the appropriate supervising
and examining department of the Bangko
c. Net Interest = Net Interest Income x 100
Margin (%) Average Interest Earning Assets Sentral is 180 calendar days after the close
of the calendar or fiscal year adopted by the
Where:
Net Interest
NBQB.
Income = Total Interest Income – Total Interest Expense
Average Interest = Sum of Total Interest Earning Assets as
Earning Assets of the 12 month-ends in the calendar/
fiscal year adopted by the NBQB Sec. 4180Q Selection, Appointment and
12 Reporting Requirements for External
Auditors; Sanction; Effectivity. Under
§ 4172Q.4 Disclosure requirements in Section 58, R.A. No. 8791, the Monetary
the annual report. NBQBs shall prepare an Board may require a quasi-bank and/or trust
annual report which shall include, in addition entity to engage the services of an
to the audited financial statements and other independent auditor to be chosen by the
usua information contained therein, a quasi-banks and/or trust entities concerned
discussion and/or analysis of the following from a list of certified public accountants
information: acceptable to the Monetary Board.
a. Financial performance; It is the policy of the BSP to promote
b. Financial position and changes high ethical and professional standards in
therein; public accounting practice and to encourage
c. Overall risk management philo- coordination and sharing of information
sophy (a general statement of the risk between external auditors and regulatory
management policy adopted by the NBQB’s authorities of banks, quasi-banks, trust entities
board of directors which serves as the basis and/or NSSLAs to ensure effective audit and
for the establishment of its risk management supervision of these institutions and to avoid
system), risk management system and unnecessary duplication of efforts. In
structure; furtherance of this policy and to ensure that
d. Qualitative and quantitative reliance by regulatory authorities and the
information on risk exposures (credit, market, public on the opinion of external auditors is
liquidity, operational, legal and other risks); well placed, the BSP hereby prescribes the
and rules and regulations that shall govern the
e. Basic business management and selection, appointment, reporting
corporate governance information such as the requirements and delisting for external
NBQB’s organizational structure, incentive auditors of banks, quasi-banks, trust entities
structure including its remuneration policies, and/or NSSLAs, their subsidiaries and
nature and extent of transactions with affiliates engaged in allied activities and other
affiliates and related parties. financial institutions which under special
laws are subject to BSP supervision.
§ 4172Q.5 Posting and submission of The selection of external auditors shall
annual report. A copy of the latest annual be valid for a period of three (3) years. BSP
report shall be posted by the NBQB in a selected external auditors shall apply for the

Part I - Page 31
§§ 4180Q - 4181Q
04.12.31
renewal of their selection every three (3) violation of any of the provisions of this
years. The provisions of Items “A” and “B” Section and for non-compliance with
of Appendix Q-30 shall likewise apply for the Monetary Board directive under Item “I”
each application for renewal. in Appendix Q-30. Erring external auditors
The Supervision and Examination Sector may also be reported by the BSP to the PRC
(SES) shall make an annual assessment of the for appropriate disciplinary action.
performance of external auditors and will
recommend deletion from the list even prior
to the three (3)-year renewal period, if based L. MISCELLANEOUS PROVISIONS
on assessment, the external auditors’ report
did not comply with BSP requirements. Sec. 4181Q Publication Requirements. The
External auditors who meet quarterly consolidated statement of condition
the requirements specified in this Section of an NBQB/trust entity and its subsidiaries
shall be included in the list of BSP selected and affiliates shall be published side-by-side
external auditors. In case of partnership, with the statement of condition of its head
inclusion in the list of BSP selected external office and its branches/other offices as of such
auditors shall apply to the audit firm only and dates as the BSP may require, within twenty
not to the individual signing partners or (20) working days from receipt of call letter,
auditors under its employment. in any newspaper of general circulation in
The BSP will circularize to all banks, the country in the prescribed format.
quasi banks, trust entities and NSSLAs the list a. The following information shall be
of selected external auditors once a year. disclosed in the Statements of Condition:
The BSP, however, shall not be liable for any (1) Non-performing loans and ratio to
damage or loss that may arise from its total loan portfolio;
selection of the external auditors to (2) Classified loans and other risk
be engaged by banks, quasi-banks, trust assets;
entities or NSSLAs for regular audit or special (3) General loan loss reserve;
engagements. (4) Specific loan loss reserve;
a. Rules and regulations. The rules and (5) Return on equity (ROE);
regulations to govern the selection and (6) DOSRI loans/advances and ratio to
delisting by the BSP of external auditors of total loan portfolio; and
quasi-banks and/or trust entities, their sub- (7) Past due DOSRI loans/advances and
sidiaries and affiliates engaged in allied ratio to total loan portfolio.
activities are shown in Appendix Q-30. For uniform calculation of the additional
b. Sanctions. The applicable sanctions/ information required, the guidelines in Annex
penalties prescribed under Sections 36 Q-3-f of Appendix Q-3 shall be observed.
and 37 of R. A. No. 7653 to the extent b. The names and positions/
applicable shall be imposed on the quasi- designations of:
bank or trust entity, its audit committee and (1) Members of the Board of Directors;
the directors approving the hiring of external and
auditors who are not in the BSP list of selected (2) President and Executive Vice-
auditors for banks, quasi-banks, trust entities Presidents (Senior Vice-Presidents, if there
and NSSLAs or for hiring, and/or retaining are no Executive Vice-Presidents) or
the services of the external auditor in equivalent positions shall be presented in the

Part I - Page 32
§§ 4181Q - 4191Q.1
04.12.31
right side column of the published statement findings noted to appropriate levels of
of condition as of June of every year. management.
(3) The program shall establish the
Sec. 4182Q Management Contracts. Subject responsibilities and duties of the compliance
to existing laws, all agreements whereby the officer and other personnel (if any) involved
affairs or operations of an NBQB will be in the compliance function.
carried out by another corporation, person (4) A copy of the compliance program
or group of persons, shall be subject to prior and the written approval of the Board of
approval by the BSP. Directors shall be submitted to the
The agreements referred to in the appropriate supervising and examining
preceding paragraph shall not be entered into department of the BSP within twenty (20)
for a period longer than five (5) years. Existing business days from date of approval.
agreements shall be allowed up to the (5) The program shall be updated at
termination date thereof: Provided, however, least annually to incorporate changes in laws
That any renewal or extension upon and regulations. Any changes in the program
termination date shall be subject to approval shall likewise be approved by the NBQB’s
by the BSP. Board of Directors and submitted to BSP
within twenty (20) business days from the
Secs. 4183Q - 4190Q (Reserved) date of approval.
b. A constructive working relationship
Sec. 4191Q Compliance System; with regulatory agencies.
Compliance Officer. NBQBs shall develop The NBQB, through its compliance
and implement a compliance system and officer, may consult the regulatory agencies
appoint/designate a compliance officer to for additional clarification on specific
oversee its implementation. provisions of laws and regulations and/or
discuss compliance findings with the
§ 4191Q.1 Compliance system. The regulatory authorities. A dialogue may also
compliance system shall have the following be initiated with respect to borderline issues.
basic elements. c. A clear and open communication
a. A written compliance program process within the NBQB to educate and
approved by the Board of Directors: address compliance matters.
(1) The compliance program shall Officers and staff shall be trained on the
enable the NBQB to identify the relevant regulatory requirements through regular
Philippine laws and regulations, analyze the meetings, distribution of manuals and
corresponding risks of non-compliance, and dissemination of regulatory issuance.
prioritize the compliance risks (e.g., low, d. Continuous monitoring and
medium, high). assessment of the compliance program.
(2) The program shall provide for The program shall provide for the
periodic compliance testing with applicable periodic review of the compliance function
legal and regulatory requirements.Testing to measure its effectiveness. The review may
frequency shall be commensurate with be carried out by the internal audit
identified risk levels (e.g., annual testing for department of the NBQB.
low-risk, quarterly testing for medium-risk, The compliance program may operate
monthly testing for high-risk). It shall also parallel to or as part of an NBQB’s internal
provide for the reporting of compliance control and auditing program.

Part I - Page 33
§§ 4191Q.2 - 4191Q.5
04.12.31
§ 4191Q.2 Compliance officer mentioned under Subsec. 4141Q.3, the

a. The principal function of the board should oversee the implementation of
compliance officer is to oversee and the compliance policy and ensure that
coordinate the implementation of the compliance issues are resolved
compliance system. His responsibility shall expeditiously. Senior management should be
include the identification, monitoring and responsible for establishing a compliance
controlling of compliance risk. policy, ensuring that it is observed, reporting
b. The appointment/designation of a to the board of directors on its ongoing
compliance officer shall require prior implementation and assessing its
approval of the Monetary Board. The bio-data effectiveness and appropriateness. Senior
of the proposed compliance officer shall be management should, at least once a year,
submitted to the appropriate supervising and report to the board of directors or a
examining department of the BSP. committee of the board on matters relevant
c. The compliance officer shall have the to the compliance policy and its
skills and expertise to provide appropriate implementation, recommending any
guidance and direction to the bank on the required changes to the policy. The report
development, implementation and should assist the board members in making
maintenance of the compliance program. an informed assessment as to whether the
d. An independent full-time compliance institution is managing its compliance risk
officer, who shall have a rank of at least a effectively. However, any material breaches
Vice President, shall be appointed. However, of laws, rules and standards shall be reported
they are allowed on a case-to-case basis, promptly.
upon recommendation of the supervising and
examining department concerned, to § 4191Q.5 Status. The compliance
designate an incumbent officer (including the function should have a formal status within
Internal Auditor) as the NBQB’s compliance the organization established by a charter or
officer: Provided, That such will not give rise other formal document approved by the
to any conflict of interest situation, that the board of directors that defines the
main function of the officer shall be that of a compliance function’s standing, authority
compliance officer and that he is considered and independence, and addresses the
a senior officer in the organizational set-up following issues:
of the NBQB. (1) measures to ensure the
independence of the compliance function
§ 4191Q.3 Compliance risk from the business activities of the quasi-bank;
Compliance risk is the risk of legal or (2) its role and responsibilities;
regulatory sanctions, financial loss, or loss to (3) its relationship with other functions
reputation a quasi-bank may suffer as a result or units within the organization;
of its failure to comply with all applicable (4) its right to obtain access to
laws, regulations, codes of conduct and information necessary to carry out its
standards of good practice. responsibilities;
(5) its right to conduct investigations of
§ 4191Q.4 Responsibilities of the board possible breaches of the compliance policy;
of directors and senior management on (6) its formal reporting relationships to
compliance. Aside from the duties and senior management and the board of
responsibilities of the board of directors directors; and

Part I - Page 34
§§ 4191Q.5 - 4191Q.9
04.12.31
(7) its right of direct access to the board compliance concerns are satisfactorily
of directors or an appropriate committee of addressed within the framework of the
the board. compliance policy for the organization as a
The compliance charter or other formal whole. As there are significant differences in
document defining the status of the legislative and regulatory frameworks across
compliance function shall be communicated countries or from jurisdiction to jurisdiction,
throughout the organization. compliance issues specific to each
jurisdiction should be coordinated within the
§ 4191Q.6 Independence. The structure of the institution’s group-wide
compliance function should be independent compliance policy. The organization and
from the business activities of the institution. structure of the compliance function and its
It should be able to carry out its responsibilities should be in accordance with
responsibilities on its own initiative in all local legal and regulatory requirements.
units or departments where compliance risk
exists and must be provided with sufficient § 4191Q.9 Outsourcing. Quasi-banks
resources to carry out its responsibilities should establish policies for managing the
effectively. It must be free to report to senior risks associated with outsourcing activities.
management and the board or a committee Outsourcing of services/activities can reduce
of the board on any irregularities or breaches the institution’s risk profile by transferring
of laws, rules and standards discovered, activities to others with the necessary
without fear of retaliation or disfavor from expertise to manage the risks associated with
management or other affected parties. The specialized business activities. However, the
compliance function should have access to use of third parties does not diminish the
all operational areas as well as any records responsibility of the board of directors and
or files necessary to enable it to carry out its senior management to ensure that the
duties and responsibilities. outsourced activity is conducted in a safe and
sound manner and in compliance with
§ 4191Q.7 Role and responsibilities of applicable laws and regulations.
the compliance function. The role and Compliance risk assessment and testing
responsibilities of the compliance function may be outsourced, subject to appropriate
should be clearly defined. If there is a division oversight by the compliance officer:
of duties and responsibilities between Provided, That a copy of the outsourcing
different functions such as legal, compliance, agreement stating the duties and
internal audit or risk management, the responsibilities as well as rights and
allocation of duties and responsibilities to obligations of the contracting parties, which
each function should be properly delineated. agreement shall be approved by the board
There should likewise be formal of directors of the institution concerned, must
arrangements for cooperation between each be submitted to the appropriate supervising
function and for the exchange of relevant and examining department of the BSP at least
information. thirty (30) days prior to its execution to enable
review of its compliance with existing
§ 4191Q.8 Cross-border issues. The regulations on outsourcing of quasi-banking
compliance function for institutions that functions.
conduct business in other jurisdictions The service level agreement shall ensure
should be structured to ensure that local a clear allocation of responsibilities between

Part I - Page 35
§§ 4191Q.9 - 4199Q
04.12.31
the external service providers and the quasi- Secs. 4192Q - 4198Q (Reserved)
bank. Furthermore, the outsourcing quasi-
bank should manage residual risks associated Sec. 4199Q General Provision on Sanctions
with outsourcing arrangements, including Any violation of the provisions of this Part
default, operational failures, and possible shall be subject to Sections 36 and 37 of R.A.
disruption of services. No. 7653.

Part I - Page 36
§§ 4201Q - 4211Q.3
96.12.31
PART TWO
DEPOSIT AND BORROWING OPERATIONS
A. - D. (RESERVED) interest rate and such other information as

may be necessary to enable the parties to
Secs. 4201Q - 4210Q (Reserved) determine the cost or yield of the borrowing
or placement shall be specified.
E. DEPOSIT SUBSTITUTE b. The date of issuance shall be
OPERATIONS indicated at the upper right corner of the
instrument, and directly below which shall
Section 4211Q Deposit Substitute be the maturity period or the word "demand",
Instruments. Only the following types of if it is a demand instrument.
instruments may be issued by NBQBs as c. The payee may be identified by his
evidence of deposit substitute liabilities: trust account/deposit account number in both
a. Promissory notes; negotiable and non-negotiable instruments.
b. Repurchase agreements; and d. Securities which are the subject of
c. Certificates of assignment/ a repurchase agreement or a certificate of
participation with recourse. assignment/participation with recourse, shall
be particularly described on the face of said
§ 4211Q.1 Prohibition against use of
instruments or on a separate instrument
certain instruments as deposit substitutes
attached and specifically referred to therein
Acceptances, bills of exchange and trust
and made an integral part thereof as to the
certificates shall not be used as evidence of
maker, value, maturity, serial number, and
deposit substitute liabilities. This prohibition
such other particulars as shall clearly identify
shall not apply to the acceptance or
the securities.
negotiation of bills of exchange in connection
e. The instrument shall provide for the
with trade transactions, or to the issuance of
payment of liquidated damages, in addition
trust certificates creating trust relationship.
to stipulated interest, in case of default by
§ 4211Q.2 Negotiations of promissory the maker/issuer, as well as attorney's fees
notes. Negotiable promissory notes acquired and cost of collection in case of suit.
by NBQBs shall not be negotiated by mere f. A conspicuous notice at the lower
indorsement and/or delivery, if they do not center margin of the face of the instrument
conform with the minimum features that the transaction is not insured by the
prescribed under Subsec. 4211Q.3. If these Philippine Deposit Insurance Corporation.
notes do not contain the features in said g. The corporate name of the issuer
Subsection, their negotiation shall be covered shall be printed at the upper center margin
by any of the appropriate deposit substitute of the instrument and directly below which
instruments mentioned in Sec. 4211Q. shall be a designation of the instrument, such
as, "Promissory Note" or "Repurchase
§ 4211Q.3 Minimum features. Deposit Agreement".
substitute instruments issued by NBQBs shall h. The words "duly authorized
have the following minimum features. officer" shall be placed directly below the
a. The present value and maturity signature of the person signing for the maker/
value and/or the principal amount and issuer.

Part II - Page 1
§§ 4211Q.3 - 4211Q.4
04.12.31
i. Each instrument shall be serially of the BSP accredited custodian in a registry

prenumbered. for said securities, if immobilized or
j. The copy delivered to the payee dematerialized while the overlying principal
shall bear the word "Original" and the copies borrowing instrument shall be physically
retained by the issuer shall be identified as delivered to the lender/purchaser. The
"Duplicate," "File Copy" or words of similar custodian shall hold the securities in the
import. name of the borrower/seller, but shall keep
k. Only security paper with adequate said securities segregated from the regular
safeguards against alteration or falsification securities account of the borrower/seller if
shall be used. the borrower/seller has an existing securities
Deposit substitute instruments shall account with the custodian. Provided, That
conform to the language prescribed by the a financial institution (NBFI) authorized by
BSP. the BSP to perform custodianship function
Any substantial deviation therefrom or may not be allowed to be custodian of
any additional stipulation therein shall be securities issued or owned by said institution,
referred to the BSP for prior approval. The its subsidiaries or affiliates, or of securities in
size and appearance of these instruments bearer form.
shall not be similar to the size and appearance The delivery shall be effected upon
of checks. Formats of standardized payment and shall be evidenced by a
instruments in Appendices Q-6 to Q-6-k shall securities delivery receipt duly signed by
be followed. authorized officers of the custodian and
Rubber stamping, typewriting and delivered to both the lender/purchaser and
handwriting some provision shall not be seller/borrower.
considered compliance with said regulations. b. Sanctions. Violation of any provision
Borrowings of NBQBs from the loans of this Subsection shall be subject to the
and discounts window of banks or NBQBs following sanctions/penalties:
shall be exempted from the documentation (1) Monetary penalties
requirements of this Section: Provided, That First Offense – Fine of P10,000 a day for
the exemption from the documentation each violation reckoned from the date the
requirements shall not be construed or violation was committed up to the date it was
interpreted as exemption of said borrowings corrected.
from the other rules on borrowings by NBQBs Subsequent offenses – Fine of P20,000
and from other BSP regulations on deposit a day for each violation reckoned from the
substitutes. date the violation was committed up to the
date it was corrected.
§ 4211Q.4 Delivery of securities.1 (2) Other sanctions
a. Securities, warehouse receipts, First offense – Reprimand for the
quedans and other documents of title which directors/officers responsible for the violation.
are the subject of quasi-banking functions, Subsequent offense –
such as repurchase agreements, shall be (a) Suspension for ninety (90) days
physically delivered, if certificated, to a BSP without pay of directors/officers responsible
accredited custodian that is mutually for the violation;
acceptable to the lender/purchaser and (b) Suspension or revocation of the
borrower/seller, or by means of book-entry accreditation to perform custodianship
transfer to the appropriate securities account function;
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1

Part II - Page 2
§§ 4211Q.4 - 4211Q.8
04.12.31
(c) Suspension or revocation of the § 4211Q.7 Call slips/tickets for 24-

authority to engage in quasi-banking function; hour loans. Call slips or tickets may be used
and/or to evidence call loan transactions of not
(d) Suspension or revocation of the authority more than twenty-four (24) hours maturity
to engage in trust and other fiduciary business. or to cover reserve deficiencies. In all other
cases, call loan transactions shall be
§ 4211Q.5 Regulation on additional evidenced by a promissory note containing
stipulation. Stipulations between the maker/ the minimum features prescribed in Subsec.
issuer and the payee which are embodied in 4211Q.3.
separate instruments shall be specifically
referred to in the deposit substitute § 4211Q.8 Requirement to state
instruments and made an integral part thereof. nature of underlying securities. In case of
repurchase agreements and certificates of
§ 4211Q.6 Substitution of underlying assignment/participation with recourse, the
securities. Any agreement allowing the stipulation shall clearly state either (a) that
issuer/maker to substitute the underlying the underlying securities are being delivered
securities shall further provide that the actual to the buyer or assignee as collaterals or (b)
substitution shall be with the prior written that the ownership thereof is being
consent of the payee. transferred to the buyer or assignee.
(Next page is Part II - Page 3)

Part II - Page 2a
§§ 4211Q.9 - 4216Q.1
96.12.31
§ 4211Q.9 Compliance with SEC rules prescribed in Sec. 4376Q shall also apply to
NBQBs shall comply with the new rules on interbank borrowings.
the registration of short-term and long-term
commercial papers appended hereto as Sec. 4215Q Borrowings from Trust De-
Appendices Q-7 and Q-8. partments or Managed Funds of Banks or
Investment Houses. Funds borrowed by
Sec. 4212Q Recording; Payment; Maturity; NBQBs from trust departments or managed
Renewal funds of banks or investment houses are not
a. Deposit substitutes shall be considered as interbank borrowings and,
recorded in the books at their respective therefore, are subject to the :
principal amounts, and reported accordingly, a. reserve requirement on deposit
regardless of whether the interest thereon has substitutes;
been paid in advance or not. b. minimum fifteen (15)-day maturity
b. If there is any stipulation that period; and
payment of the deposit substitute shall be c. minimum trading lot rule.
chargeable against a particular deposit
account, it shall further provide that the Sec. 4216Q Money Market Placements of
liability of the maker/issuer of the instrument Rural Banks. NBQBs shall not accept money
shall not be limited to the outstanding market placements from any rural bank
balance of said amount. unless the latter presents a certification under
c. The minimum maturity of any oath stating: (a) that it has no overdue special
single deposit substitute transaction shall be time deposits; (b) that it has no past due
fifteen (15) days. Interbank borrowings shall obligations with the BSP or other government
not be subject to the limitations in this financial institutions; (c) the amount of its
Section. current obligations, if any, with said
d. Automatic renewal from maturity government financial institutions; and (d) the
of the instrument may be effected only under amount of its total outstanding money market
terms and conditions previously stipulated placements. However, in no case shall such
by the parties. NBQBs sell receivables to rural banks without
recourse.
Sec. 4213Q Minimum Trading Lot. The § 4216Q.1 Definition of terms. As
minimum size of any single deposit substitute used in this Section, the following terms shall
transaction shall be P50,000. have the following meanings:
In connection with the minimum Money market placements shall
trading lot rule above stated, no NBQB shall include investments in debt instruments,
issue deposit substitute instruments in the including purchases of receivables with
name of two (2) or more persons or accounts recourse to the lending institution, except
except those falling under the following purchases of government securities on an
relationships in which cases, commingling outright basis.
may be allowed: (a) husband and wife; (b) Government securities shall include
persons related to each other within the evidences of indebtedness of the Republic
second degree of consanguinity; and (c) in of the Philippines and the BSP and other
trust for (ITF) arrangements. evidences of indebtedness or obligations of
government entities, the servicing and
Sec. 4214Q Interbank Borrowings. The repayment of which are fully guaranteed by
regulations on interbank loan transactions the Republic of the Philippines.

Part II - Page 3
§§ 4216Q.2 - 4217Q.1
96.12.31
§ 4216Q.2 Conditions required on (2) Suspension or revocation of the

accepted placements. Placements accepted authority to engage in quasi-banking
must comply with the following conditions: functions.
a. That the total money market
placements of a rural bank, as stated in the Sec. 4217Q Bond Issues of NBQBs. The
certification, including the placement being following guidelines shall govern the bond
accepted by the entity concerned, shall not issues of NBQBs.
exceed the rural bank's combined capital
accounts or net worth less current obligations § 4217Q.1 Definition of terms. For
with the BSP or other government financial purposes of this Section, the following terms
institutions; shall mean:
b. The maturity of the money market a. Government securities shall refer
placement shall not exceed sixty (60) days; and to the evidences of indebtedness of the
c. That placements shall be evidenced Republic of the Philippines or its
in all cases by promissory notes of accepting instrumentalities, or of the BSP, and must be
entities/repurchase agreements and/or freely negotiable and regularly serviced.
certificates of participation/assignment with b. Net book value shall refer to the
recourse and that underlying instruments acquisition cost of property or accounts, plus
shall be government securities the servicing additions and improvements thereon, less
and repayment of which are guaranteed by valuation reserves, if any.
the Republic of the Philippines. c. Current market value shall refer to
the value of the property as established by a
§ 4216Q.3 Sanctions. Violations of the duly licensed and independent appraiser.
provisions of this Section shall be subject to d. Affiliate shall refer to an entity
the following sanctions/penalties: linked directly or indirectly to an NBQB by
a. Fines means of:
First Offense - Fines of P3,000 a day, (1) Ownership, control or power to
reckoned from the date placement started up vote, of ten percent (10%) or more of the
to the date when said placement was outstanding voting stocks of the entity, or
withdrawn, for each violation shall be vice-versa;
assessed on the bank. (2) Interlocking directorships or
Subsequent Offenses - Fines of P5,000 officerships;
a day, reckoned from the date placement (3) Common stockholders owning ten
started up to the date placement was percent (10%) or more of the outstanding
withdrawn, for each violation shall be voting securities;
assessed on the bank. (4) Management contract or any
b. Other Sanctions arrangement granting power to direct or
First Offense - Reprimand for the cause the direction of management and
directors/officers who approved the policies;
acceptance/placement with a warning that (5) Voting trustee holding ten percent
subsequent violations will be subject to (10%) or more of the outstanding voting
more severe sanctions. securities;
Subsequent Offenses - (6) Permanent proxy or voting trust
(1) Suspension for ninety (90) days constituting ten percent (10%) or more of the
without pay for directors/officers who outstanding voting securities.
approved the placement. e. Subsidiary shall refer to a

Part II - Page 4
§§ 4217Q.1 - 4217Q.5
99.12.31
corporation or firm more than fifty percent Bonds may be issued at face value, at a
(50%) of the outstanding voting stock of discount, or at a premium. Minimum
which is directly or indirectly owned, denomination shall be P20,000.
controlled, or held with power to vote by b. Term. The minimum maturity of the
another. bonds shall be four (4) years. No optional
redemption before the fourth year shall be
§ 4217Q.2 Underwriting of bonds allowed.
Bond issues may be underwritten by entities c. Interest; manner; form of payment
including those which are affiliates or The bonds shall not be subject to
subsidiaries of the issuer. The investment of interest rate ceilings prescribed by the
affiliates or subsidiaries in said bond issue Monetary Board or Act No. 2655, as
shall be subject to: (a) individual and amended.
aggregate ceilings of ten percent (10%) and Interest paid in advance shall not exceed
thirty percent (30%), respectively, of the bond the interest for one (1) year: Provided, That
issue; and (b) the condition that the investing interest shall not be paid in kind.
affiliate or subsidiary does not have any d. Trust indenture; collaterals; sinking
outstanding loan from the issuer or that it shall fund. A trust indenture shall be executed
not incur any indebtedness from the issuer between the issuer and a qualified trust
during the period that the investment remains corporation as trustee, which shall neither be
outstanding. an affiliate nor a subsidiary of the issuer.
The following shall be deemed as
§ 4217Q.3 Compliance with SEC rules eligible collateral and shall be maintained at
NBQBs issuing or intending to issue bonds respective values indicated in relation to the
shall comply with the new rules on the face value of the bond issue:
registration of long-term commercial papers (1) Government securities - Aggregate current
(Appendix Q-8). market value of
100%
§ 4217Q.4 Notice to Bangko Sentral (2) High-grade private - Aggregate current
Within three (3) days from approval by the securities listed in market value of
SEC of its bond issue, an NBQB shall notify the big board of 150%
the appropriate department of the BSP of the stock exchanges
approval, attaching documents required by
(3) Real estate - Net book value
the SEC for the issuance and registration of of 100%
the bond issue.
(4) Unmatured receivables - Net book value
§ 4217Q.5 Minimum features. Bond acquired with recourse; of 150%
lease contracts recei-
issues by NBQBs shall have the following vable
minimum features:
a. Form; issue price; denomination. (5) Unmatured receivables - Net book value
The trust indenture and the name of the acquired without of 200%
recourse
indenture trustee shall be indicated on the
face of the bond certificate. Government and private securities,
The SEC-assigned bond registration certificates of title and documents evidencing
number and expiry date, if any, shall likewise receivables offered as security shall be
be indicated, stamped on the face of each physically delivered to the indenture trustee.
bond certificate issued.

Part II - Page 5
§§ 4217Q.5 - 4246Q
04.12.31
Substitution of collaterals shall be substitute shall be payable on demand and

allowed: Provided, That in no case shall the shall earn interest or yield from maturity to
collateral fall below the herein-required actual withdrawal or renewal at a rate
ratios. applicable to a deposit substitute with a
The issuer may, at his option, provide maturity of fifteen (15) days.
for the retirement at maturity of the bond
issue through a sinking fund to be deposited Secs. 4237Q - 4245Q (Reserved)
with and managed by the indenture trustee.
e. Bond registry. The bonds shall be H. RESERVES
fully registered as to principal and interest.
The issuer, its trustee, agent or underwriter Sec. 4246Q Reserves Against Deposit
must maintain a bond registry duly approved Substitutes. NBQBs shall maintain a nine
by the SEC for recording, in initial and percent (9%) regular reserves against deposit
subsequent transfers, the names of substitute liabilities as defined in Section 95
transferees, date of transfer, purchase price of R.A. No. 7653, regardless of maturities
and serial numbers of bonds transferred. except: (a) borrowings from the BSP through
the sale of government securities under
§ 4217Q.6 Reserve requirement. A repurchase agreements made in connection
five percent (5%) reserve shall be maintained with the provisions of Sec. 4601Q; (b) deposit
against all bond issues of NBQBs. substitutes arising from special financing
The form/composition of reserves for programs of the Government and/or
bond issues shall be in accordance with the international financial institutions; (c)
applicable rules on reserve against deposit interbank call loan transactions under Sec.
substitute liabilities and borrowings. 4376Q; and (d) bonds under Sec. 4217Q for
which the reserve requirement shall be five
§ 4217Q.7 Inapplicability of certain percent (5%).
regulations. Secs. 4211Q and 4213Q shall On top of the regular reserve
not apply to bonds issued under these requirements, an additional ten percent
guidelines. (10%)3 liquidity reserves against deposit
substitute liabilities (except Items “a” to “d”
Secs. 4218Q - 4230Q (Reserved) above) of quasi-banks shall be imposed
which may be maintained in the form
prescribed in Item “a” of Subsec. 4246Q.1.
F. (RESERVED) Any deficiency shall be in the form
prescribed in Item “b” of Subsec. 4246Q.1.
Secs. 4231Q - 4235Q (Reserved) Provided, That deposit substitutes
evidenced by repurchase agreements
(REPOs) covering government securities up
G. INTEREST to the amount equivalent to the adjusted Tier
1 capital of the quasi-bank shall be subject
Sec. 4236Q Yield/Interest Rates to the statutory reserve of two percent (2%):
a. Deposit substitutes of NBQBs shall Provided, further, That such rate shall apply
not be subject to yield or interest rate ceilings. only to REPOs, the documentation of which
b. A matured and an unclaimed deposit conforms with, and were delivered to a BSP
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3
From 7% to 10% under Cir. 418 dated 05 February 2004 effective 06 February 2004.

Part II - Page 6
§§ 4246Q - 4246Q.1
04.12.31
accredited third party custodian as required (i) The securities must bear an interest
under existing BSP regulations. rate of not more than four percent (4%) per
annum, must be non-negotiable and shall
§ 4246Q.1 Composition of reserves carry BSP support; and
The composition of the reserves shall be as (ii) The instrument must expressly state
follows: in its face the amount, maturity date and
a. Not more than seven percent (7%)1 interest rate of the obligation.
of the deposit substitute liabilities of NBQBs A list of reserves-eligible and non-eligible
under Sec. 4246Q may be maintained securities may be found in Appendix Q-9.
in the form of: Other government securities being used
(1) short-term market-yielding govern- for reserve purposes shall continue to be
ment securities purchased directly from the eligible as such: Provided, That whenever
BSP-Treasury Department; and said securities shall have matured, they shall
(2) NDC Agri-Agra ERAP Bonds, be replaced by securities carrying the above
regardless of maturity; and features.
(3) Poverty Eradication and Alleviation Securities held as reserves shall be
Certificates (PEACe) bonds only to the extent valued at cost of acquisition, and the NBQB
of the original gross issue proceeds may freely alter its composition: Provided,
determined at the time of the auction, plus That any substitution or acquisition satisfies
capitalized interest on the underlying zero- the eligibility requirements prescribed above:
coupon Treasury Notes as and when the Provided, further, That the NBQB notifies the
corresponding interest is earned over the life BSP of any such change not later than the
of the bonds; and reporting day following the change.
b. The balance shall be as follows: Securities counted as reserves which are
(1) At least ten percent (10%) in the form hypothecated or encumbered in any way or
of deposit balances with the BSP; earmarked for any other purpose shall
(2) A maximum of seventy-five percent automatically lose their eligibility as reserves.
(75%) in the form of government securities; Only the buying/lending NBQB in a
and resale agreement covering eligible
(3) The balance in the form of demand government securities may use such
deposit accounts with banks which are not securities as reserves against deposit
restricted as to withdrawal or use for current substitute liabilities. Conversely, the selling/
operations but not with financial institutions borrowing NBQB in a repurchase agreement
which have been closed and are under covering eligible government securities may
receivership or liquidation. not use such securities as reserves against
For purposes of this Subsection, deposit substitute liabilities.
government securities eligible as reserves The reserve eligibility of government
against deposit substitute liabilities of NBQBs securities under the reverse repurchase
as referred to in Item "b(2)" above shall be operations of the BSP shall be suspended
limited to bonds or other evidences of during the term of the repurchase agreement.
indebtedness representing direct obligations The phrase non-reserve eligible shall be
of the government of the Republic of the stamped on the face of the custodian receipt
Philippines having the following minimum being issued by the BSP to buyer financial
features/conditions: institutions.

Part II - Page 7
§§ 4246Q.2 - 4246Q.3
04.12.31
§ 4246Q.2 Computation of reserve on other days of the same week, and shall
position. The reserve position of any NBQB be required to pay the penalty only on the
and the penalty on reserve deficiency shall average daily net deficiency during the week.
be computed based on a seven (7)-day week, In case of abuse, the NBQB shall
starting Friday and ending Thursday, automatically lose the privilege of offsetting
including Saturdays, Sundays, public special/ reserve deficiency in the aforesaid manner
legal holidays, non-business days, until such time that it maintains its daily
unexpected declared non-business days or reserve position at the required minimum for
declared half-day holidays and days when at least two (2) consecutive weeks.
there is no clearing: Provided, That with As used in this Subsection, abuse in the
reference to public special/legal holidays, privilege of offsetting reserve deficiencies
non-business nexpected declared non- against excess reserves shall mean having
business days, declared half-day holidays reserve deficiencies occurring four (4) or
and days when there is no clearing, the more times during any given week for two
reserve position as calculated at the close of (2) consecutive weeks, whether or not
the business day immediately preceding such resulting in net weekly deficiencies.
public special/legal holidays, non-business b. In cases where the NBQB has
days and unexpected declared non-business chronic reserve deficiency on deposit
day/s and declared half-day holidays and substitute liabilities, the Monetary Board may
days when there is no clearing, shall apply (1) limit or prohibit the making of new loans
thereon. For this purpose, the principal office or investments by the NBQB concerned; (2)
in the Philippines and all other offices located prohibit the declaration of cash dividends;
therein shall be treated as a single unit. and/or (3) impose such other sanctions, as it
The required reserves in the current may deem necessary. The board of directors
period (reference reserve week) shall be of such NBQB shall be notified of such
computed based on the corresponding levels chronic reserve deficiency and the penalties
of deposit substitute liabilities of the prior therefor, and shall be required to immediately
week. correct the reserve position of the NBQB.
As used in this Subsection, the
§ 4246Q.3 Reserve deficiencies; following terms shall have the following
sanctions meanings:
a. Whenever the reserve position of Chronic reserve deficiency shall mean
any NBQB computed in the manner specified having net reserve deficiency for two (2)
in Subsec. 4246Q.2 is below the required consecutive weeks.
minimum, the NBQB concerned shall pay the New loan and new investment shall
BSP one-tenth of one percent (1/10 of 1%) refer to any loan and any investment
per day on the amount of the deficiency or involving disbursement of funds.
the prevailing ninety-one (91)- day Treasury c. Fines on legal reserve deficiencies
Bill rate plus three (3) percentage points, on deposit substitute liabilities shall be paid
whichever is higher: Provided, however, by the NBQB in accordance with Sec. 4653Q:
That the NBQB shall be permitted to offset Provided, That where the credit balance of
any reserve deficiency occurring one (1) or the NBQB's demand deposit account with the
more days of the week covered by the report BSP is insufficient and it fails to settle the
against excess reserves which it may hold assessment within fifteen (15) days from

Part II - Page 8
§§ 4246Q.3 - 4255Q
04.12.31
receipt, the Monetary Board may limit or § 4246Q.8 Guidelines in calculating and
prohibit the making of new loans or reporting to the BSP the required reserves
investments by the NBQB. on deposit substitutes evidenced by
repurchase agreements covering
§ 4246Q.4 Exemptions. Certificates government securities
of assignment issued with recourse by a. The Supervisory Data Center (SDC)
NBQBs under the IGLF Program are not shall determine the maximum allowable
covered by the reserve requirements. amount of REPOs covering government
securities that will qualify for the reduced
§ 4246Q.5 Matured and unclaimed statutory reserve requirements of two percent
deposit substitutes. Matured and unclaimed (2%). It shall be based on the amount
deposit substitutes shall continue to be reported by quasi-banks in their weekly
subject to reserves. Consolidated Daily Report of Condition. The
adjusted Tier 1 capital reported daily should
§ 4246Q.6 Book entry method for approximate the quarterly adjusted Tier 1
reserve securities. Transactions concerning capital as submitted by banks in compliance
reserve-eligible securities shall be entered in with the provisions of Sec. 4116Q.
the respective securities account of each b. Any material differences that may be
NBQB with the BSP and shall be evidenced noted by the SDC between the daily and the
by securities account debit or credit advices quarterly report shall be considered as
to be promptly furnished the institution/s erroneous reporting and shall be subject to
concerned. No certificates shall be issued the penalties under existing regulations. The
for any purpose. Transactions with third SDC shall also make a re-run of its
parties other than the BSP shall not be computation of the quasi-bank’s reserve
recognized. position and in the event that the reserve
position resulted to a reserve deficiency/ies,
§ 4246Q.7 Interest income on reserve the corresponding penalties on reserve
deposit with Bangko Sentral. Deposits deficiencies shall also apply.
maintained by NBQBs with the BSP up to c. The lagged system in the
forty percent (40%) of their reserve measurement of a quasi-bank’s reserve
requirement (excluding the percentage of requirement, as provided in Subsec.
liquidity reserves required on deposit 4246Q.2, shall also be adopted in the
substitute liabilities of NBQBs under Sec. calculation of the two percent (2%) statutory
4246Q) shall be paid interest at four percent reserve requirements for REPOs covering
(4%) per annum based on the average daily government securities.
balance of said deposits to be credited d. Deposit substitutes evidenced by
quarterly. repurchase agreements covering government
The computation of quarterly interest securities in excess of the adjusted Tier 1
payments credited to the quasi-banks’ capital shall be treated as regular deposit
demand deposit accounts (DDAs) with BSP substitutes and shall be subject to the regular
are shown in Appendix Q-27. statutory and liquidity reserve requirements
Effective July 1, 2003, published interest under existing regulations.
rates that will be applied on BSP’s Regular
DDAs of quasi-banks shall be inclusive of the Secs. 4247Q - 4255Q (Reserved)
ten percent (10%) Value Added Tax (VAT).

Part II - Page 9
§§ 4256Q - 4299Q
04.12.31
I. (RESERVED) moneys of every sort, whether pertaining to

the National Government, province, city,
Secs. 4256Q - 4275Q (Reserved) municipality, or other branch or agency of
the Government, including government-
owned or controlled corporations as defined
herein, and shall comprise "revenue funds",
J. BORROWINGS FROM THE "trust funds", and "depository funds" as these
BANGKO SENTRAL terms are defined in the Revised
Administrative Code of 1987, and deposits
Sec. 4276Q Repurchase Agreements with of, borrowings from, and all other liabilities
the Bangko Sentral. Repurchase agreements to, the Government and government entities.
with the BSP under its open market b. Government-owned or controlled
operations shall be governed by the corporations shall refer to government-
provisions of Sec. 4602Q. owned or controlled corporations which are
created by special laws. It shall exclude
Secs. 4277Q - 4280Q (Reserved) government financial institutions such as the
Development Bank of the Philippines, Land
Bank of the Philippines and Al-Amanah
K. OTHER BORROWINGS Islamic Investment Bank of the Philippines,
corporations which are organized as
Sec. 4281Q Borrowings from the subsidiaries of government-owned or
Government. NBQBs shall not borrow any controlled corporations under the provisions
fund or money from the Government and of the Corporation Law (Act No. 1459, as
government entities, through the issuance or amended) or the Corporation Code (BP Blg.
sale of its acceptances, notes or other 68) and private corporations which are taken
evidence of debt, except as may be over by government-owned or controlled
authorized by existing statutes. corporations.
§ 4281Q.1 Definition of terms. For Secs. 4282Q - 4298Q (Reserved)

purposes of this Section, the following terms
shall have the meaning indicated unless the Sec. 4299Q General Provision on Sanctions
context clearly indicates otherwise: Any violation of the provisions of this Part
a. Fund or money from the Government shall be subject to Sections 36 and 37 of R.A.
and government entities includes public No. 7653.

Part II - Page 10
§ 4301Q
02.12.31
PART THREE
LOANS, INVESTMENTS AND SPECIAL CREDITS
Section 4301Q Management of Risk Assets/ indorsers, sureties and/or guarantors are
Minimum Guidelines on Lending capable of fulfilling their commitments. For
Operations. It shall be the responsibility of this purpose, credit investigations must be
the board of directors of an NBQB to conducted and appropriate statements of
formulate written policies on the extension assets and liabilities and of income and
of credit and risk diversification and to set expenditures shall be required of credit
the guidelines for evaluation of risk assets. applicants.
Well-defined lending policies and sound d. Amounts, purpose and terms of
lending practices are essential if an NBQB is credit accommodations. Loans/credit
to perform its credit-extension function accommodations shall be granted only in
effectively and minimize the risk inherent in amounts and for periods necessary for the
any extension of credit. The responsibility completion of the operations to be financed,
should be approached in a way that will and for purposes which are attuned to
provide assurance to the public, the government economic policies. The amount
stockholders and supervisory authorities that and period of the loan shall be justified by
timely and adequate action will be taken to the financial statements submitted or by
maintain the quality of the loan portfolio and specific feasibility/project studies for a
other risk assets. particular operation to be financed by the
a. Requirement of lending policies loan applied for.
NBQB s shall have well-defined lending e. Documentation of loans. All loans/
policies which shall ensure that lending shall credit extensions shall be supported by
be upon terms which are in the best interest evidences of indebtedness and/or loan
of the institution and in accordance with agreements which shall contain, among other
existing policy, rules and regulations of the things, a statement of the purpose of the loan
Monetary Board. Such policies shall be in and a program of repayment of the
writing to form part of the institution’s obligation.
permanent records and shall be made f. Credit files. Adequate credit files
available for inspection by the Bangko of borrowers shall be maintained which shall
Sentral. contain documents such as credit
b. Lending operations, definition investigation reports, balance sheets,
Lending operations refer to any credit statements of assets and liabilities, income
accommodation and purchase of receivables and expense statements, income tax returns,
and commercial papers, including purchase bank and trade checkings, and other
of commercial papers in the secondary documents/papers showing information
market. which form the bases for the credit ex-
c. Creditworthiness of borrowers tension.
Before extending credit in any form, the g. Periodic review. A periodic review
NBQB must exercise proper caution to of the loan portfolio and the credit standing
ascertain that the debtors, co-makers, of borrowers shall be made.

Part III - Page 1
§§ 4301Q - 4301Q.6
04.12.31
h. Arm’s length transactions. An diversification strategies. Safeguarding

NBQB shall not relend to or purchase against credit risk concentrations should form
receivables or other obligations of other an important component of a quasi-bank’s
corporations, majority of the voting stock of risk management system.
which is owned by subject corporation, (5) The board of directors of a quasi-
unless the terms of the transactions are not bank shall be responsible for establishing and
more favorable than those of other similar monitoring compliance with policies
transactions. governing large exposures and credit risk
concentrations of the quasi-bank. The board
§§ 4301Q.1 - 4301Q.5 (Reserved) should review these policies regularly (at
least annually) to ensure that they remain
§ 4301Q.6 Large exposures and credit adequate and appropriate for the quasi-bank.
risk concentrations. The following guidelines Subsequent changes to the established
shall govern managing large exposures and policies must be approved by the board.
credit risk concentrations in line with the (6) The policy on large exposures and
objective of strengthening risk management credit risk concentrations shall, at a
in the quasi-banking system. minimum, cover the following:
a. General principles (a) Exposure limits that are reasonable
(1) A quasi-bank can be exposed to in relation to capital and resources for –
various forms of credit risk concentration i. Various types of borrowers/
which if not properly managed may cause counterparties (e.g. government, banks and
significant losses that could threaten its other financial institutions, corporate and
financial strength and undermine public individual borrowers);
confidence in the quasi-bank. ii. A group of related borrowers/
(2) Credit risk concentrations may arise counterparties;
from excessive exposures to individual iii. Individual industry sectors;
counterparties, groups of related iv. Individual countries; and
counterparties and groups of counterparties v. Various types of investments.
with similar characteristics (e.g. (b) The circumstances in which the
counterparties in specific geographical above limits can be exceeded and the party
locations, economic or industry sectors). authorized to approve such excesses, e.g. the
(3) Diversification of risk is essential in quasi-bank’s board of directors or credit
quasi-banking. Many past quasi-bank failures committee with delegated authority from the
have been due to credit risk concentrations board;
of some kind. It is essential for quasi-banks (c) The delegation of credit authority
to prevent undue credit risk concentrations within the quasi-bank for approving large
from excessive exposures to particular exposures;
counterparties, industries, economic sectors, (d) The procedures for identifying,
regions or countries. reviewing, managing and reporting large
(4) While concentration of credit risks exposures of the quasi-bank;
are inherent in quasi-banking and cannot be (e) The definition of exposure. Quasi-
totally eliminated, they can be limited and banks should take into account the nature
reduced by adopting proper risk control and of their business and the complexity of their

Part III - Page 2
§ 4301Q.6
04.12.31
products. In any case, a quasi-bank’s reporting systems that enable management

exposures to a counterparty should include to identify credit risk concentrations within
its on and off-balance sheet exposures and the asset portfolio of the quasi-bank or of the
indirect exposures; and group (including subsidiaries and overseas
(f) The criteria to be used for identifying branches) on a timely basis. If a concentration
a group of related persons; does exist, quasi-banks should reduce it in
(7) The board and senior management accordance with their prescribed policies.
of a quasi-bank should ensure that: Large exposures shall be subject to more
(a) Adequate systems and controls are intensive monitoring.
in place to identify, measure, monitor and (3) Quasi-banks should ensure that their
report large exposures and credit risk internal or external auditors conduct at least
concentrations of the quasi-bank in a timely an annual review of the quality of large
manner; and exposures and controls to safeguard against
(b) Large exposures of the quasi-bank credit risk concentrations. Their review
are kept under regular review. “Large should ascertain whether:
exposures” shall refer to exposures to a (a) The quasi-bank’s relevant policies,
counterparty or a group of related limits and procedures are complied with; and
counterparties equal or greater than five (b) The existing policies and controls
percent (5%) of quasi-bank’s qualifying remain adequate and appropriate for the
capital as defined under Section 4116Q. quasi-bank’s business.
(8) A quasi-bank should, where (4) Management should take prompt
appropriate, conduct stress testing and corrective action to address concerns and
scenario analysis of its large exposures to exceptions raised.
assess the impact of changes in market (5) There should also be an independent
conditions or key risk factors (e.g. economic compliance function to ensure that all
cycles, interest rate, liquidity conditions or relevant internal and prescribed requirements
other market movements) on its profile and and limits are complied with. Breaches of
earnings. prescribed requirements and deviations from
(9) It is expected that quasi-banks would established policies and limits should be
generally observe a lower internal single reported to senior management in a timely
borrower’s limit than the prescribed limit of manner.
twenty-five percent (25%) as a matter of c. Unsafe and unsound practice
sound practice. Non-observance of the principles and the
b. Monitoring of large exposures/ credit requirements of Items “a” and “b” above may
risk concentrations be a ground for a finding of unsafe and
(1) Quasi-banks should have a central unsound practice under Section 56 of the
liability record (preferably based on General Banking Law of 2000 (Appendix Q-
automated system) for each loan exposure. 24) and may be subject to appropriate
Quasi-banks should be able to monitor such sanction as may be determined by the
exposures against prescribed and internal Monetary Board.
limits on a daily basis. d. Notification requirements
(2) Every quasi-bank should have A quasi-bank must inform BSP
adequate management information and immediately where it has concerns that its

Part III - Page 2a
§§ 4301Q.6 - 4302Q.2
04.12.31
large exposures or credit risk concentrations § 4302Q.1 Provisions for losses;

have the potential to impact materially upon booking. The board of directors of quasi-
its capital adequacy, along with proposed banks are responsible for ensuring that their
measures to address these concerns. institutions have controls in place to
e. Reporting determine the allowance for probable losses
Quasi-bank’s records on monitoring of on loans, other credit accommodations,
large exposures shall be made available to advances and other assets consistent with the
the BSP examiners for verification at any institutions’ stated policies and procedures,
given time. When warranted, the BSP may generally accepted accounting principles
impose additional reporting requirements on (GAAP), the BSP rules and regulations and
quasi-bank in relation to its large exposures the safe and sound banking practices. The
and credit risk concentrations. board of directors, in fulfilling this
f. Sanction responsibility, shall require management to
Any failure or delay in complying with develop and maintain an appropriate,
the requirements under Items “d” and “e” of systematic and uniformly applied process
this Subsection shall be subject to penalty consistent and in compliance with existing
applicable to those involving major reports. BSP rules and regulations to determine the
amount of reserves for bad debts or doubtful
Sec. 4302Q Loan Portfolio and Other Risk accounts or other contingencies.
Assets Review System. To ensure that timely The specific allowance for probable
and adequate management action is taken losses for classified loans and other risk assets
to maintain the quality of the loan portfolio and the general loan loss provision as
and other risk assets and that adequate loss required in Appendix Q-10 shall be set up
reserves are set up and maintained at a level immediately.
sufficient to absorb the loss inherent in the
loan portfolio and other risk assets, NBQBs § 4302Q.2 Sanctions. Non-compliance
shall establish a system of identifying and with the requirement to book the valuation
monitoring existing or potential problem reserves required under the preceding
loans and other risk assets and of evaluating Subsection shall be a ground for the
credit policies vis-a-vis prevailing imposition of any or all of the following
circumstances and emerging portfolio trends. sanctions:
Management must also recognize that loss a. Denial of requests for authority to
reserve is a stabilizing factor and that failure establish branches/offices; and
to account appropriately for losses or make b. Fine of P5,000 a day, counted as
adequate provisions for estimated future follows:
losses may result in misrepresentation of the (1) from the date the NBQB was
NBQB’s financial condition. informed that the recommendation of the
The system of identifying and appropriate supervising and examining
monitoring problem loans and other risk department of the BSP was confirmed by the
assets and setting up of allowance for Monetary Board up to the date that said
probable losses shall include, but is not recommended valuation reserves were
limited to, the guidelines in actually booked, in case of the allowance
Appendix Q-10. for probable losses for loans and other risk

Part III - Page 2b
§§ 4302Q.2 - 4305Q
04.12.31
assets classified as Substandard (Unsecured), losses, the twenty-five percent (25%)

Doubtful and Loss as required by the BSP; allowance for probable losses on secured
and loans classified as Substandard, and the five
(2) from the dates prescribed under the percent (5%) allowance for probable losses
preceding Subsection up to the date of the on Loans Especially Mentioned.
actual booking in cases of the two percent
(2%) general provision for probable loan Secs. 4303Q - 4305Q (Reserved)
(Next page is Part III - Page 3)

Part III - Page 2c
§§ 4306Q - 4306Q.3
03.12.31
A. LOANS IN GENERAL include, in the case of liabilities of a

corporation, all liabilities of its subsidiaries:
Sec. 4306Q Loan Limit to a Single Provided, That even in cases where the
Borrower. The total liabilities of any person, p a r e n t corporation, co-partnership or
company, corporation or firm, to a quasi- association has no liability to the NBQB, the
bank for money borrowed, excluding (a) liabilities of subsidiary corporations or
loans secured by obligations of the BSP or of members of the co-partnership or association
the Philippine Government; (b) loans fully shall be combined for purposes of the single
guaranteed by the government as to the borrower’s limit (SBL).
payment of principal and interest; (c) loans
fully secured by US Treasury Notes and other § 4306Q.1 Exclusions from loan limit
securities issued by central governments and In addition to those enumerated in Sec.
central banks of foreign countries with the 4306Q, the total liabilities of a commercial
highest credit quality given by any two (2) paper issuer for commercial papers held by
internationally accepted rating agencies; (d) an NBQB as a firm underwriter shall not be
loans to the extent covered by the hold-out counted in determining compliance with the
on or assignment of, deposits maintained in SBL within a period of 180 days from the
the lending quasi-bank and held in the acquisition of the commercial paper by an
Philippines; (e) loans and acceptances under NBQB: Provided, That in no case shall such
letters of credit to the extent covered by liabilities exceed five percent (5%) of the net
margin deposits; and (f) other loans or credits worth of the selling agent beyond the normal
which the Monetary Board may, from time applicable SBL.
to time, specify as non-risk assets, shall at no
time exceed twenty-five percent (25%) of the § 4306Q.2 Contingent liabilities
combined capital accounts as defined in Sec. included in loan limit. Outstanding foreign
4106Q. and domestic standby and deferred letters of
The total liabilities of any borrower may credit less margin deposits, and outstanding
amount to a further fifteen percent (15%) of guarantees, the nature of which requires the
the combined capital accounts of such NBQB: guarantor to assume the liabilities/obligations
Provided, That the additional liabilities are of third parties in case of their inability to
adequately secured by real estate mortgage, pay, shall be included in determining the SBL
assignment or pledge of readily marketable except those fully secured by cash, hold-out
bonds and other high-grade debt securities, on deposit substitutes, or government
except those issued by the lending entity. securities.
For purposes of this Section, the term
liabilities shall mean the direct liability of the § 4306Q.3 Sanctions. Violations of
maker or acceptor of paper discounted with the provisions of the foregoing rules shall be
or sold to such NBQB and the liability of the subject to the following sanctions/penalties:
indorser, drawer or guarantor who obtains a a. Fines. Fines of one-tenth of one
loan from or discounts paper with or sells percent (1/10 of 1%) of the excess but not to
papers under his guaranty to such NBQB and exceed P30,000 a day for each violation,
shall include in the case of liabilities of a co- reckoned from the date the excess started up
partnership or association, the liabilities of to the date when such excess was eliminated,
the several members thereof and shall shall be assessed on the NBQB.

Part III - Page 3
§§ 4306Q.3 - 4307Q.4
03.12.31
b. Other Sanctions received by such banks, of P100,000 and

First Offense over per transaction account, with maturities
Reprimand for the directors/officers corresponding to the interest periods for
who approved the credit line or availment which such MRRs are being determined.
which resulted in the excess with a warning Such rates and the composition of the sample
that subsequent violations will be subject to commercial banks shall be reviewed and
more severe sanctions. determined at the beginning of every
Subsequent Offenses calendar semester on the basis of the banks’
(1) For the duration of each violation, combined levels of outstanding deposit
imposition of a fine of P500 a day for each substitutes and time deposits as of May 31
of the directors/officers who approved the or November 30, as the case may be.
credit line or availment which resulted in an The rate of interest on floating rate loans
excess. existing and outstanding as of December 23,
(2) Suspension of the NBQB from 1995 shall continue to be determined on the
branching privileges until the excess is basis of the MRRs obtained in accordance
eliminated. with the provisions of the rules existing as of
January 1, 1989: Provided, however, That the
Sec. 4307Q Interest and Other Charges parties to such existing floating rate loan
The following rules shall govern the rates of agreement are not precluded from amending
interest on loans by NBQBs. or modifying their loan agreements by
adopting a floating rate of interest determined
§ 4307Q.1 Rate ceilings. The rate of on the basis of TBR or other market-based
interest, including commissions, premiums, reference rates.
fees and other charges on loan transactions, Where the loan agreement provides for
regardless of maturity and whether secured a floating interest rate, the interest period,
or unsecured, shall not be subject to any which shall be such period of time for which
ceiling. the rate of interest is fixed, shall be such
period as may be agreed upon by the parties.
§ 4307Q.2 Floating rates of interest
The rate of interest on a floating rate loan § 4307Q.3 Effect of prepayment. If
during each interest period shall be stated there is no agreement on the rebate of interest
based on the Manila Reference Rate (MRR), in the event of prepayment of the loan, the
Treasury Bill Rate (TBR) or other market-based NBQB is not under any legal obligation to
reference rates, plus a margin as may be return the interest corresponding to the
agreed upon by the parties. period from date of prepayment to the
The MRRs for various interest periods stipulated maturity date of the loan. Any
shall be determined and announced by the prepayment made by the debtor should not,
BSP every week and shall be based on the therefore, affect computation of the effective
weighted average of the interest rates paid rate stipulated in the loan contract.
during the immediately preceding week by
the ten (10) commercial banks with the § 4307Q.4 Loan prepayment. The
highest combined levels of outstanding borrower of an NBQB shall not be prohibited
deposit substitutes and time deposits, in from prepaying a loan. A stipulation
promissory notes issued and time deposits requiring the consent of the lending NBQB

Part III - Page 4
§§ 4307Q.4 - 4307Q.5
03.12.31
to such prepayment shall be contrary to this subject to penalty: Provided, That the penalty
provision. In case of prepayment in the loan is not excessive or unconscionable.
contract, such prepayment shall not be
subject to penalty in the absence of any § 4307Q.5 Escalation clause; when
stipulation as to penalty. However, the parties allowable. Parties to an agreement pertaining
may stipulate that prepayment shall be to a loan or forbearance of money, goods or

Part III - Page 4a
§§ 4307Q.5 - 4308Q
99.12.31
credits may stipulate that the rate of interest That there is no previously accrued but
agreed upon may be increased in the event uncollected interest thereon.
that the applicable maximum rate of interest Interest income on restructured loans
is increased by law or by the Monetary Board: (principal plus capitalized interest thereon)
Provided, That such stipulation shall be valid may be accrued: Provided, That these are:
only if there is also a stipulation in the (1) In current status; and
agreement that the rate of interest agreed (2) Fully secured by real estate with
upon shall be reduced in the event that the loan value of up to sixty percent (60%) of
applicable maximum rate of interest is the appraised value of the real estate security
reduced by law or by the Monetary Board: and the insured improvements thereon, and
Provided, further, That the adjustment in the such other first class collaterals as may be
rate of interest agreed upon shall take effect deemed appropriate by the Monetary Board.
on or after the effectivity of the increase or c. Accrued interest earned but not yet
decrease in the maximum rate of interest. collected/received shall not be considered
as profits and/or earnings eligible for
§ 4307Q.6 Rate of interest in the dividend declaration and/or profit sharing.
absence of stipulation. The rate of interest d. A contra account to be designated
for the loan or forbearance of any money, Allowance for Uncollected Interest on Loans
goods or credit and the rate allowed in shall be set up in accordance with Appendix
judgments, in the absence of express contract 10 if accrued interest receivable on loans
as to such rate of interest, shall be twelve or loan installments is still uncollected after
percent (12%) per annum. three (3) months from the date such loans
and loan installments have matured or have
become non-performing.
§ 4307Q.7 Accrual of interest earned e. The amount representing
on loans. NBQBs are allowed to accrue Allowance for Uncollected Interest on Loans
interest earned on loans, subject to the may be chargeable against the excess of
following guidelines and/or procedures. outstanding valuation reserves for loans and
a. No accrual of interest income is other risk assets as appearing in the NBQB’s
allowed if a loan has become non-performing books over those recommended by the
as defined in Sec. 4311Q. Likewise, interest appropriate supervising and examining
income shall not be accrued for unmatured department of the BSP. The balance thereof,
loans/receivables with indications that if any, shall be chargeable against operations.
collectibility thereof has become doubtful. f. For all purposes, the Allowance for
These indications include declaration of Uncollected Interest on Loans shall be consi-
bankruptcy, insolvency, cessation of dered a valuation reserve/allowance against
operations, or such other conditions of the Accrued Interest Receivable account.
financial difficulties or inability to meet
financial obligations as they mature. Separate Sec. 4308Q Past Due Accounts. Past due
appropriate records shall be maintained for accounts of an NBQB shall, as a general rule,
these non-accruing unmatured loans. refer to all accounts in its loan portfolio, all
Interest on non-performing loan receivable components of trading account
accounts shall be taken up as income only securities and other receivables, as defined
when actual payments thereon are received. in the manual of accounts for non-bank
b. Interest earned on an extended or financial institutions, which are not paid at
renewed loans may be accrued: Provided, maturity.

Part III - Page 5
§§ 4308Q.1 - 4308Q.4
02.12.31
§ 4308Q.1 Accounts considered past Provided, however, That when the total
due. The following shall be considered as amount of arrearages reaches twenty percent
past due: (20%) of the total outstanding balance of the
a. Loans or receivables payable on loan/receivable, the total outstanding balance
demand - if not paid on the date indicated of the loan/receivable shall be considered as
on the demand letter, or within three (3) past due, regardless of the number of
months from date of grant, whichever comes installments in arrears: Provided, further,
earlier; That for modes of payment other than those
b. Bills discounted and time loans, listed above (e.g. daily, weekly or semi-
whether or not representing availments monthly), the entire outstanding balance of
against a credit line - if not paid on the the loan/receivable shall be considered as
respective maturity dates of the promissory past due when the total amount of arrearages
notes; reaches ten percent (10%) of the total loan/
c. Customers’ liability on drafts under receivable balance;
letters of credit/trust receipts: For this purpose, the term “installments”
(1) Sight Bills - if dishonored upon shall refer to principal and/or interest
presentment for payment or not paid within amortizations that are due on several dates
thirty (30) days from date of original entry, as indicated/specified in the loan documents.
whichever comes earlier; f. Credit card receivables - if the
(2) Usance Bills - if dishonored upon amount due is not paid within ten (10) days
presentment for acceptance or not paid on from the deadline indicated in the billing
due date, whichever comes earlier; and statement; and
(3) Trust Receipts - if not paid on due g. (Deleted by Circular No. 202 dated
date. 5.27.99.)
d. Bills and other negotiable For the purpose of determining
instruments purchased - if dishonored upon delinquency in the payment of obligations
presentment for acceptance/payment or not as defined in Subsec. 4143Q.1(e), any due
paid on maturity date, whichever comes and unpaid loan installment or portion
earlier: Provided, however, That an out-of- thereof, from the time the obligor defaults,
town check and a foreign check shall be shall be considered as past due.
considered as past due if outstanding for thirty
(30) days and forty-five (45) days, § 4308Q.2 Renewal/extension. No
respectively, unless earlier dishonored; loan shall be renewed nor its maturity date
e. Loans/receivables payable in extended unless the corresponding accrued
installments - the total outstanding balance interest receivable shall have been paid.
thereof shall be considered past due in
accordance with the following schedule: § 4308Q.3 Restructured loans. A
Minimum Number restructured loan shall be immediately
of Installments classified past due in case of default of any
Mode of Payment in Arrears principal or interest payment.
Monthly 3
Quarterly 1 § 4308Q.4 Demand loans. NBQBs
Semestral 1
shall, in case of non-payment of a demand
Annual 1
loan, make a written demand within three

Part III - Page 6
§§ 4308Q.4 - 4309Q
04.12.31
(3) months following the grant of such loan. (3) Advances. The term advances shall
The demand shall indicate a period of refer to any advance by means of an
payment which shall not be later than three incidental or temporary overdraft, cash
(3) months from the date of said demand. “vale”, any advance by means of DAUD and
any advances of unearned salary or unearned
§ 4308Q.5 Write-off of loans as bad compensation.
debts (4) Other assets. The term other assets
a. Quasi-banks, upon approval by their shall refer to investments, placements,
board of directors, may write-off loans, other ROPOAs and all other asset accounts that will
credit accommodations, advances and other not fall under loans and other credit
assets against allowance for probable losses accommodations.
(valuation reserves) or current operations as (5) Bad debts. The term bad debts shall
soon as they are satisfied that such loans, refer to the definition under Subsec. 4126Q.1.
other credit accommodations, advances and c. Reporting requirements. Notice of
other assets are worthless as follows: write-off of loans, other credit
(1) In the case of secured loans, quasi- accommodations, advances and other assets
banks may write-off loans, other credit shall be submitted in the prescribed form to
accommodations and other assets in an the supervising and examining department
amount corresponding to the booked concerned at least twenty five (25) banking
valuation reserves: Provided, That the days prior to the intended date of write-off.
balance of the secured loans, other credit The income tax expense deferred
accommodations, advances and other assets corresponding to the amount of loan, other
shall remain in the books. credit accommodation, advances and other
(2) In the case of unsecured loans, other asset written-off considered deductible for
credit accommodations, advances and other income tax purposes shall be recognized and
assets, quasi-banks shall write-off said loans, reversed in quasi-bank’s books.
other credit accommodations, advances and
other assets in full amount outstanding. Sec. 4309Q “Truth in Lending Act”
However, write-off of loans, other credit Disclosure Requirement. NBQBs are
accommodations, advances and other assets required to strictly adhere to the provisions
considered transactions with DOSRI shall be of R.A. No. 3765, otherwise known as the
with prior approval of the Monetary Board. “Truth in Lending Act”, and shall make the
b. Definitions. For purposes of this true and effective cost of borrowing an
Section, the following terms are hereby integral part of every loan contract.
defined as follows: The following regulations shall apply to
(1) Loans. The term loans shall refer to all NBQBs engaged in the following types of
all the accounts under the loan portfolio of a credit transactions:
quasi-bank as enumerated in the Manual of a. Any loan, mortgage, deed of trust,
Accounts for Quasi-Banks. advance and discount;
(2) Other credit accommodations. The b. Any conditional sales contract, any
term other credit accommodations shall refer contract to sell, or sale or contract of sale of
to exposures of quasi-banks other than loans property or services, either for present or
such as sales contract receivables, accounts future delivery, under which part or all of the
receivables, accrued interest receivables, price is payable subsequent to the making of
lease receivables, and rental receivables. such sale or contract;

Part III - Page 7
§§ 4309Q - 4309Q.1
04.12.31
c. Any rental-purchase contract; c. Down payment represents the

d. Any contract or arrangement for the amount paid by the debtor at the time of the
hire, bailment, or leasing of property; transaction in partial payment for the
e. Any option, demand, lien, pledge, property or service purchased.
or other claim against, or for delivery of d. Trade-in represents the value of an
property or money; asset agreed upon by the NBQB and debtor,
f. Any purchase, or other acquisition given at the time of the transaction as partial
of, or any credit upon the security of, any payment for the property or service
obligation or claim arising out of any of the purchased.
foregoing; and e. Non-finance charges correspond to
g. Any transaction or series of trans- the amounts advanced by the NBQB for
actions having a similar purpose or effect. items normally associated with the
The following categories of credit ownership of the property or the availment
transactions are outside the scope of these of the service purchased which are not
regulations: incidental to the extension of credit. For
(1) Credit transactions which do not example, in the case of the purchase of an
in-volve the payment of any finance charge automobile on credit, the NBQB may
by the debtor; and advance the insurance premium as well as
(2) Credit transactions in which the the registration fee for the account of the
debtor is the one specifying a definite and debtor.
fixed set of credit terms such as bank deposits, f. Amount to be financed consists of
insurance contracts, sale of bonds, etc. the cash price plus non-finance charges less
the amount of the down payment and value
§ 4309Q.1 Definition of terms of the trade-in.
a. Person means any individual, g. Finance charge represents the
partnership, corporation, association, or other amount to be paid by the debtor incidental
organized group of persons, or the legal to the extension of credit such as interest or
successor or representative of the foregoing, discount, collection fee, credit investigation
and includes the Philippine Government or fee, attorney’s fee and other service charges.
any agency thereof, or any other government, The total finance charge represents the
or any of its political subdivisions, or any difference between (i) the aggregate
agency of the foregoing. consideration (down payment plus
b. Cash price or delivered price, in case installments) on the part of the debtor, and
of trade transactions, is the amount of money (ii) the sum of the cash price and non-finance
which would constitute full payment upon charges.
delivery of the property (except money) or h. Simple annual rate is the uniform
service purchased at the NBQB’s place of percentage which represents the ratio, on
business. In the case of financial transactions, an annual basis, between the finance
cash price represents the amount of money charges and amount to be financed.
received by the debtor upon consummation In the case of single payment
of the credit transaction, net of finance upon maturity, the simple annual rate (R)
charges collected at the time the credit is in percent is determined by the following
extended, if any. method:

Part III - Page 8
§§ 4309Q.1 - 4309Q.2
04.12.31
R= finance charge x 12 x 100 charges shall, however, be indicated in the

amount to be maturity period credit contract.
financed in months
In the case of the normal installment § 4309Q.2 Information to be disclosed

type of credit of at least one (1) year in NBQBs shall furnish to each person to whom
duration, where installment payments of credit is extended, prior to the consummation
equal amount are made in regular time of the transaction, a clear statement in writing
periods spaced not more than one (1) year setting forth the following information:
apart, the R in percent is computed by the a. The cash price or delivered price
following method: of the property or service to be acquired;
number of b. The amounts, if any, to be credited
payments as down payment and/or trade-in;
R = 2 x finance charge x in a year x 100
c. The difference between the
amount to be total number
financed of payments amounts set forth under Items "a" and "b";
plus one d. The charges, individually itemized,
which are paid or to be paid by such person
In cases where the credit matures in less in connection with the transaction but which
than one (1) year (e.g., installment payments are not incident to the extension of credit;
are required every month for six (6) months), e. The total amount to be financed;
the same formula will apply except that f. The finance charges expressed in
number of payments in a year would refer terms of pesos and centavos; and
to the number of installment periods, as g. The percentage that the finance
defined in the credit contract, as if the credit charge bears to the total amount to be
matures in one (1) year. For example, financed expressed as a simple annual rate
number of payments in a year would be on the outstanding unpaid balance of the
twelve (12) for this purpose in cases where obligation.
six (6) monthly installment payments are The contract covering the credit
called for in the credit transaction.1 In cases transaction, or any other document to be
where credit terms provide for premium or acknowledged and signed by the debtor,
penalty charges depending on, for instance, shall indicate the above seven (7) items of
the timeliness of the debtor’s payments, information. In addition, the contract or
the annual rate to be disclosed in writing document shall specify additional charges,
shall be the rate for regular payments, if any, which will be collected in case certain
i.e., the premium and penalty need not be stipulations in the contract are not met by
taken into account in the determination of the debtor.
the annual rate. Such premium or penalty
--------------------------------------------------------------------------------
1
This can be determined by dividing twelve, the number of months in a year, by the number or fraction of months
between installment payments.

Part III - Page 8a
§§ 4309Q.2 - 4311Q.4
02.12.31
In case the seven (7) items of b. In the case of loans payable in

information mentioned are not disclosed in monthly installments, the total outstanding
the contract covering the credit transaction, balance thereof shall be considered non-
all of the seven (7) items, to the extent performing when three (3) or more
applicable, shall be disclosed in another installments are in arrears.
document in the form (Appendix Q-11) c. In the case of loans payable in daily,
prescribed by the Monetary Board, to be weekly or semi-monthly installments, the
signed by the debtor and appended to the total outstanding balance thereof shall be
main contract. A copy of such disclosure considered non-performing at the same time
statement shall be furnished the borrower. that they become past due in accordance
with Sec. 4308Q, i.e., the entire outstanding
§ 4309Q.3 Inspection of contracts balance of the loan/receivable shall be
covering credit transactions. NBQBs shall considered as past due when the total
keep in their office or place of business amount of arrearages reaches ten percent
copies of contracts which involve the (10%) of the total loan/receivable balance.
extension of credit and the payment of d. Restructured loans shall be
finance charges therefor. Such copies shall considered non-performing in accordance
be available for inspection or examination with existing rules and regulations.
by the appropriate supervising and e. All items in litigation as defined in
examining department of the BSP. the Manual of Accounts shall be considered
non-performing loans.
§ 4309Q.4 Posters. An abstract of
R.A. No. 3765 (Appendix Q-12) shall be § 4311Q.2 Accrual of interest earned
reproduced in a format sixty (60) cm. wide on loans. No accrual of interest income is
and seventy-five (75) cm. long and posted allowed if a loan has become non-performing
on a conspicuous place in the NBQB’s as defined under Sec. 4351Q.1. Interest on
place(s) of business. non-performing loans shall be taken up as
income only when actual payment thereon
Sec. 4310Q (Reserved) is received.
Sec. 4311Q Non-Performing Loans § 4311Q.3 Allowance for uncollected

interest on loans. A contra account to be
§ 4311Q.1 Accounts considered non- designated Allowance for Uncollected
performing; definitions Interest on Loans shall be set up in
a. Non-performing loans shall, as a accordance with Appendix Q-10 if accrued
general rule, refer to loan accounts whose interest receivable on loans and loan
principal and/or interest is unpaid for thirty installments is still uncollected after three (3)
(30) days or more after due date or after they months from the date such loans have
have become past due in accordance with become non-performing.
existing rules and regulations. This shall
apply to loans payable in lump sum and loans § 4311Q.4 Reporting requirement
payable in quarterly, semi-annual or annual NBQBs shall report the following data at the
installments, in which case, the total end of each month as additional information
outstanding balance thereof shall be in the monthly Consolidated Statement of
considered non-performing. Condition starting with their report as of May
31, 1999.

Part III - Page 9
§§ 4311Q.4 - 4337Q.1
04.12.31
Total non-performing loans xxx (CPA) and, in case he is engaged in business,

Non -performing regular loans xxx also a copy of the profit and loss statement
Non -performing restructured loans xxx duly certified by a CPA.
The above documents shall be required
Secs. 4312Q - 4320Q (Reserved) to be submitted annually for as long as the
credit accommodation is outstanding.
B. (RESERVED) § 4336Q.3 Signatories. NBQBs shall

require that credit accommodations against
Secs. 4321Q - 4335Q (Reserved) personal security be made under the
signature of the principal borrower and at
least one (1) co-maker, except in the case of
C. UNSECURED LOANS a principal borrower whose responsibility
and financial capacity are unquestionable in
Sec. 4336Q Loans Against Personal which case the signature of the borrower
Security. The following guidelines shall be shall suffice.
observed by NBQBs in the grant, renewal or
extension of unsecured loans. § 4336Q.4 Sanctions. NBQBs violating
the provisions of this Section may be
§ 4336Q.1 General guidelines. Before prohibited from extending additional credit
granting credit accommodations against accommodations against personal security.
personal security, NBQBs must exercise
proper caution by ascertaining that the Sec. 4337Q Credit Card Operations;
borrowers, co-makers, indorsers, sureties General Policy. The BSP shall foster the
and/or guarantors possess good credit development of consumer credit through
standing and are financially capable of innovative products such as credit cards
fulfilling their commitments to the NBQB. For under conditions of fair and sound consumer
this purpose, NBQBs shall keep records credit practices. The BSP likewise
containing information on the credit standing encourages competition and transparency to
and financial capacity of credit applicants. ensure more efficient delivery of services and
fair dealings with customers.
§ 4336Q.2 Proof of financial capacity Towards this end, the following rules and
of borrower. In addition to the usual regulations shall govern the credit card
personal information sheet about the operations of quasi-banks and subsidiary/
borrower, NBQBs shall require that an affiliate credit card companies, aligned with
application for a credit accommodation global best practices.
against personal security be accompanied by:
a. A copy of the latest income tax § 4337Q.1 Definition of terms
returns of the borrower and his co-maker duly a. Credit card. Means any card, plate,
stamped as received by the Bureau of Internal coupon book or other credit device existing
Revenue; and for the purpose of obtaining money,
b. If the credit accommodation property, labor or services on credit.
exceeds P500,000, a copy of the borrower’s b. Credit card receivables. Represents
balance sheet duly certified by an the total outstanding balance of credit
independent Certified Public Accountant cardholders arising from purchases of goods

Part III - Page 10
§§ 4337Q.1 - 4337Q.2
04.12.31
and services, cash advances, annual (1) Ownership, control or power to vote,
membership/renewal fees as well as interest, whether by permanent or temporary proxy
penalties, insurance fees, processing/service or voting trust, or other similar contracts, by
fees and other charges. a quasi-bank or other financial institution of
c. Minimum amount due or minimum at least ten percent (10%) or more of the
payment required. Means the minimum outstanding voting stock of the entity, or vice-
amount that the credit cardholder needs to versa;
pay on or before the payment due date for a (2) Interlocking directorship or
particular billing period/cycle as defined officership, except in cases involving
under the terms and conditions or reminders independent directors as defined under
stated in the statement of account/billing existing regulations;
statement which may include: (1) total (3) Common stockholders owning at
outstanding balance multiplied by the least ten percent (10%) of the outstanding
required payment percentage or a fixed voting stock of each financial institution and
amount whichever is higher; (2) any amount the entity; or
which is part of any fixed monthly installment (4) Management contract or any
that is charged to the card; (3) any amount arrangement granting power to the quasi-
in excess of the credit line; and (4) all past bank or other financial institution to direct
due amounts, if any. or cause the direction of management and
d. Default or delinquency. Shall mean policies of the entity, or vice-versa.
non-payment of, or payment of any amount
less than, the “Minimum Amount Due” or § 4337Q.2 Risk management system. To
“Minimum Payment Required” within two safeguard their interests, quasi-banks and
(2) cycle dates, in which case, the “Total subsidiary/affiliate credit card companies are
Amount Due” for the particular billing period required to establish an appropriate system
as reflected in the monthly statement of for managing risk exposures from credit card
account may be considered in default or operations which shall be documented in a
delinquent. complete and concise manner. The risk
e. Acceleration clause. Shall mean any management system shall cover the
provision in the contract between the quasi- organizational set-up, records and reports,
bank and the cardholder that gives the quasi- accounting, policies and procedures and
bank the right to demand the obligation in internal control.
full in case of default or non-payment of Written policies, procedures and internal
any amount due or for whatever valid reason. control guidelines shall be established on the
f. Subsidiary refers to a corporation or following aspects of credit card operations:
firm more than fifty percent (50%) of the a. Requirements for application;
outstanding voting stock of which is directly b. Solicitation and application
or indirectly owned, controlled or held with processing;
the power to vote by a quasi-bank or other c. Determination and approval of credit
financial institution. limits;
g. Affiliate refers to an entity linked d. Pre-approved cards;
directly or indirectly to a quasi-bank or other e. Issuance, distribution and activation
financial institution through any one or a of cards;
combination of any of the following: f. Supplementary or extension cards;

Part III - Page 10a
§§ 4337Q.2 - 4337Q.4
04.12.31
g. Cash advances; All credit card applications, especially

h. Billing and payments; those solicited by third party representatives/
i. Deferred payment program or special agents, shall undergo a strict credit risk
installment plans; assessment process and the information
j. Collection of past due accounts; stated thereon validated and verified by
persons other than those handling marketing.
k. Handling of accounts for write-off;
l. Suspension, cancellation and § 4337Q.4 Information to be disclosed
withdrawal or termination of card; Quasi-banks or their subsidiary/affiliate credit
m. Renewal of cards, upgrade or card companies shall disclose to each person
downgrade of credit limit; to whom the credit card privilege is extended
n. Lost or stolen cards and their in the agreement, contract or any equivalent
replacement; document governing the issuance or use of
o. Accounts of DOSRI and employees; the credit card or any amendment thereto or
p. Disposition of errors and/or questions in such other statement furnished the
about the billing statement/statement of cardholder from time to time, prior to the
account and other customers’ complaints; imposition of the charges and to the extent
and applicable, the following information:
q. Dealings with marketing agents/ a. non-finance charges, individually
collection agents. itemized, which are paid or to be paid by
the cardholder in connection with the
§ 4337Q.3 Minimum requirements transaction but which are not incident to the
Before issuing credit cards, quasi-banks and/ extension of credit;
or their subsidiary/affiliate credit card b. the percentage that the interest bears
companies must exercise proper diligence by to the total amount to be financed expressed
ascertaining that applicants possess good as a simple monthly or annual rate, as the
credit standing and are financially capable case may be, on the outstanding balance of
of fulfilling their credit commitments. The net the obligation;
take home pay of applicants who are c. the effective interest rate per annum;
employed, the net monthly receipts of those d. for installment loans, the number of
engaged in trade or business, or the net worth installments, amount and due dates or
or cash flow inferred from deposits of those periods of payment schedules to repay the
who are neither employed nor engaged in indebtedness;
trade or business or the credit behavior e. the default, late payment/penalty fees
exhibited by the applicant from his other or similar delinquency-related charges
existing credit cards, or other lifestyle payable in the event of late payments;
indicators such as but not limited to club f. the conditions under which interest
memberships, ownership and location of may be imposed, including the time period,
residence and motor vehicle ownership shall within which any credit extended may be
be determined and used as basis for setting repaid without interest;
credit limits. The gross monthly income may g. the method of determining the
also be used provided reasonable deductions balance upon which interest and/or
are estimated for income taxes, premium delinquency charges may be imposed;
contributions, loan amortizations and other h. the method of determining the
deductions. amount of interest and/or delinquency

Part III - Page 10b
§§ 4337Q.4 - 4337Q.9
04.12.31
charges, including any minimum or fixed § 4337Q.7 Deferral charges. The quasi-
amount imposed as interest and/or bank and the cardholder may, prior to the
delinquency charge; consummation of the transaction, agree in
i. where one (1) or more periodic rates writing to a deferral of all or part of one (1)
may be used to compute interest, each such or more unpaid installments and the quasi-
rate, the range of balances to which it is bank may collect a deferral charge which
applicable, and the corresponding simple shall not exceed the rate previously disclosed
annual rate; pursuant to the provisions on disclosure.
j. other fees, such as membership/
renewal fees, processing fees, collection fees, § 4337Q.8 Late payment/penalty fees
credit investigation fees and attorney’s fees; and No late payment or penalty fee shall be
k. for transactions made in foreign collected from cardholders unless the
currencies and/or outside the Philippines, for collection thereof is fully disclosed in the
dual currency accounts (peso and dollar contract between the issuer and the
billings), as well as payments made by credit cardholder: Provided, That late payment or
cardholders in any currency other than the penalty fees shall be based on the unpaid
billing currency: the application of payments; minimum amount due or a prescribed
the manner of conversion from the minimum fixed amount: Provided, further,
transaction currency and payment currency That said late payment or penalty fees may
to Philippine pesos or billing currency; be based on the total outstanding balance of
definition or general description of verifiable the credit card obligation, including amounts
blended exchange/conversion rates (e.g., payable under installment terms or deferred
MASTERCARD and/or VISA International payment schemes, if the contract between
rates on the day the item was processed/ the issuer and the cardholder contains an
posted to the billing statement, plus mark- “acceleration clause” and the total
up, if any) including conversion commission; outstanding balance of the credit card is
and/or other currency conversion charges classified and reported as past due.
and costs arising from the purchase by the
card company of foreign currency to settle § 4337Q.9 Confidentiality of
the customer’s transactions shall also be information. Quasi-banks and subsidiary/
disclosed. affiliate credit card companies shall keep
strictly confidential the data on the
§ 4337Q.5 Accrual of interest earned cardholder or consumer, except under the
Interest accrued and/or booked shall be following circumstances:
reversed and no accrual of interest shall be a. disclosure of information is with the
allowed ninety (90) days after the credit card consent of the cardholder or consumer;
receivable has become past due as defined b. release, submission or exchange of
in Subsec. 4308Q.1. customer information with other financial
institutions, credit information bureaus, credit
§ 4337Q.6 Finance charges. The card issuers, their subsidiaries and affiliates;
amount of finance charges in connection c. upon orders of court of competent
with any credit card transaction shall refer jurisdiction or any government office or
to interest charged to the cardholder. agency authorized by law, or under such

Part III - Page 10c
§§ 4337Q.9 - 4337Q.13
04.12.31
conditions as may be prescribed by the § 4337Q.12 Offsets. For purposes of

Monetary Board; transparency and adequate disclosure, the
d. disclosure to collection agencies, credit card issuer shall inform/notify the credit
counsels and other agents of the quasi-bank cardholder in the agreement, contract or any
or card company to enforce its rights against equivalent document governing the issuance
the cardholder; or use of the credit card that, pursuant to the
e. disclosure to third party service provisions of Articles 1278 to 1290 of the
providers solely for the purpose of assisting New Civil Code of the Philippines, as
or rendering services to the quasi-bank or amended the use of his credit card will
card company in the administration of its subject his deposit/s with the quasi-bank to
credit card business; and offset against any amount/s due and payable
f. disclosure to third parties such as on his credit card which have not been paid
insurance companies, solely for the purpose in accordance with the terms of the
of insuring the quasi-bank from cardholder agreement/contract.
default or other credit loss, and the
cardholder from fraud or unauthorized § 4337Q.13 Handling of complaints
charges. Quasi-banks or subsidiary/affiliate credit card
companies shall give cardholders at least
§ 4337Q.10 Suspension, termination of twenty (20) calendar days from statement date
effectivity and reactivation. Quasi-banks or to examine charges posted in his/her
their subsidiary/affiliate credit card statement of account and inform the quasi-
companies shall formulate criteria or bank/subsidiary credit card companies in
parameters for suspension, revocation and writing of any billing error or discrepancy.
reactivation of the right to use the card and Within ten (10) calendar days from receipt
shall include in their contract with of such written notice, the quasi-bank/
cardholders a provision authorizing the subsidiary credit card company shall send a
issuer to suspend or terminate its effectivity, written acknowledgement to the cardholder
if circumstances warrant. unless the action required is taken within
such ten (10)-day period.
§ 4337Q.11 Inspection of records Not later than two (2) billing cycles or
covering credit card transactions. Quasi- two (2) months which in no case shall exceed
banks or their subsidiary/affiliate credit card ninety (90) days after receipt of the notice
companies shall make available for and prior to taking any action to collect the
inspection or examination by the appropriate contested amount, or any part thereof, quasi-
supervising and examining department of the banks/subsidiary credit card companies shall
BSP complete and accurate files on card make appropriate corrections in their records
applicant/cardholder to support the and/or send a written explanation or
consideration for approval of the application clarification to the cardholder after
and determination of the credit limit which conducting an investigation. Nothing in this
shall be in accordance with the verified debt Subsection shall be construed to prohibit any
repayment ability and/or net worth of the action by the quasi-bank/subsidiary credit
card applicant/cardholder. card company to collect any amount which

Part III - Page 10d
§§ 4337Q.13 - 4351Q
04.12.31
has not been indicated by the cardholder to has given express permission or said times
contain a billing error or apply against the are the only reasonable or convenient
credit limit of the cardholder the amount opportunities for contact.
indicated to be in error.
§ 4337Q.15 Sanctions. Violations of the
§ 4337Q.14 Unfair collection practices provisions of this Section shall be subject to
Quasi-banks, subsidiary/ affiliate credit card any or all of the following sanctions
companies, collection agencies, counsels and depending upon their severity:
other agents may resort to all reasonable and a. Disqualification of the quasi-bank
legally permissible means to collect amounts concerned from the credit facilities of the BSP
due them under the credit card agreement: except as may be allowed under Section 84
Provided, That in the exercise of their rights of R.A. No. 7653;
and performance of duties, they must observe b. Prohibition of the quasi-bank
good faith and reasonable conduct and concerned from the extension of additional
refrain from engaging in unscrupulous or credit accommodation against personal
untoward acts. Without limiting the general security; and
application of the foregoing, the following c. Penalties and sanctions provided
conduct is a violation of this Subsection: under Sections 36 and 37 of R.A. No. 7653.
a. the use or threat of violence or other
criminal means to harm the physical person, Secs. 4338Q - 4350Q (Reserved)
reputation, or property of any person;
b. the use of obscenities, insults, or
profane language which amount to a criminal D. RESTRUCTURED LOANS
act or offense under applicable laws;
c. disclosure of the names of credit Sec. 4351Q Restructured Loans; General
cardholders who allegedly refuse to pay Policy. NBQBs shall have full discretion in
debts, except as allowed under Subsec. the restructuring of loans in order to provide
4337Q.9; flexibility in arranging the repayment of such
d. threat to take any action that cannot loans without impairing or endangering the
legally be taken; lending NBQB’s financial interest, except in
e. communicating or threat to special cases approved by the Monetary
communicate to any person credit Board such as loans funded partly or wholly
information which is known to be false, by foreign currency obligations. However,
including failure to communicate that a debt the restructuring of loans granted to DOSRI
is being disputed; shall be upon terms not less favorable to the
f. any false representation or deceptive NBQB than those offered to others. While
means to collect or attempt to collect any debt agreements on loan restructuring should be
or to obtain information concerning a considered as management tools to maintain
cardholder; and or improve the soundness of the NBQB’s
g. making contact at unreasonable/ lending operations, these should be drawn
inconvenient times or hours which shall be mainly to assist borrowers towards the
defined as contact before 6:00 A.M. or after settlement of their loan obligations, taking
10:00 P.M., unless the account is past due into account their capacity to pay.
for more than sixty (60) days or the cardholder

Part III - Page 10e
§§ 4351Q.1 - 4351Q.2
04.12.31
§ 4351Q.1 Definition; when to interest shall mean three (3) consecutive

consider performing/non-performing payments of the required amortizations of
Restructured loans are loans the principal principal and/or interest have been made.
terms and conditions of which have been However, in the case of a restructured loan
modified in accordance with a restructuring with capitalized interest but not fully secured
agreement setting forth a new plan of by real estate with loan value of up to sixty
payment or a schedule of payment on a percent (60%) of the appraised value of the
periodic basis. The modification may real estate security and the insured
include, but is not limited to, change in improvements thereon or other first class
maturity, interest rate, collateral or increase collaterals, six (6) consecutive payments of
in the face amount of the debt resulting from the required amortizations of principal and/
the capitalization of accrued interest/ or interest must have been made.
accumulated charges. Items in litigation and A restructured loan which has been
loans subject of judicially-approved restored to a performing loan status shall be
compromise, as well as those covered by immediately considered non-performing in
petitions for suspension or for new plans of case of default of any principal or interest
payment approved by the court or the SEC, payment in accordance with Sec. 4308Q.
shall not be classified as restructured loans.
A loan which is restructured shall be § 4351Q.2 Procedural requirements
considered non-performing except: a. A loan may be restructured subject
(1) When the loan is current and to the approval of the NBQB’s board of
performing (i.e., with updated principal and directors in a resolution which shall embody,
interest payments) on the date of among other things:
restructuring, in which case, the loan shall (1) the basis of or justification for the
retain its performing status; and approval;
(2) Fully secured by real estate with loan (2) determination of the borrower’s
value of up to sixty percent (60%) of the capacity to pay, such as viability of the
appraised value of the real estate security and business; and
the insured improvements thereon, and such (3) the nature and extent of protection
other first class collaterals as may be deemed of the NBQB’s exposure.
appropriate by the Monetary Board: The authority to approve the restructuring
Provided, That a restructured loan, with or of loans may be delegated by the NBQB’s
without capitalized interest, must be yielding board of directors to a committee or officer(s):
a rate of interest equal to or greater than the Provided, That there are board-prescribed
quasi-bank’s average cost of funds at the date guidelines specifically on restructuring of
of restructuring, otherwise, it shall be loans: Provided, further, That said guidelines
considered non-performing. shall be submitted to the appropriate
The restoration to a performing loan shall supervising and examining department of the
only be effective after a satisfactory track BSP within thirty (30) days following the date
record of payments of the required of approval thereof. However, loans
amortizations of principal and/or interest has previously approved by the executive
been established. committee as well as those granted to DOSRI
For this purpose, a satisfactory track shall be subject to approval by the board as
record of payments of principal and/or provided under existing rules and regulations.

Part III - Page 11
§§ 4351Q.2 - 4351Q.3
04.12.31
Loans restructured other than those approved (3) Hold-out on and/or assignment of
by the board shall be reported to it for deposit substitutes maintained in the lending
confirmation. institutions;
b. A second restructuring of a loan (4) “Blue chip” shares of stocks, except
shall be allowed only if there are reasonable those issued by the lending entity or by its
justifications: Provided, That it shall be parent company which owns more than fifty
considered a non-performing loan and percent (50%) of its outstanding shares of
classified, at least, “Substandard”. The stocks. For this purpose, the issuer
restoration to a performing loan status and/ corporation must be a listed corporation with
or the upgrading of loan classification, e.g., a net worth of at least P1 billion and with
from “Substandard” to “Loans Especially annual net earnings during the immediately
Mentioned”, if circumstances warrant an preceding five (5) years; and
upgrading in accordance with the criteria (5) Such other collaterals that the
under Appendix Q-10, shall only be allowed Monetary Board may declare as first class
after a satisfactory track record of at least six collaterals from time to time.
(6) consecutive payments of the required It is understood that the loan value to
amortization of principal and/or interest has be assigned the collateral shall be as
been established. prescribed under existing regulations.
c. In the restructuring process, the
NBQB shall encourage the borrower to § 4351Q.3 Classification. The
improve the quality of the loan either by classification of a loan prior to restructuring,
strengthening financial capacity or providing e.g., “Loans Especially Mentioned”,
additional collateral. “Substandard” or “Doubtful” shall be
The real estate security and/or other first retained: Provided, That a loan that is not
class collaterals offered shall be appraised classified but which is non-performing prior
at the time of restructuring to ensure that to restructuring shall be classified, at least,
current market values are being used. Real “Loans Especially Mentioned”: Provided,
estate security shall be appraised by an further, That restructured loans with
independent appraisal company acceptable capitalized interest shall be classified, at
to the BSP and shall be reappraised every least, “Substandard” and the required
year thereafter. valuation reserves shall be set up
The term “first class collaterals” refers accordingly: Provided, finally, That a more
to assets and securities which have relatively adverse classification may be given, i.e.,
stable and clearly definable value and/or “Substandard", "Doubtful" or "Loss”, if the
greater liquidity and are free from lien/ circumstances warrant it as provided under
encumbrance, such as: Appendix Q-10.
(1) Real estate; The upgrading of loan classification, e.g.,
(2) Evidences of indebtedness of the from “Substandard” to “Loans Especially
Republic of the Philippines and of the BSP, Mentioned”, if circumstances warrant an
and other evidences of indebtedness or upgrading in accordance with the criteria in
obligations the servicing and repayment of Appendix Q-10, shall only be effective after
which are fully guaranteed by the Republic a satisfactory track record of payments of
of the Philippines; the required amortizations of principal and/
or interest has been established.

Part III - Page 12
§§ 4351Q.3 - 4356Q.1
04.12.31
For this purpose, a satisfactory track c. Stockholders shall refer to (i) any
record of payments of principal and/or stockholder of record in the books of the
interest shall mean three (3) consecutive quasi-bank, acting personally, or through an
payments of the required amortizations of attorney-in-fact, executor, administrator or
principal and/or interest have been made. guardian of a minor, incompetent and/or
However, in the case of a restructured loan deceased stockholder or through a trustee
with capitalized interest but not fully secured designated by one (1) or more stockholders
by real estate with loan value of up to sixty pursuant to a voting trust agreement, whose
percent (60%) of the appraised value of the stockholdings in the lending quasi-bank,
real estate security and the insured individually and/or together with his spouse
improvements thereon or other first class or relative within the first degree of
collaterals, six (6) consecutive payments of consanguinity or affinity or relative by legal
the required amortizations of principal and/ adoption; (ii) a partnership in which the
or interest must have been made. stockholder or his spouse or any of his
relatives mentioned above is a general
Secs. 4352Q - 4355Q (Reserved) partner; and (iii) a co-owner with the
stockholder or the stockholder’s spouse or
relative mentioned above of a property/right/
E. LOANS/CREDIT ACCOMMODATIONS interest referred to in Sec. 4359Q(b)(3)
TO DIRECTORS, OFFICERS, amounting to ten percent (10%) or more of
STOCKHOLDERS AND THEIR the total subscribed capital stock of the quasi-
RELATED INTERESTS bank.
d. Outstanding loans to and placements
Sec. 4356Q General Policy. Dealings of a with the quasi-bank shall refer to loans to
quasi-bank with any of its DOSRI shall be in and deposit substitutes of the quasi-bank
the regular course of business and upon which are not subject of an assignment or
terms not less favorable to the quasi-bank hold-out agreement.
than those offered to others. e. Book value of the paid-in capital
No NBQB shall grant, renew or extend contribution shall mean the proportional
any credit accommodation to its DOSRI amount of the quasi-bank’s total capital
whenever its combined capital accounts is accounts (net of such unbooked valuation
deficient relative to risk assets held under reserves and other capital adjustments as may
Sec. 4116Q, or whenever its paid-in capital be required by the BSP) as the corresponding
is deficient relative to the required minimum paid-in capital contribution of each director,
capitalization. Neither shall it grant, renew officer or stockholder concerned bears to the
or extend any credit accommodation to any total paid-in capital of the quasi-bank:
of its DOSRI who has past due credit Provided, That as a basis for determining the
accommodations with the NBQB. individual ceiling referred to in Sec. 4360Q,
corresponding book value of the shares of
§ 4356Q.1 Definitions. For purposes of stock of such director, officer or stockholder
these regulations, the following definitions which are the subject of pledge, assignment
shall apply. or any other encumbrance shall be deducted
a. Directors shall refer to quasi-bank therefrom.
directors as defined in Sec. 4141Q. f. Secured loan, borrowing, or credit
b. Officers shall refer to quasi-bank accommodation shall refer to any loan,
officers as defined in Sec. 4142Q. discount, credit or advance, or portion

Part III - Page 13
§§ 4356Q.1 - 4357Q
04.12.31
thereof referred to in Sec. 4357Q which is not secured in accordance with Item "f"
secured by real estate mortgage, chattel above.
mortgage on tangible assets, standby letters
of credit issued by foreign banks, Sec. 4357Q Transactions Covered. The
assignments of or hold-out on deposit terms loan, borrow, money borrowed and
substitutes issued by the lending entity, cash credit accommodations as used herein shall
margin deposits, assignment or pledge of refer to transactions which involve the grant,
government securities or readily marketable renewal, extension or increase of any loan,
bonds and other high-grade debt securities discount, credit or advance in any form
except those issued by the lending entity, or whatsoever, and shall include:
by its parent company which owns more a. Outstanding availments under an
than fifty percent (50%) of its outstanding established credit line;
shares of stocks, or receivables arising from b. Drawings against an existing letter
financial leases to the extent of the guaranty of credit;
deposit plus sixty percent (60%) of the c. The acquisition by discount,
remaining value of the leased equipment. For purchase, exchange or otherwise of any note,
this purpose, the remaining value of the draft, bill of exchange or other evidence of
equipment under lease shall be determined indebtedness upon which a director, officer
by dividing the acquisition cost by the or stockholder may be liable as a maker,
original term of the lease and multiplying the drawer, acceptor, indorser, guarantor, or
resulting ratio by the unexpired portion of surety;
the term. d. Any advance of unearned salary or
For investment houses with quasi- unearned compensation for periods in excess
banking functions, a secured loan, borrowing of thirty (30) days;
or credit accommodation shall likewise e. Loans or other credit accommo-
include: dations granted by another financial
(1) Customer’s liability under import institution to such director, officer or
bills outstanding for not more than thirty (30) stockholder from funds of the NBQB
days from date of original entry; invested in the other institution’s trust or
(2) Sales contract receivable arising out other department when there is a clear
of sale of real property on credit wherein title relationship between the transactions;
to the property is retained by the NBQB; and f. The increase of an existing in-
(3) Customer’s liability-import bills debtedness, as well as additional availments
under trust receipts outstanding for not under a credit line or additional drawings
more than thirty (30) days from date of against a letter of credit;
booking: Provided, That the booking g. The sale of assets, such as shares of
under trust receipts shall have been made stock, on credit;
not later than the thirty-first (31st) day from h. Leasing transactions under R.A. No.
the date of original entry referred to in Sub- 5980, as amended; and
item (1) above. i. Any other transaction as a result of
g. Unsecured loan, borrowing or which a director, officer or stockholder
credit accommodation shall refer to any becomes obligated or may become obligated
loan, discount, credit or advance, or portion to the lending NBQB, directly or indirectly,
thereof referred to in Sec. 4357Q which is by any means whatsoever to pay money or
its equivalent.

Part III - Page 14
§ 4358Q
04.12.31
Sec. 4358Q Transactions Not Covered the account of the NBQB or for utilization of
The terms loan, borrow, money borrowed maternity and other leave credits;
or credit accommodation as used herein b. The increase in the amount of
shall not refer to the following transactions: outstanding credit accommodation as a result
a. Advances against accrued of additional charges or advances made by
compensation, or for the purpose of the NBQB to protect its interests such as
providing payment of authorized travel, taxes, insurance, etc.;
legitimate expenses or other transactions for

Part III - Page 14a
§§ 4358Q - 4359Q
02.12.31
c. The discount of bills of exchange related interest concerned reimburses/pays

drawn in good faith against actually existing the NBQB for the billed amount in full on or
values, and the discount of commercial or before the payment due date in the billing or
business paper actually owned by the person statement of account, as set by the NBQB for
negotiating the same, including, but not all other qualified credit cardholders on
limited to, the acquisition of export bills from availments made for the same period on their
any of its DOSRI which are drawn in credit cards. However, the transaction shall
accordance with the terms and conditions of be subject to applicable DOSRI regulations if
the covering letters of credit: Provided, That the director, officer, or stockholder/related
the transaction shall automatically be subject interest concerned:
to the ceiling as herein provided once the i. fails to reimburse/pay the NBQB
DOSRI who is a party to the transaction within the period mentioned herein; or
becomes directly liable to the NBQB; ii. on the outset, opts for deferred
d. Transactions with a foreign bank or payment scheme, and the availment is
other financial institution which has booked by the NBQB.
stockholding in the NBQB where the foreign
bank or other financial institution acts as Sec. 4359Q Direct or Indirect Borrowings
guarantor through the issuance of letters of For purposes of this Section, a credit
credit, guarantee letters or assignment of a accommodation shall be considered a direct
deposit in a currency eligible as part of the or indirect borrowing in accordance with
international reserves and held in a bank in the following criteria.
the Philippines to secure credit accommo- a. Direct borrowing - If the director,
dations granted to another person or entity: officer or stockholder of the lending NBQB
Provided, That the foreign bank stockholder is a party to any of the transactions
shall automatically be subject to the ceilings enumerated in Sec. 4357Q for himself or as
as herein provided in the event that its a representative or agent of others, or if he
contingent liability as guarantor becomes a acts as a guarantor, indorser or surety for
real liability; and loans from the NBQB, or if the loan or credit
e. Deposits of an NBQB with a bank, accommodation to another party is secured
whether domestic or foreign, which has by a property interest or right of the director,
stockholdings in the NBQB. officer or stockholder.
b. Indirect borrowing - If in any of the
§ 4358Q.1 Applicability to credit card transactions in Sec. 4357Q the borrower,
operations. The credit card operations of guarantor, indorser, or surety is a:
NBQBs shall not be subject to these (1) Spouse or relative within the first
regulations where the credit cardholder is a degree of consanguinity or affinity, or relative
director, officer or stockholder of the NBQB by legal adoption of a director, officer or
or their related interests (DOSRI): Provided, stockholder of the NBQB;
That (a) the privilege of becoming a credit (2) Partnership of which a director,
cardholder is open to all qualified persons officer, or stockholder or his spouse or
on the basis of selective criteria which are relative within the first degree of
applied by the NBQB to all applicants thereof; consanguinity or affinity, or relative by legal
and (b) the director, officer or stockholder/ adoption, is a general partner;

Part III - Page 15
§§ 4359Q - 4361Q
02.12.31
(3) Co-owner with the director, any or a group of related entities mentioned
officer, stockholder or his spouse or relative in Items "b(2)", "b(4)" and "b(5)" of this
within the first degree of consanguinity or Section.
affinity, or relative by legal adoption, of the Other cases of direct/indirect borrowing
property or interest or right mortgaged, shall be resolved on a case-to-case basis.
pledged or assigned to secure the loans or It shall be the responsibility of the NBQB
credit accommodations, except when the concerned to ascertain whether the
mortgage, pledge or assignment covers only borrower, guarantor, representative, indorser
said co-owner’s undivided interest; or surety is related to persons mentioned in
(4) Corporation, association, or firm Item "b(1)" of this Section or connected with
of which a director or officer of the NBQB, any of the directors, officers or stockholders
or his spouse is also a director or officer of of the NBQB in any of the capacities
such corporation, association or firm, except mentioned in Items "b(2)", "b(3)", "b(4)",
(i) where the securities of such corporation, "b(5)" and "b(6)" of this Section.
association or firm are listed and traded in In determining indirect borrowings as
the domestic stock exchange and less than enumerated above, only those cases
fifty percent (50%) of the voting stock thereof involving living relatives shall be considered.
is owned by any one (1) person or by persons
related to each other within the third degree Sec. 4360Q Individual Ceiling; Single-
of consanguinity or affinity; or (ii) where the Borrower Limit. The total outstanding direct
director, officer or stockholder of the lending credit accommodations to each of the NBQB’s
NBQB sits as a representative of the NBQB in directors, officers or stockholders, excluding
the board of directors of such corporation: those granted under officers’ fringe benefit
Provided, That the NBQB representative shall plans, shall not exceed, at any time, an
not have any equity interest in the borrower amount equivalent to the unencumbered
corporation except for the minimum shares portion of his loans to, and placements with,
required by law, rules and regulations, or by the NBQB and the book value of his paid-in
the by-laws of the corporation, to qualify a capital contribution in the lending NBQB:
person as director of the corporation: Provided, That unsecured credit
Provided, further, That the borrowing accommodations to each of the NBQB’s
corporation under (i) or (ii) is not among directors, officers or stockholders shall not
those mentioned in Items "b(5)" and "b(6)" exceed thirty percent (30%) of his total credit
of this Section; accommodations.
(5) Corporation, association or firm of Notwithstanding the provisions of this
which any or a group of directors, officers, Section, credit accommodations of an NBQB
stockholders of the lending NBQB and/or to any one of its directors, officers,
their spouses or relatives within the first stockholders or their related interests shall
degree of consanguinity or affinity or relative not exceed the SBL prescribed for NBQBs.
by legal adoption, hold/own more than
twenty percent (20%) of the subscribed Sec. 4361Q Aggregate Ceiling; Ceiling On
capital of such corporation, or of the equity Unsecured Loans. Except with prior
of such association or firm; or approval of the Monetary Board, the total
(6) Corporation, association or firm outstanding borrowings of directors, officers,
wholly or majority-owned or controlled by or stockholders, whether direct or indirect,

Part III - Page 16
§§ 4361Q - 4364Q
02.12.31
shall not exceed 100% of combined capital (2) Its shares are listed and traded in the
accounts, net of deferred income tax as domestic stock exchanges;
defined in Item "i" of Subsec. 4116Q.1 and (3) Its stockholdings in the lending
such unbooked valuation reserves and other NBQB do not exceed thirty percent (30%) of
capital adjustments as may be required by the voting stock of the NBQB; and
the BSP: Provided, That in no case shall the (4) No person or group of persons
total unsecured direct and indirect related within the first degree of
borrowings of directors, officers, and consanguinity or affinity holds/owns more
stockholders exceed thirty percent (30%) of than twenty percent (20%) of the subscribed
the aggregate ceiling or the outstanding capital of the corporation; and
direct/indirect loans thereto, whichever is c. Credit accommodations granted
lower. For the purpose of determining under officers’ fringe benefit plans.
compliance with the ceiling on unsecured
loans, NBQBs shall be allowed to average Sec. 4363Q Credit Accommodations Under
their ceiling on unsecured loans and their Officers’ Fringe Benefit Plans. The aggregate
outstanding unsecured loans every week. outstanding liabilities to an NBQB of its
In evaluating requests for extension of officers, extended under officers’ fringe
loans in excess of the aggregate ceiling, the benefit plans for the purpose of house, car,
BSP shall consider the credit standing of the and appliance financing, and meeting
borrower, viability of the projects financed educational, medical, hospital, and other
by such loans in relation to national similar expenses, shall not exceed thirty
objectives, collateral or security and other percent (30%) of the combined capital
pertinent considerations. accounts of the lending entity: Provided, That
NBQBs shall submit, for record purposes,
Sec. 4362Q Exclusions from Aggregate copies of their officers’ fringe benefit plans
Ceiling. The following credit to the appropriate department of the BSP.
accommodations shall be excluded in
determining compliance with the aggregate Sec. 4364Q Procedural Requirements. The
ceiling: following provisions shall apply if a director
a. Credit accommodations to the extent or officer is a party, directly or indirectly, to,
covered by a hold-out on, or assignment of, or acts as the representative or agent of, others
deposit substitutes in the lending NBQB, or in any of the transactions under Sec. 4357Q.
covered by cash margin deposits or secured a. Approval of the board of directors;
by evidences of indebtedness of the Republic when to obtain. Except with the prior written
of the Philippines or of the Bangko Sentral, approval of the majority of the directors,
or by other evidences of indebtedness or excluding the director concerned, no loan
obligations, the servicing and repayment of or other credit accommodation shall be
which are fully guaranteed by the Republic granted nor any of the transactions under Sec.
of the Philippines; 4357Q be entered into.
b. Credit accommodations to a b. Approval by the board; how
corporate stockholder which meets all the manifested. The approval shall be manifested
following conditions: in a resolution passed by the board of directors
(1) The corporation is a non-financial duly assembled during a regular or special
institution; meeting for the purpose and made of record.

Part III - Page 17
§§ 4364Q - 4365Q
02.12.31
c. Majority of the directors; the BSP within twenty (20) business days from
computation of. The computation of the the date of approval. The copy may be a
majority of the directors, excluding the duplicate of the original, or a reproduction
director concerned, shall be based on the copy showing clearly the signatures of the
total number of directors of the NBQB, as approving directors: Provided, That if a
provided in its articles of incorporation and reproduction copy is to be submitted, it shall
by-laws. contain, on its face or reverse side, a signed
d. Contents of the resolution. The certification by the secretary that it is a
resolution of the board of directors shall reproduction of the original written approval.
contain the following information:
(1) Name of the director or officer Sec. 4365Q Sanctions. Any violation of the
concerned and his relationship as regards the provisions of the foregoing rules shall be
credit accommodation, such as principal, subject to any or all of the following
indorser, spouse of borrower, etc.; sanctions:
(2) Nature of the loan or other credit a. Restriction or prohibition on the
accommodation, purpose, amount, credit NBQB from declaring dividends until the
basis for such loan or credit accommodation, outstanding loans and other credit
security and appraisal thereof, maturity, accommodations have been reduced to
interest rate, schedule of repayment, and within the herein prescribed ceilings;
other terms of the loan or credit b. Disqualification of the directors
accommodation; voting for the approval of the loan or credit
(3) Date of the resolution; in excess of any of the ceilings prescribed in
(4) Names of the directors who were Secs. 4360Q and 4361Q from participating
present and who participated in the in the approval of loans or credit to officers,
deliberations of the meeting; directors, and stockholders of the NBQB:
(5) Names in print and signatures of Provided, however, That the disqualification
the directors approving the resolution: may be lifted by the BSP, as the circumstances
Provided, That the corporate secretary may warrant;
sign, under a power-of-attorney, in behalf of c. Application of (1) the borrowing
a director who was present in the board director’s or officer’s share in the NBQB’s
meeting and who approved such resolution, profit sharing program and (2) the share of
in instances where such signature is the director voting for the approval of the loan
necessary, to indicate that such resolution or credit accommodation against the excess
was approved by a majority of the directors; of such loan or credit accommodation over
and any of the herein prescribed ceilings for such
(6) Such other information as may be period of time as may be approved by the
required by the appropriate supervising and Monetary Board; and
examining department of the BSP. d. For the duration of each violation,
e. Transmittal of copy of board of imposition of a fine of one-tenth of one percent
directors’ approval; contents thereof. A copy (1/10 of 1%) of the excess over the ceilings
of the written approval of the board of per day but not to exceed P30,000 a day on
directors, as herein required, shall be (1) the lending NBQB and the director, officer,
submitted to the appropriate department of or stockholder whose borrowing exceeds his

Part III - Page 18
§§ 4365Q - 4376Q.3
02.12.31
individual ceiling and (2) each of the directors § 4376Q.1 Systems and procedures
voting for the approval of the loan or credit for interbank call loan transactions. IBCL
accommodation in excess of any of the transactions of NBQBs shall be governed by
ceilings prescribed in Secs. 4360Q and the Agreement for an Interbank Call Loans
4361Q. Funds Transfer System and the Supplemental
The penalty for exceeding the individual Memorandum of Agreement executed
ceiling, aggregate ceiling and ceiling on among the BSP, the Bankers Association of
unsecured loans shall be computed on the the Philippines and the Philippine Clearing
average amount of loans in excess of said House Corporation (Appendix Q-13 and Q-
ceilings during the same week. 13-b).
NBQBs shall generate hard copies of the
Secs. 4366Q - 4370Q (Reserved) formats of the loan and repayment
instructions in the form presented in Annexes
A, B, C and D of the aforesaid agreement to
F. (RESERVED) be kept as documentary evidence of their
matched and processed IBCL transactions.
§ 4376Q.2 Accounting procedures
a. NBQBs shall immediately pass the
G. SPECIAL TYPES OF LOANS corresponding entries in their books and,
upon receipt of a copy of the transfer
Sec. 4376Q Interbank Loans. Interbank loan instruction reported as matched in the
transactions shall include, among other expanded MultiTransaction Interbank
things, (a) interbank call loan (IBCL) transac- Payment System (MIPS2 Plus), the borrowing
tions; (b) borrowings evidenced by deposit NBQB shall attach the same to the
substitute instruments; and (c) purchases of corresponding ticket debitings its Due from
receivables with recourse: Provided, BSP account in its books and, in the case of
however, That only IBCL transactions which the lending NBQB, to the same ticket passed
are evidenced by interbank loan advices or in its books on the day payment is made.
repayment transfer tickets the settlement of b. IBCL transactions shall be recorded
which is effected by the BSP in the NBQBs’ by the borrowing NBQB as Bills Payable -
respective demand deposit accounts with Interbank Call Loans.
the BSP shall be eligible to one percent (1%) c. NBQBs shall reconcile their demand
reserve: Provided, further, That funds deposit accounts with the BSP against
borrowed by NBQBs from trust departments monthly statements of account to be
of banks/investment houses shall be furnished by the BSP Comptrollership
excluded from the herein definition of Department.
interbank loan transactions.
Interbank loan transactions not § 4376Q.3 Transfer of excess funds
evidenced by interbank loan advice or The prescribed “Authority to Debit Slip” shall
repayment transfer tickets and submitted to be used by NBQBs in the transfer of their
the BSP Comptrollership Department shall be excess funds which are not otherwise lent
reported to the BSP in the prescribed form. out in the interbank loan market from their

Part III - Page 19
§§ 4376Q.3 - 4391Q.1
02.12.31
BSP reserve accounts to their operating Sec. 4382Q Investments Abroad. Except
accounts with their depository banks. as may be authorized by the Monetary Board,
The “Authority to Debit Slip” shall have the total equity investments in and/or loans
a standard size of 4 3/4" x 8 1/2" and shall to any single enterprise abroad by any NBQB
be orange in color. It shall contain the shall not at any time exceed fifteen percent
minimum data or information as required (15%) of the net worth of the investing NBQB.
and shall be accomplished and submitted to
the BSP Comptrollership Department in Sec. 4383Q Underwriting Exempted. The
duplicate after having been duly signed and/ limitations on equity investments under Sec.
or authenticated by authorized officers of the 4381Q shall not apply to inventories of
NBQB. equity securities arising out of firm
underwriting commitments of investment
§ 4376Q.4 Settlement procedures houses: Provided, That such equity holding
Interbank loan transactions (call and term) shall be disposed of within two (2) years from
among banks and NBQBs shall be settled in acquisition by the investment house.
accordance with the procedures in Appendix
Q-13-a. Secs. 4384Q - 4385Q (Reserved)
Secs. 4377Q - 4380Q (Reserved) I. (RESERVED)

H. EQUITY INVESTMENTS
Sec. 4381Q Investment in Non-Allied J. OTHER OPERATIONS

Undertakings. In order to avoid undue
concentration of economic power, the total Sec. 4391Q Purchase of Receivables and
equity investments in any single non-allied Other Obligations. The following rules shall
enterprise or industry of NBQBs, expanded govern the purchase of receivables and other
commercial banks and their subsidiaries, obligations.
whether or not the parent financial
intermediaries have equity investments in the § 4391Q.1 Yield on purchase of
enterprise, shall, in any case, remain a receivables. The rate of yield, including
minority in that enterprise, except as may be commissions, premiums, fees and other
otherwise approved by the President of the charges from the purchase of receivables and
Philippines. Non-allied enterprises are those other obligations, regardless of maturity, that
allowed for expanded commercial banks in may be charged or received by NBQBs shall
the Manual of Regulations for Banks. not be subject to any regulatory ceiling.
Equity investments as of April 1, 1980, Receivables and other obligations
which exceed the limitation under this shall include claims collectible in money of
Section, may be retained but shall not be any amount and maturity from domestic and
increased percentage-wise, and whenever foreign sources. The Monetary Board shall
reduced, shall not thereafter be increased determine in doubtful cases whether a
beyond the prescribed limitation. particular claim is included within said phrase.

Part III - Page 20
§§ 4391Q.2 - 4394Q.1
03.12.31
§ 4391Q.2 Purchase of commercial in debt securities and marketable equity

paper. Before purchasing registered securities shall be in accordance with the
commercial paper, NBQBs shall: guidelines in Appendices Q-20 and Q-20-a.
a. Require the issuing entity to submit Delay or non-submission of the
a duly certified true copy of its Certificate of Operations Manual as required under
Registration and Authority to Issue Appendix Q-20 shall be subject to a penalty
Commercial Paper; and of P500 per business day.
b. Ascertain that the registration
number and expiry date indicated in the Sec. 4392Q Reverse Repurchase
commercial paper are the same as those in Agreements with the Bangko Sentral
the Certificate of Registration submitted. Reverse repurchase agreements may be
No NBQB shall sell, discount, assign, effected with the BSP under its open market
negotiate, in whole or in part such as thru operations, subject to the terms and
syndications, participations and other similar conditions in Subsec. 4602Q.1.
arrangements, any note, receivable, loan,
debt instrument and any type of financial Sec. 4393Q (Reserved)
asset or claim, except government securities,
on a without recourse basis, or be a party in Sec. 4394Q Acquired Assets in Settlement
any capacity in any such transactions on a of Loans. The following rules shall govern
without recourse basis, unless such assets acquired in settlement of loans.
receivable, note, loan, debt instrument and
financial asset or claim is registered with the § 4394Q.1 Booking. The property
SEC. This prohibition includes transactions acquired in settlement of loans through
between an investment house and its trust foreclosure or dation in payment shall be
department. recorded at the balance of the loan (principal
Unregistered commercial papers may plus booked accrued interest receivable for
be sold, discounted, assigned or negotiated time loans, or principal less unamortized
by NBQBs to other financial intermediaries income for bills discounted) or bid/purchase
with quasi-banking functions. price, whichever is lower: Provided, That
Any violation of the above rules and where the booked amount of the Real and
regulations shall be subject to any or all of Other Properties Owned or Acquired
the following sanctions: (ROPOA). exceeds the appraised value of the
a. Suspension of quasi-banking acquired property, an allowance for probable
authority for a period of six (6) months; and losses equivalent to the excess of the amount
b. Monetary penalty of P500 per day booked over the appraised value shall be set
per transaction for each and every officer of up.
the NBQB involved in any capacity in any Non-refundable capital gains tax and
transaction violative of these regulations. documentary stamp tax paid in connection
with foreclosure/purchase of the acquired
§ 4391Q.3 Investments in debt and real estate property may be included in the
marketable equity securities. The book value of the acquired real estate:
classification, accounting procedures, Provided, That the total book value does not
valuation, sales and transfers of investments exceed the appraised value of the acquired

Part III - Page 21
§§ 4394Q.1 - 4394Q.2
03.12.31
real estate: Provided, further, That if the c. Non-cash payment for interest.
amount to be booked as ROPOA exceeds P5 Quasi-banks which accept non-cash
million, the appraisal of the foreclosed/ payments for interest on their borrowers’
purchased asset shall be conducted by an loans shall defer recognition of income by
independent appraiser acceptable to the BSP. virtue of such payments until such time that
Any excess of loan balance over the the property is sold. The ROPOA account
amount booked shall be debited to shall be debited for the non-cash payment
“Miscellaneous Income/Loss” account. received subject to the rules governing the
Claims arising from deficiency judgments booking of ROPOA. The accrued interest
rendered in connection with the foreclosure already booked shall be reversed but there
of mortgaged properties shall be lodged shall be no reversal of corresponding
under the real account “Deficiency Judgment valuation reserves, if there are any. Pending
Receivable”. While probable claims against the creation of a more appropriate account
the borrower-debtor arising from the in the Manual of Accounts for Non-Banks,
foreclosure of mortgaged properties shall be the account “Other Deferred Credits” may
lodged under the contingent account be credited for non-cash payment
“Deficiency Claims Receivable”. corresponding to interest not yet accrued in
a. Booked valuation reserves while the the books.
account is in the non-performing portfolio.
The amount of allowance for probable losses § 4394Q.2 Sales contract receivable
already booked while the account is still in This represents the balance of the selling
the non-performing portfolio shall be used price of assets owned and/or acquired under
to cover required valuation reserves for other a plan of settlement, whereby the title to said
accounts, if there are any, and if there is none, assets is transferred only to the buyer upon
it may, subject to approval by the appropriate full payment of the agreed selling price.
supervising and examining department of the Sales contract receivables which meet all
BSP, be credited to income: Provided, That the requirements/conditions enumerated
the appraised value of the acquired property below are hereby considered performing
is not lower than the amount booked as assets and therefore, not subject to
ROPOA. classification:
b. Appraisal of properties to be a. That there has been a down-payment
foreclosed or acquired. Before foreclosing or of at least twenty percent (20%) of the agreed
acquiring any property in settlement of loans selling price or in the absence thereof, the
and other advances, it must be properly installment payments on the principal had
appraised to determine its true economic already amounted to at least twenty percent
value. If the total amount to be booked as (20%) of the agreed selling price;
ROPOA exceeds P5 million, the appraisal b. That payment of the principal must
must be conducted by an independent be in equal installments or in diminishing
appraiser acceptable to the BSP. An in-house amounts and with maximum intervals of one
appraisal of such property shall be made at (1) year;
least every other year: Provided, That c. That any grace period in the payment
immediate re-appraisal shall be conducted on of principal shall not be more than two (2)
ROPOAs which materially decline in value. years; and

Part III - Page 22
§§ 4394Q.2 - 4399Q
04.12.31
d. That there is no installment payment transfer/sale of non-performing assets (NPAs)

in arrear either on principal or interest. to a Special Purpose Vehicle (SPV) or to an
Provided, That a “Sales Contract Receivable” individual that involves a single family
account shall be automatically classified residential unit, or transactions involving
“Substandard” and considered non- dacion en pago by the borrower or third party
performing in case of non-payment of any of a non-performing loan (NPL), for the
amortization due: Provided, further, That a purpose of obtaining the Certificate of
“Sales Contract Receivable” which has been Eligibility (COE) which is required to avail of
classified “Substandard” and considered the incentives provided under R.A. No. 9182
non-performing due to non-payment of any are presented in Appendix Q-28.
amortization due may only be upgraded/ The accounting guidelines on the sale of
restored to unclassified and/or performing NPAs to SPVs and to qualified individuals
status after a satisfactory track record of at for housing under the SPV Act of 2002 are
least three (3) consecutive payments of the presented in Appendix Q-28-a.
required amortization of principal and/or
interest has been established.
Sec. 4395Q (Reserved)
Sec. 4399Q General Provision on Sanctions
K. MISCELLANEOUS PROVISIONS Unless otherwise provided for, any violation
of the provisions of this Part shall be subject
Sec. 4396Q Transfer/Sale of Non-Performing to Sections 36 and 37 of R.A. No. 7653.
Assets to A Special Purpose Vehicle or to An
Individual. The procedures governing the

Part III - Page 23
§§ 4401Q - 4403Q
96.12.31
PART FOUR
TRUST, OTHER FIDUCIARY BUSINESS
AND INVESTMENT MANAGEMENT ACTIVITIES
Section 4401Q Statement of Principles terms are defined in Sec. 4403Q) of non-bank
The cardinal principle common to all trust financial institutions (e.g., investment houses
and other fiduciary relationships is fidelity. and trust corporations) allowed by law to
Policies predicated upon this principle are perform such operations.
directed towards confidentiality, scrupulous The regulations are divided into three
care, safety and prudent management of (3) Sub-Parts where:
property including reasonable probability of A. Trust and Other Fiduciary Business
income with proper accounting and shall apply to institutions authorized to
appropriate reporting thereon. Practices are engage in trust and other fiduciary business
designed to promote efficiency in including investment management activities;
administration and operation; to adhere and B. Investment Management Activities
conform with the terms of the instrument or shall apply to institutions without trust
contract; and to maintain absolute separation authority but engaged in investment
of property free from any intrusion of conflict management activities; and
of interest. C. General Provisions shall apply to
An institution incorporated or both.
authorized to engage in trust and fiduciary
business is under no obligation, either legal Sec. 4403Q Definitions. For purposes of
or moral, to accept any such business being regulating the operations of trust and other
offered nor has it the right to accept if the fiduciary business and investment
same is contrary to law, rules, regulations, management activities, unless the context
public order and public policy. It shall clearly connotes otherwise, the following
advertise its services in a dignified manner shall have the meaning indicated.
and enter such business only when demand a. Trust business shall refer to any
for such service is evident, when specially activity resulting from a trustor-trustee
equipped to render such service and upon relationship (trusteeship) involving the
full appreciation of the responsibilities appointment of a trustee by a trustor for the
involved. It shall be ready and willing to give administration, holding, management of
full disclosure of the services being offered funds and/or properties of the trustor by the
and shall conduct its dealing with trustee for the use, benefit or advantage of
transparency. Harmonious relationship shall the trustor or of others called beneficiaries.
likewise be pursued with other professions b. Other fiduciary business shall refer
to achieve the common goal of mutual to any activity of trust-licensed institutions
service to the public and protection of its resulting from a contract or agreement
interest. whereby the institution binds itself to render
services or to act in a representative capacity
Sec. 4402Q Scope of Regulations. These such as in an agency, guardianship,
regulations shall govern the grant of authority administratorship of wills, properties and
to and the management, administration and estates, executorship, receivership and other
conduct of trust, other fiduciary business and similar services which do not create or result
investment management activities (as these in a trusteeship. It shall exclude collecting

Part IV - Page 1
§ 4403Q
96.12.31
or paying agency arrangements and similar k. Principal shall refer to the person
fiduciary services which are inherent in the who grants authority to another person called
use of the facilities of the other operating an agent, under a contract to enter into
departments of such institution. Investment transactions in his behalf.
management activities, which are considered l. Agent shall refer to a person who
as among other fiduciary business, shall be acts in representation or on behalf of another
separately defined in the succeeding item to person with the latter's authority.
highlight its being a major source of fiduciary m. Trust Department shall refer to the
business. department, office, unit, group, division or
c. Investment management activity any aggrupation which carries out the trust
shall refer to any activity resulting from a and other fiduciary business of an institution.
contract or agreement primarily for financial n. Trust Officer shall refer to the
return whereby the institution (the investment designated head or officer-in-charge of the
manager) binds itself to handle or manage trust department.
investible funds or any investment portfolio o. Trust account shall refer to an
in a representative capacity as financial or account where transactions arising from a
managing agent, adviser, consultant or trusteeship are kept and recorded.
administrator of financial or investment p. Common Trust Fund (CTF) shall
management, advisory, consultancy or any refer to a fund maintained by an institution
similar arrangement which does not create authorized to perform trust functions under
or result in a trusteeship. a written and formally established plan,
d. Trust is a relationship or an exclusively for the collective investment and
arrangement whereby a person called a reinvestment of certain money representing
trustee is appointed by a person called a participations in the plan received by it in its
trustor to administer, hold and manage funds capacity as the trustee.
and/or property of the trustor for the benefit q. Fiduciary account shall refer to an
of a beneficiary. account where transactions arising from any
e. Trust agreement is an instrument of the other fiduciary businesses are kept and
in writing covering the terms and conditions recorded.
of the trust. r. Investment Manager shall refer to
f. Trustee is any person who holds any person or entity engaged in investment
legal title to the funds and/or property of a management activities as herein defined.
trust. s. Investment Management Department
g. Trustor is any person who creates shall refer to the department, unit, group,
a trust. division or any aggrupation which carries out
h. Beneficiary is any person for whose the investment management activities of an
benefit a trust is created. institution that does not have an authority to
i. Fiduciary shall refer to any person engage in trust and other fiduciary business.
or entity engaged in any of the other fiduciary t. Investment Management Officer
business as herein defined where no trustor- shall refer to the designated head or officer-
trustee relation exists. in-charge of the investment management
j. Agency shall refer to a contract department of an institution which does not
whereby a person binds himself to render have the authority to engage in trust and other
some service or to do something in fiduciary business.
representation or on behalf of another, with u. Investment management account
the consent or authority of the latter. shall refer to an account where transactions

Part IV - Page 2
§§ 4403Q - 4404Q.1
02.12.31
arising from investment management with its business title, the words trust, trust
activities are kept and recorded. corporation, trust company, trust plan or
words of similar import, without having
obtained the required authority to do so.
A. TRUST AND OTHER FIDUCIARY Starting year 2001, investment houses
BUSINESS authorized to engage in trust and other
fiduciary business shall renew their existing
Sec. 4404Q Authority to Perform Trust and licenses yearly, subject to the implementing
Other Fiduciary Business. With prior guidelines to be issued thereon.
approval of the Monetary Board, trust
corporations and investment houses may § 4404Q.1 Prerequisites for engaging
engage in trust and other fiduciary business in trust and other fiduciary business. An
under Chapter IX of R.A. No. 8791, as institution, before it may engage in trust and
amended and Section 7 of P.D. No. 129, as other fiduciary business, shall comply with
amended. the following requirements:
Entities whose articles of incorporation a. The applicant has combined capital
or any amendments thereto, include the accounts of not less than P250 million or such
purpose or power to engage in trust and other amount as may be required by the Monetary
fiduciary business, shall secure the prior Board or other regulatory agency. For this
favorable recommendation of the Monetary purpose, combined capital accounts shall
Board pursuant to Section 17 of the have the same meaning as in Sec. 4106Q;
Corporation Code. b. The applicant has been duly
If an entity is found to be engaged in licensed or incorporated as a financial
unauthorized trust and other fiduciary institution by the appropriate government
business and/or investment management agency or created by special law or charter;
activities, whether as its primary, secondary c. The articles of incorporation or
or incidental business, the Monetary Board charter of the institution shall include among
may impose administrative sanctions against its powers or purposes, acting as trustee or
such entity or its principal officers and/or administering any trust or holding property
majority stockholders or proceed against in trust or on deposit for the use, or in behoof
them in accordance with law. of others;
The Monetary Board may take such d. The by-laws of the institution shall
action as it may deem proper such as, but include, among other things, provisions on
may not be limited to, requiring the transfer the following:
or turnover of any trust and other fiduciary (1) The organization plan or structure
and/or investment management account to of the department, office, or unit which shall
duly incorporated and licensed entities of the conduct the trust and other fiduciary
choice of the trustor, beneficiary or client, as business;
the case may be. (2) The creation of a trust committee,
No entity shall advertise or represent the appointment of a trust officer and subordi-
itself as being engaged in trust and other nate officers of the trust department; and
fiduciary business or in investment (3) A clear definition of the duties and
management activities or represent itself as responsibilities as well as the line and staff
trustee or investment manager or use words functional relationships of the various units,
of similar import and/or use in connection officers and staff within the organization.

Part IV - Page 3
§§ 4404Q.1 - 4404Q.2
02.12.31
e. Where the applicant is authorized (9) It has shown substantial compliance

to engage in quasi-banking functions, it shall with other pertinent laws, rules and
also meet the following additional regulations, policies and instructions of the
requirements: BSP and it has not been cited for serious
(1) Its operations during the year violations or exceptions affecting its solvency,
immediately preceding the filing of the liquidity and profitability.
application have been profitable, i.e., its rate Where the applicant is not authorized
of return on equity is at least ten percent to engage in quasi-banking functions:
(10%); (i) The adoption of a formula or criteria
(2) It has continuously complied with for NBQBs in the determination of
its net worth-to-risk assets ratio, liquidity floor compliance with the capital-to-risk assets
and ceilings on DOSRI loans during the last ratio and ceilings on loans to DOSRI; and
six (6) months immediately preceding the (ii) The substitution of the reserve and
date of application; liquidity floor requirements with the cash
(3) It has not incurred net weekly ratio, as follows:
reserve deficiency against deposit substitutes (a) Primary reserves to Bills Payable;
during the last six (6) months immediately and
preceding the date of application; (b) Primary and secondary reserves to
(4) The ratio of its total non-performing Bills Payable;
loans to its gross loan portfolio as of the date where primary reserves consist of cash on
of filing of application does not exceed the hand, cash in vault, checks and other cash
industry average as of the end of the quarter items, due from the BSP and due from banks;
immediately preceding the date of and where secondary reserves consist of BSP-
application; supported government securities, treasury
(5) It does not have any past due bills and other government securities.
obligation with the BSP or with any Compliance with the foregoing, as well
government or non-government financial as with other requirements under existing
institution; regulations, shall be maintained up to the
(6) It has not engaged in unsafe and time the trust license is granted. An
unsound practice/s during the year imme- applicant that fails in this respect shall be
diately preceding the date of application; required to show compliance for another test
(7) It has corrected as of the date of period of the same duration.
application the violations noted in its latest
examination related to the single borrower’s § 4404Q.2 Pre-operating requirements
loan limit and all other ceilings prescribed An institution authorized to engage in trust
by the BSP; and other fiduciary business shall, before
(8) It does not have float items engaging in actual operations, submit to the
outstanding for more than sixty (60) calendar BSP the following:
days in the “Due From/To Head Office/ a. Government securities acceptable
Branches” accounts and the “Due from to the BSP amounting to P500,000 as
Bangko Sentral” account exceeding one minimum basic security deposit for the
percent (1%) of its total resources as of the faithful performance of trust and other
end of the month immediately preceding the fiduciary duties required under Subsec.
date of application; and 4405Q.1;

Part IV - Page 4
§§ 4404Q.2 - 4405Q.2
02.12.31
b. Organization chart of the trust not utilized for any other purpose: Provided,
department which shall carry out the trust and further, That such securities shall have
other fiduciary business of the institution; and remaining maturities of not more than three
c. Names and positions of individuals (3) years from the date of deposit with the
designated as chairman and members of the BSP;
trust committee, trust officer and other b. NDC Agri-Agra ERAP Bonds,
subordinate officers of the trust department regardless of remaining maturities;
with their respective bio-data and statement c. Five (5)- and Ten (10)-year Special
of duties and responsibilities. Purpose Treasury Bonds (SPTBs) provided
such bonds shall not be hypothecated in any
Sec. 4405Q Security for the Faithful way or earmarked for any other purpose and
Performance of Trust and Other Fiduciary they meet the three (3)-year remaining
Business maturity requirement to ensure that such
bonds are liquid;
§ 4405Q.1 Basic security deposit. An d. Securities backed by the unreleased
institution authorized to engage in trust and Internal Revenue Allotments (IRA) of local
other fiduciary business shall deposit with the government units (issued by a Special
BSP eligible government securities as security Purpose Trust administered by the DBP under
for the faithful performance of its trust and the IRA Monetization Program of the Union
other fiduciary duties equivalent to at least of Local Authorities of the Philippines) the
one percent (1%) of the book value of the release of which IRA on scheduled date of
total volume of trust, other fiduciary and payment has been certified by the DBM as
investment management assets: Provided, not being subject to any conditionalities:
That at no time shall such deposit be less than Provided, That such securities shall be
P500,000. eligible only to the extent of the present value
Scripless securities under Registry of of the bond computed using the original yield
Scripless Securities (RoSS) system of the to maturity (as of auction/issue date):
Bureau of Treasury (BTr) may be used as basic Provided, further, That for reserve for trust
security deposit for trust duties using the and other fiduciary duties, the remaining
guidelines in Appendix Q-21. maturities of the securities shall not exceed
three (3) years; and
§ 4405Q.2 Eligible securities e. Zero Coupon Bond Issue by the
Government securities which shall be HGC of up to P7.0 billion five (5)-year regular
deposited in compliance with the above basic series and up to P3.0 billion seven (7)-year
security deposit shall consist of: special series to finance its guaranty servicing
a. Evidences of indebtedness of the of socialized and low-cost housing projects:
Republic of the Philippines and of the BSP Provided, That they meet the three (3)-year
and any other evidences of indebtedness or remaining maturity requirement to ensure
obligations the servicing and repayment of that such bonds are liquid: Provided, further,
which are fully guaranteed by the Republic That such bonds shall qualify as eligible
of the Philippines; and such other kinds of reserve for trust and other fiduciary duties
securities which may be declared eligible by only to the extent of the present value of the
the Monetary Board: Provided, That such bond computed using the original yield to
securities shall be free, unencumbered, and maturity (as of auction/issue date).

Part IV - Page 5
§§ 4405Q.2 - 4405Q.5
04.12.31
f. Tobacco Excise Tax Receivable a. On the institution:

Monetization Program Investment (1) First offense - Penalty of P5,000 per
Certificates (TEXTR Certificates) backed by business day to be reckoned from thirty (30)
receivables representing the unreleased business days after the end of the reference
portion of the obligation of the National quarter; and
Government to its LGUs for their share of (2) Second and subsequent offenses -
the Tobacco Excise Taxes under R.A. No. Suspension of trust license.
7171 amounting to P1.85 billion and b. On the Head of the Trust and Fund
covering the years 2001 and 2002: Provided, Management Department:
That such securities shall be eligible only to (1) First offense - Reprimand with a
the extent of the present value of the stern warning that subsequent violations will
securities computed using the original yield be subjected to more severe sanctions; and
to maturity as of auction/issue date. (2) Subsequent offenses - Suspension
for ninety (90) days without pay.
§ 4405Q.3 Valuation of securities and
basis of computation of the basic security § 4405Q.5 Reserves against peso-
deposit requirement. For purposes of denominated Common Trust Funds (CTFs)
determining compliance with the basic and Trust and Other Fiduciary Accounts
security deposit under this Section, the (TOFA) - Others
amount of securities so deposited shall be a. Reserves against peso-denominated
based on their book value, that is, cost as CTFs. In addition to the basic security
increased or decreased by the corresponding deposit, an institution authorized to engage
discount or premium amortization. in trust and other fiduciary business shall
The base amount for the basic security maintain reserves on -
deposit shall be the average of the month- (1) peso-denominated CTF; and
end balances of total trust, investment (2) such other managed peso funds
management and other fiduciary assets of the which partake the nature of collective
immediately preceding calendar quarter. investment of a peso-denominated CTF as
may be indicated by the presence of the
§ 4405Q.4 Compliance period; following features :
sanctions. The trustee or fiduciary shall have (a) The funds are composed of
thirty (30) business days after the end of every contributions from two (2) or more investors;
calendar quarter within which to deposit with (b) The funds are managed/administered
the BSP securities required under this as a vehicle for collective investment and
Section. In case an institution fails to comply reinvestment;
with the basic security deposit, the Monetary (c) The trustee/administrator/agent has
Board may require the institution to desist the exclusive management and control over
from accepting new trust and other fiduciary the funds and the sole right at any time to
accounts and from renewing expiring trust sell, convert, invest, exchange, transfer or
and other fiduciary contracts. otherwise change or dispose of the assets
The following sanctions shall be comprising the funds; and
imposed for any deficiency in the basic (d) Investments/contributions to, or
security deposit for the faithful performance withdrawals from, the funds are being allowed
of trust and other fiduciary business: at anytime or as of a fixed date in the future,

Part IV - Page 6
§§ 4405Q.5 - 4405Q.6
04.12.31
and/or the income, net of all expenses The reserves to be maintained shall be
incurred in the management of the fund plus as follows:
the fee of the trustee/administrator/agent, are (i) Regular reserves 6%
being distributed among the participants of (ii) Liquidity reserves 10%1
the funds, without the need to liquidate all The liquidity reserves may be held in the
assets of the funds. form of:
The reserves to be maintained shall be (i) Short-term market-yielding government
as follows: securities purchased directly from the BSP-
(i) Regular reserves 6% Treasury Department;
(ii) Liquidity reserves 10%1 (ii) NDC Agri-Agra ERAP Bonds,
The liquidity reserves may be held in regardless of maturity; and
the form of: (iii) PEACe bonds only to the extent of
(i) Short-term market-yielding the original gross issue proceeds determined
government securities purchased directly at the time of the auction, plus capitalized
from the BSP-Treasury Department; interest on the underlying zero-coupon
(ii) NDC Agri-Agra ERAP Bonds, Treasury Notes as and when the
regardless of maturity; and corresponding interest is earned over the life
(iii) Poverty Eradication and Alleviation of the bonds.
Certificates (PEACe) bonds only to the extent The reserves on TOFA-Others shall be
of the original gross issue proceeds provided by the institution out of said funds.
determined at the time of the auction, plus
capitalized interest on the underlying zero- § 4405Q.6 Composition of reserves
coupon Treasury Notes as and when the a. The provisions of Subsec. 4246Q.1
corresponding interest is earned over the life shall govern the composition of reserves
of the bonds. against peso-denominated CTFs and such
The reserves on peso-denominated other managed peso funds as well as TOFA-
CTFs and such other managed peso funds Others of institutions authorized to engage
shall be provided by the institution out of in trust and other fiduciary business.
said funds. For purposes of this Subsection, a
b. Reserves against TOFA-Others. In special deposit account shall be maintained
addition to the basic security deposit, an by the institutions with the BSP exclusively
institution authorized to engage in trust and for trust reserves which deposits up to forty
other fiduciary business shall maintain percent (40%) of the required reserves against
reserves on TOFA-Others, except accounts peso-denominated CTFs and such other
held under (1) Administratorship; (2) Bond managed peso funds (less the percentage
Issues/Other Obligations Under Deed of allowed to be maintained in the form of short-
Trust or Mortgage; (3) Custodianship and term market-yielding government securities),
Safekeeping; (4) Depository and as well as the required reserves against TOFA-
Reorganization; (5) Employee Benefit Plans Others (less the percentage allowed to be
Under Trust; (6) Escrow; (7) Personal Trust maintained in the form of short-term market-
(testamentary and living trust); (8) yielding government securities), shall be paid
Executorship; (9) Guardianship; (10) Life interest at four percent (4%) per annum,
Insurance Trust; and (11) Pre-need Plans based on the average daily balance of said
(institutional/ individual). deposits to be credited quarterly.
____________________
1
Under MAB dated 12.29.04, regular reserve and liquidity reserve rates shall be 9% and 10%, respectively, effective the reserve
week starting 07 January 2005.

Part IV - Page 7
§§ 4405Q.6 - 4406Q.1
04.12.31
Likewise, institutions may also maintain non-business days and days where there is
a special demand deposit account with local no clearing, shall apply thereon. For the
banks exclusively for trust duties. purpose of computing reserve position, the
Effective July 1, 2003, published interest principal office in the Philippines and all
rates that will be applied on BSP’s Special branches and agencies located therein shall
Deposit Accounts of quasi-banks shall be be treated as a single unit.
inclusive of the ten percent (10%) Value The required reserves in the current
Added Tax (VAT). period (reference reserve week) shall be
b. The portion of reserves that may be computed based on the corresponding levels
maintained in the form of short-term market- of peso-denominated CTFs and such other
yielding government securities refers to managed peso funds, as well as TOFA-
government securities shall be purchased Others of the prior week.
directly from the BSP Treasury Department
at one-half percent (1/2%) below the § 4405Q.8 Reserve deficiencies;
prevailing market rate for an equivalent term sanctions. The provisions of Subsec.
and volume and subject to BSP's firm 4246Q.3 shall govern the computation of
commitment to buy back at any time at reserve deficiencies for peso-denominated
prevailing market rates. Such reserves in the CTFs and such other managed peso funds,
form of short-term market-yielding as well as for TOFA-Others, of institutions
government securities shall be in addition authorized to engage in trust and other
to other forms of eligible reserves such as fiduciary business, including the sanctions
cash in vault or on deposit with the BSP. provided in said Subsection.
All purchases of said government
securities shall be under the RoSS system of § 4405Q.9 Report of compliance
the BTr. Transactions covering said securities Every institution shall make a weekly report
shall be recorded in accordance with the to the BSP of its daily required and available
guidelines in Appendix Q-21. reserves on peso-denominated CTFs and
such other managed peso funds, as well as
§ 4405Q.7 Computation of reserve on TOFA-Others, to be submitted not later
position. An institution authorized to engage than the close of the third business day
in trust and other fiduciary business shall following the reference week.
calculate daily the required and available
reserves on the value per books of its peso- Sec. 4406Q Organization and Management
denominated CTFs and such other managed
peso funds, as well as on TOFA-Others, § 4406Q.1 Organization. An institution
based on the seven-day week, starting Friday authorized to engage in trust and other
and ending Thursday including Saturdays, fiduciary business shall, pursuant to Subsec.
Sundays, holidays, non-business days and 4404Q.1, include in its by-laws, provisions
days when there is no clearing: Provided, on the organization plan or structure of the
That with reference to holidays, non-business department, office or unit which shall
days and days where there is no clearing, conduct such business. The by-laws shall also
the reserve position at the close of business include provisions on the creation of a trust
day immediately preceding such holidays, committee, the appointment of a trust officer

Part IV - Page 8
§§ 4406Q.1 - 4406Q.2
04.12.31
and other subordinate officers and a clear shall, in turn, be only directly responsible to
definition of their duties and responsibilities the institution's board of directors.
as well as their line and staff functional No director, officer or employee taking
relationships within the organization which part in the management of trust and other
shall be in accordance with the following fiduciary accounts shall perform duties in
guidelines. other departments or the audit committee of
a. Trust and other fiduciary business the institution and vice versa. However,
of an institution shall be carried out branch managers duly authorized by the
through a trust department which shall be board of directors may, for or on behalf of
organizationally, operationally, the officer, sign predrawn trust instruments
administratively and functionally separate such as CTFs.
and distinct from the other departments c. The organization structure and
and/or businesses of the institution. definition of duties and responsibilities of the
An institution which is also engaged in trust committee, officers and employees of
investment management activities shall the trust department shall reflect adherence
conduct the same only through its trust to the minimum internal control standards
department and the responsibilities of the prescribed by the BSP.
board of directors, trust committee and trust d. Provisions shall be made by the
officer shall be construed to include the institution to have legal assistance readily
proper administration and management of available in the review of proposed and/or
investment management activities. existing trust and fiduciary agreements and
No institution shall undertake any of the documents and in the handling of legal and
trust and other fiduciary business and, tax matters related thereto.
whenever applicable, investment
management activities outside the direct § 4406Q.2 Composition of trust
control, authority and management of the committee. The trust committee shall be
trust department or through any department composed of at least five (5) members
or office which is involved in the other including the president, the trust officer and
businesses of the institution, such as the directors who are appointed by the board of
Treasury, Funds Management or any similar directors on a regular rotation basis and who
department; otherwise, any such business are not officers of the institution proper. No
shall be considered part of the institution's member of the audit committee, if the
real liabilities. institution has any, shall be concurrently
The institution proper and the trust designated as a member of the trust
department may share the following committee: Provided, That in the case of a
activities: (1) electronic data processing; (2) trust committee composed of more than five
credit investigation; (3) collateral appraisal; (5) members, the appointment therein of an
and (4) messengerial, janitorial and security operating officer may be allowed only if the
services. required balance in the membership of at
b. The trust department, trust officer least three (3) members of the board for every
and other subordinate officers of the trust operating officer shall be maintained.
department shall only be directly responsible For purposes of this Subsection, the term
to the institution's trust committee which officer shall include the president, executive

Part IV - Page 8a
§§ 4406Q.2 - 4406Q.4
04.12.31
vice president, general manager, corporate for directors and officers of financial
secretary, treasurer and others mentioned as institutions, possess the necessary technical
officers of the institution, or those whose expertise in such business: Provided, That
duties as such are defined in the by-laws, or trust officers who shall be appointed shall
are generally known to be officers of the have at least two (2) years of actual
institution (or any of its branches and offices experience or training in trust operations.
other than the Head Office) either through
announcement, representation, publication § 4406Q.4 Responsibilities of
or any kind of communication made by the administration
institution. a. Board of Directors. The board of
The board of directors shall duly note directors is responsible for the proper
in the minutes the committee members and administration and management of trust and
designate the chairman who shall be one of other fiduciary business. Funds and
the directors referred to above. properties held in trust or in any fiduciary
capacity shall be administered with the skill,
§ 4406Q.3 Qualifications of committee care, prudence and diligence necessary
members, officers and staff. The institution's under the circumstances then prevailing that
trust department shall be staffed by persons a prudent man, acting in like capacity and
of competence, integrity and honesty. familiar with such matters, would exercise
Directors, committee members and officers in the conduct of an enterprise of like
charged with the administration of trust and character and with similar aims.
other fiduciary activities shall, in addition to The responsibilities of the board of
meeting the qualification standards prescribed directors shall include, but need not be
(Next page is Part IV - Page 9)

Part IV - Page 8b
§§ 4406Q.4
96.12.31
limited to, the following: officers and staff of the institution with
(1) It shall determine and formulate appropriate training programs in the
general policies and guidelines on the: (a) administration and operation of all phases
acceptance, termination, or closure of trust of trust and other fiduciary business.
and other fiduciary accounts; (b) proper The board of directors may, by action
administration and management of each trust duly entered in the minutes, delegate its
and other fiduciary accounts; and (c) authority for the acceptance, termination,
investment, reinvestment and disposition of closure or management of trust and other
funds or property held in its capacity as fiduciary accounts to the trust committee or
trustee or fiduciary; to the trust officer, subject to certain
(2) It shall direct and review the guidelines approved by the board.
actions of the trust committee and all officers b. Trust Committee. The trust
and employees designated to manage the committee duly constituted and authorized
trust and other fiduciary accounts, especially by the board of directors shall act within the
accounts without specific agreements on sphere of authority which may be provided
investments or discretionary accounts; in the by-laws and/or as may be delegated
(3) It shall approve or confirm the by the board, such as, but not limited to, the
acceptance, termination or closure of all trust following:
and other fiduciary accounts and shall record (1) The acceptance and closing of trust
such in its minutes; and other fiduciary accounts;
(4) Upon the acceptance of an (2) The initial review of assets placed
account, it shall immediately review all non- under the trustee's or fiduciary's custody;
cash assets received for management. (3) The investment, reinvestment and
Likewise, it shall make a review of the trust disposition of funds or property;
and/or fiduciary assets at least once every (4) The review and approval of
twelve (12) months to determine the transactions between trust and/or fiduciary
advisability of retaining or disposing of such accounts; and
assets; (5) The review of trust and other
(5) It shall be responsible for taking fiduciary accounts at least once every twelve
appropriate action on the examination (12) months to determine the advisability of
reports of supervisory agencies, internal and/ retaining or disposing of the trust or fiduciary
or external auditors on the institution's trust assets, and/or whether the account is being
and other fiduciary business and recording managed in accordance with the instrument
such actions thereon in the minutes; creating the trust or other fiduciary
(6) It shall designate the members of relationship.
the trust committee, the trust officer and For this purpose, the trust committee
subordinate officers of the trust department shall meet whenever necessary and keep
and shall be responsible for requiring reports minutes of its actions and make periodic
from said committee and officers and reports thereon to the board.
recording its actions thereon in the minutes; c. Trust Officer. The trust officer
and designated by the board of directors as head
(7) It shall establish an appropriate of the Trust Department shall act and
staffing pattern and adopt operating budgets represent the institution in all trust and other
that shall enable the trust department to fiduciary matters within the sphere of his
effectively carry out its functions. It shall authority as may be provided in the by-laws
likewise be responsible for providing the or as may be delegated by the board. His

Part IV - Page 9
§§ 4406Q.4 - 4407Q
96.12.31
responsibilities shall include, but need not b. When the agreement or contract is
be limited to, the following: itself used as a certificate of indebtedness in
(1) The administration of trust and exchange for money placement from clients
other fiduciary accounts; and/or as the medium for confirming
(2) The implementation of policies placements and investment thereof;
and instructions of the board of directors and c. When the agreement or contract of
the trust committee; an account is accepted under the signature(s)
(3) The submission of reports on of those other than the trust officer or
matters which require the attention of the subordinate officer of the trust department
trust committee and the board of directors; or those authorized by the board of directors
(4) The maintenance of adequate to represent the trust officer;
books, records and files for each trust or d. Where there is a fixed rate or
other fiduciary account; and guaranty of interest, income or return in favor
(5) The maintenance of necessary of its client or beneficiary: Provided,
controls and measures to protect assets under however, That where funds are placed in
his custody and held in trust or other fixed income-generating investments, a
fiduciary capacity. quotation of income expectation or like
terms, shall neither be considered as
Sec. 4407Q Non-Trust, Non-Fiduciary and/ arrangements with a fixed rate nor a guaranty
or Non-Investment Management Activities of interest, income or return when the
The basic characteristic of trust, other agreement or indenture categorically states
fiduciary and investment management in bold letters that the quoted income
relationship is the absolute non-existence of expectation or like terms is neither assured
a debtor-creditor relationship, thus, there is nor guaranteed by the trustee or fiduciary and
no obligation on the part of the trustee, it does not, therefore, entitle the client to a
fiduciary or investment manager to fixed interest or return on his investments:
guarantee returns on the funds or properties Provided, further, That any of the following
regardless of the results of the investment. practices or practices similar and/or
The trustee, fiduciary or investment manager tantamount thereto shall be construed as
is entitled to fees/commissions which shall fixing or guaranteeing the rate of interest,
be stipulated and fixed in the contract or income or return:
indenture and the trustor or principal is (1) Issuance of certificates, side
entitled to all the funds or properties and agreements, letters of undertaking, or other
earnings less fees/commissions, losses and similar documents providing for fixed rates
other charges. Any agreement/arrangement or guaranteeing interest, income or return;
that does not conform to these shall not be (2) Paying trust earnings based on
considered as trust, other fiduciary or indicated or expected yield regardless of the
investment management relationship. actual investment results;
The following shall not constitute a (3) Increasing or reducing fees in order
trust, other fiduciary and/or investment to meet a quoted or expected yield; and
management relationship: (4) Entering into any arrangement,
a. When there is a preponderance scheme or practice which results in the
of purpose or of intent that the arrangement payment of fixed rates or yield on trust
creates or establishes a relationship other investments or in the payment of the
than a trust, fiduciary and/or investment indicated or expected yield regardless of the
management; actual investment results; and

Part IV - Page 10
§§ 4407Q - 4408Q
02.12.31
e. Where the risk or responsibility is b. The act or omission has resulted or

exclusively with the trustee, fiduciary or may result in material loss or damage or
investment manager in case of loss in the abnormal risk to the institution’s depositors,
investment of trust, fiduciary or investment creditors, investors, stockholders, or to the
management funds, when such loss is not due BSP, or to the public in general;
to the failure of the trustee or fiduciary to c. The act or omission has caused any
exercise the skill, care, prudence and undue injury, or has given unwarranted
diligence required by law. benefits, advantage or preference to the
Trust, other fiduciary and investment NBQB /trust entity or any party in the
management activities involving any of the discharge by the director or officer of his
foregoing which are accepted, renewed or duties and responsibilities through manifest
extended after October 16,1990 shall be partiality, evident bad faith or gross
reported as deposit substitutes and shall be inexcusable negligence; or
subject to the reserve requirement for deposit d. The act or omission involves entering
substitutes from the time of inception, without into any contract or transaction manifestly
prejudice to the imposition of the applicable and grossly disadvantageous to the NBQB/
sanctions provided for in Sections 36 and 37 trust entity, whether or not the director or
of R.A. No. 7653, and Sections 12 and 16 of officer profited or will profit thereby.
P.D. No. 129, as amended. The list of activities which may be
considered unsafe and unsound is shown in
Sec. 4408Q Unsafe and Unsound Practices Appendix Q-24.
Whether a particular activity may be In line with the statement of principles
considered as conducting business in an governing trust and other fiduciary business
unsafe or unsound manner, all relevant facts under Sec. 4401Q, the trustee, fiduciary or
must be considered. An analysis of the impact investment manager shall desist from the
thereof on the NBQB’s/trust entity’s operations following unsound practices:
and financial conditions must be undertaken, a. Entering in an arrangement whereby
including evaluation of capital position, asset the client is at the same time the borrower of
condition, management, earnings posture his own fund placement, or whereby the
and liquidity position. trustor or principal is a borrower of other
In determining whether a particular act trust, fiduciary or investment management
or omission, which is not otherwise funds belonging to the same family or
prohibited by any law, rule or regulation business group of such trustor or principal;
affecting NBQBs /trust entities, may be b. Granting loans or accommodations
deemed as conducting business in an unsafe to any trust committee member, officer and
or unsound manner, the Monetary Board, employee of the trust department except
upon report of the head of the supervising or where such loans are obtained by said
examining department based on findings in persons as members of an employee benefit
an examination or a complaint, shall consider fund of the trustee's own institution;
any of the following circumstances: c. Borrowing from, or selling trust, other
a. The act or omission has resulted or fiduciary and/or investment management
may result in material loss or damage, or assets to, the trust corporation or investment
abnormal risk or danger to the safety, stability, house proper to cover portfolio losses and/or
liquidity or solvency of the institution; to guarantee the return of principal or income;

Part IV - Page 11
§§ 4408Q - 4409Q.1
04.12.31
d. Granting new loans to any borrower All other provisions of Sections 30 and
who has a past due and/or classified loan 37 of R.A. No. 7653, whenever appropriate,
account with the institution itself or its trust shall also be applicable on the conduct of
department; and business in an unsafe or unsound manner.
e. Requiring clients to sign documents The imposition of the above sanctions is
in blank. without prejudice to the filing of appropriate
criminal charges against culpable persons as
§§ 4408Q.1 - 4408Q.8 (Reserved) provided in Sections 34, 35 and 36 of R.A.
No. 7653.
§ 4408Q.9 Sanctions. The Monetary
Board may, at its discretion and based on Sec. 4409Q Trust and Other Fiduciary
the seriousness and materiality of the acts or Business. The conduct of trust and other
omissions, impose any or all of the following fiduciary business shall be subject to the
sanctions provided under Section 37 of R.A. following regulations.
No. 7653 and Section 56 of R.A. No. 8791,
whenever an NBQB/trust entity conducts § 4409Q.1 Minimum documentary
business in an unsafe and unsound manner: requirements. Each trust or fiduciary account
a. Issue an order requiring the quasi- shall be covered by a written document
bank/trust entity to cease and desist from establishing such account, as follows:
conducting business in an unsafe and a. In the case of accounts created by
unsound manner and may further order that an order of the court or other competent
immediate action be taken to correct the authority, the written order of said court or
conditions resulting from such unsafe or authority.
unsound practice; b. In the case of accounts created by
b. Fines in amounts as may be corporations, business firms, organizations
determined by the Monetary Board to be or institutions, the voluntary written
appropriate, but in no case to exceed agreement or indenture entered into by the
P30,000 a day on a per transaction basis parties, accompanied by a copy of the board
taking into consideration the attendant resolution or other evidence authorizing the
circumstances, such as the gravity of the act establishment of, and designating the
or omission and the size of the quasi-bank/ signatories to, the trust or other fiduciary
trust entity, to be imposed on the quasi-bank/ account.
trust entity, their directors and/or responsible c. In the case of accounts created by
officers; individuals, the voluntary written agreement
c. Suspension of lending or foreign or indenture entered into by the parties.
exchange operations or authority to accept The voluntary written agreement or
new deposit substitutes and/or new trust indenture shall include the following
accounts or to make new investments; minimum provisions:
d. Suspension of responsible directors (1) Title or nature of contractual
and/or officers; agreement in noticeable print;
e. Revocation of quasi-banking license (2) Legal capacities, in noticeable print,
and/or trust authority; and/or of parties sought to be covered;
f. Receivership and liquidation under (3) Purposes and objectives;
Section 30 of R.A. No. 7653. (4) Funds and/or properties subject of
the arrangement;

Part IV - Page 12
§§ 4409Q.1 - 4409Q.3
04.12.31
(5) Distribution of the funds and/or b. Loans fully guaranteed by the

properties; Republic of the Philippines as to the payment
(6) Duties and powers of trustee or of principal and interest;
fiduciary; c. Loans fully secured by a hold-out
(7) Liabilities of the trustee or on, assignment or pledge of deposit
fiduciary; substitutes of the institution or deposits with
(8) Reports to the client; other banks, or mortgage and chattel
(9) Termination of contractual mortgage bonds issued by the trustee or
arrangement and, in appropriate cases, fiduciary; and
provision for successor-trustee or fiduciary; d. Loans fully secured by real estate
(10) The amount or rate of the or chattels in accordance with Section 78 of
compensation of trustee or fiduciary; R.A. No. 337, as amended, and subject to
(11) A statement in noticeable print to the requirements of Sections 75, 76 and 77
the effect that trust and other fiduciary of R.A. No. 337, as amended.
business are not covered by the PDIC and The specific directives required under
that losses, if any, shall be for the account of this Subsection shall consist of the following
the client; and information:
(12) Disclosure requirements for (1) The transaction to be entered into;
transactions requiring prior authority and/or (2) The borrower's name;
specific written investment directive from the (3) Amount involved; and
client, court of competent jurisdiction or (4) Collateral security(ies), if any.
other competent authority.
§ 4409Q.3 Transactions requiring
§ 4409Q.2 Lending and investment prior authority. A trustee or fiduciary shall
disposition. Assets received in trust or in not undertake any of the following
other fiduciary capacity shall be administered transactions for the account of a client, unless
in accordance with the terms of the prior to its execution, such transaction has
instrument creating the trust or other fiduciary been fully disclosed and specifically
relationship. authorized in writing by the client,
When a trustee or fiduciary is granted beneficiary, other party-in-interest, court of
discretionary powers in the investment competent jurisdiction or other competent
disposition of trust or other fiduciary funds authority:
and unless otherwise specifically enumerated a. Lend, sell, transfer or assign money
in the agreement or indenture and directed or property to any of the departments,
in writing by the client, court of competent directors, officers, stockholders or employees
jurisdiction or other competent authority, of the trustee or fiduciary, or relatives within
loans and investments of the fund shall be the first degree of consanguinity or affinity,
limited to: or the related interests of such directors,
a. Evidences of indebtedness of the officers and stockholders; or to any
Republic of the Philippines and of the BSP, corporation where the trustee or fiduciary
and any other evidences of indebtedness or owns at least fifty percent (50%) of the
obligations the servicing and repayment of subscribed capital or voting stock in its own
which are fully guaranteed by the Republic right and not a trustee nor in a representative
of the Philippines or loans against such capacity;
government securities;

Part IV - Page 12a
§ 4409Q.3
04.12.31
b. Purchase or acquire property or the first degree of consanguinity or

debt instruments from any of the affinity, or the related interest of such
departments, directors, officers, directors, officers and stockholders; or
stockholders, or employees of the from any corporation where the trustee
trustee or fiduciary, or relatives within or fiduciary owns at least fifty
(Next page is Part IV - Page 13)

Part IV - Page 12b
§§ 4409Q.3 - 4409Q.7
96.12.31
percent (50%) of the subscribed capital or § 4409Q.5 Funds awaiting investment

voting stock in its own right and not as trustee or distribution. Funds held by the trustee or
nor in a representative capacity; fiduciary awaiting investment or distribution
c. Invest in equities of, or in securities shall not be held uninvested or undistributed
underwritten by, the trustee or fiduciary or a any longer than is reasonable for the proper
corporation in which the trustee or fiduciary management of the account.
owns at least fifty percent (50%) of the
subscribed capital or voting stock in its own § 4409Q.6 Other applicable
right and not as trustee nor in a representative regulations on loans and investments. The
capacity; and loans and investments of trust and other
d. Sell, transfer, assign, or lend money fiduciary accounts shall be subject to
or property from one trust or fiduciary pertinent laws, rules and regulations for
account to another trust or fiduciary account banks and NBQBs that shall include, but need
except where the investment is in any of those not be limited to, the following:
enumerated in Items a to d of Subsec. a. Requirements of Sections 76 and
4409Q.2. 77 of R.A. No. 337, as amended;
Directors, officers, stockholders, and b. Provisions of Section 4(e) of the
their related interest covered by this New Rules on Registration of Short-Term
Subsection shall be those considered as such Commercial Papers and Section 7(f) of the
under existing regulations on loans to DOSRI New Rules on the Registration of Long-Term
in Part III - E of this Manual. The procedural Commercial Papers issued by the SEC
and reportorial requirements in said (Appendices Q-7 and Q-8).
regulations shall also apply. c. Criteria for past due accounts; and
The disclosure required under this d. Qualitative appraisal of loans,
Subsection shall consist of the following investments and other assets that may require
minimum information: provisions for probable losses in accordance
(1) The transactions to be entered into; with the criteria set in Appendix Q-10; and
(2) Identities of the parties involved in the corresponding allowance for probable
the transactions and their relationships (shall losses booked in accordance with the Manual
not apply to Item d of this Subsection); of Accounts for Trust and Other Fiduciary
(3) Amount involved; and Business and Investment Management
(4) Collateral security(ies), if any. Activities.
The above information shall be made
known to clients in a separate instrument or § 4409Q.7 Operating and accounting
in the very instrument creating the trust or methodology. Trust and other fiduciary
fiduciary relationship. accounts shall be operated and accounted
for in accordance with the following:
§ 4409Q.4 Ceilings on loans. Loans a. The trustee or fiduciary shall
funded by trust accounts shall be subject to administer, hold or manage the fund or
the single borrower's loan limit and DOSRI property in accordance with the instrument
ceilings imposed on NBQBs under Part III - A creating the trust or other fiduciary
and - E of this Manual. For purposes of relationship; and
determining compliance with said ceilings, b. Funds or property of each client
the total amount of said loans granted by the shall be accounted separately and distinctly
institution and its trust department to the same from those of other clients herein referred to
person, firm or corporation shall be as individual account accounting.
combined.

Part IV - Page 13
§§ 4409Q.8 - 4409Q.16
04.12.31
§§ 4409Q.8 - 4409Q.15 (Reserved) quasi-bank or is directly or indirectly the

registered or beneficial owner of more than
§ 4409Q.16 Qualification and ten percent (10%) of any class of its equity
accreditation of quasi-banks acting as trustee security.
on any mortgage or bond issuance by any e. Investment and management of the
municipality, government-owned or funds. A domestic quasi-bank designated as
controlled corporation, or any body politic trustee of a mortgage or bond issuance may
a. Applicability. Quasi-banks duly hold and manage, in accordance with the
accredited by the BSP may act as trustee on provisions of the trust indenture or
any mortgage or bond issued by any agreement, the proceeds of the mortgage or
municipality, government-owned or bond issuance and such assets and funds of
controlled corporation, or any body politic. the issuing municipality, corporation, or
b. Application for accreditation. A body politic as may be required to be
quasi-bank desiring to act as trustee on any delivered to the trustee under the Trust
mortgage or bond issued by any municipality, indenture/agreement, subject to the
government-owned or controlled following conditions/restrictions:
corporation, or any body politic shall file an (1) Pending the utilization of such funds
application for accreditation with the pursuant to the provisions of the trust
appropriate supervising and examining indenture/agreement, the same shall only be
department of SES. The application shall be (i) deposited in a bank authorized to accept
signed by the president or officer of deposits from the Government or
equivalent rank of the quasi-bank and shall government entities: Provided, That the
be accompanied by the following documents: depository bank is not a subsidiary or affiliate
(1) certified true copy of the resolution of the trustee quasi-bank, or (ii) invested in
of the institution’s board of directors peso-denominated treasury bills acquired/
authorizing the application; purchased from any securities dealer/entity,
(2) a certification signed by the president other than the trustee or any of its unit/
or officer of equivalent rank that the institution department, its subsidiary or affiliate.
has complied with all the qualification (2) Investments of funds constituting or
requirements for accreditation. forming part of the sinking fund created as
c. Qualification requirements. A quasi- the primary source for the payment of the
bank applying for accreditation to act as principal and interests due the mortgage or
trustee on any mortgage or bond issued by bonds shall also be limited to deposits in any
any municipality, government-owned or bank authorized to accept deposits from the
controlled corporation, or any body politic Government or government entities and
must comply with the requirements in investments in government securities that are
Appendix Q-31. consistent with such purpose which must be
d. Independence of the trustee. A quasi- acquired/ purchased from any securities
bank is prohibited from acting as trustee of a dealer/ entity, other than the trustee or any
mortgage or bond issuance if any elective or of its unit/department, its subsidiary or
appointive official of the LGU, government- affiliate.
owned or controlled corporation, or body f. Waiver of confidentiality. A quasi-
politic which issued said mortgage or bond bank designated as trustee of any mortgage
and/or his related interests own such number or bond issued by any municipality,
of shares of the quasi-bank that will allow him government-owned or controlled
or his related interests to elect at least one (1) corporation, or any body politic shall submit
member of the board of directors of such to the appropriate supervising and examining

Part IV - Page 14
§§ 4409Q.16 - 4410Q.1
04.12.31
department of SES a waiver of the (c) Revocation of the authority to act as

confidentiality of information under Sections trustees on any mortgage or bond issuance
2 and 3 of R.A. No. 1405, as amended, duly by any municipality, government-owned or
executed by the issuer of the mortgage or controlled corporations, or body politic.
bond in favor of the BSP. (3) Subsequent offense –
g. Reportorial requirements. A quasi- (a) Fine of up to P30,000 a day for the
bank authorized by the BSP to act as trustee institution for each violation reckoned from
of the proceeds of mortgage or bond issuance the date the violation was committed up to
of a municipality, government-owned or the date it was corrected;
controlled corporation, or body politic shall (b) Suspension or revocation of the trust
comply with reportorial requirements that license;
may be prescribed by the BSP. (c) Suspension for one hundred twenty
h. Applicability of the rules and (120) days without pay of the directors/
regulations on Trust, Other Fiduciary officers responsible for the violation.
Business and Investment Management
Activities. The provisions of the Rules and Sec. 4410Q Unit Investment Trust Funds/
Regulations on Trust, Other Fiduciary Common Trust Funds2. The following rules
Business and Investment Management and regulations shall govern the creation,
Activities not inconsistent with the provisions administration and investment/s of Unit
of this Subsection shall form part of these Investment Trust (UIT) Funds.
rules. The rules and regulations on Common
i. Sanctions. Without prejudice to the Trust Funds (CTFs) are in Appendix Q-32.
penal and administrative sanctions provided
for under Sections 36 and 37, respectively, § 4410Q.1 Definition
of the R.A. No. 7653, violation of any a. Unit Investment Trust Funds. Unit
provision of this Subsection shall be subject Investment Trust Funds are open-ended
to the following sanctions/penalties pooled trust funds denominated in pesos or
depending on the gravity of the offense: any acceptable currency, which are operated
(1) First offense – and administered by a trust entity and made
(a) Fine of up to P10,000 a day for the available by participation. The term Unit
institution for each violation reckoned from Investment Trust Fund is synonymous to
the date the violation was committed up to CTFs. As an open-ended fund, participation
the date it was corrected; and or redemption is allowed as often as stated
(b) Reprimand for the directors/ officers in its plan rules.
responsible for the violation. b. Trust entity. Any bank, investment
(2) Second offense – house or a stock corporation duly authorized
(a) Fine of up to P20,000 a day for the by the Monetary Board to engage in trust,
institution for each violation reckoned from investment management and fiduciary
the date the violation was business.
committed up to the date it was corrected; c. Board of directors. For this purpose,
(b) Suspension for ninety (90) days the term shall include a trust entity’s duly
without pay for directors/officers responsible constituted board of directors or its functional
for the violation; and oversight equivalent which shall include the
---------------------------------------------------------------------------
2
The regulations on common trust funds (CTFs) were relocated to Appendix Q-32. UIT Funds regulations took effect on 01
October 2004 (effectivity of Circular 447 dated 03 September 2004).

Part IV - Page 15
§§ 4410Q.1 - 4410Q.6
04.12.31
country head in the case of foreign c. All such participations shall be

institutions. pooled and invested as one (1) account
(referred to as collective investments).
§ 4410Q.2 Establishment of a Unit d. The beneficial interest of each
Investment Trust Fund. Any trust entity participation unit shall be determined under
authorized to perform trust functions may a unitized net asset value per unit (NAVPu)
establish, administer and maintain one (1) valuation methodology defined in the written
or more UIT Funds subject to applicable plan of the UIT Fund, and no participation
provisions under this Section. shall be admitted to, or redeemed from, the
fund except on the basis of such valuation.
§ 4410Q.3 Administration of a Unit To arrive at a fund’s NAVPu, the fund’s total
Investment Trust Fund. The trustee shall Net Assets is divided by the total outstanding
have exclusive management and control of units. Total Net Assets is a summation of the
each UIT Fund under its administration, and market value of each investment less fees,
the sole right at any time to sell, convert, taxes, and other qualified expenses, as
reinvest, exchange, transfer or otherwise defined under the plan rules.
change or dispose of the assets comprising
the fund: Provided, That no participant in a § 4410Q.6 Plan rules. Each UIT Fund
UIT Fund shall have or be deemed to have shall be established, administered and
any ownership or interest in any particular maintained in accordance with a written trust
account or investment in the UIT Fund but agreement drawn by the trustee, referred to
shall have only its proportionate beneficial as the “plan” which shall be approved by
interest in the fund as a whole. the board of directors of the trustee and a
copy of which shall be submitted to the BSP
§ 4410Q.4 Relationship of trustee with for approval prior to its implementation.
Unit Investment Trust Fund. A trustee The plan shall contain the following
administering a UIT Fund shall not have any minimum elements:
other relationship with such fund other than a. Title of the plan. This shall
its capacity as trustee of the UIT Fund: correspond to the product/brand name by
Provided, however, That a trustee which which the UIT Fund is proposed to be known
simultaneously administers other trust, and made available to its clients.
fiduciary or investment management funds b. Manner in which the fund is to be
may invest such funds in the trustee’s UIT operated. A statement of the fund’s
Fund, if allowed under a policy approved investment objectives and policies including
by the board of directors. limitations, if any.
c. Investment powers of the trustee
§ 4410Q.5 Operating and accounting with respect to the fund, including the
methodology. A UIT Fund shall be operated character and kind of investments, which
and accounted for in accordance with the may be purchased, by the fund. There must
following: be an unequivocal statement of the full
a. The total assets and accountabilities discretionary powers of the trustee as far as
of each fund shall be accounted for as a single the fund’s investments are concerned. These
account referred to as pooled-fund powers shall be limited only by the duly
accounting method. stated investment objective and policies of
b. Contributions to each fund by clients the fund.
shall always be through participation in units d. The unitized NAVPu valuation
of the fund and each unit shall have uniform methodology as prescribed under Subsec.
rights or privileges, as any other unit. 4410Q.5.d shall be employed.

Part IV - Page 16
§§ 4410Q.6 - 4410Q.7
04.12.31
e. Terms and conditions governing the Such special expense shall be payable to a
admission or redemption of units of third party covered by a separate contract
participation in the fund. If the frequency of and disclosed to participants. No other fees
admission or redemption is other than daily; shall be charged to the fund.
that is, any business day, the same should Marketing or other promotional related
be explicitly stated in the Plan rules: expenses shall be for the account of the
Provided, That the admission and redemption trustee and shall be presumed covered by
prices shall be based on the prevailing market the trust fee.
value of underlying investments at that time. j. Such other matters as may be
f. Aside from the regular audit necessary or proper to define clearly the
requirement applicable to all trust accounts, rights of participants in the UIT Fund. The
an external audit of each UIT Fund shall be provisions of the plan shall govern
conducted annually by an independent participation in the fund including the rights
auditor acceptable to the BSP and the results and benefits of persons having interest in
thereof made available to participants. The such participation, as beneficiaries or
external audit shall be conducted by the same otherwise. The Plan may be amended by a
external auditor engaged for the audit of the resolution of the Board of Directors of the
trust entity. trustee: Provided, however, That participants
g. Basis upon which the fund may be in the fund shall be immediately notified of
terminated. The Plan shall state the rights of such amendments and shall be allowed to
participants in case of termination of the fund. withdraw their participations within a
Termination of the fund shall be duly reasonable time but in no case less than thirty
approved by the trustee’s Board of Directors (30) calendar days after the amendments are
and a copy of the resolution submitted to the approved, if they are not in conformity with
appropriate department of the BSP. the amendments made thereto: Provided
h. Liability clause of the trustee. There further, That amendments to the plan shall
must be clear and prominent statement be submitted to the BSP within ten (10)
adjacent to where a client is required to sign business days from approval of the
that contract is not a deposit account but a amendments by the Board of Directors. The
trust agreement and that any loss/income is amendments shall be deemed approved after
for the account of the participant; that the thirty (30) business days from date of
trustee is not liable for losses unless upon completion of requirements.
willful default; and that the fund is not insured A copy of the Plan shall be available at
by the PDIC; the principal office of the trustee during
i. Amount of fees/commission and regular office hours, for inspection by any
other charges to be deducted from the fund. person having an interest in the fund or by
The amount of fees that shall be charged to a his authorized representative. Upon request,
fund shall cover the fund’s fair and equitable a copy of the plan shall be furnished such
share of the routine administrative expenses interested person.
of the trustee such as salaries and wages,
stationery and supplies, credit investigation, § 4410Q.7 Minimum disclosure
collateral appraisal, security, messengerial requirements
and janitorial services, EDP expenses, BSP a. Disclosure of UIT Fund investments.
supervision fees and internal audit fees. A list of prospective and outstanding
However, the trustee may charge a UIT Fund investment outlets shall be made available
for special expenses if such is necessary to by the trustee for the review of all UIT Fund
preserve or enhance the value of the Fund. clients. Such disclosure shall be substantially

Part IV - Page 17
§ 4410Q.7
04.12.31
in the form as shown in Appendix Q-34. The (iii) Absolute peso or foreign currency
list of investment outlets shall be updated value
quarterly. No indicative rates of return shall be
b. Distribution of investment units. The provided in the trust participating agreement.
trustee may issue such conditions or rules, as Marketing materials may present relevant
may affect the distribution of investment units historical performance purely for reference
subject to the minimum conditions and with clear indication that past results
enumerated hereunder. do not guarantee similar future results.
(1) Marketing materials. All printed (3) A participating trust agreement or
marketing materials related to the sale of a UIT confirmation of contribution/re-demption
Fund shall clearly state: need not be manually signed by the trustee
(a) The designated name of the fund and or his authorized representative if the same
the fund’s trustee. is in the form of an electronic document that
(b) The participation is not a “deposit conforms with the implementing rules and
account” but a trust product; and that any loss/ regulations of R.A. No. 8792, otherwise
income is for the account of the participant; known as the Electronic Commerce Act.
that the Bank is not liable for losses unless c. Regular publication/computation/
proven to be negligent. availability of the fund’s NAVPu. Trust
(c) The participation does not carry any entities managing a UIT Fund shall cause at
guaranteed rate of return and it is not insured least the weekly publication of the NAVPu
by the PDIC. of such fund in one (1) or more newspaper
(d) Minimum information regarding: of national circulation: Provided, That a
(i) The general investment policy and pooled weekly publication of such NAVPu
applicable risk profile. shall be considered as substantial compliance
(ii) Particulars or administrative and with this requirement. The said publication,
marketing details like pricing and cut-off time. at the minimum, shall clearly state the name
(iii)All charges made/to be made against of the fund, its general classification, the
the fund, including trust fees, other related fund’s NAVPu and the moving return on
charges. investment (ROI) of the fund on a year-to-
(iv)The availability of the plan rules date (YTD) and year-on-year (YOY) basis.
governing the Fund, upon the client’s request. NAVPu shall be computed daily and
(v) Customer and product suitability shall be made available to participants and
standards. prospective participants upon request.
(2) Evidence of participation. Every UIT d. Marketing personnel. To ensure the
Fund participant shall be given - competence and integrity of all duly
(a) A participating trust agreement. Such designated UIT marketing personnel, all
agreement shall clearly indicate that the trust personnel involved in the sales of these funds
product does not have any guaranteed rate of shall be required to undergo standardized
return and it is not insured with the PDIC. training program in accordance with the
(b) A confirmation of participation and guidelines of this Subsection. This training
redemption made to /from the Fund that shall program may be conducted by their
contain the following information: respective trust entities in accordance with
(i) NAVPu of the fund on day of purchase the minimum training program guidelines
/redemption; provided by the Trust Officers Association
(ii) Number of units purchased/ of the Philippines (TOAP). Such training
redeemed; and program shall however be regularly validated
by TOAP.

Part IV - Page 18
§§ 4410Q.8 - 4410Q.11
04.12.31
§ 4410Q.8 Exposure limit to single policies duly approved by the Trust

person/entity. The combined exposure of the Committee and disclosed to participants.
UIT Fund to any entity and its related parties The use of hedging instruments shall also
shall not exceed fifteen percent (15%) of the be disclosed in the “Plan” as provided in Item
market value of the UIT Fund: Provided, That, “c” of Subsec. 4410Q.6 and specified in the
this limitation shall not apply to non-risk quarterly “list of investment outlets” as
assets as defined by the BSP. provided in Item “a” of Subsec. 4410Q.7.
In case the limit is breached due to the
marking-to-market of certain investment/s or § 4410Q.10 Other related guidelines on
any extraordinary circumstances, e.g. valuation of allowable investments
abnormal redemptions which are beyond the a. In pricing debt securities,
control of the trustee, the trustee shall be interpolated yields shall be used for securities
given thirty (30) days from the time the limit with odd or off-the-run tenors using the
is breached to correct the same. straight-line basis and generally accepted
market convention.
§ 4410Q.9 Allowable investments and b. In case outstanding UIT Fund
valuation. UIT Fund investments shall be investments may deteriorate in quality, i.e.,
limited to bank deposits and the following no longer tradable as defined under Subsec.
financial instruments: 4410Q.9, the trustee shall immediately
(a) Securities issued by or guaranteed by provision to reflect fair value in accordance
the Philippine government, or the BSP; with generally accepted accounting
(b) Tradable securities issued by the principles or as may be prescribed by the
government of a foreign country, any political BSP. If no fair value is available, the
subdivision of a foreign country or any instrument shall be assumed to be of no
supranational entity; market value.
(c) Exchange-listed securities,
(d) Marketable instruments that are § 4410Q.11 Unit Investment Trust
traded in an organized exchange; Fund administration support
(e) Loans traded in an organized market; a. Backroom operations. Administrative
and rules on backroom under Sec. 4421Q shall
(f) such other tradable investments be applicable to UIT Fund. Adequate systems
outlets/categories as the BSP may allow: to support the daily marking-to-market of the
Provided, That a financial instrument is fund’s financial instruments shall be in place
regarded as tradable if quoted two-way prices at all times. In this respect, a daily
are readily and regularly available from an reconcilement of the fund’s resultant marked-
exchange, dealer, broker, industry group, to-market value with the unrealized market
pricing service or regulatory agency, and losses and gains (respective contra asset
those prices represent actual and regularly balance) versus the book value of the fund
occurring market transactions on an arm’s for investments in financial instruments shall
length basis. be done and all differences resolved within
The UIT Fund may avail itself of financial the day.
derivatives instruments solely for the purpose b. Custody of securities. Investments in
of hedging risk exposures of the existing securities of a UIT Fund shall be held for
investments of the Fund, provided these are safekeeping by BSP accredited third party
accounted for in accordance with existing custodians which shall perform independent
BSP hedging guidelines as well as the trust marking-to-market of such securities.
entity’s risk management and hedging

Part IV - Page 19
§§ 4410Q.12 - 4411Q.1
04.12.31
§ 4410Q.12 Counterparties § 4411Q.1 Minimum documentary

a. Dealings with related interests/ requirements. An investment management
NBQB proper/holding company/ account shall be covered by a written
subsidiaries/affiliates and related companies. document establishing such account, as
A trustee of a UIT Fund shall be transparent follows:
at all times and maintain an audit trail for all a. In the case of accounts created by
transactions with related parties or entities. corporations, business firms, organizations or
The trustee shall observe the principle of best institutions, the voluntary written agreement
execution and no purchase/sale shall be or indenture entered into by the parties,
made with related counterparties without accompanied by a copy of the board
considering at least two (2) competitive resolution or other evidence authorizing the
quotes from other sources. establishment of, and designating the
b. Accreditation of counterparties. The signatories, to the investment management
Fund shall only invest with approved 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 agreement
Committee. Counterparties shall be subject or indenture entered into by the parties.
to appropriate limits in accordance with The voluntary written agreement or
sound risk management principles. contract shall include the following minimum
provisions:
§ 4410Q.13 Foreign currency- (1) Prenumbered contractual
denominated Unit Investment Trust Funds agreement form;
UIT Fund denominated in any acceptable (2) Title or nature of contractual
foreign currency provided under existing BSP agreement in noticeable print;
rules and regulations may be established. (3) Legal capacities, in noticeable
Such fund may only be invested in allowable print, of parties sought to be covered;
investments denominated in pesos or any (4) Purposes and objectives;
acceptable foreign currency as expressly (5) The initial amount of funds and/or
allowed under the fund’s Plan rules and value of securitie ssubject of the arrangement
properly disclosed to fund participants. delivered to the investment manager;
(6) Statement in underlined noticeable
§ 4410Q.14 Exemptions from statutory print that:
and liquidity reserves, single borrowers (a) The agreement is an agency and not
limit, DOSRI. The provisions on reserves, a trust agreement. As such, the client shall at
single borrower’s limit and DOSRI ceilings all times retain legal title to funds and
under Secs. 4360Q and 4361Q, respectively, properties subject of the arrangement;
applicable to trust funds in general shall not (b) The arrangement does not
be made applicable to UIT Funds. guaranty a yield, return or income by the
investment manager. As such, past
Sec. 4411Q Investment Management performance of the account is not a guaranty
Activities. The conduct of investment of future performance and the income of
management activities shall be subject to the investments can fall as well as rise depending
following regulations. on prevailing market conditions; and

Part IV - Page 20
§§ 4411Q.1 - 4411Q.5
04.12.31
(c) The investment management § 4411Q.4 Lending and investment

agreement is not covered by the PDIC and disposition. Assets received in investment
that losses, if any, shall be for the account of management capacity shall be administered
the client; in accordance with the terms of the
(7) Duties and powers of the instrument creating the investment
investment manager; management relationship.
(8) Liabilities of the investment When an investment manager is granted
manager; discretionary powers in the investment
(9) Reports to the client; disposition of investment management funds
(10) The amount or rate of the and unless otherwise specifically enumerated
compensation of the investment manager; in the agreement or indenture and directed
(11) Terms and conditions governing in writing by the client, loans and
withdrawals from the account; investments of the fund shall be limited to:
(12) Termination of contractual a. Evidences of indebtedness of the
arrangement; and Republic of the Philippines and of the BSP,
(13) Disclosure requirements for and any other evidences of indebtedness or
transactions requiring prior authority and/or obligations the servicing and repayment of
specific written investment directives from the which are fully guaranteed by the Republic
client. of the Philippines or loans against such
A sample investment management government securities;
agreement which conforms to the foregoing b. Loans fully guaranteed by the
requirements is shown as Appendix Q-14. Republic of the Philippines as to the payment
of principal and interest;
§ 4411Q.2 Minimum size of each c. Loans fully secured by a hold-out on,
investment management account. No assignment or pledge of deposit substitutes
investment management account shall be maintained with the institution or deposits
accepted or maintained for an amount less with banks, or mortgage and chattel mortgage
than P1 million. An investment management bonds issued by the investment manager; and
account reduced to less than P1 million due d. Loans fully secured by real estate or
to investment losses shall be exempt from this chattels in accordance with Section 78 of
requirement. R.A. No. 337, as amended, and subject to
the requirements of Sections 75, 76 and 77
§ 4411Q.3 Commingling of funds. Two of R.A. No. 337, as amended.
(2) or more individual investment The specific directives required under
management accounts shall not be this Subsection shall consist of the following
commingled except for the purpose of information:
investing in government securities or in duly (1) The transaction to be entered into;
registered commercial papers: Provided, That (2) Borrower's name;
the participation of each of the (3) Amount involved; and
aforementioned accounts in the commingled (4) Collateral security(ies), if any.
account shall not be less than P1 million:
Provided, further, That such commingling has § 4411Q.5 Transactions requiring prior
been fully disclosed and specifically agreed authority. An investment manager shall not
in writing by the clients. undertake any of the following transactions

Part IV - Page 20a
§§ 4411Q.5 - 4411Q.8
04.12.31
for the account of a client, unless prior to its and reportorial requirements in said
execution, such transaction has been fully regulations shall also apply.
disclosed and specifically authorized in The disclosure required under this
writing by the client: Subsection shall consist of the following
a. Lend, sell, transfer or assign money minimum information:
or property to any of the departments, (1) The transactions to be entered into;
directors, officers, stockholders, or (2) Identities of the parties involved in
employees of the investment manager, or the transaction and their relationships (shall
relatives within the first degree of not apply to Item d of this 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 or
percent (50%) of the subscribed capital or in the very instrument creating the
voting stock in its own right and not as trustee investment management relationship.
nor in a representative capacity;
b. Purchase or acquire property or debt § 4411Q.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 or
relatives within the first degree of registered in the name of the principal or of
consanguinity or affinity, or the related the investment manager: Provided, That in
interests of such directors, officers and case of the latter, the instrument shall indicate
stockholders; or from any corporation where that the investment manager is acting in a
the investment manager owns at least fifty representative capacity and that the
percent (50%) of the subscribed capital or principal's name is disclosed thereat.
voting stock in its own right and not as trustee
nor in a representative capacity; § 4411Q.7 Ceilings on loans. Loans
c. Invest in equities of or in securities funded by investment management accounts
underwritten by the investment manager or shall be subject to the DOSRI ceilings
a corporation in which the investment imposed on NBQBs in Part III - E of this
manager owns at least fifty percent (50%) of Manual. For purposes of determining
the subscribed capital or voting stock in its compliance with said ceilings, the total
own right and not as trustee, nor in a amount of said loans granted by the
representative capacity; and institution and its trust department to the
d. Sell, transfer, assign or lend money same person, firm or corporation shall be
or property from one trust fiduciary or combined.
investment management account to another
trust, fiduciary or investment management § 4411Q.8 Operating and accounting
account except where the investment is in methodology. Investment management
any of those enumerated in Items a to d of accounts shall be operated and accounted
Subsec. 4411Q.4. for in accordance with the following:
Directors, officers, stockholders and their a. The investment manager shall
related interest covered by this Subsection administer, hold or manage the fund or
shall be those considered as such under property in accordance with the instrument
existing regulations on loans to DOSRI under creating the investment management
Part III - E of this Manual. The procedural relationship; and

Part IV - Page 20b
§§ 4411Q.8 - 4414Q.1
04.12.31
b. Funds or property of each client or incidental business, the Monetary Board

shall be accounted separately and distinctly may impose administrative sanctions against
from those of other clients herein referred to such entity or its principal officers and/or
as individual account accounting. majority stockholders or proceed against
them in accordance with law.
Sec. 4412Q (Reserved) The Monetary Board may take such
action as it may deem proper such as, but
Sec. 4413Q Required Retained Earnings may not be limited to, requiring the transfer
Appropriation. An institution authorized to or turnover of any investment management
engage in trust and other fiduciary business account to duly incorporated and licensed
shall, before the declaration of dividends, entities of the choice of the client.
carry to retained earnings appropriated for An entity not authorized to engage in
trust business at least ten percent (10%) of its investment management activities shall not
net profits realized out of its trust, investment advertise or represent itself as being engaged
management and other fiduciary business in investment management activities or
since the last preceding dividend declaration represent itself as investment manager or use
until the retained earnings shall amount to words of similar import.
twenty percent (20%) of its authorized capital Starting year 2001, investment houses
stock and no part of such retained earnings authorized to engage in investment
shall at any time be paid out in dividends but management activities shall renew their
losses accruing in the course of its business existing licenses yearly, subject to the
may be charged against surplus. implementing guidelines to be issued
thereon.
B. INVESTMENT MANAGEMENT § 4414Q.1 Prerequisites for engaging

ACTIVITIES in investment management activities. An
entity before it may engage in investment
Sec. 4414Q Authority to Perform management activities shall comply with the
Investment Management. An investment following requirements:
house may act as financial consultant, a. It has been duly licensed by the
investment adviser or portfolio manager appropriate government agency or created
under Section 7 of P.D. No. 129, as amended. by special law or charter.
However, this shall not be construed as b. The articles of incorporation or
authority to engage in trust and other fiduciary charter of the institution shall include among
business. its powers or purposes the authority to
Entities whose articles of incorporation engage in investment management activities.
or any amendments thereto, include the c. The by-laws of the institution shall
purpose or power to act as financial include, among other things:
consultant, investment adviser or portfolio (1) The organization plan or structure
manager shall secure the prior favorable of the department, office or unit which shall
recommendation of the Monetary Board conduct the investment management
before the filing of said articles of activities of the institution;
incorporation or amendments thereto with (2) The creation of an investment
the SEC. management committee, the appointment of
If an entity is found to be engaged in an investment management officer and
unauthorized investment management subordinate officers of the investment
activities, whether as its primary, secondary management department; and

Part IV - Page 20c
§§ 4414Q.1 - 4415Q.1
04.12.31
(3) A clear definition of the duties and time the authority is granted. An applicant
responsibilities, as well as the line and staff that fails in this respect shall be required to
functional relationships, of the various units, show compliance for another test period of
officers and staff within the organization. the same duration.
d. Where the applicant is authorized to
engage in quasi-banking functions, the § 4414Q.2 Pre-operating requirements
applicant shall also meet the following An institution authorized to engage in
additional requirements: investment management activities shall,
(1) It has continuously complied with before engaging in actual operations, submit
the capital-to-risk assets ratio, reserve to the BSP the following:
requirements against deposit substitutes, a. Government securities acceptable to
liquidity floor, and ceilings on DOSRI loans the BSP amounting to P500,000 as minimum
for the last sixty (60) days immediately basic security deposit for the faithful
preceding the date of application; performance of investment management
(2) It has not incurred net weekly reserve duties required under Subsec. 4415Q.1;
deficiencies against deposit substitutes b. Organization chart of the investment
during the last eight (8) weeks immediately management department which shall carry
preceding the date of application; and out the investment management activities of
(3) It has shown substantial com-pliance the institution; and
with other pertinent laws, rules and c. Names and positions of individuals
regulations, policies and instructions of the designated as chairman and members of the
BSP and has not been cited for serious/major investment management committee,
violations or exceptions affecting its investment management officer and other
solvency, liquidity and profitability. subordinate officers of the investment
Where the applicant is not authorized management department.
to engage in quasi-banking functions:
(i) The adoption of a formula/criteria for Sec. 4415Q Security for the Faithful
NBQBs in the determination of compliance Performance of Investment Management
with the capital-to-risk assets ratio and Activities
ceilings on loans to DOSRI; and
(ii) The substitution of the reserve and § 4415Q.1 Basic security deposit. An
liquidity floor requirements with the cash institution authorized to engage in investment
ratio, as follows: management activities shall deposit with the
(a) Primary reserves to Bills Payable; and BSP eligible government securities as security
(b) Primary and secondary reserve to for the faithful performance of its investment
Bills Payable: management activities equivalent to at least
where primary reserves consist of cash on one percent (1%) of the book value of the
hand, cash in vault, checks and other cash total volume of investment management
items, due from the BSP and due from banks; assets: Provided, That at no time shall such
and where secondary reserves consist of BSP- deposit be less than P500,000.
supported government securities, treasury Scripless securities under the RoSS
bills and other government securities. system of the BTr may be used as basic
Compliance with the foregoing, as well security deposit for the faithful performance
as with other requirements under existing of investment management activities using
regulations, shall be maintained up to the the guidelines in Appendix Q-21.

Part IV - Page 20d
§§ 4415Q.2 - 4416Q
04.12.31
§ 4415Q.2 Eligible securities. Securities The following sanctions shall be

enumerated in Subsec. 4405Q.2 shall be imposed for any deficiency in the basic
eligible as security deposit for faithful security deposit for the faithful performance
performance of investment management of investment management activity:
activities. a. On the institution:
(1) First offense - Penalty of P5,000 per
§ 4415Q.3 Valuation of securities and business day to be reckoned from thirty (30)
basis of computation of the basic security business days after the end of the reference
deposit requirement. For purposes of quarter; and
determining compliance with the basic (2) Second and subsequent offenses -
security deposit under this Section, the Suspension of investment management
amount of securities so deposited shall be license.
based on their book value, that is, cost as b. On the Head of the Fund
increased or decreased by the corresponding Management Department:
discount or premium amortization. (1) First Offense - Reprimand with a
The base amount for the basic security stern warning that subsequent violations will
deposit shall be the average of the month- be subjected to more severe sanctions; and
end balances of the total assets of investment (2) Subsequent offenses - Suspension for
management funds of the immediately ninety (90) days without pay.
preceding calendar quarter.
Sec. 4416Q Organization and
§ 4415Q.4 Compliance period; Management. The provisions under Sec.
sanctions. The investment manager shall 4406Q up to Subsec. 4406Q.4 shall govern
have thirty (30) business days after the end of the organization and management of
every calendar quarter within which to institutions without trust license which are
deposit with the BSP securities required under engaged in investment management
this Section. activities only. The following terms shall,
In case an institution fails to comply with however, be used:
the basic security deposit, the Monetary Board a. Investment management activities
may require the institution to desist from in lieu of trust and other fiduciary business;
accepting new investment management b. Investment management accounts
accounts and from renewing expiring in lieu of trust and other fiduciary accounts;
investment management contracts.

Part IV - Page 20e
§§ 4416Q - 4422Q
96.12.31
c. Investment management committee management department shall keep books

in lieu of trust committee; and records on trust, other fiduciary and
d. Investment management officer in investment management accounts separate
lieu of trust officer; and and distinct from the books and records of
e. Investment management department its other businesses and shall follow the
in lieu of trust department. Manual of Accounts for Trust and Other
Fiduciary Business and Investment
Sec. 4417Q Non-Investment Management Management Activities prescribed by the BSP.
Activities. The provisions of Sec. 4407Q Each trust, other fiduciary or investment
shall apply in determining non-investment management account shall have a record
management activities except that the terms separate from all other accounts except only
trust, other fiduciary, trustee and fiduciary in the case of CTFs where the trustee can
shall be disregarded. maintain common records utilizing pooled
fund accounting method for each fund:
Sec. 4418Q Unsound Practices. The Provided, That the trustee shall clearly
provisions of Sec. 4408Q shall govern the indicate in the records the trustors owning
unsound practices for investment participation in the CTF and the extent of the
management accounts. interest of such trustors.
Books and records shall contain full
Sec. 4419Q Conduct of Investment information relative to each trust, other
Management Activities. The provisions of fiduciary or investment management account
Sec. 4411Q shall govern the conduct of and shall be supported by duplicate signed
investment management activities of an copies of related documents. Said records
institution without trust license that is and duplicate signed copies or related
engaged in investment management documents shall be compiled and kept as to
activities. allow inspection by BSP examiners and
submission of information or reports as may
Sec. 4420Q Required Retained Earnings be required by competent authorities.
Appropriation. An institution authorized to
engage in investment management activities Sec. 4422Q Custody of Assets. All monies,
shall, before the declaration of dividends, properties or securities received by an
carry to retained earnings appropriated for institution in its capacity as trustee, fiduciary,
trust business at least ten percent (10%) of or investment manager shall be kept
its net profits realized out of its investment physically separate and distinct from the
management activities since the last assets of its other businesses and shall be
preceding dividend declaration until the under the joint custody of at least two (2)
retained earnings shall amount to twenty persons, one of whom shall be an officer of
percent (20%) of its authorized capital stock the trust or investment management
and no part of such retained earnings shall department, designated for that purpose by
at any time be paid out in dividends, but the board of directors.
losses accruing in the course of its business The investment of each trust, other
may be charged against retained earnings. fiduciary or investment management account
shall be kept physically separated from those
C. GENERAL PROVISIONS of other trust, other fiduciary or investment
management accounts, and adequately
Sec. 4421Q Books and Records. The identified as the assets or property of the
institution's trust department or investment relevant account.

Part IV - Page 21
§§ 4423Q - 4425Q.1
96.12.31
Sec. 4423Q Fees and Commissions. An plans, shall contain provisions regarding the
institution acting as trustee, fiduciary or applicability of regulations governing
investment manager shall be entitled to taxation on the income of trust, other
reasonable fees and commissions which shall fiduciary or investment management
be determined on the basis of the cost of accounts. For this purpose, the trustee,
services rendered and the responsibilities fiduciary or investment manager shall
assumed: Provided, That where the trustee, maintain adequate records and shall include
fiduciary or investment manager is acting as information such as the amount of final
such under appointment by a court, the income tax withheld at source and the
compensation shall be that allowed or amount withheld by the trustee, fiduciary or
approved by the court: Provided, further, investment manager in the periodic reports
That in the case of CTFs, the fee which a submitted to trustors, beneficiaries, principals
trustee may charge each participant shall be and other parties in interest.
fully disclosed by the trustee in the CTF plan,
prospectus, flyers, posters and all forms of Sec. 4425Q Reports Required
advertising materials to market the fund and
in the documents given to clients as proof of § 4425Q.1 To trustor, beneficiary,
participation in the fund. In no case shall principal. Every institution acting as trustee,
such fees and commissions be based on the fiduciary or investment manager shall render
excess of the income of the trust, other reports on the trust, other fiduciary or
fiduciary or investment management funds investment management accounts to the
over a certain amount or percentage. trustor, beneficiary, principal or other party
No trustee, fiduciary or investment in interest or the court concerned or any party
manager shall solicit or receive rebates on duly designated by the court order, as the
commissions, fees and other payments for case may be, under the following guidelines:
the services rendered to the trust, other a. The reports shall be in such forms
fiduciary or investment management account as to apprise the party concerned of the
or beneficiaries of the trust, other fiduciary significant developments in the
or investment management account by administration of the account and shall
stockbrokers, real estate brokers, insurance consist of:
agents and similar persons or entities unless (1) A balance sheet;
the rebates, fees and other payments shall (2) An income statement;
accrue to the benefit of the trust, other (3) A schedule of earning assets of the
fiduciary or investment management account account; and
or the beneficiaries thereof. (4) An investment activity report;
Officers and employees of the trust b. Items (3) and (4) above shall
department or investment management include at least the following:
department of institutions, while serving as (1) Name of issuer or borrower;
such, shall be prohibited from retaining any (2) Type of instrument;
compensation for acting as co-trustee or (3) Collateral, if any;
fiduciary in the administration of a trust, other (4) Amount invested;
fiduciary or investment management (5) Earning rate or yield;
account. (6) Amount of earnings;
(7) Transaction date; and
Sec. 4424Q Taxes. The terms and conditions (8) Maturity date;
of trust, other fiduciary or investment c. The reports shall be prepared in
management agreements, including CTF such frequency as required under the

Part IV - Page 22
§§ 4425Q.1 - 4427Q
96.12.31
agreement but shall not in any case be longer activities, which shall cover at the minimum
than once every quarter; and a review of the trust/investment management
d. The reports shall be made available operations, practices and policies, including
to clients not later than twenty (20) calendar audit and internal control system, shall be
days from the end of the reference date/ subject to auditing standards to the extent
period in Item c above. necessary to express an opinion on the
financial statements.
§ 4425Q.2 To the Bangko Sentral The audit of the trust/investment
An institution acting as trustee, fiduciary or management department of an institution
investment manager shall submit periodic authorized to engage in trust and other
reports prescribed by the appropriate fiduciary business/investment management
supervising and examining department of the activities shall be covered by a separate
BSP on the institution's trust and other supplemental audit report to be submitted
fiduciary business and investment to the institution's board of directors and to
management activities within the deadline the BSP within the prescribed period
indicated in Appendix Q-3. containing, among other things, the
statements of condition of trust funds and
Sec. 4426Q Audits managed funds and the related statements
§ 4426Q.1 Internal audit. The of earnings of both funds presented
institution's internal auditor shall include separately, as well as the auditor's letter of
among his functions, the conduct of periodic comments/findings and recommendations.
audits of the trust department or investment
management department at least once every § 4426Q.3 Board action. A report of
twelve (12) months. The board of directors, the foregoing audits, together with the actions
in a resolution entered in its minutes, may thereon, shall be noted in the minutes of the
also require the internal auditor to adopt a board of directors of the institution.
suitable continuous audit system to
supplement and/or to replace the periodic Sec. 4427Q Authority Resulting from
audit. In any case, the audit shall ascertain Merger or Consolidation. In merger of
whether the institution's trust and other financial institutions, the authority to engage
fiduciary business and investment in trust and other fiduciary business and in
management activities have been investment management activities shall
administered in accordance with laws, BSP continue to be in effect if the surviving
rules and regulations, and sound trust or institution has such authority and the same
fiduciary principles. has not been withdrawn by the BSP. In case
the surviving institution does not have
§ 4426Q.2 External audit. The trust previous authority but desires to engage in
and other fiduciary business and investment trust and other fiduciary business and in
management activities of an institution shall investment management activities, it shall
be included in the annual financial audit by secure the prior approval of the Monetary
independent external auditors required Board to engage in such business as part of
under Sec. 4172Q. its application for merger to enable it to
The audit of the assets and incorporate such among its powers or
accountabilities of the trust department/ purpose clause in its articles of incorporation,
investment management department of an articles of merger, by-laws and such other
NBFI authorized to engage in trust and other pertinent documents.
fiduciary business/investment management In the consolidation of financial

Part IV - Page 23
§§ 4427Q - 4441Q.2
04.12.31
institutions where the resulting entity is an management accounts, the Monetary Board,
entirely new one, it shall secure from the on the basis of the recommendation of the
Monetary Board an authority to engage in examining department, shall order the
trust and other fiduciary business or in withdrawal of the institution's authority to
investment management activities before it engage in trust and other fiduciary
may engage in such business. management activities.
Sec. 4428Q Receivership. Whenever a Secs. 4430Q - 4440Q (Reserved)

receiver is appointed by the Monetary Board
for an institution that is authorized to engage Sec. 4441Q Securities Custodianship and
in trust and other fiduciary business or in Securities Registry Operations. The
investment management activities, the following rules and regulations shall govern
receiver shall, pursuant to the instructions of securities custodianship and securities
the Monetary Board, proceed to close the registry operations of quasi-banks/trust
trust, other fiduciary and investment entities.
management accounts promptly and/or
transfer all other accounts to substitute § 4441Q.1 Statement of policy. It is the
trustees, fiduciaries or investment managers policy of the BSP to promote the protection
acceptable to the trustors, beneficiaries, of investors in order to gain their confidence
principals or other parties in interest: and encourage their participation in the
Provided, That where the trustee, fiduciary development of the domestic capital market.
or investment manager is acting as such Therefore, the following rules and regulations
under appointment by a court, the receiver are promulgated to enhance transparency of
shall proceed pursuant to the instructions of securities transactions with the end in view
said court. of protecting investors.
Sec. 4429Q Surrender of Trust or § 4441Q.2 Applicability of this

Investment Management License. Any NBFI regulation. This regulation shall govern
which has been authorized to engage in trust securities custodianship and securities
and other fiduciary business or in investment registry operations of banks and NBFIs under
management activities and which intends to BSP supervision. It shall cover all their
surrender said authority shall file with the BSP transactions in securities as defined in Section
a certified copy of the resolution of its board 3 of the Securities Regulation Code (SRC),
of directors manifesting such intention. The whether exempt or required to be registered
appropriate supervising and examining with the Securities and Exchange
department of the BSP shall then conduct an Commission (SEC), that are sold, borrowed,
examination of the institution's trust, other purchased, traded, held under custody or
fiduciary business and investment otherwise transacted in the Philippines where
management activities. If the institution is at least one (1) of the parties is a bank or an
found to have satisfactorily discharged its NBFI under BSP supervision. However, this
duties and responsibilities as trustee, regulation shall not cover the operations of
fiduciary or investment manager, and has stock and transfer agents duly registered with
provided for the orderly closure or transfer the SEC pursuant to the provisions of SRC
of its trust, fiduciary or investment Rule 36-4.1 and whose only function is to

Part IV - Page 24
§§ 4441Q.2 - 4441Q.5
04.12.31
maintain the stock and transfer book for (which includes custody and/or registry
shares of stock. operations) and other related documents
embodying the risk management system
§ 4441Q.3 Prior Bangko Sentral must be submitted to the appropriate
approval. Quasi-banks/trust entities may act supervising and examining department at the
as securities custodian and/or registry only time of application for authority and within
upon prior Monetary Board approval. thirty (30) days from updates;
e. It must have adequate technological
§ 4441Q.4 Application for authority. capabilities and the necessary technical
A quasi-bank/trust entity desiring to act as expertise to ensure the protection, safety and
securities custodian and/or registry shall file integrity of client assets, such as:
an application with the appropriate (1) It can maintain an electronic registry
supervising and examining department of the dedicated to recording of accountabilities to
BSP. The application shall be signed by the its clients; and
highest ranking officer of the institution and (2) It has an updated and comprehensive
shall be accompanied by a certified true copy computer security system covering system,
of the resolution of its board of directors network and telecommunication facilities
authorizing the institution to engage in that will:
securities custodianship and/or registry. (a) limit access only to authorized users;
(b) preserve data integrity; and
§ 4441Q.5 Pre-qualification (c) provide for audit trail of transactions.
requirements for a securities custodian/ f. It has complied, during the period
registry immediately preceding the date of
a. It must be a quasi-bank or a trust application, with the following:
entity; (1) ceilings on credit accommodation to
b. It must have complied with the DOSRI; and
minimum capital accounts required under (2) single borrower’s limit.
existing regulations not lower than an g. It has no reserve deficiencies during
adjusted capital of P300 million or such the eight (8) weeks immediately preceding
amounts as may be required by the Monetary the date of application;
Board in the future; h. It has set up the prescribed
c. It must have a CAMELS composite allowances for probable losses, both general
rating of at least “4” (as rounded off) in the and specific, as of date of application;
last regular examination; i. It has not been found engaging in
d. It must have in place a unsafe and unsound practices during the last
comprehensive risk management system six (6) months preceding the date of
approved by its board of directors appropriate application;
to its operations characterized by a clear j. It has generally complied with laws,
delineation of responsibility for risk rules and regulations, orders or instructions
management, adequate risk measurement of the Monetary Board and/or BSP
systems, appropriately structured risk limits, Management;
effective internal control and complete, k. It has submitted additional
timely and efficient risk reporting systems. documents/information which may be
In this connection, a manual of operations requested by the appropriate supervision and

Part IV - Page 25
§§ 4441Q.5 - 4441Q.8
04.12.31
examination department, such as, but not the custody contract or in a separate
limited to: document or agreement attached thereto:
(1) Standard custody/registry agreement Provided, further, That the custodian shall
and other standard documents; immediately make known to the securities
(2) Organizational structure of the owner all payments made and collections
custody/registry business; received with respect to the securities under
(3) Transaction flow; and custody;
(4) For those already in the custody or j. Securities borrowing and lending
registry business, a historical background for operations as agent.
the past three (3) years;
l. It shall be conducted in a separate § 4441Q.7 Functions and
unit headed by a qualified person with at least responsibilities of a securities registry
two (2) years experience in custody/registry a. Maintains an electronic registry
operations; and book;
m. It can interface with the clearing and b. Delivers confirmation of transactions
settlement system of any recognized and other documents within agreed trading
exchange in the country capable of achieving periods;
a real time gross settlement of trades. c. Issues registry confirmations for
transfers of ownership as it occurs;
§ 4441Q.6 Functions and d. Prepares regular statement of
responsibilities of a securities custodian. A securities balances at such frequency as may
securities custodian shall have the following be required by the owner on record but not
basic functions and responsibilities: less frequent than every quarter; and
a. Safekeeps the securities of the client; e. Follows appropriate legal
b. Holds title to the securities in a documentation to govern its relationship with
nominee capacity; the Issuer.
c. Executes purchase, sale and other
instructions; § 4441Q.8 Protection of securities of
d. Performs at least a monthly the customer. A custodian must incorporate
reconciliation to ensure that all positions are the following procedures in the discharge of
properly recorded and accounted for; its functions in order to protect the securities
e. Confirms tax withheld; of the customer:
f. Represents clients in corporate a. Accounting and recording for
actions in accordance with the direction securities. Custodians must employ
provided by the securities owner; accounting and safekeeping procedures that
g. Conducts mark-to-market valuation fully protect customer securities. It is
and statement rendition; essential that custodians segregate customer
h. Does earmarking of encumbrances or securities from one another and from its
liens such as, but not limited to, Deeds of proprietary holdings to protect the same from
Assignment and court orders; and the claims of its general creditors.
In addition to the above basic functions, All securities held under custodianship
it may perform the following value-added shall be recorded in the books of the
service to clients: custodian at the face value of said securities
i. Acts as a collecting and paying agent: in a separate subsidiary ledger account
Provided, That the management of funds that “Securities Held Under Custodianship” if
may be collected shall be clearly defined in booked in the Bank Proper or the subsidiary

Part IV - Page 26
§§ 4441Q.8 - 4441Q.10
04.12.31
ledger account “Safekeeping and registry must be a third party with no

Custodianship – Securities Held Under subsidiary/affiliate relationship with the issuer
Custodianship”, if booked in the Trust of securities while a BSP-accredited custodian
Department: Provided, That securities held must be a third party with no subsidiary/
under custodianship where the custodian affiliate relationship with the issuer or seller
also performs securities borrowing and of securities. A quasi-bank/trust entity
lending as agent shall be booked in the Trust accredited by BSP as securities custodian
Department. may, however, continue holding securities
b. Documentation. The appropriate it sold under the following cases:
documentation for custodianship shall be a. where the purchaser is a related entity
made and it shall clearly define, among acting in its own behalf and not as agent or
others, the authority, role, responsibilities, representative of another;
fees and provision for succession in the event b. where the purchaser is a non-resident
the custodian can no longer discharge its with existing global custody agreement
functions. It shall be accepted in writing by governed by foreign laws and conventions
the counterparties. wherein the institution is designated as
The governing custodianship agreement custodian or sub-custodian; and
shall be pre-numbered and this number shall c. upon approval by the BSP, where the
be referred to in all amendments and purchaser is an insurance company whose
supplements thereto. custody arrangement is either governed by a
c. Confirmation of custody. The global custody agreement where the quasi-
custodian shall issue a custody confirmation bank/trust entity is designated as custodian
to the purchaser or borrower of securities to or sub-custodian or by a direct custody
evidence receipt or transfer of securities as agreement with features at par with the
they occur. It shall contain, as a minimum, standards set under this Subsection drawn
the following information on the securities or prepared by the parent company owning
under custody: more than fifty percent (50%) of the capital
(1) Owner of securities; stock of the purchaser and executed by the
(2) Issuer; purchaser itself and its custodian.
(3) Securities type; Purchases by non-residents and
(4) Identification or serial numbers; insurance companies that are exempted from
(5) Quantity; the independence requirement of this Section
(6) Face value; and shall, however, be subject to all other
(7) Other information, which may be provisions of this Subsection.
requested by the parties.
d. Periodic reporting. The custodian § 4441Q.10 Registry of scripless
shall prepare at least quarterly (or as frequent securities of the Bureau of the Treasury. The
as the owner of securities will require) Registry of Scripless Securities (RoSS),
securities statements delivered to the operated by the Bureau of the Treasury,
registered owner’s address on record. Said which is acting as a registry for government
statement shall present detailed information securities is deemed to be automatically
such as, but not limited to, inventory of accredited for purposes of this Section and
securities, outstanding balances, and market is likewise exempted from the independence
values. requirement under Subsec. 4441Q.9.
However, securities registered under the
§ 4441Q.9 Independence of the registry RoSS shall only be considered delivered if
and custodian. A BSP-accredited securities said securities were transferred by means of

Part IV - Page 27
§§ 4441Q.10 - 4441Q.29
04.12.31
book entry to the appropriate securities § 4441Q.13 Basic security deposit

account of the purchaser or his designated Securities held under custodianship whether
custodian. Book entry transfer to a sub- booked in the Trust Department or carried
account for clients under the primary account in the regular books of the quasi-bank/trust
of the seller shall not constitute delivery for entity shall be subject to a security deposit
purposes of this Section and of Subsec. for faithful performance of duties at the rate
4211Q.4. of 1/25 of one percent (1%) of the total face
value or P500,000 whichever is higher.
§ 4441Q.11 Confidentiality. A BSP- However, securities held under
accredited securities custodian/ registry shall custodianship where the custodian also
not disclose to any unauthorized person any performs securities borrowing and lending
information relative to the securities under as agent shall be subject to a higher basic
its custodianship/registry. The management security deposit of one percent (1%) of the
shall likewise ensure the confidentiality of total face value. For this purpose, the
client accounts of the custody or registry unit following subsidiary ledger account shall be
from other units within the same created in the Trust Department Books:
organization. “Safekeeping and Custodianship -
Securities Held Under Custodianship with
§ 4441Q.12 Compliance with anti- Securities Borrowing and Lending As Agent”
money laundering laws/regulations. For Compliance shall be in the form of
purposes of compliance with the government securities deposited with the
requirements of R.A. No. 9160, otherwise BSP eligible pursuant to existing regulations
known as the “Anti-Money Laundering Act governing security for the faithful
of 2001,” as amended, particularly the performance of trust and other fiduciary
provisions regarding customer identification, business.
record keeping and reporting of suspicious
transactions, a BSP-accredited custodian may § 4441Q.14 Reportorial requirements
rely on referral by the seller/issuer of An accredited securities custodian shall
securities: Provided, That it maintains a comply with reportorial requirements that
record of such referral together with the may be prescribed by the BSP, which shall
minimum identification, information/ include as a minimum, the face and market
documents required under the law and its value of securities held under custodianship.
implementing rules and regulations.
A BSP accredited custodian must §§ 4441Q.15 - 4441Q.28 (Reserved)
maintain accounts only in the true and full
name of the owners of the security. § 4441Q.29 Sanctions. Without prejudice
However, said securities owners may be to the penal and administrative sanctions
identified by number or code in reports and provided for under Sections 36 and 37,
correspondences to keep his identity respectively, of the R.A. No. 7653, violation
confidential. of any provision of this Section shall be
Securities subject of pledge and/or deed subject to the following sanctions/penalties:
of assignment as of 14 October 2004 (date a. First offense –
of Circular 457), may be held by a lending (1) Fine of up to P10,000 a day for the
quasi-bank up to the original maturity of the institution for each violation reckoned from
loan or full payment thereof, whichever the date the violation was committed up to
comes earlier. the date it was corrected; and

Part IV - Page 28
§§ 4441Q.29 - 4499Q
04.12.31
(2) Reprimand for the directors/officers (3) Suspension for one hundred twenty
responsible for the violation. (120) days without pay of the directors/
b. Second offense - officers responsible for the violation.
(1) Fine of up to P20,000 a day for the
institution for each violation reckoned from Secs. 4442Q - 4498Q (Reserved)
the date the violation was committed up to
the date it was corrected; and Sec. 4499Q Sanctions. Any violation of the
(2) Suspension for ninety (90) days provisions of this Part shall be subject to
without pay of directors/officers responsible Sections 36 and 37 of R.A. No. 7653, without
for the violation. prejudice to the imposition of other sanctions
c. Subsequent offenses – as the Monetary Board may consider
(1) Fine of up to P30,000 a day for the warranted under the circumstances that may
institution for each violation from the date include the suspension or revocation of an
the violation was committed up to the date institution's authority to engage in trust and
it was corrected; other fiduciary business or in investment
(2) Suspension or revocation of the management activities, and such other
authority to act as securities custodian and/ sanctions as may be provided by law.
or registry; and

Part IV - Page 29
§§ 4501Q - 4505Q
96.12.31
PART FIVE
FOREIGN EXCHANGE OPERATIONS
Section 4501Q Authority; Coverage. With amount of letters of credit outstanding of an

prior approval of the Monetary Board, and investment house shall not exceed, at any
subject to the provisions of Article III, Chapter given time, twice its net worth, except as may
IV of R.A. No. 7653 and Section 7(13) of P.D. otherwise be specifically authorized by the
No. 129, as amended, an investment house Monetary Board;
may engage in foreign exchange operations c. Holding foreign currency balances
which shall be limited to the servicing of with foreign correspondents in connection
project or program requirements of the with export-related services but in no case
following enterprises: for speculative purposes;
a. BSP-certified export-oriented firms; d. Entering into forward foreign
b. Board of Investments-registered exchange contracts with the BSP in
export-oriented firms; and connection with the foregoing activities; and/
c. Construction or service firms with or
overseas contracts approved by the e. Such other related foreign
Department of Labor and Employment. exchange activities as may be approved by
the Monetary Board.
Sec. 4502Q Specific Foreign Exchange
Activities. The specific foreign exchange Sec. 4503Q Separate Department. Any
operations which investment houses may investment house that may be authorized to
undertake in connection with the preceding engage in foreign exchange operations shall
Section are: set up a separate department/unit to handle
a. Arranging or contracting of foreign such operations.
loans for the account of the client firm, or
contracting of foreign loans for the account Sec. 4504Q Applicability of Pertinent
of the investment house for relending to the Bangko Sentral Rules. The foreign exchange
client firm, subject to pertinent BSP rules and operations of an investment house are subject
regulations; to all applicable BSP rules and regulations
b. Providing import- and export- on foreign exchange operations, including
related services to said firms such as letters modifications thereof, considering the special
of credit and other acceptable modes of nature of investment house operations, and
payment, and the discounting of export drafts: the sanctions in connection therewith.
Provided, That the total amount of foreign
exchange transactions investment houses Sec. 4505Q Aggregate Ceiling on Issuance
may deal in shall not exceed the amount of of Guarantees. Total standby letters of credit,
the financing arranged or provided by the foreign and domestic, including guarantees,
investment house which involves the the nature of which requires the guarantor
importation and exportation of related goods to assume the liabilities/obligations of third
and services: Provided, further, That the parties in case of their inability to pay, that

Part V - Page 1
§§ 4505Q - 4599Q
96.12.31
may be issued by NBQBs and outstanding at Sec. 4599Q General Provision on Sanctions
any given time, shall not exceed fifty percent Any violation of the provisions of this Part
(50%) of the NBQB’s net worth, except those shall be subject to Sections 36 and 37 of R.A.
fully secured by cash, hold-out on deposits/ No. 7653.
deposit substitutes on government securities.

Part V - Page 2
§§ 4601Q - 4602Q
02.12.31
PART SIX
MISCELLANEOUS
A. OTHER OPERATIONS shall immediately become due and payable.

If settlement of the amount due is not made
Section 4601Q Open Market Operations within three (3) days from the date of its
The following rules and regulations shall disqualification, the BSP shall proceed to
govern the buying and selling of government collect said amount in accordance with the
securities in the open market pursuant to preceding paragraph.
Section 91 of R.A. No. 7653: d. Reverse repurchase agreements
a. The BSP may buy and sell in the covering the sale of portion of the security
open market for its own account: holdings of the BSP portfolio may be made
(1) Evidences of indebtedness issued under the terms provided for in Subsec.
directly by the Government of the Philippines 4602Q.1.
or by its political subdivisions; and
(2) Evidences of indebtedness issued § 4601Q.1 Settlement procedures
by government instrumentalities and fully Purchase and sale of government securities
guaranteed by the Government. under repurchase agreements (GS/RP)
The above evidences of indebtedness between and among banks and NBQBs and
must be freely negotiable and regularly BSP in connection with the latter’s open
serviced and must be available to the general market operations shall be settled in
public through banks, NBQBs and accredited accordance with the procedures in Appendix
government securities dealers. Q-13-a and -b.
b. Outright purchases and sales of gov-
ernment securities shall be effected on the Sec. 4602Q Repurchase Agreements with
basis of the lowest price offered or the highest the Bangko Sentral. Repurchase agreements
price bid. may be effected with the BSP subject to the
c. Repurchase agreements shall be following terms and conditions:
open to banks (except rural banks), NBQBs a. Rate. The rates on the repurchase
and accredited government securities dealers facility shall be set by the Treasury
and shall be made under the terms provided Department, with the concurrence of the
for in Sec. 4602Q and the following: Governor, taking into account prevailing
(1) The repurchase agreement may be liquidity/market conditions.
paid at any time before maturity at the option b. Term. At the option of the Treasury
of the issuer of the repurchase agreement; Department, availments may be for a
(2) In the event the securities covered minimum of one (1) day (overnight) and a
by the repurchase agreement are not maximum of ninety-one (91) days.
repurchased by the issuer of such agreement, c. Security. Only obligations of the
they may be sold in the open market or National Government and its instru-
transferred to the BSP Portfolio; and mentalities and political subdivisions, which
(3) Should an issuer of a repurchase are fully guaranteed by the Government, with
agreement become no longer qualified as a remaining maturity of not more than ten
such, its outstanding repurchase agreement (10) years and which are freely negotiable

Part VI - Page 1
§§ 4602Q - 4603Q
03.12.31
and regularly serviced, shall be eligible as e. Reservation. Prepayment may be

underlying instruments for repurchase made by the BSP at its option anytime before
agreements, subject to the collateral maturity.
requirement prescribed by the BSP. To properly monitor transactions
d. Delivery. Delivery of the underlying involving reverse repurchase agreements
instruments shall be made to the BSP at the with the BSP, all investment houses and
prescribed time. For overnight repurchase financing companies with quasi-banking
agreements, delivery of the underlying functions ( IH/FC with QB ) shall record
instruments shall be made not later than properly its Reverse Repurchase Agreements
12:00 noon of the date of transaction. (REPO) with the BSP sold to clients.
Government securities which are held When an IH/FC sells an outstanding
by the issuer of the repurchase agreement reverse REPO agreement with the BSP to a
under the book-entry system with the BSP client, the securities under REPO support two
may be used as underlying instruments only (2) loan transactions – the IH/FC’s claim on
with the conformity of the BSP. the BSP under the original REPO and the
e. Upon termination of the repurchase client’s claim on the IH/FC under the new
agreement, the issuer of such agreement REPO. The IH/FC’s claim on the BSP arising
shall claim and take delivery of the underlying from the reverse REPO should not be offset
instruments at the Treasury Department, BSP. against its loan payable to clients in the
Failure to claim and take delivery of the subsequent sale of the REPO because the
underlying instruments immediately upon counterparties to the two (2) transactions are
such termination shall relieve the BSP of any different. Thus, the IH/FC’s reverse REPO
liability or responsibility for the loss or transaction with the BSP shall remain to be
misplacement of said instruments. recorded as “Government Securities
Purchased under Reverse Repurchase
§ 4602Q.1 Reverse repurchase Agreements with BSP ” under “Trading
agreements with Bangko Sentral. Reverse Account Securities – Loans”. The IH/FC’s
repurchase agreements may be effected with payable to clients arising from the subsequent
the BSP subject to the following terms and sale of the reverse REPO shall be recorded as
conditions: “Reverse Repurchase Agreements with BSP
a. Rate. The rates shall be set by the Sold to Clients” under Bills Payable –
Treasury Department, with the concurrence Others”. The subsequent sale of the reverse
of the Governor, taking into account the REPO agreements is not subject to reserve
prevailing liquidity/market conditions. requirements. The pro-forma accounting
b. Term. At the option of the Treasury entries are in Appendix Q-26.
Department, availments may be for a Effective July 1, 2003, published interest
minimum of one (1) day (overnight) and a rates that will be applied on BSP’s Reverse R/
maximum of 364 days. P agreements of quasi-banks shall be inclu-
c. Security. The collateral shall consist sive of the ten percent (10%) Value Added
of obligations of the National Government Tax (VAT).
and other freely negotiable securities in the
BSP portfolio valued at 100%. Sec. 4603Q Derivatives. NBQBs and/or their
d. Delivery. No delivery of the subsidiaries/affiliates may engage in financial
collateral shall be made, but a custody receipt derivatives activities upon prior approval of
shall be issued instead. the BSP.

Part VI - Page 2
§ 4603Q.1
04.12.31
§ 4603Q.1 Scope and pre-qualification (iii) Consistent with board-approved risk

requirements. The following provisions shall appetite;
govern the scope and pre-qualification (iv) Consistent with the level and
requirements for the grant of authority to complexity of the institution’s trading
engage in derivatives activities. activities; and
a. For regular derivatives authority (v) Fully documented and independently
(1) Scope. Financial institutions (FIs) validated.
supervised by the BSP may apply for a regular (d) The ability to monitor counterparty
derivatives license. A licensed FI may sell risks on outstanding contracts through a
derivatives products to its customers: methodology that reflects changes in credit
Provided, That the FI shall hedge such exposure as market rates change;
derivatives: Provided, further, That the risk (e) The technical competence of key
being hedged is already existing with the FI officers/traders responsible for the derivatives
itself. products; and
(2) Pre-qualification requirements. An (f) The procedures for evaluating client
application to engage in a regular derivatives suitability.
activities may be granted upon determination (3) Other requirements. BSP shall
by the BSP that the applicant possesses: evaluate quasi-bank’s and other BSP
(a) The ability to account for its currency supervised FI’s financial soundness and track
exposures on a per currency basis through record of compliance with major prudential
its Multi-Currency Subsidiary Ledger; requirements, such as, but not limited to:
(b) The ability to account for swaps and (a) CAMELS composite rating of at least
forwards either through the accrual or net “3” in the last regular examination;
present value basis. Swaps and forwards (b) Minimum applicable capital
designated as hedge only at inception may adequacy ratio;
be accounted for using the accrual method. (c) Minimum reserves against deposit
Forwards designated as trading shall be liabilities/deposit substitutes, CTFs, and
marked-to-market daily using the net present TOFA-Others; and
value methodology; (d) Maximum allowable open foreign
(c) The ability to manage and monitor exchange position.
price risks for the whole derivatives portfolio b. For engaging in derivatives
to ensure continuous assessment of the transactions as end-users
effectiveness of the hedge. While the ideal (1) Scope. FIs may engage in derivatives
method of measuring these risks is through transactions purely as end-users and do not
"value-at-risk” methodology, alternative need a license for such activities.
systems are acceptable: Provided, That these (2) Requirements. The FIs shall show
are: proof of approval by their board of directors
(i) Capable of measuring and to use derivatives. Such approval must
aggregating risks across trading and non- clearly specify the following as minimum
trading activities; guidelines:
(ii) Approved by the FI’s board of (a) Derivatives products to be used and
directors; the type of transactions to be hedged shall
be specified;

Part VI - Page 3
§§ 4603Q.1 - 4603Q.6
04.12.31
(b) Transactions shall be limited to Failure to submit said written request

hedging purpose only; there shall be no within the prescribed period shall be
speculative activity; presumed not renewing said licenses.
(c) Dealings shall only be with licensed/ b. The license may be renewed subject
authorized counterparties; and to compliance with the following:
(d) Transactions shall be reported (1) BSP standard of financial soundness
regularly to the board of directors. and track record of compliance with major
prudential regulations;
§ 4603Q.2 Transactions between (2) Adequate risk management systems;
parent and subsidiary. All derivatives and
transactions between parent NBQB and (3) Adequate internal control system and
subsidiary (e.g., Forex Corporation) shall be procedures including record keeping for
with prior BSP approval. derivatives activities.
§ 4603Q.3 Renewals. The license to § 4603Q.4 Risk management guidelines

engage in derivatives activities shall be for a NBQBs and/or their subsidiaries/affiliates
period of one (1) year. authorized to engage in derivatives activities
a. The following guidelines shall be shall adopt a policy manual that contains the
observed for the annual renewal of minimum features and principles embodied
derivatives licenses of NBQBs: in the Risk Management Guidelines for
(1) For derivatives granted before Derivatives (Appendix Q-15).
September 17, 2001, the licenses are Risk disclosure statements, which should
operative only until September 17, 2002. at least contain the disclosure statements in
Said licenses shall be renewed on or before Appendix Q-16, shall be provided to the
said date. Subsequently, the licenses shall clients/customers of NBQBs and/or their
be renewed on or before September 17 of subsidiaries/affiliates in order to advise the
each year; former of the risks involved in derivatives
(2) For derivatives granted after activities.
September 17, 2001, the licenses are A detailed statement on the position of
operative for a period of one (1) year the clients/customers must be sent to them
reckoned from the date of approval. The periodically.
licenses therefore, shall be renewed on or
before the end of the one (1)-year period; § 4603Q.5 Accounting guidelines. In
and recording derivatives activities in the books,
(3) NBQBs shall submit a written NBQBs and/or their subsidiaries/affiliates
request to renew their derivatives licenses shall observe the guidelines enumerated in
at least forty-five (45) calendar days before Appendix Q-17.
the expiration of the existing licenses. The
NBQBs will be notified of the BSP action on § 4603Q.6 Reporting requirements
their request. Until such notice is received, Aside from the daily/monthly FX position
NBQBs can continue to enter into new reports, a monthly report on transactions/
derivatives contracts as allowed under their outstanding derivatives transactions shall also
previously approved licenses. be required for NBQBs which enter into
derivatives contracts as end-user.

Part VI - Page 4
§§ 4603Q.7 - 4603Q.15
03.12.31
§ 4603Q.7 Sanctions. Monetary § 4603Q.15 Definition of terms

penalties prescribed under Sections 35, 36 a. Foreign exchange obligation shall
and 37 of R.A. No. 7653 and/or suspension refer to an actual FX commitment to a non-
of foreign exchange operations, shall be resident or any Authorized Agent Bank (AAB)
imposed on any NBQB , its subsidiaries/ where the amount, payment tenor and party
affiliates (including directors or officers) that have been determined.
engage in derivatives activities without prior b. Foreign exchange exposure shall re-
BSP approval. fer to an FX risk arising from an existing com-
If the NBQB submits an erroneous mitment to or from a non-resident or AAB
written representation or certification, a cease which leads to payment of an FX obligation
and desist order shall be imposed, in addition or receipt of an FX asset based on verifiable
to a monetary penalty of P10,000 per documents on deal date.
transaction. The NBQB ’s derivatives c. Resident shall refer to -
operations may only be resumed after the (1) An individual citizen of the Philip-
appropriate supervising and examining pines residing therein; or
department has made a thorough validation (2) An individual who is not a citizen
of the NBQB ’s compliance with of the Philippines but is permanently resid-
requirements. ing therein; or
(3) A corporation or other juridical
§§ 4603Q.8 - 4603Q.13 (Reserved) person organized under the laws of the
Philippines; or
§ 4603Q.14 Forward and swap (4) A branch, subsidiary, affiliate,
transactions. Quasi-banks and their extension office or any other unit of
customers may hedge through financial corporations or juridical persons which are
derivatives products their foreign exchange organized under the laws of any country and
obligations and/or exposures eligible for operating in the Philippines, except Offshore
servicing by the banking system under Banking Units (OBUs).
Circular No. 1389 dated April 13, 1993, as d. Non-resident shall refer to an
amended. individual, a corporation or other juridical
As a rule, quasi-banks and their person not included in the definition of
subsidiaries/affiliates duly authorized to resident.
engage in derivatives transactions under e. Foreign exchange swap refers to a
Subsec. 4603Q.1 may only enter into transaction involving the actual exchange of
derivatives contracts with their customers two (2) currencies (principal amount only)
where either party to the transaction is on a specific date at a rate agreed on deal
hedging eligible actual FX obligations or date (the first leg), and a reverse exchange of
existing FX exposures. the same two (2) currencies at a date further
To ensure that such financial derivatives in the future (the second leg) at a rate
products are not used for activities that (different from the rate applied to the first leg)
destabilize the FX market, the following agreed on deal date.
guidelines as well as minimum documentary f. Foreign exchange forward refers to
requirements for FX forwards and swaps shall a transaction involving the exchange of two
be strictly adhered to.

Part VI - Page 4a
§§ 4603Q.15 - 4603Q.18
03.12.31
(2) currencies at a rate agreed on deal date with the maturity of the underlying
for value or delivery (cash settlement) at some obligation. This shall not preclude
time in the future (more than two (2) business pretermination of the contract due to
days later). prepayment provided prior BSP approval is
g. Non-deliverable forward (NDF) obtained.
refers to the forward FX contract where only The FX proceeds of deliverable FX
the net difference between the contracted forward contracts shall be immediately
forward rate and the market rate shall be remitted or paid to the non-resident supplier/
settled at maturity. beneficiary or AAB except for foreign
investments where said FX proceeds are
§ 4603Q.16 Documentation reconverted to Philippine pesos and re-
Minimum documentary requirements for FX invested in eligible peso instruments such as
forward and swap transactions in Appendix those listed in Item A.2.2 of Appendix Q-29.
Q-29 shall be presented on or before deal b. Swaps (purchase of FX at first leg
date to the banks, and their subsidiaries/ and sale of FX at second leg)
affiliates. The tenor/maturity of swap contracts
Unless otherwise indicated, documents shall not be less than thirty (30) calendar days
shall be stamped “deliverable/FX hedged” or but not longer than: (i) the maturity of the
“non-deliverable/FX hedged” upon underlying FX obligation; or (ii) the
presentation/submission indicating the date approximate due date of settlement of the
and amount hedged and signed by FX exposure. In case of prepayments of
authorized officer of the banks and their foreign currency loans covered by swaps,
subsidiaries/affiliates. Copies of all duly banks shall ensure that such prepayments are
marked supporting documents shall be allowed under the covering loan agreement.
retained by the quasi-banks and/or their
subsidiaries/affiliates and shall be made § 4603Q.18 Cancellations, roll-overs
available to the BSP for verification. Said or non-delivery of FX forward contracts
copies shall be marked “documents All cancellations, roll-overs or non-
presented as required” and signed by the delivery of FX forward contracts, whether
servicing entity’s authorized signatory. purchases or sales, shall be subject to the
No double hedging shall be allowed following guidelines to determine the validity
covering the same underlying FX obligation/ thereof:
exposure. a. Eligibility test. Forward contracts
must be supported by documents listed in
§ 4603Q.17 Tenor/maturity of FX for- Appendix Q-29 hereof.
ward or swap b. Frequency test. The reasonableness
a. FX forwards (whether deliverable or of the cancellation, roll-over or non-delivery
non-deliverable) and swaps (sale of FX at first shall be based on the results of the evaluation
leg and purchase of FX at second leg) of the justification/explanation submitted by
The tenor/maturity shall not be longer banks as evidenced by appropriate
than: (i) the maturity of the underlying FX documents.
obligation; or (ii) the approximate due date c. Counterparty test. The cancellation
or settlement of the FX exposure. However, or roll-over of forward contracts must be duly
for foreign currency loans, the tenor of the acknowledged by the counterparty to the
deliverable FX forward shall be co-terminus contract as shown in documents submitted

Part VI - Page 4b
§§ 4603Q.18 - 4603Q.26
03.12.31
by banks, e.g., there should be conforme of Above-cited reports shall be transmitted

counterparty as evidenced by the to e-mail address iod@bsp.gov.ph.
counterparty signature on pertinent
documents. §§ 4603Q.22 - 4603Q.25 (Reserved)
d. Mark-to-market test. The booking or
recording in the books of accounts of the § 4603Q.26 Sanctions
profit or loss on contracted forward contracts Violations of Subsecs. 4603Q.14 to
and cash flows/settlement to counterparties 4603Q.21 shall be subject to the penalty
must be fully supported by appropriate provisions under R.A. No. 7653 (The New
documents such as authenticated copy of Central Bank Act) and other existing banking
debit/credit tickets, schedules showing laws and regulations.
among others, mark-to-market valuation Failure to comply with Subsec.
computation, etc. 4603Q.18 shall result in the exclusion of the
forward contracts in the computation of the
§ 4603Q.19 Non-deliverable forward quasi-bank’s consolidated daily position
contracts with non-residents. Only banks starting from day one (1), i.e., when the
with expanded derivatives license may enter individual contracts were entered into.
into NDF contracts to sell FX to non-residents. Violations of the prescribed FX position limits
shall be subject to the following sanctions
§ 4603Q.20 Compliance with Anti- provided under Circular Letter dated March
Money Laundering rules. All transactions 13, 1998:
under Subsecs. 4603Q.14 to 4603Q.21 shall
comply with the regulations on anti-money a. Monetary Penalties
laundering under Sec. 4691Q. Per Calendar Month Daily Penalty
1st business day P10,000
§ 4603Q.21 Reporting requirements 2nd business day 20,000
3rd business day of violation, 30,000
Quasi-banks and their subsidiaries/ and onwards, or if the excess
affiliates duly authorized to engage in FX position is 30% or more
derivatives transactions shall continue to be of the allowable limits in any
covered by the BSP’s existing reporting business day, regardless of
whether a quasi-bank
requirements on financial derivatives.
is in the first, second, third or
Cancellations, roll-overs or non-delivery of more days of violation
deliverable forward contracts shall be
reported electronically in excel format to the b. In addition, the following non-
BSP not later than two (2) business days after monetary sanctions shall be imposed on the
reference week as indicated in Appendix Q-3. quasi-bank committing violations considered
Swap contracts with non-bank resident as:
counterparties involving purchase of FX at (1) “chronic”, i.e., when the violation
the initial leg by said quasi-banks and their continues beyond three (3) business days
subsidiaries/affiliates from non-bank within a calendar month, but the excess
counterparties shall likewise be reported position is less than thirty percent (30%) of
electronically in excel format to the BSP not the allowable limit; and
later than two (2) business days after reference (2) “abusive”, i.e., when the violation
week as indicated in Appendix Q-3. continues beyond three (3) business days

Part VI - Page 4c
§§ 4603Q.26 - 4626Q.1
04.12.31
within a calendar month and excess position provisions of P.D. No. 129, as amended
is thirty percent (30%) or more of the (Appendix Q-18).
allowable limit.
"Chronic" Suspension of the quasi-bank’s cash
violation dividend declaration and branching Sec. 4626Q Asset-Backed Securities. The
privileges until the violation is following regulations shall govern the
corrected but in no case shall such origination, issuance, sale, servicing and
suspension be less than thirty (30) administration of asset-backed securities
calendar days. (ABS) by any NBQB including its subsidiaries
and affiliates engaged in allied activities,
"Abusive" Suspension of the quasi-bank's
which are domiciled in the Philippines.
violation cash dividend declaration and
branching privileges until the
violation is corrected but in no case § 4626Q.1 Definition of terms
shall such suspension be less than a. Assets shall mean loans or
sixty (60) calendar days. receivables existing in the books of the
originator prior to securitization. Such assets
c. The Monetary Board may impose are generated in the ordinary course of
other non-monetary sanctions on a quasi- business of the originator and may include
bank for violations determined by BSP as mortgage loans, consumption loans, trade
“chronic” or “abusive” on a case-to-case ba- receivables, lease receivables, credit card
sis, pursuant to Section 37 of R.A. No. 7653. receivables and other similar financial assets.
d. Quasi-banks shall be duly advised b. Asset-backed securities shall refer
by the BSP of their violations and the corre- to the certificates issued by a special purpose
sponding sanctions imposed for such viola- trust (SPT) representing undivided ownership
tions. interest in the asset pool.
e. A monetary penalty imposed on a c. Asset pool shall mean a group of
quasi-bank shall be paid to the BSP Cash identified, self-amortizing assets that is
Department, within three (3) business days conveyed to the SPT issuing the ABS and
from the receipt of advice of said penalty such other assets acquired as a consequence
imposition. of the securitization.
Furthermore, reports required under d. Clean-up call shall refer to an option
Subsec. 4603Q.21 are considered as granted to the seller to purchase the
Category A report for purposes of imposing remaining assets in the asset pool.
sanctions on delayed, erroneous or e. Credit enhancement shall refer to
amendatory reports as prescribed under Sec. any legally enforceable scheme that is
4162Q. intended to enhance the marketability of the
Counterparties that habitually cancel ABS and increase the probability that
deliverable forwards without proper investors receive payment of amounts due
justification may be subject of a BSP watchlist. them.
f. Guarantor shall refer to an entity
Sec. 4604Q Underwriting by Investment that guarantees the repayment of principal
Houses. Underwriting commitments and fees and interests on loans or receivables included
of investment houses shall be subject to the in the asset pool in the event of default by
rules issued by the SEC to implement the the borrower.

Part VI - Page 4d
§§ 4626Q.1 - 4626Q.4
03.12.31
g. Investible funds shall refer to the corporate strategic plan. The board of
proceeds of collection of loans or receivables directors shall ensure that the securitization
included in the asset pool which are not yet of assets is consistent with such program.
due for distribution to investors.
h. Issuer shall refer to the SPT that § 4626Q.4 Minimum documents
issues the ABS. required. The application to securitize must
i. Originator shall refer to an NBQB be accompanied by the following documents
and/or its subsidiary or affiliate engaged in as a minimum requirement:
allied activities that grants or purchases loans a. Trust indenture evidencing the
or receivables and assembles them into a conveyance of the assets from the seller to
pool for securitization. the issuer or SPT, the features of which shall
j. Residual certificates shall refer to include the following:
certificates issued representing claims on the (1) Title or nature of the contract in
remaining value of the asset pool after all ABS noticeable print;
holders are paid. (2) The parties involved, indicating in
k. Seller shall refer to the entity which noticeable print, their respective legal
conveys to the SPT the assets that constitute capacities, responsibilities and functions;
the asset pool. (3) Features and amount of ABS;
l. Servicer shall refer to the entity (4) Purposes and objectives;
designated by the issuer primarily to collect (5) Description and amount of assets
and record payments received on the assets, comprising the asset pool;
to remit such collections to the issuer and (6) Representation and warranties;
perform such other services as may be (7) Credit enhancements;
specifically required by the issuer excluding (8) Distribution of funds;
asset management or administration. (9) Authorized investment of investible
m. Special purpose trust shall refer to funds;
a trust administered by a trustee and created (10) Rights of the investor;
solely for the purpose of issuing and (11) Reports to investors; and
administering an ABS. (12) Termination and final settlement.
n. Trustee shall refer to the entity The trust indenture shall include as
designated to administer the SPT. annexes the servicing agreement between the
o. Underwriter shall refer to the entity trustee and the servicer and the underwriting
engaged in the act or process of distributing agreement between the seller and the
and selling of the ABS either on guaranteed underwriter.
or best-efforts basis. b. Prospectus. As a minimum
requirement, it shall contain the following:
§ 4626Q.2 Authority. Any NBQB (1) Summary of the contents of the
including its subsidiaries and affiliates prospectus;
engaged in allied activities, may securitize (2) Description of each class of
its assets upon prior approval of the BSP. certificates, including such matters as
probable yields, payment dates and priority
§ 4626Q.3 Management oversight of payments;
The originator/seller shall have the (3) Description of the assets comprising
securitization program approved by its board the asset pool as well as the representations
of directors. The originator/seller shall and warranties set forth by the originator and/
integrate such securitization program into its or seller;
(Next page is Part VI - Page 5)

Part VI - Page 4e
§§ 4626Q.4 - 4626Q.7
98.12.31
(4) Assumptions underlying the cash flow read and understood the disclosures.
projections for each class of certificate;
(5) Description of any credit § 4626Q.7 Conveyance of assets
enhancement; a. The conveyance of the assets
(6) Identity of the servicer; and comprising the asset pool shall be done
(7) Disclosure statements as required within the context of a true sale and, for this
under Subsec. 4626Q.6. purpose, the seller may not retain in its books
c. Specimen of application to purchase the ABS, except the residual certificate, if any.
ABS. It shall include the terms and conditions b. The seller shall have no obligation to
of the purchase and the disclosures required repurchase or substitute an asset or any part
under Subsec. 4626Q.6. of the asset pool at any time, except in cases
d. Specimen of certificate. It shall of a breach of representation or warranty, or
indicate the features of the ABS and the under a revolving structure, to replace
disclosures required under Subsec. 4626Q.6. performing assets which have been paid out
in part or in full.
§ 4626Q.5 Minimum features of ABS c. The seller shall be under no obligation
The ABS shall be pre-numbered and printed to provide additional assets to the SPT to
on security paper. The ABS shall be signed maintain a coverage ratio of collateral to
and authenticated by the trustee. They are outstanding ABS. A breach of this
transferable by endorsement of the certificate. requirement will be considered a credit
The transfer shall be recorded in the books enhancement and should be charged against
of the trustee, indicating the names of the capital. However, this will not apply to an
parties to the transaction, the date of the asset pool conveyed under a revolving
transfer and the number of the certificate structure such as the securitization of credit
transferred. card receivables.
The minimum denomination of any d. Securitized assets shall be considered
ABS shall be P10,000. the subject of a true sale between the seller
and the SPT. Sold assets shall be taken off
§ 4626Q.6 Disclosures. The following the books of the seller and shall be transferred
disclosures must be provided in a to the books of the SPT.
conspicuous manner in any document For accounting purposes, the transfer shall
inviting investment, application to purchase only be considered a true sale if the following
ABS and in the certificate itself: three (3) conditions have been satisfied:
a. The ABS do not represent deposit (1) the transferred assets have been
substitutes or liabilities of the originator, isolated and put beyond the reach of the
servicer or trustee and that they are not seller and its creditor;
insured with PDIC; (2) the SPT has the right to pledge or
b. The investor has investment risks; exchange its interest in the assets; and
c. The trustee does not guarantee the (3) the seller does not effectively maintain
capital value of the ABS or the collectibility control over the transferred assets by any
of the asset pool; and concurrent agreement.
d. The rights of an investor. e. All expenses incidental to
The investors shall be required to sign underwriting, conveyance of the asset pool
an acknowledgment indicating that they have including expenses for credit enhancement

Part VI - Page 5
§§ 4626Q.7 - 4626Q.12
98.12.31
may be paid by the originator/seller: b. The seller or originator shall deliver

Provided, That no further expenses shall be to the trustee all original documents or
borne by the originator/seller after the asset instruments with respect to each asset sold.
pool has been conveyed to the SPT.
§ 4626Q.11 Trustee and issuer
§ 4626Q.8 Representations and a. The trustee shall be the trust
warranties department of a bank licensed to do business
a. Standard representations and in the Philippines.
warranties refer to an existing state of facts b. The trustee shall have the right to
that the originator, seller or servicer can either manage or administer the asset pool. The
control or verify with reasonable due trustee shall see to it that necessary measures
diligence at the time the assets are sold. Any are taken to protect the asset pool.
breach of representation or warranty may c. The trustee shall undertake a
give rise to legal recourse. performance review of the asset pool at least
b. The representations or warranties shall quarterly and shall prepare a report to
be clear and explicit and, in particular, shall investors indicating, among others,
not relate to the future creditworthiness of collections, fees and other expenses as well
the assets in the asset pool or the performance as defaults, which report shall be made
of the SPT or the securities issued. available to the investors at anytime after thirty
c. Any agreement to pay damages as (30) days from end of the reference quarter.
a result of breach of warranties and d. The trustee shall initiate all civil
representations shall hold only where: actions including foreclosure of mortgaged
(1) there is a well-documented negotia- properties to effect collection of receivables
tion of the agreement in good faith; in the asset pool. The servicer or any other
(2) the burden of proof for a breach of party may be designated by the trustee to
representation or warranty rests with the perform such function on a case-by-case
other party; basis.
(3) damages are limited to the loss e. The trustee may invest the investible
incurred as a result of the breach; and funds only in obligations issued and/or fully
(4) there is a written notice of claim guaranteed by the government of the
specifying the basis for the claim. Republic of the Philippines or by the BSP and
The BSP shall be notified of any instance such other high-grade readily marketable
where an NBQB or its subsidiaries/affiliates debt securities as the BSP may approve.
has agreed to pay damages arising out of any f. The trustee shall designate a
breach of representation or warranty. replacement of the servicer if the latter fails
to satisfactorily perform its duties and
§ 4626Q.9 Third party review. A due responsibilities according to the terms and
diligence review by an independent entity conditions of the servicing agreement.
mutually agreed upon by the seller and the
issuer shall be done before the assets are sold. § 4626Q.12 Servicer
a. The servicer shall perform its duties
§ 4626Q.10 Originator and seller according to the terms and conditions of the
a. The seller may itself be the originator, servicing agreement and such other written
and may likewise be designated as the instructions as the trustee may issue on a
servicer. case-by-case basis. Collections made by the

Part VI - Page 6
§§ 4626Q.12 - 4626Q.15
98.12.31
servicer shall be remitted promptly to the § 4626Q.14 Guarantor

trustee or as may be agreed upon by the a. Only an entity the regular business
parties in the servicing agreement, but in no of which includes the issuance of guarantees
case shall the remittance period be longer or similar undertaking may act as guarantor.
than one (1) month. b. The guarantor must have the
b. The servicer shall prepare periodic financial capacity to perform its
reports as may be required by the trustee. responsibilities in accordance with the terms
c. The servicer shall report to the and conditions of the guarantee agreement.
trustee within thirty (30) days any borrower It shall submit to the trustee at least once in
which fails to pay its debt at maturity date or every six (6) months such financial reports
any adverse development that may affect the as the trustee may require.
collectibility of any loan account or c. The originator or seller may not issue
receivable comprising the asset pool. a counter-guarantee in favor of the guarantor.
d. The servicer shall have no authority
to waive penalties and charges except with § 4626Q.15 Credit enhancement. Credit
a written authority from the trustee. enhancement may be provided in any of the
following manner:
§ 4626Q.13 Underwriter a. Standby letter of credit issued by an
a. An expanded commercial bank EKB/KB other than the originator’s/seller’s
(EKB) or investment house (IH) shall have subsidiary/affiliate, parent bank or the parent
written policies and procedures on bank’s subsidiary/affiliate, and trustee or its
underwriting of ABS. 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, the
c. An underwriter may deal in ABS, 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 of c. Guarantee issued by any entity
its parent bank or the trust department of its other than the originator/seller or its
parent bank’s subsidiaries/affiliates. subsidiary/affiliate, its parent bank or the
d. An EKB/IH may act as underwriter, parent bank’s subsidiary/affiliate, and trustee
on a firm basis, of ABS except those or its subsidiary/affiliate.
administered by its trust department, the trust d. Overcollateralization provided by
departments of its subsidiaries/affiliates, the the originator/seller wherein the assets
trust department of its parent bank or the trust conveyed to the SPT exceed the amount of
department of its parent bank’s subsidiaries/ securities to be issued.
affiliates. Losses arising from overcollateralization
e. The underwriter may not extend shall be recognized by the originator/seller
credit for the purpose of purchasing the ABS upfront. Such losses shall be treated as capital
which such EKB/IH underwrites or that which charges.
is underwritten by its subsidiaries/affiliates, e. Spread account wherein the income
its parent bank or its parent bank’s from the underlying pool of receivables is
subsidiaries/affiliates. made available to cover any shortfall in the

Part VI - Page 7
§§ 4626Q.15 - 4626Q.19
98.12.31
repayment of ABS. The spread account shall b. Any director, officer or employee
be handled by the trustee which shall account of the originator, seller or servicer may not
for it separately. If not needed, this “spread” serve as a member of the board of directors
generally reverts to the holder of the residual or trust committee of the trustee or vice versa
certificate. for the duration of the securitization.
f. Subordinated securities that are c. The trust indenture shall not contain
lower ranking, or junior to other obligations any stipulation whereby the seller, its
and are paid after claims to holders of senior subsidiaries/affiliates, its parent bank or the
securities are satisfied. parent bank’s subsidiaries/affiliates shall
g. Other credit enhancements as may commit to extend any credit facility to the
be approved by the Monetary Board. issuer and/or trustee.
To be consistent with the concept of a d. The ABS shall not be eligible as
true sale, subordinated securities shall be sold collateral for a loan extended by an NBQB
to third party investors other than the which originated/sold the underlying assets
originator’s/seller’s parent company or its of such ABS.
subsidiary/affiliate and the trustee or its e. The trust department of a bank that
subsidiary/affiliate or, if held by the seller, has discretion in the management of any trust
capital charges should be booked upfront. or investment management account may not
Otherwise, the subordinated securities shall purchase for said trust/investment
be treated as deposit substitute subject to management account ABS administered by
legal reserves. the trust department of the same bank, the
trust department of such trustee’s
§ 4626Q.16 Clean-up call. A clean- subsidiaries/affiliates, the trust department of
up call may be exercised by the seller once such trustee’s parent bank and the trust
the outstanding principal balance of the department of the parent bank’s subsidiaries/
receivable component of the asset pool falls affiliates.
to ten percent (10%) or less of the original The trustee may not designate its
principal balance of the asset pool. Where subsidiary/affiliate, its parent or the parent’s
the asset pool includes foreclosed and other subsidiaries/affiliates as servicer or vice versa.
assets, such assets shall be included in the
clean-up call and the consideration thereof § 4626Q.18 Amendment. Any
shall be at current market value. Such a amendment to the trust indenture shall
clean-up call shall not be considered require the prior approval of the BSP.
recourse or in violation of Subsec. 4626Q.7
on conveyance of assets. § 4626Q.19 Miscellaneous provision
Without prior approval of the BSP, any entity
§ 4626Q.17 Prohibited activities supervised by the BSP authorized to engage
a. The seller may not, under any in trust and fiduciary business may act as
circumstance, designate its trust department, trustee or servicer in a securitization scheme
the trust department of its subsidiaries/ originated by an entity not supervised by the
affiliates, the trust department of its parent BSP: Provided, That the assets which are the
bank or the trust department of its parent subject of such securitization are existing in
bank’s subsidiaries/affiliates as trustee. the books of the entity prior to securitization:
Provided, further, That such entity acting as

Part VI - Page 8
§§ 4626Q.19 - 4651Q.9
03.12.31
trustee or servicer is not a subsidiary/affiliate further, That the corresponding appreciation

of the originator/seller, its parent bank or credit shall not form part of the combined
the parent bank’s subsidiaries/affiliates or capital accounts of NBQBs but lodged under
vice versa: Provided, finally, That such entity a Revaluation Reserve account.
acting as trustee may not designate its
subsidiaries/affiliates, its parent or the § 4651Q.2 (Reserved)
parent’s subsidiaries/affiliates as servicer or
vice versa. § 4651Q.3 Reclassification of real and
other properties owned or acquired as
§ 4626Q.20 Report to Bangko Sentral NBQB premises. Real and other properties
The trustee shall submit a report of every owned or acquired (ROPOA) reclassified
securitization scheme in formats to be either as Real Property-Land or Real Property-
prescribed by the BSP. The report shall be Building shall be booked at their ROPOA
submitted to the appropriate supervising and balance, net of any valuation reserve:
examining department of BSP, within fifteen Provided, That only such acquired asset or a
(15) business days after the end of every portion thereof that will be immediately used
reference quarter. Such report shall be or earmarked for future use may be
considered a Category A report for purposes reclassified and booked as Real Property-
of implementing fines in the submission of Land/Building.
required reports pursuant to existing NBQBs, prior to the reclassification of
regulations. their ROPOA accounts to Real Property-Land/
Building, shall first secure prior BSP approval
Secs. 4627Q - 4650Q (Reserved) before effecting the reclassification and shall
submit, in case of future use, justification and
plans for expansion/use.
§§ 4651Q.4 - 4651Q.8 (Reserved)
Sec. 4651Q NBQB Premises and Other
Fixed Assets. The following rules shall § 4651Q.9 Batas Pambansa Blg. 344 –
govern the premises and other fixed assets An Act To Enhance The Mobility Of Disabled
of NBQBs. Persons By Requiring Certain Buildings,
Institutions, Establishments And Public
§ 4651Q.1 Appreciation or increase Utilities To Install Facilities And Other
in book value of NBQB premises and other Devices. In order to promote the realization
fixed assets. As a general rule, appreciation of the rights of disabled persons to participate
or increase in book value of NBQB premises fully in the social life and the development
and other fixed assets is not allowed. of the societies in which they live and the
However, in cases where the market value enjoyment of the opportunities available to
of the property has greatly increased since other citizens, no license or permit for the
the original purchase, appreciation may be construction, repair or renovation of public
allowed: Provided, That the appropriate and private buildings for public use,
supervising and examining department of the educational institutions, airports, sports and
BSP shall be notified in advance of the recreation centers and complexes, shopping
proposed increase in value: Provided, centers or establishments, public parking

Part VI - Page 9
§§ 4651Q.9 - 4653Q.2
03.12.31
places, workplaces, public utilities, shall be BSP shall bill the NBQB for the full amount
granted or issued unless the owner or of the annual fee or for the balance thereof
operator thereof shall install and incorporate not covered by its deposit account, as the
in such building, establishment or public case may be.
utility, such architectural facilities or Within thirty (30) calendar days from
structural features as shall reasonably receipt of the bill, the NBQB shall make the
enhance the mobility of disabled persons corresponding remittance to the BSP. Failure
such as sidewalks, ramps, railings and the to pay the bill within the prescribed period
like. If feasible, all such existing buildings, shall subject the NBQB to administrative
institutions, establishments, or public utilities sanctions.
may be renovated or altered to enable the
disabled persons to have access to them. Sec. 4653Q Payment of Fines and Other
Charges. The following regulations shall
Sec. 4652Q Annual Fees on Quasi-Banks govern the payment of fines and other
NBQBs shall contribute to the BSP an annual charges by NBQBs.
fee to help defray the cost of maintaining the
appropriate supervising and examining § 4653Q.1 Payment of fines. NBQBs
department. shall, within fifteen (15) calendar days from
For purposes of computing the annual receipt of the statement of account from the
fees chargeable against NBQBs, the term Total BSP, pay the fines for reserve deficiency,
Assessable Assets shall be the amount reportorial delay/deficiency, refusal to permit
referred to as the total assets under Section examination, or failure to comply with, or
28 of R.A. No. 7653 (end-of-quarter total violation of, any law or any order, instruction
assets per balance sheet, after deducting cash or regulation issued by the Monetary Board,
on hand and amounts due from banks, or any order, instruction or ruling by the
including the BSP and banks abroad) plus Governor.
Trust Department accounts. For NBQBs which maintain demand
Average Assessable Assets shall be the deposit accounts with the BSP, fines which
summation of end-of-quarter total assessable are unpaid after the lapse of the fifteen (15)-
assets divided by the number of quarters in day period shall be automatically debited
operation during the particular assessment against the corresponding demand deposit
period. account of the NBQB concerned: Provided,
The annual fees for quasi-banks for the That if the balance of the entity's account is
assessable years 2000, 2001 and 2002 shall insufficient to cover the fines due, such fines
be one twenty-eighth (1/28) of one percent shall be paid not later than the following
(1%) multiplied by their AAAs for 2000, 2001 business day. For the purpose of this Section,
and 2002 respectively. business day means a day on which the BSP
Annual fees to be collected from NBQBs head office and the head office of the NBQB
shall be debited from their respective are open for business.
deposits with the BSP by the BSP Accounting
Department upon receipt of the notice of the § 4653Q.2 Check/demand draft pay-
assessment from the appropriate supervising ments to the Bangko Sentral. NBQBs shall
and examining department of the BSP. make all check and demand draft payments
Where the deposit account is for legal reserve, supervisory fees, fines or
insufficient to cover the assessment fee, the penalties and collections or repayments of

Part VI - Page 10
§§ 4653Q.2 - 4654Q.1
03.12.31
notes used as collateral for loans, payable b. Affiliate is an entity linked directly
either to the Cash Department, Bangko or indirectly to an NBQB by means of:
Sentral ng Pilipinas, Mabini St., Malate, (1) Ownership, control or power to
Manila or directly to the BSP Regional Cash vote, of ten percent (10%) or more of the
Units. Such payments shall be accompanied outstanding voting stock of the entity, or vice-
by the appropriate form as shown in versa;
Appendix Q-22. Payments not accompanied (2) Interlocking directorship or
by the required payment forms shall be officership;
presumed to be additions to reserves and (3) Common stockholders owning ten
shall be credited to the demand deposit percent (10%) or more of the outstanding
account of the paying NBQB. voting stock of each of the financial
Check payments shall be value-dated intermediary and the entity;
when the check is cleared. (4) Management contract or any
arrangement granting power to the financial
Sec. 4654Q Examination by the Bangko intermediary to direct or cause the direction
Sentral. The BSP shall have supervision over, of management and policies of the entity, or
and conduct periodic or special examinations vice-versa; or
of NBQBs, including their subsidiaries and (5) Permanent proxy or voting trust in
affiliates in allied activities. favor of the financial intermediary
The head and examiners of the constituting ten percent (10%) or more of the
appropriate supervising and examining outstanding voting stock of the entity, or vice-
department of the BSP are authorized to versa.
administer oaths to any director, officer, or c. Financial allied undertakings refer
employee of NBQBs, including their to enterprises or firms with homogeneous or
subsidiaries and affiliates engaged in allied similar activities/business/functions with the
activities, and to compel the presentation of financial intermediary and may include, but
all books, documents, papers or records not limited to, leasing companies, banks,
necessary in their judgment to ascertain the investment houses, financing companies,
facts relative to the true condition of the credit card operations, financial institutions
institution as well as the books and records addressed/catering to small and medium
of persons and entities relative to or in scale industries, and such other similar
connection with the operations, activities or activities as the Monetary Board may declare
transactions of the institution under as appropriate from time to time.
examination, subject to the provision of d. Non-financial allied undertakings
existing laws protecting or safeguarding the may include, but not limited to, warehousing
secrecy or confidentiality of investments of companies, storage companies, safe deposit
private persons, natural or juridical, in debt box companies, companies engaged in the
instruments issued by the Government. management of mutual funds but not in the
mutual funds themselves, management
§ 4654Q.1 Definitions corporations engaged or to be engaged in
a. Subsidiary is a corporation more activities similar to the management of
than fifty percent (50%) of the outstanding mutual funds, insurance agencies, companies
voting stock of which is directly or indirectly engaged in home building and home
owned, controlled, or held with power to development and companies providing
vote by an NBQB. drying and/or including facilities for

Part VI - Page 11
§§ 4654Q.1 - 4657Q.2
03.12.31
agricultural crops such as rice and corn and derecognition of domestic credit rating
such other similar activities as the Monetary agencies (CRAs) for bank supervisory
Board may declare as appropriate from time purposes.
to time.
§ 4657Q.1 Statement of policy. The
introduction in the financial market of new
Sec. 4655Q Applicability of Expanded
and innovative products create increasing
Commercial Banking Rules on NBQBs. In
demand for and reliance on CRAs by the
case of conflict between rules applicable to
industry players and regulators as well. As a
banks with expanded commercial banking
matter of policy, the BSP wants to ensure that
authority and those applicable to NBQBs in
the reliance on credit ratings is not
activities where they perform the same func-
misplaced. The following rules and
tions, the rules governing banks with
regulations that shall govern the recognition/
expanded commercial banking authority
derecognition of domestic CRAs for quasi-
shall prevail.
bank supervisory purposes.
Sec. 4656Q Basic Laws Governing § 4657Q.2 Minimum eligibility criteria

Investment Houses and Financing Only ratings issued by CRAs recognized
Companies. The following are the basic laws by the BSP shall be considered for BSP quasi-
governing investment houses and financing bank supervisory purposes. The BSP, through
companies: the Monetary Board, may officially recognize
a. Investment houses. P.D. No. 129, a credit rating agency upon satisfaction of the
as amended, known as The Investment following requirements:
Houses Law, governs the establishment, a. Organizational structure
operation and regulation of investment (1) A domestic CRA must be a duly
houses. To effectively carry out the provisions registered company under the Securities and
of this Decree, the SEC, pursuant to the Exchange Commission (SEC); and
powers vested in it by said Decree, (2) A domestic CRA must have at least
promulgated basic rules and regulations five (5) years track record in the issuance of
(Appendix Q-18) to implement the provisions reliable and credible ratings. In the case of
of the Decree. new entrants, a probationary status may be
b. Financing companies. R.A. No. granted: Provided, That the CRA employs
8556, known as The Financing Company Act professional analytical staff with experience
of 1998, regulates the organization and in the credit rating business.
operation of financing companies. To b. Resources
effectively carry out the provisions of this Act, (1) Human Resources
the SEC, pursuant to the powers vested in it (a) The size and quality of the CRA’s
under said Act, promulgated basic rules and professional analytical staff must have the
regulations to implement the provisions of capability to thoroughly and competently
the Act (Appendix Q-19). evaluate the assessed/rated entity’s
creditworthiness;
Sec. 4657Q Recognition and Derecognition (b) The size of the CRA’s professional
of Domestic Credit Rating Agencies for Bank analytical staff must be sufficient to allow
Supervisory Purposes. The following substantial on-going contact with senior
regulations shall govern the recognition and management and operational levels of

Part VI - Page 12
§ 4657Q.2
03.12.31
assessed/rated entities as a routine (3) The CRA must use an assessment

component of the surveillance process; methodology that is subject to on-going
(c) The CRA shall establish a Rating review and is responsive to changes in the
Committee composed of adequately operations of assessed/rated entities.
qualified and knowledgeable individuals in d. Independence
the rating business, majority of whom must (1) The CRA must be free from control
have at least five (5) years experience in credit of and undue influence by the entities it
rating business; assesses/rates;
(d) The directors of the CRA must (2) The assessment process must be free
possess a high degree of competency from ownership pressures to allow
equipped with the appropriate education and management to exercise independent
relevant experience in the rating business; professional judgement;
(e) The directors, officers, members of (3) Persons directly involved in the
the rating committee and professional assessment process of the CRA are free from
analytical staff of the CRA have not at any conflicts of interest with assessed/rated
time been convicted of any offense involving entities, and
moral turpitude or violation of the Securities (4) The CRA does not assess/rate an
Regulation Code; and associate entity.
(f) The directors, officers, members of e. Transparency
the rating committee and professional (1) A general statement of the assessment
analytical staff of the CRA are not currently methodology used by the CRA should be
involved as a defendant in any litigation publicly available;
connected with violations of the Securities (2) The CRA shall disseminate to the
Regulation Code nor included in the BSP public thru a well-circularized publication,
watchlist. all assigned ratings disclosing whether the
(2) Financial resources rating issued is solicited or unsolicited;
(a) The CRA must have the financial (3) The rationale of ratings issued and
capability to invest in the necessary risk factors considered in the assessment
technological infrastructure to ensure speedy should be made available to the public;
acquisition and processing of data/ (4) The ratings issued by the CRA should
information and timely release of reliable and be available both to domestic and foreign
credible ratings; and institutions with legitimate interest; and
(b) The CRA must have financial (5) Publication of changes in ratings
independence that will allow it to operate together with the basis for the change should
free from economic and political pressures. be done on a timely basis.
c. Objectivity f. Disclosure requirements
(1) The CRA must use a rigorous and (1) Qualitative disclosures
systematic assessment methodology that has (a) Definition of ratings along with
been established for at least one (1) year; corresponding symbols;
however, a three (3)-year period is preferable; (b) Definition of what constitutes a
(2) The assessment methodology of the default, time horizon within which a default
CRA must be based both on qualitative and is considered and measure of loss given a
quantitative approaches; and default;

Part VI - Page 13
§§ 4657Q.2 - 4657Q.3
03.12.31
(c) Material changes within the CRA (b) power to govern the financial and
(i.e., changes in management or operating policies of the enterprise under a
organizational structure, rating personnel, statute or an agreement;
modifications of rating practices, financial (c) power to appoint or remove the
deterioration) that may affect its ability to majority of the members of the board of
provide reliable and credible ratings. directors or equivalent governing body;
(2) Quantitative disclosures (d) power to cast the majority votes at
(a) Actual default rates experienced in meetings of the board of directors or
each rating category; and equivalent governing body; or
(b) Rating transitions of assessed/ rated (e) any other arrangement similar to any
entities over time (i.e., likelihood of an AAA of the above.
credit rating transiting to AA etc. over time). h. Internal compliance procedures
g. Credibility (1) The CRA must have the necessary
(1) The CRA must have a general internal procedures to prevent misuse or
reputation of high standards of integrity and unauthorized disclosure of confidential/ non-
fairness in dealing with its clients and public information; and
conducts its business in an ethical manner; (2) The CRA must have rules and
(2) The CRA is generally accepted by regulations that prevent insider trading and
predominant users in the market (i.e., issuers, other conflict of interest situations.
investors, bankers, financial institutions,
securities traders); and § 4657Q.3 Pre-qualification requirements
(3) The CRA must carry out its rating The application of a domestic CRA for
activities with due diligence to ensure ratings BSP recognition shall be submitted to the
are fair and appropriate. appropriate supervising and examining
For purposes of this Section, a department of the BSP together with the
subsidiary refers to a corporation, more than following information/documents:
fifty percent (50%) of the voting stock of a. An undertaking
which is owned or controlled directly or (1) That the CRA shall comply with
indirectly by the CRA while an affiliate refers regulations, directives and instructions which
to a corporation, not more than fifty percent the BSP or other regulatory agency/body may
(50%) but not less than ten percent (10%) of issue from time to time; and
the voting stock of which is owned or (2) That the CRA shall notify the BSP in
controlled directly or indirectly by the CRA. writing of any material changes within the
“Control” exists when the parent owns organization (i.e., changes in management
directly or indirectly through subsidiaries or organizational structure, rating personnel,
more than one-half of the voting power of modifications of its rating practices, financial
an enterprise unless, in exceptional deterioration) that may affect its ability to
circumstance, it can be clearly demonstrated provide reliable and credible ratings.
that such ownership does not constitute b. Other documents/information:
control. Control may also exist even when (1) Brief history of the CRA, major rating
ownership is one-half or less of the voting activities handled including information on
power of an enterprise when there is: the name of the client, type of instruments
(a) power over more than one-half of the rated, size and year of issue;
voting rights by virtue of an agreement with (2) Audited financial statements for the
other stockholders; past three (3) years and such other

Part VI - Page 14
§§ 4657Q.3 - 4661Q
04.12.31
information as the Monetary Board may (1) Failure to maintain compliance with
consider necessary for selection purposes; the requirements under Subsec. 4657Q.2 or
(3) For new entrants, employment of any willful misrepresentation in the
professional analytical staff with experience information/documents required under
in the credit rating business; Subsec. 4657Q.3;
(4) List of major stockholders/partners (2) Involvement in illegal activities such
(owning at least ten percent (10%) of the as ratings blackmail; creation of a false market
voting stocks of the CRA directly or along or insider trading; divulging any confidential
with relatives within the 1st degree of information about a client without prior
consanguinity or affinity); consent to a third party without legitimate
(5) List of directors, officers, members of interest; indulging in unfair competition (i.e.,
the rating committee and professional luring clients of another rating agency by
analytical staff of the CRA; including their assuring higher ratings etc.); and
qualifications, experience related to rating (3) Any violations of applicable laws,
activities, directorship and shareholdings in rules and regulations.
the CRA and in other companies, if any; b. Procedure for derecognition. A CRA
(6) List of subsidiaries and affiliates shall only be derecognized upon prior notice
including their line of business and the nature and after being given the opportunity to
of interest of the CRA in these companies; defend itself.
(7) Details of the denial of a previous
request for recognition, if any (i.e., § 4657Q.6 Recognition of PhilRatings
application date, date of denial, reason for as domestic credit rating agency for bank
denial etc.); and supervisory purposes. Credit ratings
(8) Details of all settled and pending assigned by Philippine Rating Services
litigations connected with the securities Corporation (PhilRatings) may be used,
market against the CRA, its directors, officers, among others, for determining appropriate
stockholders, members of the rating risk weights in ascertaining compliance with
committee and professional analytical staff, existing rules and regulations on risk-based
if any. capital requirements.
§ 4657Q.4 Inclusion in BSP list Secs. 4658Q - 4660Q (Reserved)

The BSP will regularly circularize to all
banks and non-bank financial institutions an Sec. 4661Q Examination by the BSP. The
updated list of recognized CRAs. The BSP, term “examination” shall, henceforth, refer
however, shall not be liable for any damage to an investigation of an institution under the
or loss that may arise from its recognition of supervisory authority of the BSP to determine
CRAs to be engaged by users. compliance with laws and regulations. It
shall include determination that the
§ 4657Q.5 Derecognition of credit institution is conducting its business on a safe
rating agencies and sound basis. Examination requires full
a. Grounds for derecognition. Credit and comprehensive looking into the
rating agencies may be derecognized from operations and books of institutions, and shall
the list of BSP recognized CRAs under the include, but need not be limited to, the
following circumstances: following:

Part VI - Page 15
§§ 4661Q - 4699Q
04.12.31
a. Determination of the NBQB’s Secs. 4662Q - 4690Q (Reserved)

solvency and liquidity position;
b. Evaluation of asset quality as well as Sec. 4691Q Anti-Money Laundering
determination of sufficiency of valuation Regulations. Banks, offshore banking
reserves on loans and other risk assets; units(OBUs), quasi-banks (QBs), trust entities,
c. Review of all aspects of NBQB non-stock savings and loan associations
operations; (NSSLAs), pawnshops, and all other
d. Assessment of risk management institutions, including their subsidiaries and
system, including the evaluation of the affiliates supervised and/or regulated by the
effectiveness of the NBQB management’s BSP, otherwise known as “covered
oversight functions, policies, procedures, institutions” shall comply with the provisions
internal control and audit; of R.A. No. 9160, as amended, otherwise
e. Appraisal of overall management of known as the “Anti-Money Laundering Act
the NBQB; of 2001,” and its Implementing Rules and
f. Review of compliance with Regulations (IRRs) in Appendix Q-25 and
applicable laws, rules and regulations; and those in Appendix Q-23.
g. Any other activities relevant to the
above. §§ 4691Q.1 - 4691Q.8 (Reserved)
Regular or periodic examination shall be
done once a year, with an interval of twelve § 4691Q.9 Sanctions and Penalties
(12) months from the last date thereof. a. Whenever a covered institution
Special examination may be conducted violates the provisions of Section 9 of R.A.
earlier, or at a shorter interval, when No. 9160 or of this Section, the officer(s) or
authorized by the Monetary Board by an other persons responsible for such violation
affirmative vote of five (5) members. shall be punished by a fine of not less than
In the full exercise of the supervisory P50,000 nor more than P200,000 or by
powers of the BSP, examination by the BSP imprisonment of not less than two (2) years
of institutions shall be complemented by nor more than ten (10) years, or both, at the
overseeing thereof. In this regard, the term discretion of the court pursuant to Section
“overseeing” shall refer to a limited 36 of R.A. No. 7653, otherwise known as
investigation of an institution, or any “The New Central Bank Act”.
investigation/s that is limited in scope, b. Without prejudice to the criminal
conducted to inquire into a particular area/ sanctions prescribed above against the
aspect of an institution’s operations, for the culpable persons, the Monetary Board may,
purpose of overseeing that laws and at its discretion, impose upon any covered
regulations are complied with, inquiring into institution, its directors and/or officers for any
the solvency and liquidity of the institution, violation of Section 9 of R.A. No. 9160, the
enforcing prompt corrective action, or such administrative sanctions provided under
other matters requiring immediate Section 37 of R.A. No. 7653.
investigation: Provided, That - (i) specific
authorizations be issued by the Deputy Secs. 4692Q - 4698Q (Reserved)
Governor, Supervision and Examination
Sector, and (ii) periodic summary reports on Sec. 4699Q General Provision on Sanctions
overseeings made be submitted to the Unless otherwise provided, any violation of
Monetary Board. the provisions of this Part shall be subject to
Sections 36 and 37 of R.A. No. 7653.

Part VI - Page 16
APP. Q-1
96.12.31
GUIDELINES TO EVALUATE INVESTMENT HOUSES

(Appendix to Sec. 4105Q)
1. Capital - The requirement is a (3) Fund usage. Support of priority

minimum paid-in capital of P200 million for investment areas of the Government and
an investment house to be established in other projects which may be determined by
Metro-Manila and P100 million for all others. the Bangko Sentral shall be emphasized.
Foreign equity, if any, shall be registered with Funds placed on maturities beyond one (1)
and approved by the Board of Investments year shall be preferred.
and the Bangko Sentral.
(4) Planned distribution of portfolio
2. Citizenship - Majority (51%) of the Activities indicating money-market services
voting stock shall be owned by Filipinos. and investment in subsidiaries and affiliates,
while necessary to sustain the investment
3. Directorship/Officership - Majority of house, shall be subordinated to the preferred
the board members shall be Filipinos. activities above-indicated. Other activities
Resident foreign directors and technicians as financial management, counseling,
shall register with the Bureau of Immigration distribution of equity and debentures for
and Deportation. Compliance with the "public" ownership, etc., shall be
prohibition on interlocking directorship/ considered.
officership between banks and investment b. The one (1)-year investment
houses and between NBQB s shall be program of the investment house shall be
observed. related to the government development plan
by indicating the portion of the investment
4. Promotion of Public Interest and and savings targets in the plan which would
Economic Growth - be supported by the investment house
a. Submission of a one (1)-year industry.
investment program indicating: c. A one (1)-year projected income
(1) Underwriting and distribution statement showing major sources of income
activities. These shall show in details the and expense items.
various stages leading to the completion of d. Operational agreement with other
an agreement. Target dates for each stage in financial institutions.
the underwriting process shall be indicated e. A statement justifying the operation
which should serve as reference points in the of the investment house as not in conflict with
event that an investment house is unable to public interest and economic growth, taking
bring the program and its components to into account the existing number of
fruition. Target volume of underwriting investment houses, indicating:
would be set initially at twenty-five percent (1) record of underwriting;
(25%) of paid-in capital. (2) evidence of medium and long-term
(2) Fund mobilization. Emphasis shall loans;
be on maturities beyond one (1) year. (3) evidence of obtaining funds with
Domestic and foreign sources shall be maturity beyond one (1) year; and
indicated and the latter shall be evaluated (4) equity investments which were
in terms of pertinent Bangko Sentral subsequently distributed to the public.
regulations.

Appendix Q-1 - Page 1
APP. Q-1
96.12.31
5. Organization, Direction and c. Absence of administrative or criminal

Administration - The organizational/ conviction; and
functional chart should match the d. Affiliation with professional
organization framework with operational organizations.
objectives. The management of the company,
board of directors and the managerial staff, 7. Branching - The rate at which branch
must be firmly designated before it can be offices are to be established shall depend
granted a license to operate as an investment upon the ability of the company to conduct
house. operations from headquarters/head offices as
well as on correspondent (banking)
6. Integrity, Experience and Expertise of arrangements.
Board and Management Staff Other factors to be considered are the
a. Formal training, academic or others; following:
b. Experience along financial a. Reserve and liquidity position; and
management, securities dealing, fund b. Profitability and capacity to absorb
management, project evaluation and losses.
feasibility studies;

APP. Q-2
96.12.31
DETERMINATION OF AMOUNT OF ADDITIONAL CAPITAL

THE ENTITY MUST PUT UP
(PROJECTION BASE - LATEST AVAILABLE REPORT)
(IN THOUSAND PESOS)
(Appendix to Subsec. 4151Q.2)
(Name of Entity)
A. 1. Estimated Amount of Risk Assets of Present

Office for the Next 12 Months
a. Actual Risk Assets P xxx

b. Add: xx% of (a) xxx
Risk Assets - (Base Period) P xxx
Risk Assets - (Previous Year) xxx
Increase P xxx
Rate of Increase = increase = xx%
actual risk assets
c. Total of (a) and (b) P xxx
2. Maximum Possible Level of Risk Assets Based

on the Base Period Figures:
a. Net worth Less 30% of Paid-in

Capital (Pxxx - xxx) P xxx
b. 100% of Borrowings (Bills Payable) xxx
c. 80% of Unutilized Acceptances or
Credit Line with Foreign Bank(s) xxx P xxx
B. Estimated Risk Assets for the First 12

Months of Operation:
1. Branch Approved but not yet Opened: P xxx
2. Branch Being Applied for: xxx
Add: Lower of A.1 or A.2 xxx
C. Total Estimated Risk Assets for 12 Months P xxx
D. 10% of C (Minimum Paid-in Capital Required) P xxx

APP. Q-2
96.12.31
E. Less:
Present Combined Capital Accounts P xxx
(Base Period Figures)
Add: xx% of above xxx xxx
Capital Accounts - (Base Period) P xxx

Capital Accounts - (Previous Year) xxx
Increase P xxx
*Rate of Increase = Increase = xx%

Capital Accounts of
Previous Year
F. Estimated Excess of Capital over Minimum Capital

Required or Additional Amount of Capital Applicant
Must Put Up, as the case may be P xxx
*The computation to arrive at the "rate of increase" in capital accounts shall only be considered if there
is sufficient indication or evidence that the NBQB will continue to follow the same amount of increase in
capital accounts for the succeeding year. If no evidence is found that the NBQB will continue to increase
its capital accounts for the same amount for the succeeding year, then computations should consider only
the amount of net profits (after dividends) plowed into the business for the year immediately preceding the
date of application plus the amount of capital that the NBQB promised to put up per its schedule or
program submitted to the Bangko Sentral. If no such schedule or program was submitted, then only the
amount of net profits (after dividends) for the year immediately preceding the date of application should
be considered.

LIST OF REPORTS REQUIRED FROM NON-BANK FINANCIAL INTERMEDIARIES
ENGAGED IN QUASI-BANKING FUNCTIONS
Manual of Regulations for Non-Bank Financial Institutions

Report Submission Submission
Category BSP Form No. Report Title Frequency Deadline Procedure
B BSP 7-26-01 Information Sheet Annually January 31 Appropriate BSP SED
B BSP-7-26-01.1 Biographical Data of Directors/Officers Annually January 31 or 15th In case of changes in edu-
and as calendar day follow- cational attainment and
changes ing the creation or fill- experience in financial
occur ing up of a vacancy management and related
in the Board of Direc- fields, only additional
tors and the manage- qualifications that will
rial staff enhance the director's or
officer's competence or
will qualify him to his
present position shall be
reported.
B Unnumbered Notice of Election/Appointment of Members As change 10th day from elec- Original - Appropriate
of Board of Directors and Committees occurs tion/assumption of BSP SED
office
B Unnumbered Change of List of Directors/Officers/ As change Immediately after Original - Appropriate

(no prescribed Employees occurs change BSP SED
form)
A-2 Unnumbered Acknowledgment receipt of copies of specific Annually or 15th business day Appropriate BSP SED
(no prescribed duties and responsibilities of the board of as directors after date of election
form) directors and of a director and certification are elected
that they fully understand the same
B Unnumbered Report on Disqualification of Director/Officer As disquali- Within 72 hours Appropriate BSP SED
(no prescribed fication from receipt of
form) occurs report by board of
directors
Q Regulations
A-2 Unnumbered Computation of the Risk-Based Capital Quarterly Original - Appropriate
04.12.31
APP. Q-3
Adequacy Ratio Covering Credit Risks (for BSP SED
NBQBs only)
Q Regulations
04.12.31
APP. Q-3
- solo basis (Head Office and branches) 15th business day

after end of refer-
ence quarter
- consolidated basis (Parent QB plus subsidiary 30th business day

financial allied undertaking excluding after end of refer-
insurance companies) ence quarter
A-2 BSP-7-26-02-A/B Consolidated Statement of Condition Monthly 15th business day Separate report for Head
after end of refer- Office and each Branch;
ence month and a Consolidated Re-
Manual of Regulations for Non-Bank Financial Institutions port for Head office and
Branches; to be submit-
ted via electronic mail
Schedules:
A-2 BSP-7-26-02-A Loans/Receivables,Trading Account Securities

Schedule 1 (TAS) - Loans Underwritten Debt Securities
(IHs only)
A-2 BSP-7-26-02-B Loans/Receivables and Trading Account

Schedule I Securities (TAS)-Loans
(FCs only)
A-2 BSP 7-26-02-A Bills Payable and Bonds Payable

Schedule 5
(For IHs)
A-2 BSP 7-26-02-B Bills Payable and Bonds Payable

Schedule 5
(For FCs)
A-2 BSP-7-26-02-A/B Remaining Maturities of Selected Accounts

Schedule 4 Interest Rate and Maturity Matching
A-2 BSP-7-26-02-A/B Interest Rate and Maturity Matching

Schedule 3
A-2 BSP-7-26-02-A Underwritten Securities, Trading Account

Schedule 2 Securities - Investments, Available for Sale
(For IHs) Securities and Investments in Bonds & Other
Debt Instruments
A-2 BSP-7-26-02-B Trading Account Securities - Investments,

Schedule 2 Available for Sale Securities and Investments
(For FCs) in Bonds & Other Debt Instruments
A-2 BSP-7-26-02-A Underwritten Securities, Trading Account

Schedule 2.1 Securities - Investments, Available for Sale
(For IHs) Securities and Investments in Bonds & Other
Debt Instruments (Government Issue - Local
Government Units)
A-2 BSP-7-26-02-B Trading Account Securities - Investments,

Schedule 2.1 Available for Sale Securities and Investments
(For FCs) in Bonds & Other Debt Instruments
(Government Issue - Local Government Units)
A-2 BSP-7-26-02-A Loans/Receivables, Trading Account Securities

Schedule 1 - Loans and Underwritten Debt Securities
(For IHs)

Schedule 1 Securities - Loans
(For FCs)
A-2 BSP-7-26-02-A Loans/Receivables, Trading Account Securities

Schedule 1.1 - Loans and Underwritten Debt Securities
(For IHs) (Borrowings of Local Government Units)
Q Regulations
04.12.31
APP. Q-3
Schedule 1.1 Securities - Loans (Borrowings of Local
(For FCs) Government Units)
A-2 BSP-7-26-02-B Data on Firm's Businesses

Schedule 6
(FCs only)
Q Regulations
04.12.31
APP. Q-3
A-2 BSP-7-26-03-A/B Consolidated Statement of Income and Monthly 15th business day Separate report for
Expenses following end of Head Office and each
reference month branch; and a
Consolidated Report for
Head Office and
Branches; to be
submitted via electronic
mail
A-2 BSP-7-26-05 Consolidated Report of Required and Available Weekly 4th business day -do-
Reserves Against Deposit Substitutes and following end of
Manual of Regulations for Non-Bank Financial Institutions Special Financing reference week
A-2 BSP-7-26-05.1 Components of Deposit Substitutes With -do- -do- -do-

Original Maturities of 730 Days or Less
A-2 BSB-7-26-05.3 Eligible Philippine Government Securities Weekly 4th business day -do-
Utilized as Reserves Against Deposit following end of
Substitutes reference week
A-2 BSP-7-26-06 Statement of Capital Required and Capital Semi- 7th business day E-mail to SRSO:
Accounts Monthly after 15th and end of srso-nbqb@bsp.gov.ph
month
Control Prooflist duly signed by the authorized Fax to SRSO@523-3461

officer of the institution
B BSP-7-26-10 Information Sheet and "Truth in Lending Act" As needed - Original - Appropriate
Creditor's Certification BSP SED
B BSP-7-26-13 Past Due Receivables, Loans and/or Quarterly 15th calendar day Original - Appropriate
Commercial Papers/Private Securities after end of reference BSP SED
quarter
B BSP-7-26-14 Rolled-Over Loans and/or Commercial Papers -do- -do- -do-

(Above P100,000)
B BSP-7-26-15 Report on Underwriting Activities Quarterly End of month Original - Appropriate

(IH only) following each BSP SED
quarter
A-3 BSP-7-26-18 Consolidated Monthly Report on Credit Monthly 15th calendar day -do-
Accommodations to Directors, Officers, from end of reference
Stockholders and Their Related Interests month
A-3 BSP-7-26-18.1 Credit Accommodations to Directors, Officers, -do- -do- -do-

Stockholders, and Their Related Interests
B BSP-7-26-20 Report on Equity Investments in Non-Allied Semestrally 15th business day -do-
Undertakings following end of
reference semester
B BSP-7-26-21 Borrowing-Investment Program Annually 1st working day of See Annex Q-3-a for
March of reference details of the report
year
B BSP-7-26-22 Annual Underwriting Program Annually 1st working day of Original - Appropriate
(IH only) March of reference BSP SED
year
A-2 BSP-7-26-23TR Report on Trust and Other Fiduciary Business Quarterly 10th business day Original - Appropriate
(IH with Trust and Investment Management Activities with after end of reference BSP SED
only) prescribed schedules quarter Duplicate - SRSO
(Revised per CL
dated 1.27.03)
Schedules:
Q Regulations
Investment in Other Securities and Debt

Instruments (Item 1.A.2)
04.12.31
APP. Q-3
Loans and Discounts (Item 1.A.4)
Q Regulations
04.12.31
APP. Q-3
Investment in Common Trust Funds (Item

1.A.5)
Deposits in Banks (Item 1.A.13)
CTF Revaluation Account (Item 1.A.20)
Allowance for Probable Losses (Item 1.A.21)
Accumulated Market Gains/(Losses) (Item

1.A.23)
Exposures to Directors, Officers, Stockholders
and Their Related Interest
Government Funds Held in Trust
Tax-Exempt Accountabilities (Items 1.B.1,

1.B.2 and 1.B.3)
B BSP-7-26-23IM Report on Investment Management Activities Quarterly 10th business day Original - Appropriate
(IH with IMA with prescribed schedules after end of reference BSP SED
only) quarter
Schedules:
Investment in Other Securities and Debt

Instruments (Item 1.A.2)
Loans and Discounts (Item 1.A.4)

Investment in Common Trust Funds (Item
1.A.5)
Deposits in Banks (Item 1.A.12)
Allowance for Probable Losses (Item 1.A.17

Accumulated Market Gains/(Losses) (Item

1.A.19)
Exposures to Directors, Officers, Stockholders

and Their Related Interest
Tax-Exempt Accountabilities (Item 1.B.1)
A-2 BSP-7-26-24 Credit and Equity Exposures to Individuals/ Quarterly 15th business day Electronic submission/
(Revised August Companies/Groups Aggregating P1Million from end of diskette - SRSO
2003 per CL and Above reference quarter
dated 8.6.03)
Notarized Control Prooflist Fax to SRSO
B BSP-7-26-25 Dividends Declared As dividends 10th business day -

are declared from approval of
declaration by the
Board of Directors
B BSP-7-26-26 Statement of Condition for Publication Quarterly 20th business day See Sec. 4181Q for
from receipt of call requirement on pub-
lication of names of
directors/officers
Control Prooflist duly signed by the authorized E-mail to SRSO: srso-

officer of the institution nbqb@bsp.gov.ph
Fax to SRSO@523-3461
A-1 Copy of Published Statement of Condition with Quarterly 5th business day Original - Appropriate
Q Regulations
Publisher's Certificate from publication BSP SED

date
04.12.31
APP. Q-3
Q Regulations
04.12.31
APP. Q-3
B Unnumbered Daily Report on Interbank Borrowings Not Daily (only Noon of business Original - Appropriate
Effected Through Clearing Account with when there day following date of BSP SED
Bangko Sentral are trans- report
a c t i o n s
covered)
B Unnumbered Securities Brokering Without Recourse Weekly 4th business day after -do-
(IH only) Transactions for P50,000 and Above end of reference
week
For institutions authorized to engage in

Manual of Regulations for Non-Bank Financial Institutions derivatives activities:
A-3 Unnumbered Outstanding Derivatives Contracts Monthly 5th business day -do-
from end of
reference month
A-3 Unnumbered Report on Trading Gains/Losses on Derivatives -do- -do- -do-

Transactions
A-3 Unnumbered Outstanding Peso Derivatives Contracts -do- -do- -do-
A-3 Unnumbered Copy of Written Approval of Board of As 20th business day -

Directors on Credit Accommodations to Approved from date of approval
Directors, Officers, Stockholders, and Their
Related Interests
B Unnumbered Consolidated Annual Financial Statements of Annually 120th calendar day See Annex Q-3-b for the
Financial Intermediaries and Their Allied after end of reference guidelines
Undertakings/Affiliates/Subsidiaries supported year
by Individual Annual Financial Statements of
the Allied Undertakings/Affiliates/Subsidiaries
and their audited financial statements
B Unnumbered (no Quarterly Report on Operations (signed by the Quarterly 30th day after end of Original - Appropriate
prescribed form) President) reference quarter BSP SED
B Unnumbered (no 3 copies of Annual Report of Management to Annually As soon as available Original - Appropriate
prescribed form) Stockholders Covering Results of Operations BSP SED
for the Previous Year
B Unnumbered (no 3 copies of Audited Financial Statements for Annually 90th day after the -do-
prescribed form) Previous Year Prepared by the External Auditor start of audit
and the Corresponding Auditor's Letter of
Comments
B Unnumbered (no Report on Crimes/Losses for Head Office/ As crime or 48th hour from See Annex Q-3-d for list
prescribed form) Branches incident knowledge of crime/ of documentary require-
occurs incident ments
Original - Appropriate
BSP SED
B Unnumbered Report on Outstanding Loans Secured by Monthly 10th business day Original - Appropriate
Shares of Stocks of Other Banks/NBQBs after end of BSP SED
reference month
B Unnumbered Certification under oath for "No transaction" Quarterly 5th business day -do-
(no interbank borrowings) dates during from end of
calendar quarter reference quarter
B Unnumbered (no Amendments to Articles of Incorporation/By- As changes 15th calendar day -do-
prescribed form) Laws/material documents required to be occur following change/
submitted to the Bangko Sentral approval of change

by proper authorities
B Unnumbered Board resolution on NBQB's signatories of As 3rd day from date of -do-
Q Regulations
report submitted to Bangko Sentral authorized resolution
04.12.31
APP. Q-3
Q Regulations
04.12.31
APP. Q-3
B Unnumbered Documentary requirements on directors/ Continuing - See Annex-Q-3-e for

officers/major individual stockholders owning requirements documentary require-
10% or more of the outstanding voting for any new ments/information
securities director/ required
o f f i c e r
elected/ Original - Appropriate
appointed for BSP SED
the first time
in NBQB
unless such
information is
Manual of Regulations for Non-Bank Financial Institutions on file with
the Bangko
Sentral for not
more than 5
years
B Unnumbered Documentary requirements/information on Upon sub- - -do-

organizational structure and operational mission of
policies application
to engage in
QBF
As changes 15th calendar day -do-

occurs from change/issu-
ance
B Unnumbered Corporate Secretary's Certification under oath As change in Immediately after -do-
(no prescribed on list of stockholders and/or groups of composition change
form) stockholders of stockhold-
ers occurs
B Unnumbered (no Certification under oath that it has not granted In case of 4th business day -do-
prescribed form) any new loan or made any new investment chronic following end of
during the period covered by the suspension reserve reference week
deficiency
A-2 Unnumbered (no Notice to BSP on SEC's approval of bond issue As 3rd business day Original - Approrpiate
prescribed form) together with the documents required by the approved from approval by BSP SED
SEC for the creation and registration SEC
B Unnumbered (no Report on Required and Available Reserves Weekly 3rd business day To be submitted by
prescribed form) on Peso-Denominated CTFs, Such Other following reference institutions with trust
Managed Peso Funds and TOFA-Others week operations
Original - Appropriate
BSP SED
Control Prooflist duly signed by the authroized E-mail to SRSO: srso-

nbqb@bsp.gov.ph
Fax to SRSO@523-3461
Reconciliation statement on demand deposit Monthly 7th business day Original to be submitted
with BSP from receipt of BSP to BSP Comptrollership
statement of ac- Department; one copy
count to appropriate BSP SED
A-2 Unnumbered Report on Suspicious Transactions As 5th business day To be submitted to the
transaction from date of transac- Anti-Money Laundering
occurs tion/knowledge Council
A-2 Unnumbered Report on Covered Transactions -do- -do- -do-
Certification of compliance with existing anti-

A-2 Unnumbered (no Annually 20th business day To be submitted to the

prescribed form) money laundering regulations after date of election appropriate BSP SED
B Unnumbered Plan of Action to comply with Anti-Money - 30th business day To be submitted to the
Laundering requirements from July 31, 2000 appropriate BSP SED
Q Regulations
or from opening of
the institution
04.12.31
APP. Q-3
B Unnumbered (no Report on Transactions/Outstanding Monthly - -do-
prescribed form) Derivatives Transactions as End-User
Q Regulations
04.12.31
APP. Q-3
B Unnumbered Report on Foreign Exchange Swaps with Non- Weekly 2nd banking day after IOD @ e-mail:
Banks where 1st Leg is a Purchase of Foreign end of reference iod@bsp.gov.ph
Exchange Against Pesos (For NBQBs with week
derivatives license)
B Unnumbered Report on Cancellations, Roll-overs and Non- Weekly 2nd banking day IOD @ e-mail:
Delivery of Foreign Exchange Forwards from end of reference iod@bsp.gov.ph
Purchase - Sales Contracts week
(For NBQBs with derivatives license)
Unnumbered Audit Engagement Contract As contract 15th calendar day Appropriate BSP SED
Manual of Regulations for Non-Bank Financial Institutions (no prescribed is signed from date of signing
form) of contract
B SES Form 6H Notice/Application for Write-off of Loans, As write-off 25th business day Original and duplicate -
(CBP-7-16-21), Other Credit Accommodations, Advances and occurs prior to the intended Appropriate BSP SED
revised Other Assets date of write-off
Waiver of the Confidentiality of Information As

under Sections 2 and 3 of R.A. No. 1405, as transaction
amended occurs
ANNEX Q-3-a
96.12.31
INFORMATION ON
ONE-YEAR BORROWING-INVESTMENT PROGRAM
TO BE SUBMITTED BY NBQBs
(Annex to Appendix Q-3)
1. Investment areas indicating industry 2. Borrowing operations to support the

direction of the corporation engaged in investment program indicating among
quasi-banking, indicating as a minimum, the others:
following: (a) Maturity -- short-term: less than a
(a) money market operations; year
(b) investments in stocks and bonds; -- medium-term: one (1)
(c) investments in government year to five (5) years
securities; -- long-term: more than
(d) receivables financing; five (5) years
(e) leasing activities; and (b) Interest rate per annum for the
(f) direct loaning operations. above three types of borrowings (more
Likewise to be disclosed are the other indicatory than fixed).
preferred areas of investment, e.g., real Individual or institutional source of funds;
estate, condominium, and those related to whether domestic or foreign, governmental
the government programs and other projects or private, financial or non-financial.
which may be determined by the Bangko
Sentral. 3. Preference shall be given to fund
For investment houses with quasi- usage and mobilization at terms beyond one
banking functions, the proposed (1) year.
underwriting program, as well as the
previous year's activities, shall also be
submitted identifying debt and equity issues.

Annex Q-3-a
ANNEX Q-3-b
96.12.31
GUIDELINES GOVERNING THE CONSOLIDATION

OF FINANCIAL STATEMENTS OF FINANCIAL
INTERMEDIARIES AND THEIR ALLIED
UNDERTAKINGS/SUBSIDIARIES/AFFILIATES
I. Definitions. The following definitions companies, firms or enterprises, made for

of terms are hereby adopted: purposes of control, affiliation or other
a. Consolidated Financial Statements continuing business advantage.
shall refer to the combined statement of d. Subsidiary and affiliates refer to a
condition/balance sheet and statement of corporation, firm or entity as defined in
income and expenses of two or more Subsection 4654.1.a and b.
corporate entities as they would appear if e. Cost Method refers to the accounting
they were one organization, after method of recording at cost, and
eliminating the effects of inter-company continuously carrying at cost, equity
transactions. investment, regardless of increases or
b. Financial Allied Undertakings refer decreases in the underlying value of the
to enterprises or firms with homogenous or investments resulting from earnings or losses
similar activities/business/functions with the of the allied undertaking/affiliate/subsidiary.
financial intermediary and may include but f. Equity Method refers to the
not limited to leasing companies, banks, accounting method of recording equity
investment houses, financing companies, investments at cost and adjusting the balance
credit card operations, financial institutions of the account to reflect increases or
addressed/ catering to small and medium decreases in the underlying value of the
scale industries, and such other similar investments resulting from earnings or losses
activities as the Monetary Board may declare of the allied undertakings/affiliate/subsidiary.
as appropriate from time to time. Non-
financial allied undertakings may include II. Consolidation Requirements.
but not limited to warehousing companies, a. The financial statements of allied
storage companies, safe deposit box undertakings shall be consolidated with
companies, companies engaged in the those of the investing financial intermediary
management of mutual funds but not in the only when the allied undertaking is a
mutual funds themselves, management subsidiary and a financial allied undertaking
corporations engaged or to be engaged in as defined herein.
activities similar to the management of b. In the case of non-financial allied
mutual funds, insurance agencies, companies undertakings and affiliates, consolidation
engaged in home building and home may be required on a case-to-case basis as
development and companies providing may be determined by the appropriate
drying and/or including facilities for supervising and examining department of
agricultural crops such as rice and corn and the Bangko Sentral.
such other similar activities as the Monetary c. Financial statements of all domestic
Board may declare as appropriate from time and foreign subsidiaries shall be consolidated
to time. with those of the investing financial
c. Equity Investments refer to intermediary (domestic parent), except -
investments in the capital stock of (1) subsidiaries about to be disposed of;

Annex Q-3 -b - Page 1
ANNEX Q-3-b
96.12.31
(2) subsidiaries where control is being (2) The following are eliminated in
exercised on a temporary basis; consolidation:
(3) subsidiaries whose financial (a) All intercompany transactions; for
statements bear a closing date different from instance, rental income of a subsidiary from
that of the investing financial intermediary's its premises should be netted against
financial statements and/or - rent expenses incurred by the investing
(a) the difference in closing dates financial intermediary for occupying said
exceeds three months or more; premises.
(b) the closing dates of all the statements (b) All intercompany accounts/
are not expressly indicated; transactions that reflect the existence of a
(c) the necessity of the difference to debtor- creditor relationship between the
closing date is not explained; and investing financial intermediary and its
(d) changes in accounting periods of the subsidiaries and/or between subsidiaries.
affiliate/constituent companies are not (c) All asset accounts of the investing
disclosed, together with their financial financial intermediary which represent
statements. ownership of investments in subsidiaries
(4) subsidiaries whose business against the capital accounts of the
activities are dissimilar from those of the consolidated subsidiaries.
investing financial intermediary that the (3) All income and expense accounts
presentation of separate financial statement shall be closed to the capital accounts of each
would provide better information; and subsidiary.
(5) foreign subsidiaries located in places (4) All the remaining assets and
where - liabilities of the subsidiaries shall be
(a) there are foreign exchange transferred to appropriate accounts of the
restrictions; investing financial intermediary.
(b) the rates of exchange fluctuate (5) For not wholly-owned subsidiaries,
widely; segregate the share of minority stockholders/
(c) there are unfavorable legislations interest in the capital stock and retained
in force; and earnings of such subsidiaries and lodge the
(d) the foreign government concerned same under "Minority Interest in Subsidiary"
is undergoing a process of change. account which shall be shown as a separate
section between the Liabilities and
III. Consolidation Procedures. Stockholders' Equity sections of the
a. Consolidation of the financial Consolidated Statement of Condition.
statements shall involve the following (6) Other generally accepted
procedures: consolidation principles/procedures not
(1) Consolidation shall be on a line-by- inconsistent herewith maybe adopted.
line basis; i.e., accounts of the investing (7) Consolidating adjustments and
financial intermediary and its subsidiaries to eliminations shall appear only on working
be consolidated are combined by adding papers and shall not be recorded in the books
together like item of assets, liabilities, of the individual entities concerned.
revenue and expenses, except in the case b. For consolidated statement/report
of foreign currency of the host country purposes, the following accounts shall be
where the allied undertaking/subsidiary/ used for the differences, between cost and
affiliate is located which shall be shown book value of equity investments on date of
under "Other Assets"; acquisition:

ANNEX Q-3-b
96.12.31
(1) "Excess of Cost Over Book Value (1) Name and nature of business;
of Equity Investments" (2) Original cost of the investment;
For excess of cost of equity outstanding balance, book value and
investment over its book value difference, if any; and accounting treatment
(2) "Excess of Book Value Over Cost of the difference;
of Equity Investments" (3) Percentage of ownership/equity
For the excess of book value of investment;
equity investments over its cost (4) Differences in reporting dates from
The first account shall be shown under that of the reporting financial intermediary;
Other Assets caption while the second (5) Whether or not their financial
account shall be shown under the caption statements have been consolidated; and
Unearned Income And Other Deferred (6) Reasons for not consolidating in the
Credits in the Consolidated Statement of case of the unconsolidated entities.
Condition. b. Where the unconsolidated
c. The investments (which are subsidiaries are, in the aggregate, material
recorded at the cost method) of the investing in relation to the consolidated financial
financial intermediary in allied position or operating results, summarized
undertakings/subsidiaries/affiliates whose information as to their assets, liabilities and
financial statements are not consolidated operating statements should be presented/
shall be adjusted for their share in the indicated, shown in footnotes, or separate
earnings or losses of such entities, with the financial statements should be presented for
use of the equity method as defined in such subsidiaries, either individually or in
Item I above. However, these adjustments groups, where appropriate.
shall appear only in working papers and shall c. Any information on:
not be recorded in the books of the individual (1) Exposure to exceptional risks of
entities concerned. operating in other countries, including the
risk of foreign currency exchange rate
IV. Disclosures. The following schedules/ fluctuations.
disclosures shall be attached to/made in the (2) The extent to which there are
consolidated financial statements: statutory or contractual restrictions on the
a. An appropriate list/schedule of the distribution of the accumulated retained
allied undertakings/subsidiaries/affiliates income of the group.
showing the following information:

ANNEX Q-3-c
96.12.31
REPORTING GUIDELINES ON CRIMES/LOSSES

1. NBQBs shall report on the following 2. The following guidelines shall be

matters through the appropriate supervising observed in the preparation and submission
and examining department: of the report.
a. Crimes whether consummated, a. The report shall be prepared in two
frustrated or attempted against property/ (2) copies and shall be submitted within five
facilities (such as robbery, theft, swindling (5) business days from knowledge of the
or estafa, forgery and other deceits) and crime or incident, the original to the
other crimes involving loss/destruction of appropriate supervising department and the
property of the NBQB when the amount duplicate to the BSP Security Coordinator,
involved in each crime is P20,000 or more. thru the Director, Security Investigation and
Crimes involving NBQB personnel, Transport Department.
regardless of whether or not such crimes b. Where a thorough investigation
involve the loss/destruction of property of and evaluation of facts is necessary to
the NBQB, even if the amount involved is complete the report, an initial report
less than those above specified, shall submitted within the five (5)-business day
likewise be reported to the BSP. deadline may be accepted: Provided, That
b. Incidents involving material loss, a complete report is submitted not later than
destruction or damage to the institution's fifteen (15) business days from termination
properties/facilities, other than arising from of investigation.
a crime, when the amount involved per
incident is P100,000 or more.

Annex Q-3-c
ANNEX Q-3-d
96.12.31
DOCUMENTARY REQUIREMENTS ON DIRECTORS/OFFICERS/

MAJOR INDIVIDUAL STOCKHOLDERS
I. Directors and/or major individual (b) Clearances from the Criminal

stockholders owning 10% or more of the Investigation Services of the Philippine
outstanding voting securities: Constabulary, the National Intelligence and
(a) Statement of financial condition as Security Authority, and such other relevant
of latest date under oath or certified by an investigating agency as might be determined
independent CPA. Appropriate disclosures by the appropriate supervising and
shall be made when necessary, specifically examining department; and
on encumbered assets and names of (c) Certification under oath by each
creditors; director/officer to the effect that he/she is not
(b) Income tax return for the preceding disqualified under Sec. 4143Q.
year;
(c) Tax clearance for business purposes; III. Non-resident foreign directors shall be
(d) Information on integrity, credit exempted from the documentary
standing and business experience from requirements enumerated above, except for
banking institutions in Manila/locality where the following:
firm operates and in places of residences or (a) Bio-data sheet in the prescribed form
birth; and accomplished under oath;
(e) Affidavit of two (2) persons of good (b) Clearance from the National Bureau
standing other than the present employer of Investigation (NBI) or the Department of
or relatives within the third degree of affinity Foreign Affairs; and
or consanguinity. For stockholders, (c) Certification under oath that the
information on credit standing is sufficient. foreign director is not disqualified under Sec.
4143Q.
II. Directors/Officers:
(a) Bio-data sheet in the prescribed form
accomplished under oath;

Annex Q-3-d
ANNEX Q-3-e
96.12.31
DOCUMENTS/INFORMATION ON ORGANIZATIONAL
STRUCTURE AND OPERATIONAL POLICIES
I. Documents on organizational structure (c) Number of vacancies in the Board

and operational policies (d) Names of corporations where they
1. Chart of the firm's organizational serve as Chairman of the Board or as
structure or any substitute therefor; President and names of other business
2. Name of departments/units/offices enterprises of which they are proprietors or
with their respective duties and partners
responsibilities; (e) For the Corporate Secretary,
3. Designations of positions in each indicate if he is also a Director
department/unit/office with the respective (f) Date of annual election of directors
duties and responsibilities; per By-Laws
4. Manual of Instructions or the like 6. Executive officers including Auditor:
embodying the operating policies/ (a) Names and titles
procedures of each department/unit/office, (b) Telephone number of each officer
covering such areas as: (office)
(a) Signing/delegated authority; (c) For the Executive Vice-President,
(b) Procedure/flow of paper work; state the names of corporations where he
and serves as Chairman of the Board and names
(c) Other matters. of other business enterprises which he is
5. Memoranda-Circulars or the like proprietor or partner
issued covering organizational and (d) For Vice-Presidents and other
operational and operation policies; officers with non-descriptive titles, indicate
6. Sample copies of each of the forms/ area of responsibility, e.g. Vice-President for
reports used by each office/unit/department Operations or Vice- President, International
other than those submitted to the Bangko Department
Sentral; and (e) Include officers from President to
7. Such other documents/information Vice-President
which may be required from time to time. 7. Branches, agencies and extension
offices:
II. Other Data (a) Name of branch, agency or
1. Name of Institution extension office, e.g. Quiapo Branch or
2. Address Makati Agency
3. P.O. Box number (b) Address
4. Cable address or cable code (c) Names and telephone number of:
5. Board of Directors including (1) Manager
Corporate Secretary: (2) Cashier
(a) Names of Chairman, Vice-Chairman (3) Accountant
and Directors (d) For agencies and extension offices,
(b) Number of directors per By-laws indicate name of mother branch.

Annex Q-3-e
ANNEX Q-3-f
02.12.31
GUIDELINES ON CALCULATING
ADDITIONAL INFORMATION REQUIRED
IN PUBLISHED STATEMENT OF CONDITION
In calculating the additional information required to be disclosed in the Statement of Con-

dition for publication, the following guidelines shall be observed:
1. All amounts and ratios to be reported shall be as of the same call date. However, the basis
for computing the Return on Average Equity shall be the latest quarter immediately
preceding the call date.
2. Return on Average Equity shall be computed as follows:
Return on Average Net Income/(Loss) After

Equity (%) = Income Tax x 100
Average Total Capital Accounts
Where Net Income After Tax and Average Total Capital Accounts shall be:
Average Total Capital

Net Income After Tax Accounts
March Quarter End Net Income Sum of end-month Capital
After Tax Multiplied by 4 Accounts (December -
March) divided by 4.
June Semester End Net Income Sum of end-month Capital

After Tax Multiplied by 2 Accounts (December - June)
divided by 7.
September Nine (9) months Ended Sum of end-month Capital

Net Income After Tax Accounts (December -
multiplied by 1.333333 September) divided by 10.
December Year Ended Net Income Sum of end-month Capital

After Tax Accounts (December -
December) divided by 13.

Annex Q-3-f
APP. Q-4
96.12.31
GUIDELINES ON PRESCRIBED REPORTS SIGNATORIES

AND SIGNATORY AUTHORIZATION
(Appendix to Subsec. 4162Q.1 )
Category A-1 reports shall be signed by officers in-charge. Likewise, the signing
the chief executive officer, or in his absence, authority in this category shall be contained
by the executive vice president, and by the in a resolution approved by the board of
comptroller, or in his absence, by the chief directors in the format prescribed in Annex
accountant, or by officers holding equivalent Q-4-b.
positions. The designated signatories in this
category, including their specimen Categories A-3 and B reports shall be
signatures, shall be contained in a resolution signed by officers or their alternates, who
approved by the board of directors in the shall be duly designated in a resolution
format prescribed in Annex Q-4-a. approved by the board of directors in the
format as prescribed in Annex Q-4-c.
Category A-2 reports of head offices shall
be signed by the president, executive vice- Copies of the board resolutions on the
presidents, vice-presidents or officers report signatory designations shall be
holding equivalent positions. Such reports submitted to the appropriate supervising and
of other offices/units (such as branches) shall examining department of the BSP within
be signed by their respective managers/ three (3) days from the date of resolution.

Appendix Q-4
ANNEX Q-4-a
96.12.31
FORMAT OF RESOLUTION FOR SIGNATORIES

OF CATEGORY A-1 REPORTS
Resolution No. _____
Whereas, it is required under Subsec. 1. Mr. President

4162Q.1 that Category A-1 reports be Specimen Signature
signed by the chief executive officer, or in or
his absence, by the executive vice-
president, and by the comptroller, or in his Executive
absence, by the chief accountant, or by 2. Mr. Vice-President
Specimen Signature
officers holding equivalent positions.
Whereas, it is also required that aforesaid and
officers of the institution be authorized under
a resolution duly approved by the 3. Mr. Comptroller
institution's Board of Directors; Specimen Signature
Whereas, we, the members of the Board or
of Directors of (Name of Institution) ,
are conscious that, in designating the officials Chief
who would sign said Category A-1 reports, 4. Mr. Accountant
Specimen Signature
we are actually empowering and
authorizing said officers to represent and act are hereby authorized to sign Category A-1
for or in behalf of the Board of Directors in reports of .
particular and (Name of Institution) (Name of Institution)
in general;
Whereas, this Board has full faith and
confidence in the institution's Chief Done in the City of Philippines,
Executive Officer, Executive Vice-President, this day of , 19 .
Comptroller and Chief Accountant, as the
case may be, and, therefore, assumes
responsibility for all the acts which may be
CHAIRMAN OF THE BOARD
performed by aforesaid officers under their
delegated authority;
Now, therefore, we, the members of the DIRECTOR DIRECTOR
Board of Directors, resolve, as it is hereby
DIRECTOR DIRECTOR
resolved that:
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY

Annex Q-4-a
ANNEX Q-4-b
96.12.31

Whereas, it is required under Subsec. Name of Specimen Position Report

4162Q.1 that Category A-2 reports of head Officer Signature Title No.
offices be signed by the president, executive
vice-presidents, vice-presidents or officers
holding equivalent positions, and that such are hereby authorized to sign the Category
reports of other offices be signed by the A-2 reports of .
respective managers/officers-in-charge; (Name of Institution)
Whereas, it is also required that aforesaid
officers of the institution be authorized under Done in the City of ,
a resolution duly approved by the Philippines, this day of ,
institution's Board of Directors; 19 .
Whereas, we, the members of the Board
of Directors of (Name of Institution) ,
are conscious that, in designating the officials CHAIRMAN OF THE BOARD
who would sign said Category A-2 reports,
we are actually empowering and
DIRECTOR DIRECTOR
authorizing said officers to represent and act
for or in behalf of the Board of Directors in DIRECTOR DIRECTOR
particular and (Name of Institution) in
general; DIRECTOR DIRECTOR
ATTESTED BY:
confidence in the institution's President (and/
or the Executive Vice-President, etc., as the
case may be) and, therefore, assumes CORPORATE SECRETARY
Now, therefore, we, the members of the
resolved that:

Annex Q-4-b
ANNEX Q-4-c
96.12.31

OF CATEGORIES A-3 AND B REPORTS
Whereas, it is required under Subsec. Name of

4162Q.1 that Categories A-3 and B reports Authorized
Signatory/ Specimen Position Report
be signed by officers or their alternates; Alternate Signature Title No.
Whereas, it is also required that aforesaid
officers of the institution be authorized under 1. Authorized
a resolution duly approved by the (Alternate)
institution's Board of Directors;
2. Authorized
Whereas, we the members of the Board (Alternate)
of Directors of (Name of Institution) are
conscious that, in designating the officials etc.
who would sign said Categories A-3 and B
reports, we are actually empowering and are hereby authorized to sign the Categories
authorizing said officers to represent and act A-3 and B reports of
(Name of Institution)
for or in behalf of the Board of Directors in
particular and (Name of Institution) in Done in the City of ,
general; Philippines, this day of , 19 .
confidence in the institution's authorized
signatories and, therefore, assumes
delegated authority; DIRECTOR DIRECTOR
Board of Directors, resolve, as it is hereby DIRECTOR DIRECTOR
resolved that: DIRECTOR DIRECTOR
ATTESTED BY:
ATTESTED BY:
CORPORATE SECRETARY

Annex Q-4-c
APP. Q-5
96.12.31
MINIMUM INTERNAL CONTROL STANDARDS

FOR NBQBs
I. Proper Accounting Records custodians. Verification should include both

1. NBQBs should maintain proper and the physical inventory of securities and the
adequate accounting records. record checking.
2. These records should be kept currently e. Periodic verification of the accuracy
posted and should contain sufficient detail of the interest credits and payments to deposit
so that an audit trail is established. substitute liabilities accounts.
3. All entries should bear official approval 3. All exceptions in the reconciliation/
and should be initialed by the person verification should be followed up
originating and another person checking immediately until satisfactorily corrected.
them.
III. Division of Duties and Responsibili-
II. Independent Balancing ties
1. Independent balancing shall mean that 1. The duties of all the officers and
records posted by a person or cash held by a employees should be segregated, clearly
cashier shall be balanced or counted by defined, understood, documented and
another person. manualized if possible. No individual shall
2. The minimum independent balancing have complete authority and responsibility for
procedures which should be adopted are the handling all phases of any transaction from
following: beginning to end.
a. Monthly reconcilement of general 2. The physical handling of a transaction
ledger balances against their respective should be separated from its recording and
subsidiary and supporting records and supervision as follows:
documentations by someone other than the a. A person handling cash should not be
bookkeeper, the person handling the records, permitted to post the ledger records nor
or the person directly connected with should posting of the general ledger be
processing the transactions. performed by an employee who posts the
b. Irregular and unannounced count of investor's/creditor's subsidiary ledgers;
cashier's cash and checks and other cash b. A loaning officer should never be
items at least twice a month by the auditor/ allowed to disburse proceeds of notes,
control officer or by an officer not connected accept note payment nor process loan
with the treasurer's/cashier's office or its ledgers;
equivalent. c. The functions of issuing, recording and
c. Monthly reconcilement of cash in signing of checks should be separated;
banks accounts (domestic and foreign) and d. The receipt of statements from
due from/to head office/branches by someone depository bank should be assigned to an
other than the check custodian, the person employee other than the one connected with
posting the general ledger entries or the the preparation, recording and signing of
authorized signatory of the bank account. checks;
d. Periodic verification of securities and e. Custodians of securities should not be
collaterals by someone other than their allowed to handle security transactions;

A PP. Q-5
96.12.31
f. Collateral appraisals should be done b. All accountable forms

by an employee/officer other than the ones c. Collaterals
approving the loans; d. Securities
g. Incoming checks and other cash items e. Documents of title and/or ownership
should be recorded chronologically in a of properties or fixed assets
register by an employee other than the f. Safekeeping items
bookkeeper; g. Vault doors and safe combinations.
h. Credit reports should be obtained by
someone other than lending officers; V. Signing Authorities
i. Mailing of client's statements and 1. Signing authorities for the different
delinquent notices should be done by an levels of officers to sign for and in behalf of
employee other than the one who granted the institutions should be approved by the
the loan or the one handling the records; board of directors and the extent of each level
and of authority should be clearly defined. These
j. Paid checks/drafts should be signing authorities should include but need
controlled and maintained by an officer/ not be limited to the following:
employee other than the authorized signatory a. Lending;
or the cashier. b. Borrowing;
3. Extensive background checking of c. Investments;
persons intended to be assigned to handle d. Approval of expenses;
cash and securities should be conducted. e. Various supervisory reports; and
Frequent follow-up checking after their f. Checks.
employment should also be made.
VI. Dual Control
IV. Joint Custody 1. Dual control shall mean the work of
1. Joint custody shall mean the processing one (1) person is to be verified by a second
of transactions in the presence of and under person to determine (a) that proper authority
the direct observation of a second person. has been given to handle the transaction, (b)
Both persons shall be equally accountable for that the transaction is properly recorded, and
the physical protection of the items and (c) that proper settlement of the transaction is
records involved. made.
2. Physical protection should be deemed 2. The routine of each transaction should
established through the use of two (2) locks be designed so that at least two (2) or more
or combinations on a file chest or vault individuals are involved in the completion of
compartment. every transaction.
3. Two (2) or more persons should be 3. The following accounts/transactions
assigned to each half of the control so that should be under dual control:
operating efficiency is not impaired if one a. Checks - The signature of at least two
person is not immediately available. (2) officers should be required in the issuance
4. Persons who are related to each of checks.
other within the third degree of b. Borrowing - The signature of at least
consanguinity or affinity should not be made two (2) authorized officers should be
joint custodians. required.
5. The following should be under joint c. All transactions giving rise to "due to"
custody: or "due from" account and all instruments of
a. Cash on hand or in vault remittances evidencing these transactions

APP. Q-5
02.12.31
particularly those involving substantial X. Direct Verification

amounts, should be approved by two (2) 1. Direct verification shall mean the
authorized officers. confirmation of account or records by direct
correspondence/visits with the institution's
VII. Number Control customers.
1. Sequence number controls should be 2. The following accounts, among others,
incorporated in the accounting systems and should be subject to direct verification by the
should be used in registering notes, in issuing internal auditing staff at least once a year:
official checks and in other similar situations. a. Balances of loans and credit
Number control should be policed by a accommodations of borrowers;
person designated by senior management b. Outstanding balances of borrowings
who should be detached from the particular and other liabilities;
operations involved. c. Outstanding balances of receivables/
2. The following are the forms, payables;
instruments and accounts that should be d. Collaterals securing said accounts.
number-controlled:
a. Checks; XI. Other Internal Control Standards
b. Promissory notes and other 1. Investments
commercial papers; a. Investment limits and a list of
c. Official and provisional receipts; accredited companies as approved by the
d. Certificate of stocks; Board of Directors or by its Credit Committee
e. Loan accounts; and should be established as a guide for investing
f. Expense vouchers. in any financial institution engaged in money
market trading.
VIII. Rotation of Duties b. Investments should be secured by
1. The duties of personnel handling cash, assets approved by the Board of Directors or
securities and bookkeeping records should be by its Credit Committee.
rotated. c. Checks representing placements of
2. Rotation assignment should be investments should be released only upon
irregular, unannounced and long enough to receipt of either the deposit substitute
permit disclosure of any irregularities or instrument or the underlying securities or
manipulations. documents of title.
2. Miscellaneous
IX. Independence of the Internal Auditor a. Loan applications and related
1. The position of internal auditor should documents should be spot-checked to insure
be provided for in the by-laws together with their authenticity, including verification of
the duties and responsibilities, scope and name, residence, employment and current
objectives of internal auditing. reputation of the borrowers.
2. The internal auditor should report b. No employee should be permitted to
directly to the Audit Committee. process transaction affecting his own
3. The internal auditor should not install account.
nor develop procedures, prepare records or c. Cashiers and other employees having
engage in other activities which he normally contact with customers should be prohibited
reviews or appraises. from preparing deposit substitute tickets or
other records for the customers.

APP. Q-5
02.12.31
d. NBQBs should have a sound (1) Insurance coverage - for losses arising
recruitment policy since internal control from calamities and theft/robberies.
begins from point of hiring. (2) Fidelity bonds - for losses arising from
e. NBQBs should secure adequate dishonest, fraudulent and criminal acts of
insurance coverages, fidelity and other accountable officers/employees.
indemnity protection, viz:

APP. Q-6
96.12.31
STANDARDIZED DEPOSIT SUBSTITUTE

INSTRUMENTS
Serial No.
(Name of NBQB)
PROMISSORY NOTE
Issue Date : , 19
Maturity Date : , 19
FOR PESOS (P )
(Present Value/Principal)
RECEIVED, promises to pay

(Name of Issuer/Maker)
or order, the sum

(Name/Account Number of Payee)
of PESOS (P )
(Maturity Value/Principal & Interest)
subject to the terms and conditions on the reverse side hereof.
(Duly Authorized Officer)
NOT INSURED WITH THE PHILIPPINE DEPOSIT INSURANCE

CORPORATION (PDIC)

APP. Q-6
96.12.31
TERMS AND CONDITIONS OF A PROMISSORY NOTE
1. Computation of Yield
Interest is hereby stipulated/computed at % per annum, compounded ( ) monthly
( ) quarterly ( ) semi-annually ( ) others.
2. No Pretermination
This promissory note shall not be honored or paid by the issuer/maker before the maturity
date indicated on the face hereof.
3. Liquidated Damages
In case of default, issuer/maker shall pay, in addition to stipulated interest, liquidated
damages of (Amount or %) , plus attorney's fees of (Amount or %) and costs
of collection in case of suit.
4. Renewal
( ) No automatic renewal.
( ) Automatic renewal under the following terms:
5. Collateral/Delivery
( ) No collateral
( ) Collateral/secured by (describe collateral)
( ) Physically delivered to Payee
( ) Evidenced by Custodian Receipt No. dated
issued by
( ) Collateralized/secured by (fraction or %)
share of (describe collateral) as evidenced
by Custodian Receipt No. dated
issued by .
6. Substitution of Securities
( ) Not acceptable to Payee
( ) Acceptable to Payee, however, actual substitution shall be with prior written consent
of payee.
7. Separate Stipulations
( ) This Agreement is subject to the terms and conditions of
(describe document) dated
executed by (name of party/ies) and
made an integral part hereof.

APP. Q-6
96.12.31
Serial No.
(Name of NBQB)
REPURCHASE AGREEMENT
Issue Date : , 19
Repurchase Date : , 19
FOR AND IN CONSIDERATION OF PESOS (P )

Vendor, (name of NBQB) hereby sells, transfers and conveys in favor of Vendee,
(name of Vendee) the security(ies) described below, it being mutually
agreed upon that the same shall be resold by Vendee and repurchased by Vendor on the
repurchase date indicated above at the price of PESOS (P ),
subject to the terms and conditions stated on the reverse side hereof.
(Description of Securities)
Issuer Serial Number/s Maturity Date/s Face Value Interest/Yield
P P
TOTAL P P
CONFORME:
(Signature of Vendee)
NOT INSURED WITH THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC)

APP. Q-6
96.12.31
TERMS AND CONDITIONS OF A REPURCHASE AGREEMENT
1. Computation of Yield
Yield is hereby stipulated/computed at % per annum, compounded ( ) monthly ( )
quarterly ( ) semi-annually ( ) others.
Vendor shall not repurchase subject security/ies before the repurchase date stipulated
on the face of this document.
In case of default, the Vendor shall be liable, in addition to stipulated yield, for liquidated
damages of (Amount or %) , plus attorney's fees of (Amount or %) ,
and costs of collection in case of suit.
4. Renewal
( ) No automatic renewal
( ) Automatic renewal under the following terms:
5. Delivery/Custody of Securities
( ) Physically delivered to Payee
( ) Evidenced by Custodian Receipt No. dated,
issued by
6. Substitution of Securities
( ) Not acceptable to Payee
( ) Acceptable to Payee, however, actual substitution shall be with prior written consent
of payee.
( ) This Agreement is subject to the terms and conditions of (describe document)
dated , executed by (name of Party/ies)
and made an integral part hereof.

APP. Q-6
96.12.31
Serial No.
(Name of NBQB)
CERTIFICATE OF ASSIGNMENT WITH RECOURSE
Issue Date: , 19
FOR AND IN CONSIDERATION OF PESOS (P )

(name of Assignor) hereby assigns, conveys, and transfers
with recourse to (name of Assignee) the debt of (name of Principal Debtor) to
the Assignor, specifically described as follows:
(Description of Debt Securities)
Principal Debtor Serial Number/s Maturity Date/s Face Value Interest/Yield
P P
TOTAL P P
and Assignor hereby undertakes to pay, jointly and severally with the Principal Debtor, the
face value of, and the interest/yield on, said debt securities. The assignment shall be subject
to the terms and conditions on the reverse side hereof.
CONFORME:
(Signature of Assignee)

APP. Q-6
96.12.31
TERMS AND CONDITIONS OF CERTIFICATE OF ASSIGNMENT

WITH RECOURSE
Assignor shall not pay nor repurchase subject security/ies before the maturity date thereof.
In case of default, Assignor shall be liable, in addition to interest, for liquidated damages
of (Amount or %) plus attorney's fees of (Amount or %) ,
( ) Physically delivered to Assignee
( ) Evidenced by Custodian Receipt No. dated ,
issued by .
( ) This Agreement is subject to the terms and conditions of ,
dated executed by (name of Party/ies)

APP. Q-6
96.12.31
Serial No.
(Name of NBQB)
CERTIFICATE OF ASSIGNMENT WITH RECOURSE
Issue Date: , 19
FOR AND IN CONSIDERATION OF PESOS (Present Value/Principal) (P ),

(name of Assignor) hereby assigns, conveys, and transfers with recourse to
(name of Assignee) the debt of (name of Principal Debtor) to the Assignor, specifically described
as follows:
P P
TOTAL P P
and hereby undertakes that in case of default of the Principal Debtor, Assignor shall pay
the face value of, and the interest/yield on, said debt securities, subject to the terms and
conditions on the reverse side hereof.
CONFORME:
(Signature of Assignee)

APP. Q-6
96.12.31
TERMS AND CONDITIONS OF CERTIFICATE OF ASSIGNMENT

WITH RECOURSE
Assignor shall not pay nor repurchase subject security/ies before the maturity date thereof.
In case of default, Assignor shall be liable, in addition to interest, for liquidated damages
of (Amount or %) plus attorney's fees of (Amount or %) , and costs
of collection in case of suit.
( ) Physically delivered to Assignee
( ) Evidenced by Custodian Receipt No.
dated , issued by
( ) This Agreement is subject to the terms and conditions of ,
dated executed by (name of Party/ies)

APP. Q-6
96.12.31
Serial No:
(Name of NBQB)
CERTIFICATE OF PARTICIPATION WITH RECOURSE
Issue Date: , 19
FOR AND IN CONSIDERATION OF PESOS (P ) , this

certificate of participation is hereby issued to evidence the (Fraction or %) share
of (name of Participant) in the loan/s of granted by/assigned
to the herein Issuer, specifically described as follows:
P P
TOTAL P P
The issuer shall pay, jointly and severally with the Principal Debtor, (Fraction or %) share
of the face value of, and the interest/yield on, said debt security(ies), subject to the terms
and conditions on the reverse side hereof.
CONFORME:
(Signature of Participant)

APP. Q-6
96.12.31
TERMS AND CONDITIONS OF CERTIFICATE OF PARTICIPATION

WITH RECOURSE
Issuer shall not pay nor repurchase the participation before the maturity date of subject
security(ies).
In case of default, the Issuer of this instrument shall be liable, in addition to interest, for
liquidated damages of (Amount or %) , plus attorney's fees of (Amount or %) ,
( ) Physically delivered to Participant
issued by
( ) This Agreement is subject to the terms and conditions of (describe document) ,
dated executed by (name of Party/ies) and made
an integral part hereof.

APP. Q-6
96.12.31
Serial No:
(Name of NBQB)
CERTIFICATE OF PARTICIPATION WITH RECOURSE
Issue Date: , 19
FOR AND IN CONSIDERATION OF PESOS , (P )

this certificate of participation is hereby issued to evidence the (Fraction or %) share
of (Participant) in the loan/s of granted by/assigned
to the herein Issuer, specifically described as follows:
P P
TOTAL P P
In case of default of the Principal Debtor, the Issuer shall pay the (Fraction or %) share
of the face value of, and the interest/yield on, said debt security(ies), subject to the terms
and conditions on the reverse side hereof.
CONFORME:
(Signature of Participant)

APP. Q-6
96.12.31
TERMS AND CONDITIONS OF CERTIFICATE OF PARTICIPATION

WITH RECOURSE
Issuer shall not pay nor repurchase the participation before the maturity date of subject
security(ies).
In case of default, the Issuer of this instrument shall be liable, in addition to interest, for
liquidated damages of (Amount or %) , plus attorney's fees of (Amount or %) , and
costs of collection in case of suit.
( ) Physically delivered to Participant
issued by .
( ) This Agreement is subject to the terms and conditions of (describe document) dated
executed by (name of Party/ies) and made an integral
part hereof.

APP. Q-7
96.12.31
NEW RULES ON REGISTRATION OF

SHORT-TERM COMMERCIAL PAPERS
Pursuant to Presidential Decree No. 678, commercial paper, (b) indicating the
as amended by Presidential Decree No. aggregate amount to be applied for, (c)
1798, and other existing applicable laws, the providing that the registration statement shall
Securities and Exchange Commission be signed by the principal executive officer,
hereby promulgates the following new the principal operating officer, the principal
Rules and Regulations governing short-term financial officer, the comptroller, or principal
commercial papers, in the interest of full accounting officer, or persons performing
disclosure and protection of investors and similar functions, and (d) designating at least
lenders, in accordance with the monetary two senior officers with a rank of vice-
and credit policies of the Bangko Sentral. president or higher, or their equivalent, to
sign the commercial paper instrument to be
Sec. 1. Scope. These Rules and issued;
Regulations shall apply to short-term (3) The latest audited financial
commercial papers issued by corporations. statements; and should the same be as of a
date more than three (3) months prior to the
Sec. 2. Definition. For the purpose of filing of the registration statement, an
these Rules, the following definitions shall unaudited financial statement as of the end
apply: of the immediately preceding month:
(a) Commercial paper is an evidence Provided, however, That such unaudited
of indebtedness of any corporation to any financial statement shall be certified under
person or entity with a maturity of 365 days oath by the accountant and the senior
or less. financial officer of the applicant, duly
(b) Interbank loan transactions shall authorized for the purpose, and substituted
refer to borrowings between and among with an audited financial statement within
banks and non-bank financial intermediaries 120 days after the end of the applicant's fiscal
duly authorized to perform quasi-banking year.
functions. (4) Schedules A to L, based on sub-
(c) Issue means creation of a section (3) above, in the form attached as
commercial paper and its actual or Annex "A";
constructive delivery to the payee. (5) A committed credit line agreement
with a bank, or any financial institution
Sec. 3. Registration of Commercial which may be qualified subsequently by the
Papers. Any corporation desiring to issue Bangko Sentral, earmarked specifically for
commercial paper shall apply for registration repayment of aggregate outstanding
with, and submit to, the Commission the commercial paper issues on a pro-rata basis,
following: with the following features:
(a) Ordinary Registration;
(1) Sworn Registration Statement in the (i) A firm, irrevocable commitment to
prescribed form; make available funds to cover at least 20%
(2) Board resolution signed by majority of the aggregate commercial papers
of its members (a) authorizing the issue of outstanding at any time: Provided, That if

APP. Q-7
96.12.31
the commitment is extended by a group, Average acid-test ratios shall be at least

there shall be a lead bank or any financial 0.5:1 computed as follows:
institution which may be qualified
subsequently by the Bangko Sentral acting Cash, receivables, and
Acid-test ratio= marketable securities
for the group; Current Liabilities
(ii) The commitment shall be effective
for as long as the issues are outstanding and 2) Average solvency position shall be
may be renewed by the bank or any financial one whereby total assets must not be less
institution which may be qualified than total liabilities;
subsequently by the Bangko Sentral; 3) Average net profit margin shall be at
(iii) The request for drawdown shall be least 3% computed as follows:
addressed to the bank or any financial
institution which may be qualified Net income after income
subsequently by the Bangko Sentral, which tax, corporate development
request shall be duly signed by a member taxes, and other
of the board of directors and a senior financial Net profit margin = non-cash charges
officer of the commercial paper issuer, duly Net sales or revenues
authorized for the purpose by an appropriate
board resolution, which shall also provide OR
for the designation of the alternate
signatories (likewise a member of the board Average annual return on equity shall be
of directors and a senior financial officer); at least 8% computed as follows:
(iv) A provision that availments shall be
Net income after income
allowed only for repayment of commercial
tax, corporate development
papers which are due and payable in Return on equity = taxes, and other non-cash
accordance with the terms of the Total stockholders' equity
commercial paper;
(v) Notwithstanding the foregoing 4) Average interest service coverage
requirements for a committed credit line ratio shall be at least 1.2:1 computed as
with a bank, or any financial institution follows:
which may be qualified subsequently by the Net income-before-interest
Bangko Sentral ng Pilipinas, any corporation expense, income tax,
desiring to issue commercial papers may be corporate development
exempted from compliance therewith by the taxes, and other non-cash
Interest service = charges
Securities and Exchange Commission, coverage ratio Interest expense
should it meet all of the following financial
ratios based on consolidated audited
financial statements for the immediate past 5) Debt-to-equity ratio shall not exceed
three (3) years: 2.5:1.
1) Average current ratio shall be at least
1.2:1 computed as follows: The Securities and Exchange Commission
may, in its discretion, consult with industry
Current ratio = Current Assets
organization(s) such as Investment Houses
Current Liabilities
Association of the Philippines (IHAP) and
OR Bankers Association of the Philippines (BAP)
and/or the Credit Information Bureau, Inc.

APP. Q-7
96.12.31
6) A selling agreement for the (i) A statement printed in red on the left-
commercial paper issues with an expanded hand margin of the front page of the
commercial bank or an investment house, following tenor:
or any financial institution which may be "A registration statement relating to these
qualified subsequently by the Bangko short-term commercial papers has been filed
Sentral, with minimum conditions that the with, but has not yet been approved by, the
selling agent, among others, shall be Securities and Exchange Commission.
responsible for ensuring that the issuer Information contained herein is subject to
observes the provisions of these rules completion or amendment. These short-
pertaining to the use of proceeds of the term commercial papers may not be sold
committed credit line and, with the issuer, nor may offer to buy be accepted prior to
shall be jointly responsible for complying the time the registration statement is
with all reportorial requirements of the approved. This preliminary prospectus shall
Commission and the Bangko Sentral in not constitute an offer to buy nor shall there
connection with the commercial paper issue, be any sale of these commercial papers in
it being understood that the primary the Philippines as such offer, solicitation, or
responsibility for the submission of the report sale is prohibited prior to registration under
to said regulatory agencies is upon the the Securities Act, as amended by P.D. No.
selling agent: Provided, however, That if 678 and P.D. No. 1798."
the commercial paper issuer is unable to (ii) Aggregate maximum amount
provide the information necessary to meet applied for, stated on the front page of the
such reportorial requirements, the selling prospectus;
agent shall, not later than two (2) working (iii) Description and nature of the
days prior to the date when the report is due, applicant's business;
notify the Commission of such inability on (iv) Intended use of proceeds;
the part of the issuer: Provided, finally, That (v) The nature of the firm, irrevocable,
if the selling agreement is with a group, and committed credit line, the amount of
composed of expanded commercial banks the line which shall be at least 20% of the
and/or investment houses or any financial aggregate outstanding commercial paper
institutions which may be qualified issues, proceeds of which shall be allocated
subsequently by the Bangko Sentral, there on a pro-rata basis to the aggregate
shall be a syndicate manager acting and outstanding commercial paper issue
responsible for the group. (regardless of the order of their maturities),
(7) Income statements for the and the manner of availments, as stipulated
immediate past three (3) fiscal years audited in the credit line agreement between the
by an independent certified public bank and the issuer;
accountant: Provided, That, if the applicant (vi) The provision in the selling
has been in operation for less than three agreement naming the selling agent and the
years, it shall submit income statements for responsibilities of the selling agent in
such number of years that it has been in connection with, among others, the use by
operation. the issuer of the proceeds of the bank
(8) A printed copy of a preliminary committed credit line and the reportorial
prospectus approved by the applicant's requirements under these rules;
Board of Directors which, among others, (vii) Other obligations of the commercial
shall contain the following: issuer classified by maturities (maturing

APP. Q-7
96.12.31
within six (6) months; from six (6) months to (iii) Ratio of (a) net income after taxes
one (1) year; over one (1) year; and past- to (b) net worth;
due amounts); (iv) Net profits-to-sales ratio; and
(viii) Encumbered assets; (v) Such other financial indicators as
(ix) Directors, officers, and may be prescribed by the Commission.
stockholders owning 2% or more of the total These additional data shall likewise be
subscribed stock of the corporation, incorporated in the prospectus.
indicating any advance to said directors, (c) The Commission may, whenever
officers, and stockholders; it deems necessary impose other
(x) List of entities where it owns more requirements in addition to those
than 33-1/3% of the total equity, as well as enumerated in subsections (a) and/or (b)
borrowings and advances to said entities; above.
(xi) Financial statements for the
immediate past three (3) fiscal years audited Sec. 4. Commercial Papers Exempt
by an independent certified public Per Se. The following specific debt
accountant: Provided, That if the applicant instruments are exempt per se from the
has been in operation for less than three (3) provisions of these Rules:
years, it shall submit financial statements for (a) Evidence of indebtedness arising
such number of years that it has been in from interbank loan transactions;
operation. (b) Evidence of indebtedness issued by
(b) Special Registration the national and local governments;
In the case of special registration provided (c) Evidence of indebtedness issued to
for under Section 10 hereof, the following the Bangko Sentral under its open market
shall, in addition to the immediately and/or rediscounting operations;
preceding requirements, be prepared and (d) Evidence of indebtedness issued by
submitted by the selling agent on behalf of the Bangko Sentral ng Pilipinas, Philippine
the applicant: National Bank, Development Bank of the
(1) Projected annual cash flow Philippines, Land Bank of the Philippines,
statement as of the date of filing, presented Government Service Insurance System, and
on a quarterly basis, supported by schedules the Social Security System;
on actual maturity patterns of existing (e) Evidence of indebtedness issued to
receivables and liabilities (under six (6) the following primary institutional lenders:
months, six (6) months to one (1) year, over banks, including their trust accounts, trust
one (1) year, and past-due amounts) and companies, non-bank financial
inventory turnover as of the end of the month intermediaries authorized to engage in quasi-
prior to the filing of the registration banking functions, investment houses,
statement; and including their trust accounts, financing
(2) Complementary financial ratios for companies, investment companies, non-
each of the immediate past three (3) fiscal stock savings and loan associations, building
years: and loan associations, venture capital
(i) Ratio of (a) the total of cash on hand, corporations, special purpose corporations
marketable securities, current receivables referred to in Central Bank Monetary Board
to (b) the total of current liabilities; Res. No. 1051 dated June 19, 1981, insurance
(ii) debt-to-equity ratio, with debt companies, government financial
referring to all kinds of indebtedness, institutions, pawnshops, pension and
including guarantees; retirement funds approved by the Bureau of

APP. Q-7
96.12.31
Internal Revenue, educational assistance Provided, That no registered commercial

funds established by the national paper issuer may issue commercial paper
government; and other entities that may be exempt per se under Section 4 (f) hereof.
classified as primary institutional lenders by
the Bangko Sentral, in consultation with the Sec. 7. Compliance with Bangko
Securities and Exchange Commission: Sentral Quasi-Banking Requirements
Provided, That all such evidences of Nothing in these Rules shall be construed
indebtedness shall be held on to maturity as an exemption from or a waiver of the
and shall neither be negotiated nor assigned applicable Bangko Sentral rules/regulations
to any one other than the Bangko Sentral or circulars governing the performance of
and the Development Bank of the quasi-banking functions or financial
Philippines, with respect to private intermediaries duly authorized to engage in
development banks in connection with their quasi-banking activities. Any violation of said
rediscounting privilege, and financial Bangko Sentral rules/regulations or circulars
intermediaries with quasi-banking functions; shall be considered a violation of these rules
(f) Evidence of indebtedness the total and regulations.
outstanding amount of which does not
exceed P5,000,000 and issued to not more Sec. 8. Action on Application for
than ten (10) primary lenders other than those Registration.
mentioned in subsection (e) above, which (a) Within sixty (60) days after receipt of
evidence of indebtedness shall be payable the complete application for registration, the
to a specific person and not to bearer and Commission shall act upon the application
shall neither be negotiated nor assigned but and shall, in the appropriate case, grant the
held on to maturity; applicant a Certificate of Registration and
(g) Evidence of indebtedness Authority to Issue Commercial Papers.
denominated in foreign currencies; and (b) The Commission shall return any
(h) Evidence of indebtedness arising from application for registration, in cases where
bonafide sale of goods or property. the requirement of applicable laws and
regulations governing the issuance of
Sec. 5. Other Commercial Papers commercial papers have not been complied
Exempt from Registration. Commercial with, or for reasons which shall be so stated.
papers issued by any financial intermediary
authorized by the Bangko Sentral to engage Sec. 9. Ordinary Registration
in quasi-banking functions shall be exempt If the value of commercial papers applied
from registration under Section 3, but shall for, when added to the total outstanding
be subject to payment of the exemption fee, liabilities of the applicant, does not exceed
as provided under Section 15, and to the three hundred percent (300%) of networth
reportorial requirements under Section 17, based on the financial statements referred
all under these Rules. to under Section 3(a) (3), the commercial
papers shall be registered upon compliance
Sec. 6. Prohibition. No commercial with the requirements specified in Section
paper, except of a class exempt under 3(a) hereof. The same principle shall apply
Sections 4 and 5 hereof, shall be issued in the case of renewal of the Authority to
unless such commercial paper shall have Issue Commercial Paper.
been registered under these Rules:

APP. Q-7
96.12.31
Sec. 10. Special Registration Sec. 13. Basic Features of Registered

If the value of commercial paper applied for Commercial Papers
exceeds three hundred per cent (300%) of (a) All registered commercial paper
networth, as contemplated in the preceding instruments shall have a standard format,
section, it shall be subject to compliance serially pre-numbered, and denominated.
with the requirement under Section 3(b) The instrument shall state, among others, the
hereof. debt ceiling of the registrant and a notice
that information about the registrant
Sec. 11. Validity Period of the submitted in connection with the registration
Authority to Issue Commercial Paper. The and other reportorial requirements from the
authority to issue commercial papers shall issuer is available at the Commission and
be valid for a period of three hundred sixty- open to public inspection and that the issuer
five (365) days which shall be indicated in is not authorized by the Bangko Sentral to
the Authority to Issue Commercial Paper, perform quasi-banking functions.
provided that renewal thereof, upon (b) A specimen of the proposed
application filed at least forty five (45) days commercial paper instrument shall be
prior to its expiry date, may be for a period submitted to the Commission for approval
shorter than three hundred sixty-five (365) of the text thereof.
days. (c) The approved instrument shall be
printed by the Bangko Sentral Security
Sec. 12. Conditions of the Authority Printing Plant pursuant to a prior authorization
to Issue Commercial Paper from the Commission, and shall be released
(a) In the event that the commercial by the Commission to the issuer.
paper issuer fails to pay in full any
commercial paper upon demand at stated Sec. 14. Minimum Maturity Value
maturity date, the Authority to Issue The maturity value of each registered
Commercial Paper is automatically commercial paper instrument shall not be
suspended. The selling agent shall, within lower than P300,000.
the next working day, notify the Commission
thereof, and the Commission shall forthwith Sec. 15. Fees. Every registrant shall pay
issue a formal Cease-and-Desist Order, the following fees:
enjoining both the issuer and the selling (a) Upon application for registration, and
agent from further issuing or selling for renewals thereof, a filing fee of not more
Commercial papers. than 1/50th of 1% based on the total
(b) Whenever necessary to implement commercial paper proposed to be issued.
the monetary and credit policies (b) For issuers of commercial paper
promulgated from time to time by the exempt under Section 5 hereof, an annual
Monetary Board of the Bangko Sentral, the exemption fee of P10,000.
Commission may suspend the Authority to
Issue Commercial Paper, or reduce the Sec. 16. Notice of Availment
authorized amount thereunder, or schedule Whenever the credit line is drawn upon,
the maturities of the registered commercial the selling agent and/or issuer shall, within
paper to be issued. two (2) working days immediately following

APP. Q-7
96.12.31
the date of drawdown, notify the and the Bangko Sentral, has made any
Commission of such event, indicating the untrue statement of a material fact, or
amount availed of and the total availment omitted to state any material fact required
as of that given time. to be stated therein or necessary to make
the statements therein not misleading, or
Sec. 17. Periodic Reports refuses to permit any lawful examination
(a) Issuers of registered commercial into its corporate affairs, the Commission
papers and those exempt under Section 5 shall, in its discretion, impose any or all of
hereof shall submit to the Commission and the following sanctions:
the Bangko Sentral the following reports in (a) Suspension or revocation, after
the prescribed form: proper notice and hearing, of the Certificate
(1) Monthly reports on commercial of Registration and Authority to Issue
papers outstanding as at the end of each Commercial Paper;
month, to be submitted within ten (10) (b) A fine in accordance with the
working days following the end of the guidelines that the Commission shall issue
reference month; from time to time: Provided, however, That
(2) Quarterly reports on commercial such fine shall in no case be less than P200
paper transactions, accompanied by an or more than P50,000 for each violation,
interim quarterly financial statement, to be plus not more than P500 for each day of
submitted within thirty (30) calendar days continuing violation. Annex "B" hereof shall
following the end of the reference quarter; initially be the guideline on the scale of fines;
and (c) Other penalties within the power of
(3) For issuers whose application for the Commission under existing laws; and
registration was under Section 10 hereof, the (d) The filing of criminal charges against
projected quarterly cash flow statements the individuals responsible for the violation.
with the corresponding quarter's actual
figure, to be submitted within ten (10) Sec. 19. Cease-and-Desist Order. The
working days following the end of the Commission may, on its own motion or
reference quarter; upon verified complaint by an aggrieved
(b) These periodic reports shall be party, issue a Cease-and-Desist Order ex-
signed under oath by the corporate officers parte if the violation(s) mentioned in Section
authorized pursuant to a board resolution 18 may cause great or irreparable injury to
previously filed with the Commission; the investing public, or may amount to
(c) Issuers whose offices are located in palpable fraud, or violation of the disclosure
the provinces may submit their reports to requirements of the Securities Act and of
the nearest extension offices of the these Rules and Regulations.
Commission. The issuance of such Cease-and-Desist
Order automatically suspends the Authority
Sec. 18. Administrative Sanctions. If to Issue Commercial Paper.
the Commission finds that there is a violation Such Cease-and-Desist Order shall be
of any of these Rules and Regulations and confidential in nature until after the
implementing circulars or that any issuer, imposition of the sanctions mentioned in
in a registration statement and its supporting Section 18 shall have become final and
papers, as well as in the periodic reports executory.
required to be filled with the Commission

APP. Q-7
96.12.31
Immediately upon the issuance of an ex- Sec. 21. Transitory Provision. Any
parte Cease-and-Desist Order, the authority to Issue Commercial Paper, valid
Commission shall notify the parties and subsisting as of the date of the effectivity
involved, and schedule a hearing on of these Rules and Regulations, shall remain
whether to lift such order, or to impose the valid and upon its expiration may, at the
administrative sanctions provided for in discretion of the Commission and subject to
Section 18 not later than fifteen (15) days such conditions as it may impose, be
after receipt of notice. renewed on the basis of the Rules of
Registration of Commercial Papers dated
Sec. 20. Repealing Clause. These December 10, 1975 for an aggregate period
Rules and Regulations supersede the Rules not exceeding fifteen (15) months from its
on Registration of Commercial Papers dated expiry date.
December 10, 1975, and all the
amendments to said Rules. All other rules, Sec. 22. Effectivity. These Rules and
regulations, orders, and memoranda circular Regulations shall take effect on December
of the Commission which are inconsistent 11, 1981.
herewith are likewise hereby repealed or
modified accordingly. (Editors Note: Annexes "A" and "B" are
not reproduced in this Appendix.)

APP. Q-8
96.12.31
NEW RULES ON THE REGISTRATION

OF LONG-TERM COMMERCIAL PAPERS
(Appendix to Subsecs. 4211Q.9 and 4217Q.3)
Pursuant to Section 4(b) of the Revised and any unissued authorized commercial
Securities Act and other existing applicable papers to net worth.
laws, the Securities and Exchange g. Specific person shall refer to a duly
Commission (SEC) hereby promulgates the named juridical or natural person as an
following New Rules and Regulations investor for its or his own account, a trustee
governing long-term commercial papers, in for one or more trustors, an agent or fund
the interest of full disclosure and protection manager for a principal under a fund
of investors and lenders, in accordance with management agreement, and does not
the monetary and credit policies of the BSP: include numbered accounts.
h. Net worth shall refer to the excess of
Section 1. Scope. These Rules shall total assets over total liabilities, net of
apply to long-term commercial papers issued appraisal surplus.
by corporations. i. Subsidiary shall refer to a company
more than fifty percent (50%) of the
Sec. 2 Definitions. For purposes of outstanding voting stock of which is directly
these Rules, the following definitions shall or indirectly owned, controlled, or held with
apply: power to vote by another company.
a. Long-term commercial papers shall j. Affiliate shall refer to a concern
refer to evidence of indebtedness of any linked, directly or indirectly, to another by
corporation to any person or entity with means of:
maturity period of more than 365 days. 1) Ownership control and power to vote
b. Interbank loan transactions shall of 10%, but not more than 50%, of the
refer to borrowings between and among outstanding voting stock.
banks and non-bank financial intermediaries 2) Common major stockholders; i. e.,
duly authorized to perform quasi-banking owning 10%, but not more than 50%, of the
functions. outstanding voting stock.
c. Issue shall refer to the creation of 3) Management contract or any
commercial paper and its actual or arrangement granting power to direct or
constructive delivery to the payee. cause the direction of management and
d. Appraised value shall refer to the policies.
value of chattel and real property, as 4) Voting trustee holding 10%, but not
established by a duly licensed and more than 50%, of the outstanding voting
independent appraiser. stock.
e. Current market value shall refer to 5) Permanent proxy constituting 10%,
the value of the securities at current prices, but not more than 50%, of the outstanding
as quoted at the stock exchanges. voting stock.
f. Recomputed debt-to-equity ratio k) Underwriting shall refer to the act or
shall refer to the proportion of total process of distributing and selling of any kind
outstanding liabilities, including the amount of original issues of long-term commercial
of long-term commercial papers applied for, papers of a corporation other than those of

APP. Q-8
96.12.31
the underwriter itself, either on guaranteed 5) Such other financial indicators, as may
or best-effort basis. be required by the Commission.
l) Trust accounts shall refer to those c. Debt to equity
accounts with a financial institution The recomputed debt-to-equity to ratio of
authorized by the BSP to engage in trust the applicant based on the financial
functions, wherein there is a trustor-trustee statements required under Sec. 4.c. hereof
relationship under a trust agreement. shall not exceed 4:1: Provided, That the
authorized short-term commercial papers do
Sec. 3. Conditions for Registration not exceed three hundred percent (300%)
Long-term commercial papers shall be of net worth and upon compliance with the
registered under any of the following registration requirements specified in Sec.
conditions: 4 hereof.
a. Collateral The conditions under which the
The amount of long-term commercial commercial papers of a registrant were
papers applied for is covered by the registered shall be strictly maintained during
following collaterals which are not the validity of the Certificate of Registration.
encumbered, restricted, or earmarked for
any other purpose and which shall be Sec. 4. Registration Requirements
maintained at their respective values at all Any corporation desiring to issue long-term
times, indicated in relation to the face value commercial papers shall apply for
of the long-term commercial paper issue; registration with, and submit to, the
1) Securities listed in - Current market Commission the following:
the stock exchanges value of 200% a. Sworn Registration Statement in the
2) Registered real estate - Appraised value
mortgage of 150% form prescribed by the Commission;
3) Registered chattel mort- - Appraised value b. Board resolution signed by a majority
gage on heavy equipment, of 200% of its members -
machinery, and similar 1) authorizing the issue of long-term
assets acceptable to the
commercial papers;
Commission and registrable
with the appropriate 2) indicating the aggregate amount to be
government agency applied for;
b. Financial Ratios 3) stating purpose or usage of proceeds
A registrant who meets such standard, as thereof;
may be prescribed by the Commission, 4) providing that the registration
based on the following complementary statement shall be signed by any of the
financial ratios for each of the immediate following: the principal executive officer, the
past three (3) fiscal years: principal operating officer, the principal
1) Ratio of (a) the total cash, marketable financial officer, the comptroller or principal
securities, current receivables to (b) the total accounting officer, or persons performing
of current liabilities; similar functions; and
2) Debt-to-equity ratio, with debt 5) designating at least two senior officers
referring to all kinds of indebtedness, with a rank of vice-president, or higher of
including guarantees; their equivalent, to sign the commercial
3) Ratio of (a) net income after taxes to paper instruments to be issued.
(b) net worth; c. The latest audited financial statements
4) Net profits to sales ratio; and and should the same be as of a date more

APP. Q-8
96.12.31
than three (3) months prior to the filing of is with a group composed of expanded
the registration statements, an unaudited commercial banks and/or investment houses
financial statement as of the end of the or any financial institutions which may be
immediately preceding month; Provided, qualified subsequently by the BSP, there
however, That such unaudited financial shall be a syndicate manager acting and
statement shall be certified under oath by responsible for the group: Provided, finally,
the accountant and the senior financial officer That the underwriter may be changed
of the applicant duly authorized for the subject to prior approval by the
purpose and substituted with an audited Commission;
financial statement within 105 days after the g. A typewritten copy of a preliminary
end of the applicant's fiscal year; prospectus approved by the applicant's
d. Schedules A to L based on subsection Board of Directors which, among others,
c above, in the form attached as Annex "A"; shall contain the following:
e. Income statements for the immediate 1) A statement printed in red on the left-
past three (3) fiscal years audited by an hand margin of the front page, to wit:
independent certified public accountant: "A registration statement relating to these
Provided, That if the applicant has been in long-term commercial papers has been filed
operation for less than three (3) years, it shall with, but has not yet been approved by, the
submit income statements for such number Securities and Exchange Commission.
of years that it has been in operation; Information contained herein is subject to
f. An underwriting agreement for the completion or amendment. These long-term
long-term commercial paper issues with an commercial papers may not be sold nor may
expanded commercial bank or an offers to buy be accepted prior to the ap-
investment house, or any other financial proval of the registration statement. This
institution which may be qualified preliminary prospectus shall not constitute
subsequently by the BSP with minimum an offer to buy nor shall there be any sale of
condition, among others, that the these long-term commercial papers in the
underwriter and the issuer shall be jointly Philippines as such offer, solicitation, or sale
responsible for complying with all is prohibited prior to registration under the
reportorial requirements of the Commission Revised Securities Act."
and the BSP in connection with the long-term 2) Aggregate maximum amount applied
commercial paper issue, it being understood for, stated on the front page of the
that the primary responsibility for the prospectus;
submission of the report to these regulatory 3) Description and nature of the
agencies is upon the underwriting applicant's business;
agreement and thereafter, the responsibility 4) Intended use of proceeds;
shall devolve upon this issuer: Provided, 5) Provisions in the underwriting
however, That if the issuer is unable to agreement, naming the underwriter and its
provide the information necessary to meet responsibilities in connection with, among
such reportorial requirements, the others, the reportorial requirements under
underwriter shall, not later than two (2) these Rules;
working days prior to the date when the 6) Other obligations of the applicant
report is due, notify the Commission of such classified by maturities - maturing within six
inability on the part of the issuer: Provided, (6) months; from six (6) months to one (1)
further, That if the underwriting agreement year; and one (1) year and past-due amounts;

APP. Q-8
96.12.31
7) List of assets which are encumbered, complied with the provisions of these Rules
restricted, or earmarked for any other and the terms and conditions of the
purposes; Certificate of Registration.
8) List of directors, officers, and b. The Commission shall return any
stockholders owning two percent (2%) or application for registration, in cases where
more of the total outstanding voting stock of the requirements of applicable laws and
the corporation, indicating any advance to regulations governing the issuance of long-
said directors, officers, and stockholders; term commercial papers have not been
9) List of entities where it owns more complied with, or for reasons which shall
than 33-1/3% of the total outstanding voting be so stated.
stock, as well as borrowings from, and
advances to, said entities. Sec. 6. Close-end Registration
h. Projected annual cash flow statement Registration of long-term commercial
presented on a quarterly basis as of the papers under these Rules shall be a close-
approximate date of issuance for a period end process, whereby the portion of the
co-terminus with the life time of the issue, authorized amount already issued shall be
indicating the basic assumptions thereto and deducted from the authorized amount and
supported by schedules on actual maturity may no longer be reissued even if reacquired
patterns of outstanding receivables and in any manner, pursuant to the terms and
liabilities (under six (6) months, six (6) conditions of issue.
months to one (1) year, over one (1) year,
and past-due accounts) and inventory Sec. 7. Long-Term Commercial
turnover; Papers Exempt Per Se. The following
i. Data on financial indicators, as may specific long-term debt instruments are
be prescribed by the Commission, for each exempt per se from the provisions of these
of the immediate past three (3) fiscal years, Rules:
such as on solvency, liquidity, and a. Evidence of indebtedness arising from
profitability. interbank loan transactions;
The Commission may, whenever it b. Evidence of indebtedness issued by
deems necessary, impose other the national and local governments;
requirements in addition to those c. Evidence of indebtedness issued by
enumerated above. government instrumentalities, the
repayment and servicing of which are fully
Sec. 5. Action on Application for guaranteed by the National Government;
Registration d. Evidence of indebtedness issued to
a. Within sixty (60) days after receipt of the BSP under its open market and/or
the complete application for registration, the rediscounting operations;
Commission shall act upon the application e. Evidence of indebtedness issued by
and shall, in the appropriate case, grant the the BSP , Philippine National Bank,
applicant a Certificate of Registration and Development Bank of the Philippines, and
Authority to Issue Long-Term Commercial Land Bank of the Philippines;
Papers valid for one (1) year, which may be f. Evidence of indebtedness issued to the
renewed annually with respect to the following primary institutional lenders:
unissued balance of the authorized amount, banks, including their trust accounts, trust
upon showing that the registrant has strictly companies, non-bank financial

APP. Q-8
96.12.31
intermediaries authorized to engage in quasi-

banking functions, investment houses,
including their trust accounts, financing
companies, investment companies, non-
stock savings and loan associations, building
and loan associations, venture capital
corporations, special purpose corporations
referred to in Central Bank Monetary Board
Resolution No. 1051 dated June 19, 1981,
insurance companies, government financial
institutions, pawnshops, pension and
retirement funds approved by the Bureau of
Internal Revenue, educational assistance
funds established by the national
government, and other entities that may be
classified as primary institutional lenders by
the BSP , in consultation with the
Commission: Provided, That all such
evidences of indebtedness shall be held on
to maturity and shall neither be negotiated
nor assigned to any one other than the BSP,
and the Development Bank of the
Philippines, with respect to private
development banks in connection with their
rediscounting privileges, and financial
intermediaries with quasi-banking functions;
g. Evidence of indebtedness, the total
outstanding amount of wh dos wnotT* -0.0002 l1 l1 l1 l1 l1 ro200032.f(5 s ofillith Ptios (11 0 ET91 6(iw 353

APP. Q-8
96.12.31
no registered long-term commercial paper maturity date and has accordingly

issuer may issue long-term commercial automatically suspended the issuance of its
paper exempt per se under Section 7(g) long-term commercial papers. Within the
hereof. next working day, the Commission shall
b. There shall be no pretermination of forthwith issue a formal Cease-and-Desist
long-term commercial papers either by the Order enjoining the issuer from further
issuer or the lender within 730 days from issuing long-term commercial papers.
issue date. Pretermination shall include c. Whenever necessary to implement
optional redemption, partial installments, the monetary and credit policies
and amortization payments; however, promulgated from time to time by the
installment and amortization payments may Monetary Board of the BSP, the Commission
be allowed, if so stipulated in the loan may suspend the authority to issue long-term
agreement. commercial paper, or reduce the authorized
amount thereunder, or schedule the
Sec. 10. Compliance with Bangko maturities of the registered long-term
Sentral Quasi-Banking Requirements commercial paper to be issued.
Nothing in these Rules shall be construed
as an exemption from, or a waiver of, the Sec. 12. Basic Features of Registered
applicable BSP rules and regulations Commercial Papers
governing the performance of quasi-banking a. All registered commercial paper
functions. Any violation of said BSP rules instruments shall have a standard format,
and regulations shall be considered a serially pre-numbered, and denominated.
violation of these Rules. The instrument shall state, among others, the
debt ceiling of the registrant and a notice
Sec. 11. Conditions of the Authority to that information about the registrant
Issue Long-Term Commercial Papers submitted in connection with the
a. During the effectivity of the registration, and other reportorial
underwriting agreement, should the issuer requirements from the issuer is available at
fail to pay in full any interest due on or the Commission and open to public
principal of long-term commercial paper inspection, and that the issuer is not
upon demand at stated maturity date, the authorized by the BSP to perform quasi-
Authority to Issue Long-Term Commercial banking functions.
Papers shall be automatically suspended. b. A specimen of the proposed
The underwriter shall, within the next commercial paper instrument shall be
working day, notify the Commission thereof, submitted to the Commission for approval
and the Commission shall forthwith issue a of the text thereof.
formal Cease-and-Desist Order enjoining c. The instrument approved by the
both the issuer and the underwriter from Commission shall be printed by an entity
further issuing or underwriting long-term authorized by the Commission and shall be
commercial papers. released by the Commission to the issuer.
b. Upon the expiration of the
underwriting agreement, it shall be the Sec. 13. Minimum Principal Amount
responsibility of the issuer to notify the The minimum principal amount of each
Commission that it failed to pay in full any registered long-term commercial paper
interest due on, or principal of, long-term instrument shall not be lower than the
commercial paper upon demand at stated

APP. Q-8
96.12.31
amounts indicated in the following Sec. 16. Administrative Sanctions. If

schedule: the Commission finds that there is a
a. Up to two years P100,000 violation of any of these Rules and
b. Over two years but less Regulations and implementing circulars, or
than four years 50,000 that any issuer, in a registration statement
c. Four years or more 20,000 and its supporting papers, as well as in the
periodic reports required to be filed with the
Sec. 14. Fees. Every registrant shall Commission and the BSP, has made any
pay the following fees: untrue statement of a material fact, or
a. Upon application for registration, a omitted to state any material fact required
filing fee of 1/20 of 1% based on total to be stated therein or necessary to make
commercial paper proposed to be issued, the statements therein not misleading, or
but not to exceed P75,000. refuses to permit any lawful examination
b. For issuers of commercial papers into its corporate affairs, the Commission
exempt under Section 8 hereof, an annual shall, in its discretion, impose any or all of
exemption fee of P10,000. the following sanctions:
a. Suspension or revocation, after proper
Sec. 15. Periodic Reports notice and hearing, of the Certificate of
a. Issuers of registered long-term Registration and Authority to Issue
commercial papers, through their Commercial Paper;
underwriters and those exempt under b. A fine in accordance with the
Section 8 hereof, shall submit the following guidelines that the Commission shall issue
reports in the form prescribed by the from time to time: Provided, however, That
Commission: such fine shall in no case be less than P200
1) Monthly reports on long-term nor more than P50,000 for each violation,
commercial papers outstanding as at the end plus not more than P500 for each day of
of each month, to be submitted within ten continuing violation. Annex "B" hereof shall
(10) working days following the end of the initially be the guidelines on the scale of
reference month; fines;
2) Quarterly reports on long-term c. Other penalties within the power of
commercial paper transactions, the Commission under existing laws; and
accompanied by an interim quarterly d. The filing of criminal charges against
financial statement to be submitted within the individuals responsible for the
thirty (30) calendar days following the end violation.
of the reference quarter; and
3) Actual quarterly cash flow statement, Sec. 17. Cease-and-Desist Order
to be submitted within ten (10) working days a. The Commission may, on its own
following the end of the reference quarter. motion or upon verified complaint by an
b. These periodic reports shall be signed aggrieved party, issue a Cease-and-Desist
under oath by the corporate officers Order ex-parte, if the violation(s) mentioned
authorized, pursuant to a board resolution in Section 16 hereof may cause great or
previously filed with the Commission. irreparable injury to the investing public, or
c. Issuers whose offices are located in will amount to palpable fraud or violation of
the provinces may, through their the disclosure requirements of the Revised
underwriters, submit their reports to the Securities Act and of these Rules and
nearest extension office of the Commission. Regulations.

APP. Q-8
96.12.31
b. The issuance of such Cease-and- Sec. 19. Transitory Provision

Desist Order automatically suspends the a. Any authority or Certificate of
Authority to Issue Long-Term Commercial Exemption to Issue Long-Term Commercial
Paper. Papers, granted under the Rules on
c. Such Cease-and-Desist Order shall be Registration of Long-Term Commercial
confidential in nature, until after the Papers dated October 15, 1976, valid and
imposition of the sanctions mentioned in subsisting as of the date of the effectivity of
Section 16 hereof shall have become final these Rules, shall remain valid with respect
and executory. only to all outstanding issue until such issues
d. Immediately upon the issuance of an are retired or redeemed.
ex-parte Cease-and-Desist Order, the b. The Commission may, at its discretion
Commission shall notify the parties and subject to such conditions it may impose,
involved, and schedule a hearing on authorize issuance of any unissued portion
whether to lift such order, or to impose the of the issuer's approved long-term debt
administrative sanctions provided for in ceiling solely for refinancing of maturing
Section 16 not later than fifteen (15) days long-term commercial paper issue for a
after receipt of notice. period not beyond fifteen (15) months from
the effectivity date of these Rules.
Sec. 18. Repealing Clause. These
Rules and Regulations supersede the Rules Sec. 20. Effectivity. These Rules and
on Registration of Long-Term Commercial Regulations shall take effect fifteen (15)
Paper and Bonds dated October 15, 1976 days after publication in two newspapers
and all the amendments to said Rules except of general circulation in the Philippines.
as provided in Section 19 hereof. All other
rules, regulations, orders, memoranda
circular of the Commission, which are
inconsistent herewith, are likewise hereby (Ed. Note: Annexes "A" and "B" are not
repealed or modified accordingly. reproduced in this Appendix.)

APP. Q-9
96.12.31
LIST OF RESERVE - ELIGIBLE AND NON-ELIGIBLE SECURITIES

A. Government securities ELIGIBLE as reserves against peso deposit liabilities and

reserves deposit substitute liabilities:
1. Direct obligations of the Government of 4% NAWASA Bonds (1st to 9th &
the Republic of the Philippines eligible as 13th Series)
reserve against peso deposit liabilities and
deposit substitute liabilities: 3. The following government securities
a. 4% PWED Bonds all outstanding bearing more than four percent (4%) per
series annum interest, whether Bangko Sentral
b. 4% NPC Bonds (26th - 50th Series supported or not, if BEING USED BY
except 39th Ser. which bear 6% - obligation BANKS/NBQBs as reserve against deposit
assumed by the National Government) substitute liabilities as of January 17, 1977
c. 4% Treasury Bonds (30th S; 57th shall continue to be eligible as such:
S; 59th-71st S; 78th-93rd S) Provided, That whenever said securities
Treasury Bonds with less than 4% per shall have matured, they shall be replaced
annum interest considered eligible by by securities carrying the features/conditions
reason of expressed BSP limited support to enumerated under Circular No. 638, dated
original purchaser: November 8, 1978, as amended:
2% T/Bond L of 1973/2003 1st Series (1st 6% PWED Bonds - All outstanding

issues
& 2nd Release) 6% NPC Bonds - -do
3% T/Bond L of 1978/2008 55th Series 7% NPC Bonds - -do
(1st Release) 8-½% NPC Bonds - 13th - 22nd Series
4% T/Bond L of 1979/2009 55th Series 7% MWSS Capital - All outstanding
Bonds issues
(2nd Release)
6% NIA Bonds - -do-
3-¼% T/Bond L of 1974/1999 6th Series 4½% Treasury Bonds - -do-
(1st-2nd Release) 4 710% Treasury Bonds - 7th Series
3-¼% T/Bond L of 1978/2003 54th Series 5% Treasury Bonds - 9th Series
(1st--3rd Release) 6% Treasury Bonds - 8th Series
7% Treasury Bonds - All outstanding
issues except
d. 4% Treasury Notes L of 1980/1995 15th Series
115th Series 10-¾% Treasury Bonds - All outstanding
e. Bonds made specifically eligible to its issues
9% Treasury Notes - 60th - 65th Series
holders only:
10-½% Treasury Notes - 101st Series (1st &
4% Treasury Capital Bonds -- DBP only 2nd Release)
2% Capital Treasury Bonds -- PNB only 10-¾% Treasury Notes - 56th and 61st Series
11-¼% Treasury Notes - 59th Series
2. Bonds and other evidences of 6% NAWASA Bonds - 11th, 12th and 1st
Series
indebtedness bearing interest rate of four 10% EPZA Bonds - 9th - 11th Series
percent (4%) per annum, issued by 10-¾% EPZA Bonds - 3rd - 8th Series
government-owned or controlled
corporations, political subdivisions and
instrumentalities likewise eligible as

APP. Q-9
96.12.31
B. The following government securities Treasury Bonds

are NOT ELIGIBLE whatsoever for reserve 2% T/Bond L of 1973/2003 4th Series
purposes: 2-¾% T/Bond L of 1974/1986 7-A & 7-B Series
3% T/Bond L of 1976/2001 26th, 27th, 31st -
Negotiable Land Certificate (NLC) 34th, 46th & 47th Series
Cultural Center of the Philippines (CCP) 3% T/Bond L of 1977/2002 49th Series
Bonds 3-¼% T/Bond L of 1974/1999 6th Series
Philippine Charity Sweepstakes Office 3rd & 4th Release
3-¼% T/Bond L of 1977/2002 6th Series
(PCSO) Bonds
5th Release
Public Estate Authority (PEA) Bonds 3-¼% T/Bond L of 1975/2000 21st Series
National Development Company (NDC) 1st Release
Bonds 3-¼% T/Bond L of 1977/2002 21st Series
National Housing Authority (NHA) Bonds 2nd Release
3-¼% T/Bond L of 1977/2002 51st Series
National Food Authority (NFA) Bonds 1st & 2nd Release
NHMFC Bahayan Certificates 3-¼% T/Bond L of 1978/2003 54th Series
Light Rail Transit Authority (LRTA) Notes 1st & 34th Release
CBCIs (Auctioned/discounted) - 24th -29th 3-¼% T/Bond L of 1980/2005 58th Series
3-¾% T/Bond L of 1973/2003 2nd Series
Series
CBCIs (Negotiated) A to D-1Series and Treasury Notes
5th to 7th Series (18 months) 2% T/Notes L of 1976/1991 79th Series
CBCIs 10-½% Special Series 1st - 32nd 3% T/Notes L of 1982/1997 128th Series
Series 3% T/Notes L of 1981/1986 120th Series
Central Bank Bills (Negotiated/ & 125th Series
3-½% T/Notes L of 1982/1997 Special Series
discounted) 1st-24th Release
Treasury Bills (Negotiated/discounted)
Treasury Notes and Treasury Bonds
bearing less than four percent (4%) per
annum, but not given BSP support as
follows:

APP. Q-10
02.12.31
GUIDELINES IN IDENTIFYING AND MONITORING

PROBLEM LOANS AND OTHER RISK ASSETS AND
SETTING UP OF ALLOWANCE FOR PROBABLE LOSSES
I. Classification of loans. In addition a. Loans with unregistered mortgage

to classifying loans as either current or past instrument which is not in compliance with
due, the same should be qualitatively the loan approval;
appraised and grouped as Unclassified or b. Loans with improperly executed
Classified. supporting deed of assignment/pledge
agreement/chattel mortgage/real estate
A. Unclassified loans. These are loans mortgage;
that do not have a greater-than-normal risk c. Loans with unnotarized mortgage
and do not possess the characteristics of instruments/agreements;
classified loans as defined below. The d. Loans with collaterals not covered by
borrower has the apparent ability to satisfy appraisal reports or appraisal reports not
his obligations in full and therefore no loss updated;
in ultimate collection is anticipated. The e. Loan availments against expired
following loans, among others, shall not be credit line; availments in excess of credit line;
subject to classification: availments against credit line without prior
1. Loans or portions thereof secured by approval by appropriate authority;
hold-outs on deposit substitutes maintained f. Loans with collaterals not insured or
in the lending institutions, margin deposits, with inadequate/expired insurance policies
or government-supported securities; or the insurance policy is not endorsed in
2. Loans with technical defects and favor of the NBQB;
deficiencies in documentation and/or g. Loans granted beyond the limits of
collateral requirements. These deficiencies approving authority;
are isolated cases where the exceptions h. Loans granted without compliance
involved are not material nor is the NBQB’s with conditions stated in the approval; and
chance to be repaid or the borrower’s ability i. Loans secured by property the title
to liquidate the loan in an orderly manner to which bears an uncancelled annotation or
undermined. These exceptions should be lien or encumbrance.
brought to management’s attention for
corrective action during the examination and B. Classified loans. These are loans
those not corrected shall be included in the which possess the characteristics outlined
Report of Examination under “Miscellaneous hereunder. Classified loans are subdivided
Exceptions – Loans”. Moreover, deficiencies into (1) loans especially mentioned; (2)
which remained uncorrected in the following substandard; (3) doubtful; and (4) loss.
examination shall be classified as “Loans
Especially Mentioned”. 1. Loans especially mentioned. These
The following are examples of loans to be are loans that have potential weaknesses
cited under “Miscellaneous Exceptions – that deserve management’s close attention.
Loans”: These potential weaknesses, if left

APP. Q-10
04.12.31
uncorrected, may affect the repayment of the 2. Substandard. These are loans or
loan and thus increase credit risk to the portions thereof which appear to involve a
NBQB. Their basic characteristics are as substantial and unreasonable degree of risk
follows: to the institution because of unfavorable
a. Loans with unlocated collateral record or unsatisfactory characteristics.
folders and documents including, but not There exists in such loans the possibility of
limited to, title papers, mortgage instruments future loss to the institution unless given
and promissory notes; closer supervision. Those classified as
b. Loans to firms not supported by board “Substandard” must have a well-defined
resolutions authorizing the borrowings; weakness or weaknesses that jeopardize their
c. Loans without credit investigation liquidation. Such well-defined weaknesses
report; may include adverse trends or development
d. Loans with no latest income tax of financial, managerial, economic or
returns and/or latest audited financial political nature, or a significant weakness in
statements, except consumer and small and collateral. Their basic characteristics are as
medium enterprises (SME) loans which are follows:
current, have not been restructured and are a. Secured loans
supported by latest income tax returns and/ (1) Past due and circumstances are such
or latest audited financial statements at the that there is an imminent possibility of
time they were granted. foreclosure or acquisition of the collateral
For this purpose, consumer loans is de- because of failure of all collection efforts;
fined to include housing loans not exceed- (2) Past due loans to borrowers whose
ing P5 million, loans for purchase of car, properties securing the loan have declined
household appliance(s), furniture and fix- in value materially or have been found with
tures, loans for payment of educational and defects as to ownership or other adverse
hospital bills, salary loans and loans for per- information; and
sonal consumption; (3) Current loans to borrowers whose
e. Loans the repayment of which may audited financial statements show impaired/
be endangered by economic or market negative net worth except for start-up firms
conditions that in the future may affect the which should be evaluated on a case-to-case
borrower’s ability to meet scheduled basis.
repayments as evidenced by a declining b. Unsecured loans
trend in operations, illiquidity, or increasing (1) Renewed/extended loans of
leverage trend in the borrower’s financial borrowers with declining trend in operations,
statements; illiquidity, or increasing leverage trend in the
f. Loans to borrowers whose properties borrower’s financial statements without at
securing the loan (previously well secured least twenty percent (20%) repayment of the
by collaterals) have declined in value or with principal before renewal or extension; and
other adverse information; (2) Current loans to borrowers with
g. Loans past due for more than thirty unfavorable results of operations for two
(30) days up to ninety (90) days; and (2) consecutive years or with impaired/
h. Loans previously cited as negative net worth except for start-up firms
Miscellaneous Exceptions still uncorrected in which should be evaluated on a case-to-
the current BSP examination. case basis.

APP. Q-10
04.12.31
c. Loans under litigation; d. Loans wherein the possibility of loss

d. Loans past due for more than ninety is extremely high but because of certain
(90) days; important and reasonably specific pending
e. Loans granted without requiring factors that may work to the advantage and
submission of the latest audited financial strengthening of the asset, its classification
statements (AFS)/income tax returns and/ as an estimated loss is deferred until a more
or statements of assets and liabilities to exact status is determined.
determine paying capacity of the borrower;
f. Loans with unsigned promissory 4. Loss. These are loans or portions
notes or signed by unauthorized officers of thereof which are considered uncollectible
the borrowing firm; and or worthless and of such little value that their
g. Loans classified as “Loans Especially continuance as bankable assets is not
Mentioned” in the last BSP examination warranted although the loans may have some
which remained uncorrected in the current recovery or salvage value. The amount of
examination. loss is difficult to measure and it is not
practical or desirable to defer writing off these
3. Doubtful. These are loans or basically worthless assets even though partial
portions thereof which have the weaknesses recovery may be obtained in the future. Their
inherent in those classified as “Substandard”, basic characteristics are as follows:
with the added characteristics that existing a. Past due clean loans the interest of
facts, conditions, and values make collection which is unpaid for a period of six (6) months;
or liquidation in full highly improbable and b. Loans payable in installments where
in which substantial loss is probable. Their amortization applicable to interest is past due
basic characteristics are as follows: for a period of six (6) months, unless the loan
a. Past due clean loans classified as is well secured;
“Substandard” in the last BSP examination c. When the borrower’s whereabouts
without at least twenty percent (20%) is unknown, or he is insolvent, or his earning
repayment of principal during the succeeding power is permanently impaired and his co-
twelve (12) months or with current makers or guarantors are insolvent or that
unfavorable credit information; their guaranty is not financially supported;
b. Past due loans secured by collaterals d. Where the collaterals securing the
which have declined in value materially such loans are considered worthless and the
as, inventories, receivables, equipment, and borrower and/or his co-makers are insolvent;
other chattels without the borrower offering e. Loans considered as absolutely
additional collateral for the loans and uncollectible; and
previously classified “Substandard” in the last f. Loans classified as “Doubtful” in the
BSP examination; last BSP examination and without any
c. Past due loans secured by real estate payment of interest or substantial reduction
mortgage, the title to which is subject to an of principals during the succeeding twelve
adverse claim rendering settlement of the (12) months, or have current unfavorable
loan through foreclosure doubtful; and credit information which renders collection
of the loans highly improbable.

APP. Q-10
04.12.31
C. Credit card receivables reported income and reported as a separate

component of stockholders’ equity [Net
Credit card receivables shall be classified Unrealized Gains/(Losses) on Securities
in accordance with age as follows: Availabe for Sale] until realized.
4. Underwriting Accounts (UA) shall
No. of days initially be booked at cost and subsequently
past due Classification valued at fair market values. Unrealized gains
and losses are excluded from reported
91 - 120 Substandard income and reported as a separate
121 - 180 Doubtful component of stockholders’ equity [Net
181 or more Loss Unrealized Gains/(Losses) on Securities
Available for Sale] until realized. UA account
The foregoing is the minimum is applicable only to UBs.
classification requirement. Management may
therefore formulate additional specific B. Equity investment in affiliates shall
guidelines. be booked at cost or book value whichever
is lower on the date of acquisition. If cost is
II. Investments and Other Risk Assets greater than book value, the excess shall be
charged in full to operations or booked as
A. Investment in debt securities and deferred charges and amortized as expense
marketable equity securities over a period not exceeding five (5) years.
1. Investment in Bonds and Other Debt Subsequent to acquisition, if there is an
Instruments (IBODI) shall be valued at cost impairment in the recorded value, the
adjusted for discount or premium through impairment should adequately be provided
periodic amortization charges or credits to with allowance for probable losses.
income. When the decline in fair market
value below the amortized cost is other than C. Other property owned or acquired
temporary, i.e., full collection of principal 1. The basic characteristics of real estate
and interest is not expected on a debt property acquired subject to "Substandard"
security, the amortized cost basis of the classification are as follows:
particular debt security shall be adequately a. Acquired for less than five (5) years
provided with allowance for probable losses. unless worthless.
The amount of investment loss provision shall b. Converted into a Sales Contract
be accounted for as a realized loss and Receivable.
charged to reported current income. c. Sold subject to a firm purchase
2. Trading Account Securities (TAS) shall commitment from a third party before the
initially be booked at cost and subsequently close of the examination.
valued at fair market values. Unrealized gains 2. The basic characteristics of real estate
and losses are recognized and booked property acquired subject to "loss"
against “Trading Gain/Loss” account. classification are as follows:
3. Available for Sale Securities (ASS) a. Foreclosure expenses and other
shall initially be booked at cost and charges included in the book value of the
subsequently valued at fair market values. property, excluding the amount of non-
Unrealized gains or losses are excluded from refundable capital gains tax and

APP. Q-10
04.12.31
documentary stamp tax paid in connection b. Property which is worthless or not

with the foreclosure/purchase which meet the salable;
criteria for inclusion in the book value of the c. Property whose title is lost or is being
acquired property. contested in court;
b. The excess of the book value over d. Foreclosure expenses and other
the appraised value. charges included in the book value of the
c. Property whose title is definitely lost property; and
to a third party or is being contested in court. e. The excess of the book value of the
d. Property wherein the exercise of the property over its appraised or realizable
right of usufruct is not practicable or possible value.
as when it is eroded by a river or is under Valuation reserves shall also be provided
any like circumstances. for foreclosed personal property in
Real estate property acquired are not accordance with the following schedule,
sound assets. Because of their nature, that reckoned from the date of foreclosure or from
is, non-liquid and non-productive, their the perfection of the contract, if acquired
immediate disposal through sale is highly through dation in payment.
recommended. If such is not possible, they End of Year
should be charged-off by annually providing After Expiry of
a valuation reserve in accordance with the Redemption Annual
following schedule starting at the expiration Period or Provision
Perfection of to Cost of Accumulated
of the statutory redemption period.
Contract Acquisition Reserve
End of Year
After Expiry of
1st Year 50% 50%
Redemption Annual 2nd Year 30% 80%
Period or Provision 3rd Year 20% 100%
Perfection of to Cost of Accumulated
Contract Acquisition Reserve E. Accounts Receivable
1. Accounts receivable arising from
6th Year 10% 10% loan and investment accounts still
7th Year 10% 20% uncollected after six (6) months from the date
8th Year 10% 30% such loans or loan installments have matured
9th Year 10% 40% or have become past due shall be provided
10th Year 10% 50% with a 100% allowance for uncollected
accounts receivable.
D. Acquired or repossessed personal 2. All other accounts receivable should
property be classified in accordance with age as
1. All personal property owned or follows, unless there is good reason for non-
acquired held for three (3) years or less from classification:
date of acquisition shall be classified as
Substandard assets. No. of Days
2. The basic characteristics of acquired Outstanding Classification
or repossessed personal property classified
as Loss are as follows: 61 - 180 Substandard
a. Property not sold for more than three 181 - 360 Doubtful
(3) years from date of acquisition; 361 or more Loss

APP. Q-10
04.12.31
The classification according to age of 2. One percent (1%) of the outstanding

accounts receivable should be used in balance of unclassified loans other than
classifying other risk assets not covered restructured loans less loans which are
above. However, their classification should considered non-risk under existing laws,
be tempered by favorable information rules and regulations.
gathered in the review. The general loan loss provision shall be
computed as follows:
F. Accrued Interest Receivable
1. Accrued interest receivable on For Loans Not Restructured
loans or loan installments still uncollected Gross Loan Portfolio (Excluding
after three (3) months from the date such Restructured Loans) Pxxx
loans or loan installments have matured or Less: Classified Loans (based on
latest BSP examination)
have become non-performing shall be
Loans especially mentioned Pxxx
provided with a 100% allowance for Substandard
uncollected interest on loans. Secured xxx
2. All other accrued interest receivable Unsecured xxx
on loans or loan installments shall be Doubtful xxx
classified similar to the classification of their Loss xxx xxx
respective loan accounts. Unclassified Loans Pxxx
Less: Loans considered non-risk
III. Allowance for probable losses. An under existing regulations xxx
allowance for probable losses on the loan Loan Portfolio, net of exclusions Pxxx
General Loan Loss Provision (1% of
accounts should be set up as follows:
net loan portfolio) Pxxx
A. Specific allowance For Restructured Loans

Allowance Restructured Loans (Gross) Pxxx
Classification (Percent) Less: Classified Loans (based on
latest BSP examination)
1. Unclassified 0 Loans especially mentioned Pxxx
2. Loans Especially Mentioned 5 Substandard
3. Substandard Secured xxx
(a) Secured 10 Unsecured xxx
Doubtful xxx
(b) Unsecured 25
Loss xxx xxx
4. Doubtful 50 Unclassified Restructured Loans Pxxx
5. L o s s 100 Less: Loans considered non-risk
under existing regulations xxx
B. General allowance. In addition to Restructured Loans, net of exclusions Pxxx
the allowance for probable losses required General Loan Loss Provision (5% of
under Item "A", a general provision for loan net restructured loans) Pxxx
losses shall also be set up as follows: The excess of the booked general loan
1. Five percent (5%) of the outstanding loss provisions over the amount required as
balance of unclassified restructured loans less a result of the reduction of the amount
the outstanding balance of restructured loans required to be set up to one percent (1%)
which are considered non-risk under existing shall first be applied to unbooked specific
laws, rules and regulations; and valuation reserves, whether or not authorized

APP. Q-10
04.12.31
to be booked on a staggered basis and only covered by the appraised value of the
the remainder can be considered as income. collateral: Provided, further, That said
The specific and general allowances for collateral is re-appraised at least annually.
probable losses shall be adjusted accordingly Management is, however, encouraged
for additional allowance required by the BSP: to provide additional allowance as it deems
Provided, That in cases of partially secured prudent and to formulate additional specific
loans, only ten percent (10%) allowance shall guidelines within the context of the herein-
be required for the portion thereof which are described system.

APP. Q-11
96.12.31
FORMAT-DISCLOSURE STATEMENT OF
LOAN/CREDIT TRANSACTION
(Business Name of Creditor)
DISCLOSURE STATEMENT OF LOAN/CREDIT TRANSACTION (SINGLE PAYMENT

OR INSTALLMENT PLAN)
(As required under R.A. 3765, Truth in Lending Act)
Name of Borrower
Address
1. Cash/Purchase Price or Net Proceeds of Loan P

(Item Purchased)
2. LESS: Downpayment and/or Trade-in Value (Not applicable for

loan transaction)
3. Unpaid Balance of Cash/Purchase Price or Net Proceeds of Loan
4. Non-Finance Charges [Advanced by Seller/Creditor]:
a. Insurance Premium P
b. Taxes
c. Registration Fees
d. Documentary/Science Stamps
e. Notarial Fees
f. Others:
Total Non-Finance Charges
5. Amount to be Financed (Items 3 + 4) P

APP. Q-11
96.12.31
6. Finance Charges*
a. Interest % p.a. P
from to
[ ] Simple [ ] Monthly
[ ] Compound [ ] Quarterly
[ ] Semi-Annual
[ ] Annual
b. Discounts
c. Service/Handling Charges
d. Collection Charges
e. Credit Investigation Fees
f. Appraisal Fees
g. Attorney's/Legal Fees
h. Other charges incidental to the
extension of credit (specify):
Total Finance Charges P
7. Percentage of Finance Charges to Total Amount Financed

(Computed in accordance with Subsec. 4309Q.1) %
8. Effective Interest Rate
(Method of computation attached) %
9. Payment
a. Single Payment due P
(Date)
b. Total Installment Payments
(Payable in weeks/months @ P ) P
* Time price differential should be disclosed as a finance charge. If an itemization cannot be made, a
lump-sum figure may be reported among Other charges incidental to the extension of credit in Item 6h.

APP. Q-11
96.12.31
10. Additional charges in case certain stipulations

in the contract are not met by the debtor:
Nature Rate Amount
CERTIFIED CORRECT:
(Signature of Creditor/
Authorized Representative
Over Printed Name)
Position
I ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT PRIOR TO THE

CONSUMMATION OF THE CREDIT TRANSACTION AND THAT I UNDERSTAND AND
FULLY AGREE TO THE TERMS AND CONDITIONS THEREOF.
(Signature of Buyer/Borrower
Over Printed Name)
DATE
NOTICE TO BUYER/BORROWER: YOU ARE ENTITLED TO A COPY

OF THIS PAPER WHICH YOU SHALL SIGN.

APP. Q-12
96.12.31
ABSTRACT OF "TRUTH IN LENDING ACT"

(Republic Act No. 3765)
Section 1. This Act shall be known as the (3) the difference between the amounts
"Truth in Lending Act." set forth under clauses (1) and (2);
Sec. 2. Declaration of Policy. It is hereby (4) the charges, individually itemized,

declared to be the policy of the State to which are paid or to be paid by such person
protect its citizens from a lack of awareness in connection with the transaction but which
of the true cost of credit to the user by are not incident to the extension of credit;
assuring a full dis-closure of such cost with a
view of preventing the uninformed use of (5) the total amount to be financed;
credit to the detriment of the national
economy. (6) the finance charge expressed in
terms of pesos and centavos; and
xxxx xxxx xxxx
(7) the percentage that the finance
Sec. 3. As used in this Act, the term - charge bears to the total amount to be
financed expressed as a simple annual rate
xxxx xxxx xxxx on the outstanding unpaid balance of the
obligation.
(3) "Finance charge" includes interest,
fees, service charges, discounts, and such xxxx xxxx xxxx
other charges incident to the extension of
credit as the Board may by regulation Sec. 6. (a) Any creditor who in
prescribe. connection with any credit transaction fails
to disclose to any person any information in
xxxx xxxx xxxx violation of this Act or any regulation issued
thereunder shall be liable to such person in
Sec. 4. Any creditor shall furnish to each the amount of P100 or in an amount equal
per-son to whom credit is extended, prior to twice the finance charge required by such
to the consummation of the transaction, a creditor in connection with such transaction,
clear statement in writing setting forth, to whichever is the greater, except that such
the extent applicable and in accordance with liability shall not exceed P2,000 on any
rules and regulations prescribed by the credit transaction.
Board, the following information:
xxxx xxxx xxxx
(1) the cash price or delivered price of
the property or service to be acquired; (c) Any person who willfully violates
any provision of this Act or any regulation
(2) the amounts, if any, to be credited issued thereunder shall be fined by not less
as down payment and/or trade-in; than P1,000 nor more than P5,000 or

APP. Q-12
96.12.31
imprisonment for not less than 6 months nor against such defendant under this Act as to
more than one year or both. all matters respecting which said judgment
would be an estoppel as between the parties
xxxx xxxx xxxx thereto.
(d) Any final judgment hereafter Sec. 7. This Act shall become effective
rendered in any criminal proceeding under upon approval.
this Act to the effect that a defendant has
willfully violated this Act shall be prima facie Approved, June 22, 1963.
evidence against such defendant in an action
or proceeding brought by any other party

APP. Q-13
02.12.31
AGREEMENT FOR THE ENHANCED

INTERBANK CALL LOAN FUNDS TRANSFER SYSTEM
KNOW ALL MEN BY THESE PRESENTS:
This Agreement for an enhanced Interbank Call Loan Funds Transfer System (the “Agreement”) entered
into by and among the following:
The BANGKO SENTRAL NG PILIPINAS, a public corporation duly organized and existing under the
laws of the Republic of the Philippines, with principal address at the BSP Building, Roxas Boulevard,
Manila (hereinafter known as the “BSP”);
The BANKERS ASSOCIATION OF THE PHILIPPINES, an organization of duly licensed universal/

commercial banks in the Philippines, with principal offices at the 11th floor, Sagittarius Building, H. V.
dela Costa Street, Salcedo Village, Makati City (hereinafter referred to as the “BAP”);
and
The PHILIPPINE CLEARING HOUSE CORPORATION, an organization duly incorporated under the
laws of the Republic of the Philippines, with principal offices at the Ground Floor, 5-Storey Building,
Bangko Sentral ng Pilipinas, Manila (hereinafter referred to as the “PCHC”);
WITNESSETH THAT:
WHEREAS, presently, Interbank Call Loans (IBCLs) are transmitted to the BSP using the Multitransaction
Interbank Payment System (MIPS) under an arrangement governed by the Memorandum of Agreement
for Interbank Call Loan Funds Transfer System dated October 4, 1995;
WHEREAS, the BSP and the BAP would like to improve the efficiency of the system by allowing a more
direct interface to the BSP’s own computer and accounting systems and achieve settlement finality
through the gross settlement of IBCLs and thereby reduce systemic risk;
WHEREAS, the BSP and the BAP would like to set up the foundation for a Real Time Gross Settlement
(RTGS) system for the Philippine economy for all other high value payments; and
WHEREAS, the BSP, the BAP, and the PCHC would like to lay down the parameters and the terms and
conditions of a new and improved electronic funds transfer system;
NOW THEREFORE, premises considered, the BSP, the BAP, and the PCHC mutually agree as follows:
1.0 APPOINTMENT – The PCHC is hereby designated as the exclusive service provider for the front-
end software, data communications facility, MIPS server system, and the BSP gateway interface
program for the new electronic IBCL Funds Transfer System (the “System”) for all banks/financial
institutions (the “Participants”) participating in the said System.

APP. Q-13
02.12.31
The BSP is hereby designated as the settlement bank for the settlement of all IBCL transactions
transmitted through the System. Further, the BSP shall be the exclusive systems provider and
operator for the BSP Gateway Server and Financial Accounting System (FAS) where the electronic
settlement of IBCL transactions are processed, computed, and stored for the System.
2.0 DESCRIPTION OF THE SYSTEM
2.1 The System shall be composed of the following components:
2.1.1 Front-end software – The front-end software shall be deployed at each Participant’s offices. This
software shall be developed and maintained by PCHC. The front-end software shall allow each
Participant to enter its IBCL transactions (the “Electronic Transfer Instructions”) and transmit these
electronically to the BSP through the PCHC server in a secure manner.
2.1.2 The PCHC Server – The PCHC Server shall receive the Electronic Transfer Instructions from the
Participants through PCHC’s telecommunications network, validate and authenticate each
electronic transfer instruction, and immediately relay these to the BSP’s FAS through the BSP
Gateway.
2.1.3 The BSP Gateway Server – The BSP Gateway Server shall act as a transit point for the Electronic
Transfer Instructions and status files being transferred between the PCHC Server and the BSP’s
FAS.
2.1.4 The BSP’s FAS – The FAS of the BSP is the general ledger system of the BSP wherein all accounting
entries to the BSP’s books as well as the Participants’ Demand Deposit Accounts (DDA’s) are
recorded electronically. The FAS also generates the statements of account for the DDA’s which
are sent electronically through the BSP cc:Mail System to the Participants on a regular basis.
2.1.5 The BSP’s cc:Mail System – The BSP’s cc:Mail system shall be used as the main delivery facility
for sending official DDA statements and for communicating messages to the Participants.
2.2 The System shall have the following security features:
2.2.1 Log-in ID’s and passwords – To ensure that only authorized personnel are able to enter and
authorize transactions through the System;
2.2.2 Maker/Checker Functions – To ensure that at least two (2) authorized personnel of each Participant
are involved in the inputting, approval, and transmission of Electronic Transfer Instructions into
the System;
2.2.3 Test Keys Authentication against PCHC and BSP – To ensure that the Electronic Transfer Instructions
received are coming from authorized sources; and
2.2.4 Firewalls – To prevent unauthorized access to the BSP’s internal systems.
3.0 MARKET CONVENTIONS – The following market conventions shall be followed in the IBCL
market:

APP. Q-13
02.12.31
3.1 IBCL Settlement Timeframe - Transactions shall be concluded by and among Participants during
the settlement timeframe prescribed by BSP Circular 266 series of 2000 dated November 7, 2000.
The timelines for IBCL transactions shall be as follows:
7:30 A.M. - 7:45 A.M. AM Returned Cash and Other Clearing Items
(COCI) receiving window
7:46 A.M. - 8:45 AM PCHC processing window
8:46 A.M - 9:00 A.M. PCHC sends results to BSP; results ready for
download by affected participants at 9:00 AM.
9:01 A.M. - 9:45 A.M. Morning IBCL window to cover returned COCI
items (back-valued to previous day i.e. the same
date as the date of original presentation of the
returned COCI)
9:46 A.M. - 10:00 A.M. BSP update of ledgers in FAS
10:01 A.M. - 4:00 P.M. Regular IBCL window for trading of same-day funds.
4:01 P.M. PCHC Peso Netting cutoff
System is temporarily closed to IBCL transactions
4:16 P.M. PCHC sends Peso Netting results to BSP
4:30 P.M. PCHC Electronic check clearing cutoff
5:00 P.M. PCHC sends check clearing to BSP
5:01 P.M. - 5:30 P.M. BSP update and transmission of DDA statements
which already includes all transactions for the day
5:31 P.M. - 6:30 P.M. System is reopened to allow same-day value IBCL
trading to cover funding/reserve shortfalls due to
clearing results
3.1.1 From 7:30 to 7:45 A.M., the morning returned COCI receiving window shall be open for banks
who are affected by returned COCI items where adjustments are made to the DDA’s for value the
previous day. In this case, it shall be necessary for the affected banks to either borrow or lend
funds for value the previous day in order for their DDA’s to be in compliance with the necessary
reserve levels. This backvalue window shall be open from 9:01 A.M. and 9:45 A.M.
3.1.2 The regular trading window shall be from 10:01 A.M. to 4:00 P.M. for the trading and settlement
of same-day value IBCL transactions. There shall be a temporary closure of the System at 4:01
P.M. to allow the BSP to post the results of the PCHC Peso Netting and Electronic Check clearing
operations to the respective DDA’s of individual Participants. The regular window shall be then
reopened from 5:31 P.M. to 6:30 P.M. to allow IBCL trading for same-day funds to cover funding
or reserve shortfalls resulting from check clearing results.
3.2 Confirmation Process – The following procedures shall be used by Participants for confirming
IBCL transactions:
3.2.1 IBCL transactions concluded during any of the trading windows shall be confirmed by telephone
prior to settlement to ensure that all transaction details are in order. Responsibility for initiating
the phone confirmation shall lie with the borrowing party.

APP. Q-13
02.12.31
3.2.2 Written confirmations shall also be sent by both parties for proper control and documentation.
For SWIFT member institutions, it is strongly suggested that such confirmations be sent electronically
through the SWIFT network using the SWIFT MT 320 format.
3.2.3 Discrepancies, if any, shall be resolved by both parties on mutually acceptable basis. Voice logs,
if available, shall be resorted to in aid of resolution of the discrepancy. Any discrepancies not
resolved shall be subjected to the process in Section 8.0 below entitled “Settlement of Disputes
Among Participants”.
3.3 Settlement Instructions- Settlement instructions for IBCL transactions shall be initiated as follows:
3.3.1 For new IBCL transactions, the Lender shall be responsible for sending the proper Electronic
Transfer Instructions on the given transaction date. The Electronic Transfer Instructions shall be
sent through the System and shall consist of an instruction to the BSP to debit the Lender’s DDA
account and credit the Borrower’s DDA account. For transactions in the morning IBCL window
that covers returned COCI items, the value date of the debit/credit shall be for the previous day, as
defined in section 3.1. For transactions during the regular IBCL window, the value date shall be
the same as the transaction date.
3.3.2 For maturing IBCL transactions, the Borrower shall be responsible for sending the proper Electronic
Transfer Instructions on the maturity date of the transaction. The Electronic Transfer Instructions
shall be sent through the System and shall consist of an instruction to the BSP to debit the Borrower’s
DDA account and to credit the Lender’s DDA account for the maturity value of the transaction.
3.3.3 Transactions with the BSP – Participant’s transactions with the BSP shall be handled as follows:
Reverse Repurchase Agreements (RRP’s) – For RRP’s, the lending Participant shall be
responsible for sending the proper Electronic Transfer Instructions on the transaction date. The
Electronic Transfer Instructions shall be sent through the System and shall consist of an instruction
to the BSP to debit the Lender’s DDA account for the fund placement. On maturity date of the
RRP, the BSP shall be responsible for crediting the DDA of the lender during the first hour that the
System is up. Credit shall be performed using the BSP’s FAS.
Repurchase Agreements (RP’s) – For RP’s, the BSP shall be responsible for crediting directly
the borrower’s DDA using the BSP’s FAS. On maturity date, the BSP shall debit the borrower’s
DDA for principal plus interest using the BSP’s FAS.
Debits and credits to DDA of Participants resulting from RRP and RP transactions with the
BSP shall be part of the statements of account broadcast by the BSP on an hourly basis under
Section 3.6 below.
3.4 Transaction Status Verification – Participants shall be able to verify the status of their Electronic
Transfer Instructions as follows:
3.4.1 Using the front-end software, the BSP Update Status Report may be downloaded by Participants
to print the status of transactions. These transactions may have one of five (5) status:

APP. Q-13
02.12.31
(R) Rejected – Transaction has been rejected because it has failed BSP authentication;
(C) Cancelled – Transaction has been cancelled by the BSP because of insufficient funds by
cutoff time;
(P) Pending – Transaction has been received at the BSP but has not yet been settled, tempo-
rarily queued;
(S) Settled – Transaction has been received at the BSP and corresponding debit and credit
entries have already been posted on the respective DDA’s.
Blank – Electronic Transfer Instruction has been sent to the BSP Gateway Server but has not yet
been transferred to the FAS for processing.
3.4.2 Both the sending and receiving parties can view the status of their transactions.
3.4.3 It is recommended that Participants view their transaction status on an hourly basis.
3.4.4 Final and official DDA settlement reports shall be available from the BSP’s cc:Mail server on an
hourly basis.
3.5 Settlement of IBCL transactions – The following rules shall govern the settlement of IBCL
transactions at the BSP.
3.5.1 Upon receipt of the Electronic Transfer Instructions through the System, settlement of IBCL
transactions shall be performed with finality (i.e. cannot be reversed) by the BSP through the
Participants’ respective DDA’s. These accounting entries shall be passed using the BSP’s FAS.
3.5.2 Debit instructions shall be settled by the BSP on a gross, transaction-by-transaction, First-In-First-
Out basis. The FAS timestamp shall be used for FIFO processing and settlement of the Electronic
Transfer Instructions. The PCHC MIPS server timestamp shall be used as the official time of
receipt of the Electronic Transfer Instructions into the System and shall be used to control the cut-
off times.
3.5.3 It is understood that the BSP shall only post debit instructions if the sending Participant’s DDA is
adequately funded. Otherwise, the transaction shall not be posted and shall be held in queue.
3.5.4 If a transaction is held in queue due to inadequate DDA balances, other succeeding transactions
which are of lower value and which are within the available DDA balances shall be posted ahead
of the transaction which was held in queue.
3.5.5 Transactions held in queue shall remain there until adequate funds are received by the DDA to
allow posting.
3.5.6 Transactions that remain in queue until the IBCL window closes shall be cancelled from the
System. For the back-value IBCL window, the cut-off shall be 9:45 A.M. For the regular same-day
IBCL window, there shall be two cut-offs, one at 4:01 P.M. and the final cutoff at 6:30 P.M.

APP. Q-13
02.12.31
3.5.7 The BSP reserves the right to withhold all or part of a Participant’s DDA balances from settlement
of IBCL transactions, subject to the Monetary Board’s instructions.
3.5.8 Where applicable, the BSP’s transactions with the Participants shall be posted in the BSP’s FAS
before the System opens for the regular IBCL window from 10:01 A.M. to 4:00 P.M. These
transactions shall include tax payments, maturing rediscount loans, maturing repurchase
agreements, maturing reverse repurchase agreements, and other transactions of Participants with
the BSP.
3.5.9 Participants shall endeavor to transmit all repayment instructions for maturing IBCL borrowings
during the first hour of operation of the System in order to improve liquidity in the System.
3.6 BSP Hourly Broadcast of DDA Statements:
3.6.1 BSP shall broadcast, on an hourly basis, each Participant’s running DDA transactions and balances
for the day using the cc:Mail system.
3.6.2 IBCL transactions reflected in the DDA statement retrieved from cc:Mail shall be considered as
final and irrevocable. No unwinding of transactions shall be allowed except check clearing
results which are reversed using the returned COCI window.
3.6.3 Participants shall be responsible for designating authorized personnel who shall have access to
their DDA balance information from the BSP. The BSP shall open cc:Mail accounts for each of
these designated personnel at the BSP’s mail server.
3.6.4 Participants shall be responsible for reconciling their transactions against the DDA statements
received from the BSP. Any discrepancies shall immediately be advised in writing or through cc
Mail message to the BSP for correction/rectification.
4.0 AVAILABILITY OF SERVICES – The services outlined in this Agreement shall be available at the
PCHC as well as the BSP at a fixed hour on all banking days, including local holidays. For purposes of
this Agreement, banking days refer to the days when the BSP is open for business and settlement of
transactions contemplated herein.
4.1 The PCHC and the BSP shall endeavor to develop, test, and communicate to all Participants a
Continuity of Business (COB) plan aimed at providing continuous operation of the System. This
COB plan shall incorporate various scenarios that may occur such as but not limited to hardware
failure, fire, power outage, telecommunications outage, typhoon, earthquake, flood, civil
disturbances, or other events at either the BSP site or the PCHC site.
4.2 Each Participant shall be responsible for developing and testing its own COB plan and ensuring
that back-up machines, backup files, telephone lines, and other necessary equipment are available
at their site or back-up site to allow continuous operations under the various scenarios above.
4.3 The PCHC shall also make available a desktop PC as an input facility for the use of any Participant
who is unable to enter data through its own facilities.

APP. Q-13
02.12.31
5.0 TRANSACTION FEES
5.1 PCHC shall charge the amount of P100.00 for each electronic funds transfer instruction sent by the
remitting Participant. The transaction fee shall be subject to regular review by the PCHC for
adjustment as may be deemed necessary.
5.2 BSP shall charge the amount of P20.00 for each Electronic Transfer Instruction received.
5.3 Both PCHC and BSP charges shall be debited from the Participants’ DDA’s on a monthly basis,
based on the PCHC’s monthly report of transactions.
5.4 The BSP shall not be subject to any fees or charges under this section.
6.0 PARTICIPATION AGREEMENT
6.1 Participating banks who are members of the BAP can avail themselves of the services provided by
the System by executing the Participation Agreement which is attached hereto as Annex “A” and
made an integral part hereof. Participating banks who formally join the System shall be considered
bound by the terms and conditions hereof, and any amendments thereto, as if they had executed
this Agreement.
6.2 Financial institutions who are non-BAP members may avail themselves of the services of the System
by filing a Participation Agreement addressed to the PCHC, the BAP, and the BSP subject to the
terms and conditions under the section Annex “A”. Such financial institutions shall be considered
bound by the terms and conditions herein after written notification of the approval of the PCHC,
the BAP, and the BSP, respectively.
Non-BAP members shall be required to pay an admission fee in such sum or sums as the BAP and/
or the PCHC shall impose before being formally admitted into the System. Participating banks
financial institutions who were previously Participants in MIPS shall be exempt from paying the
admission fees.
7.0 RIGHTS AND OBLIGATIONS OF THE PARTIES AND PARTICIPATING BANKS/FINANCIAL

INSTITUTIONS:
7.1 The PCHC shall be responsible for the development, testing, and maintenance of the software for
both the Participants’ front-end software, the PCHC MIPS server, and the interface software with
the BSP’s FAS. The PCHC shall provide updates to the software as may be required by the Partici-
pants and shall charge applicable one-time development fees accordingly.
7.2 The PCHC shall be responsible for providing, maintaining, and upgrading the PCHC MIPS server,
including the necessary data telecommunications facility to access the server, and ensure that
adequate COB plans are in place for uninterrupted operations.
7.3 The PCHC shall be responsible for exchanging authentication test keys with all Participants and
implementing regular changes thereto.

APP. Q-13
02.12.31
7.4 The BSP shall be responsible for ensuring that the BSP Gateway Server is operative and that adequate
backup facilities are made available to have continuous and efficient operation of the System. The
BSP shall also be responsible for ensuring the integrity and continued operation of its FAS which is
an integral part of the system.
7.5 The BSP shall be responsible for exchanging authentication test keys with all Participants and
implementing regular changes thereto.
7.6 The BSP shall be responsible for settlement of IBCL transactions sent through the System. The
settlement process involves receiving and authenticating the Electronic Transfer Instructions from
the remitting bank through the System, checking if the remitting bank has sufficient DDA balances,
and posting the debit entry in the remitting bank’s DDA and the credit entry in the beneficiary
bank’s DDA through the BSP’s FAS. For this purpose, the Participant hereby authorizes the BSP to
execute said debit and credit instructions based on Electronic Transfer Instructions received through
the System.
7.7 The BSP shall be responsible for providing all Participants hourly updates of their respective DDA
balances through account statements sent out via cc:Mail. In this connection, the BSP shall be
responsible for maintaining the cc:Mail server and in granting access to this server to duly authorized
personnel as identified by each participating institution.
7.8 Each Participant shall be solely responsible for ensuring the confidentiality, safety, and security of
its log-in IDs, passwords, and authentication keys for activating the system and initiating IBCL
transactions. If it has reason to believe that the confidentiality or security of its log-in IDs, passwords,
and authentication keys have been compromised, the Participant shall take immediate steps to
have these disabled and changed to new passwords/keys.
7.9 Each Participant shall be legally bound by its Electronic Transfer Instructions which it sent through
the System without need of any other manually prepared confirmation, paper, or instrument,
provided that the same has been authenticated by the BSP and provided further that they comply
with the terms and conditions set forth herein.
7.10 Each Participant shall be responsible for promptly checking the correctness and completeness of
the debit/credit entries of the BSP under the System and to promptly notify the BSP of any errors
discovered.
7.11 Each Participant shall be responsible for reclaiming funds erroneously sent by it through the
System. The BSP and the PCHC shall not be responsible for undertaking the reclaim of funds.
Participants who are recipients of funds erroneously sent shall endeavor to promptly return such
funds upon notice by the sending institution and upon verification that the funds were indeed
erroneously sent. In cases where the recipient of funds was not able to remit the funds back on the
same value date as the erroneous remittance, due compensation shall be paid by the recipient for
the use of funds for the applicable period. Interest rate applicable shall be the average interbank
call loan rate for the period as published.
Such erroneous receipt of funds shall in any case be subject to the provisions of Art. 22 of the Civil
Code of the Philippines.

APP. Q-13
02.12.31
7.12. The BAP, being a mere negotiating and signing agent for participating banks, shall not be made a
party to any dispute nor be held answerable for any liability by any transacting parties to IBCL
transactions. Its role is to be a catalyst in framing and structuring this Agreement which aims to
improve the current electronic means of processing IBCL transactions. The PCHC and all
participating banks/financial institutions who formally join the System and avail themselves of the
services provided herein shall have no cause of action or right of relief whatsoever against the
BAP in connection with, arising out of or in relation to, any transactions covered by the Agreement.
The PCHC shall not be held responsible for any loss, liability or damage caused by errors and
mistakes of Participants and shall be held free and harmless from claims, suits, costs, and damages
attributing thereto.
The BSP, as Settlement Bank, shall not be made a party to any dispute nor be held answerable for
any liability by any transacting party to IBCL transactions. The BSP, when acting in accordance
with the provisions of this Agreement, shall be kept free and harmless by all participating banks
and financial institutions for executing and/or effecting settlement/payment instructions, or, as
may be proper, making and implementing reclaiming transactions under par. 7.11 above.
8.0 SETTLEMENT OF DISPUTES AMONG PARTICIPANTS
8.1 Due compensation for errors committed by one or both parties shall be as stipulated in Section VII
of the MART trading guidelines for Interbank Call Loan Transactions. Unresolved disputes involving
participating institutions shall be referred to Voluntary Arbitration. Each party shall propose a
Voluntary Arbitration Committee by listing five (5) names of reputable persons well-versed in the
issue in dispute. Thereafter, the proponent to Voluntary Arbitration shall strike out one name and
the respondent another and so on until only three names are left who shall comprise the Voluntary
Arbitration Committee.
8.2 The decision of the Voluntary Arbitration Committee shall be final and executory in accordance
with law. There shall be no appeal unless the decision is tainted with fraud and/or with apparent
bias in favor of one party.
8.3 The Voluntary Arbitration Law shall apply in a suppletory character.
9.0 REVISIONS TO THE AGREEMENT
9.1 Terms and conditions contained in this Agreement shall be subject to the regulations of the BSP and
the provisions of existing laws of the Republic of the Philippines.
9.2 Procedures, forms, automation programs, hardware specifications, and deadlines referred to herein
may be changed or enhanced subject to mutual agreement in writing among the BSP, the PCHC,
and the BAP. Such changes and enhancements, when executed by the BAP, shall be binding on all
Participants whether BAP member banks or non-member financial institutions.
9.3 Without prejudice to the immediate implementation of this Agreement, the parties herein may
establish such further rules and regulations that may be subsequently be needed to augment,
implement, interpret and govern this Agreement.

APP. Q-13
02.12.31
10.0 CONTRACTUAL EFFECTIVITY
This Agreement shall remain valid until terminated by mutual consent of the parties.
11.0 CONFIDENTIALITY – The PCHC and the BSP agree to maintain strict confidentiality of all
transactions, data, and/or information provided by, or pertaining to, each Participant under the System.
Violation thereof shall subject the person or persons responsible therefor to the penalty provisions of
Sec. 36 of RA 7653.
IN WITNESS WHEREOF, the parties have hereunto set their hands this 5th day of July, 2001 at the City
of Manila, Philippines.
BANGKO SENTRAL BANKERS ASSOCIATION

NG PILIPINAS OF THE PHILIPPINES
By: By:
PHILIPPINE CLEARING HOUSE

CORPORATION
By:
WITNESSES:
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES)

CITY OF MANILA ) S. S.
BEFORE ME, a Notary Public for and in the City of Manila, Philippines, personally appeared:
Name Community Tax Cert. No. Date & Place Issued
known to me and to me known to be the same person who executed the foregoing Agreement for the
Enhanced Interbank Call Loan Funds Transfer System and who acknowledged to me that the same is his
free and voluntary act and deed and that of the institution he represents.
This instrument consists of ______( ) pages including this page whereon the acknowledgment
is written, is duly signed by the parties and their respective instrumental witnesses on each and every
page thereof.
WITNESS MY HAND AND SEAL this 5th day of July in the City of Manila, Philippines.
NOTARY PUBLIC
Doc. No. _____;
Page No. _____;
Book No._____;

APP. Q-13
02.12.31
SUPPLEMENTAL AGREEMENT FOR THE

ENHANCED INTERBANK CALL LOAN FUNDS TRANSFER SYSTEM
(Appendix to Subsecs. 4376Q.1 and 4601Q.1 )
This Supplemental Agreement entered into by and among the following:
The BANGKO SENTRAL NG PILIPINAS, a government corporation created under Republic Act No.
7653, otherwise known as the New Central Bank Act, with principal address at the BSP Building,
Central Bank Complex, Roxas Boulevard, Manila (hereinafter known as the “BSP”);
The BANKERS ASSOCIATION OF THE PHILIPPINES, an industry association of duly licensed univer-
sal and commercial banks in the Philippines, duly authorised by its member-banks to represent and
bind them in this Supplemental Agreement, with principal offices at the 11th floor, Sagittarius Building,
H. V. dela Costa Street, Salcedo Village, Makati, City (hereinafter referred to as the “BAP”);
and
The PHILIPPINE CLEARING HOUSE CORPORATION, a corporation duly organised and existing
under the laws of the Republic of the Philippines, with principal offices at the Ground Floor, 3-Storey
Building, Central Bank Complex, Roxas Boulevard, Manila (hereinafter referred to as the “PCHC”);
WITNESSETH THAT:
WHEREAS, presently, Interbank Call Loans (IBCL’s) are settled on a gross settlement basis at the BSP
through the Enhanced Multitransaction Interbank Payment System (hereinafter referred to as “MIPS2”)
under an arrangement governed by the Agreement for the Enhanced Interbank Call Loan Funds Trans-
fer System dated July 05, 2001 (the “MIPS2 Agreement”);
WHEREAS, the BSP and the BAP would like to utilize MIPS2 to effect other types of interbank fund
transfers such as settlement of FX transactions, settlement of securities transactions and other inter-
bank payments and thereby reduce systemic risk by providing a means of making final and irrevocable
payments among banks;
NOW THEREFORE, premises considered, the BSP, the BAP, and the PCHC have mutually agreed to
execute this Supplemental Agreement and add the following provisions as part of the MIPS2 Agreement:
OPERATING HOURS AND SETTLEMENT CONVENTIONS
1. The MIPS2 System shall be open for operation from 10:00 A.M. to 4:00 P.M. for other types of
interbank fund transfer transactions. Remitting/Paying banks shall enter orders through the
Funds Transfer Screen of MIPS2. Each transaction shall be properly identified as to the type of
interbank transaction being settled (e.g. FX Settlement, Securities Settlement).

APP. Q-13
02.12.31
2. Upon receipt of the electronic transfer instructions through the System, these shall be settled with
finality by the BSP through the Participants’ (as the term is defined in the MIPS2 Agreement)
respective Demand Deposit Account (DDA). These accounting entries shall be passed using the
BSP’s Financial Accounting System (FAS).
3. Debit instructions shall be settled by the BSP on a gross, transaction by transaction, first-in-first out
basis. The FAS timestamp shall be used for FIFO processing and settlement of the electronic
transfer instructions. The PCHC MIPS server timestamp shall be used as the official time of receipt
of the Electronic Transfer Instructions into the System and shall be used to control the cut-off
times.
4. It is understood that the BSP shall only post debit instructions if the sending participant’s DDA is
adequately funded. Otherwise, the transaction shall not be posted and shall be held in queue.
5. If a transaction is held in queue due to inadequate DDA balances, other succeeding transactions
which are of lower value and which are within the available DDA balances shall be posted ahead
of the transaction which was held in queue.
6. Transactions held in queue shall remain there until adequate funds are received by the DDA to
allow posting.
7. All electronic fund transfer transactions that remain in queue until 4:00 P.M. shall be automatically
cancelled from the System.
8. In order to ensure that there is sufficient liquidity in the system and that system gridlock does not
occur, Participants shall submit their transactions at the early hours of operation of the system and not
deliberately hold back payments. For payment of FX transactions, Participants shall transmit at least
70% of their obligations (based on total value) before 12 noon. For payment of securities transactions,
Participants shall transmit at least 50% of their obligations before 2:00 p.m.
9. The BAP shall monitor these transmission times and shall exert every effort to ensure that these
guidelines are complied with. In this regard, the PCHC shall provide to the BAP daily reports on
the performance of all banks with regards to these rules. Such statistics shall show the proportion
of payment orders (by value) sent in before the relevant times (12 noon for FX settlements and 2
p.m. for securities settlements).
10. Compensation charges for errors in processing/settlement instructions resulting in delayed payment
settlement of transactions shall be for the account of the party in error and shall be based upon the
existing schedule for computing compensation charges for GS and FX settlements.
11. In the case of transactions with the BSP, for outright purchase/sale of government securities
whether for investment or liquidity reserves as well as purchase and sale of foreign exchange, the
BSP shall be responsible for crediting directly (in case of sale of securities/foreign exchange to the
BSP)/debiting directly (in case of purchase of securities/foreign exchange from the BSP) the
Participant’s demand deposit account (DDA) using the BSP’s FAS.

APP. Q-13
02.12.31
Debits and credits to DDA of Participants resulting from outright purchase and sale of securities/
foreign exchange transactions with the BSP shall be part of the statements of account broadcast
by the BSP on an hourly basis under Section 3.6 of the MIPS 2 Agreement.
All other terms and conditions of the MIPS2 Agreement (hereto attached as Annex) which are not
inconsistent with the provisions of this Supplemental Agreement and not otherwise modified or
superseded thereby shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands this 13th day of November
2001 at the City of Manila, Philippines.
BANGKO SENTRAL NG PILIPINAS BANKERS ASSOCIATION OF THE

PHILIPPINES
By: By:
________________________________ _______________________________
PHILIPPINE CLEARING HOUSE CORPORATION

By:
________________________________
WITNESSES:
______________________ _____________________ ____________________
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES)

CITY OF MANILA ) S. S.
BEFORE ME, a Notary Public for and in the City of Manila, Philippines, personally appeared:
Name Community Tax Cert. No. Date & Place Issued
known to me and to me known to be the same person who executed the foregoing Supplemental
Agreement and who acknowledged to me that the same is his free and voluntary act and deed and that
of the institution he represents.
This instrument consists of ______( ) pages including this page whereon the acknowledgment
is written, is duly signed by the parties and their respective instrumental witnesses on each and every
page thereof.
WITNESS MY HAND AND SEAL this ________day of ___________ in the City of
______________, Philippines.
NOTARY PUBLIC
Doc. No. _____;

Page No. _____;
Book No._____;
Series of 2001

APP. Q-13
02.12.31
Annex 1
PARTICIPATION AGREEMENT - MIPS2 PLUS

(for BAP Members)
____________________
Bankers Association of the Philippines

11/F Sagittarius Building
H.V. de la Costa St.
Salcedo Village, Makati City
Gentlemen:
Please be advised that we agree to participate in the Interbank Call Loan Funds Transfer System (the
"System") which is covered by the Agreement dated ________________, 2001 (the "Agreement) among
yourselves, the BSP and the PCHC and its subsequent amendments or revisions as may be agreed upon
by the parties thereto from time to time.
We agree to be bound by all the terms and conditions of the Agreement and adopt it as an integral part
of this Participation Agreement, including the authority of the BSP to execute our credit and debit
Electronic Transfer Instructions. Further, we agree to comply with all our obligations as a participating
bank as provided in the Agreement. Lastly, we agree to keep yourselves, the BSP and the PCHC free
and harmless form any claim or liability arising from, or in connection with, our transactions transmitted
through the System in accordance with the provisions of the Agreement.
This participation will become effective apon our conformity hereto and your notification of the same
to us, to the PCHC and the BSP.
Very truly yours,
________________________________
Participating Bank/Financial Institution
APPROVED:
By:
_________________________________

APP. Q-13
02.12.31
Annex 2
PARTICIPATION AGREEMENT - MIPS2 PLUS

(for non-BAP Members)
____________________

11/F Sagittarius Building
H.V. de la Costa St.
Salcedo Village, Makati City
Philippine Clearing House Corporation

Ground Floor, 5 Storey Bldg.
Bangko Sentral ng Pilipinas
Manila
Gentlemen:
Please be advised that we agree to participate in the Interbank Call Loan Funds Transfer System (the
"System") which is covered by the Agreement dated ________________, 2001 (the "Agreement) among
yourselves, the BSP and the PCHC and its subsequent amendments or revisions as may be agreed upon
by the parties thereto from time to time.
We agree to be bound by all the terms and conditions of the Agreement and adopt it as an integral part
of this Participation Agreement, including the authority of the BSP to execute our credit and debit
Electronic Transfer Instructions. Further, we agree to comply with all our obligations as a participating
bank/financial institution as provided in the Agreement. Lastly, we agree to keep yourselves, and the
BSP free and harmless form any claim or liability arising from, or in connection with, our transactions
transmitted through the System in accordance with the provisions of the Agreement.
This participation will become effective apon our conformity hereto and your notification of the same
to us, and the BSP.
Very truly yours,
________________________________
Participating Bank/Financial Institution
APPROVED:
Bankers Association of the Philippines Philippine Clearing House Corporation
By: By:
_________________________________ ___________________________________

APP. Q-13-a
02.12.31
SETTLEMENT PROCEDURES FOR INTERBANK LOAN TRANSACTIONS AND

PURCHASE AND SALE OF GOVERNMENT SECURITIES
UNDER REPURCHASE AGREEMENTS WITH THE BANGKO SENTRAL
Interbank loan transactions (call and term) among banks and NBQBs and purchase and
sale of government securities under repurchase agreements (GS/RP) between and among banks
and NBQBs and BSP in connection with the latter's open market operations shall be settled
gross, on a trade-for-trade basis and with finality subject to the availability of balances in the
deposit reserves maintained by NBQBs in the BSP in accordance with the following procedures:
1. The lender, in the case of lending/borrowing and purchaser in GS/RP transaction, and
the borrower, in the case of collection/payment and repurchaser in a GS/RP transaction, should
transmit an IBCL-MIPS (System) Fund Transfer Instructions (Instruction) to the PCHC which
shall forward the transaction electronically to BSP. Each transacting party shall use its
confidential ID and password to activate the System and initiate/authorize its transaction. The
electronic debit instruction shall undergo System authentication by the PCHC and BSP.
Authentication confirms that the Instruction contains the proper approvals from authorized
officers of the originating institution.
2. BSP shall settle in the deposit reserves maintained by banks and NBQBs in the BSP
the individual interbank loan and GS/RP transaction within the following settlement time frame:
From 9:00 AM to 9:45 AM

Only lending/borrowing to cover shortfall in deposit reserves with BSP arising from the
results of the AM Returned COCIs Clearing conducted under Sec. X203 of the Manual of
Regulations for Banks, valued on the same date as the date of the original presentation of the
COCI to PCHC and BSP regional clearing centers (RCCs).
From 10:00 AM to 4:00 PM

All interbank loan transactions and GS/RP transactions to be given value on the date of
the loan grant/repayment and GS purchase/repurchase.
From 5:30 PM to 6:30 PM

Only lendings/borrowings to cover the shortfall in reserve deposits with BSP arising
from losses arising from the regular afternoon check clearing to be given value on the date of
the loan grant/repayment and GS purchase/repurchase.
3. BSP is not obliged to effect the transfer of funds in the deposit reserves maintained by
banks and NBQBs in the BSP if there is no sufficient balance in said deposit reserves of the
transacting party whose account shall be debited in the BSP books.

Appendix Q-13-a - Page 1
APP. Q-13-b
02.12.31
INTRADAY LIQUIDITY FACILITY FOR THE IMPLEMENTATION OF APP. Q-13-a

ON THE IMPROVED INTERBANK CALL LOAN FUNDS TRANSFER SYSTEM
(MIPS 2)
The Intraday Liquidity Facility (ILF) shall be established to support the implementation
of the settlement of transactions involving interbank loans and government securities (GS)
under repurchase agreements (RPs) with the BSP in connection with its Open Market
Operations (OMO).
BSP recognizes that there are interbank transactions, other than check clearing, that
are still settled on net basis. These interbank transactions include primary auction of
government securities, secondary trading of GS, peso-netting arising from $-Peso swaps
and lendings/borrowings among banks. The ILF provides the smoothening mechanism in
the settlement of these interbank transactions which are not covered by App. Q-13-a but
could cause a failure of settlement of transactions under MIPS2. The operations of the ILF
are considered part of the BSP’s OMO.
The basic features of ILF are described below. The timeline and procedures are
shown in Annex "A".
1. Establishment of BSP ILF Sub-Account with BTR-RoSS - To establish the ILF, each
bank/NBQB shall instruct the Bureau of Treasury (BTr) to move from their accounts
with BTr-RoSS to the BSP ILF sub-account the pool of peso-denominated GS to be
pledged as collaterals covered by a “Contract to Pledge/Sell under R/P”. This sub-
account is unique to ILF.
2. Access to the facility - The ILF shall be accessed only within the 10:00 AM to 4:00 PM
trading window of App. Q-13-a. Whenever the reserve deposits of banks/NBQBs are
not sufficient to cover the amount of eligible interbank transaction to be settled, the
Financial Accounting System (FAS) of BSP shall automatically access the unutilized
balance of ILF and move the funds to the Demand Deposit account (DDA) of the
bank/NBQB, up to the amount not exceeding its intraday bank limit.
3. Eligible interbank transactions – Only the following interbank transactions shall be
eligible for settlement thru ILF:
(a) Primary auction of GS

(b) Secondary trading of GS
(c) Peso netting from $-Peso swap
(d) Lendings/borrowings and their collections/repayments
4. Intraday bank limit - Banks/NBQBs shall set their individual ILF limits based on the
amount of GS to be delivered to the pool and to be pledged.

Appendix Q-13-b - Page 1
APP. Q-13-b
02.12.31
5. Eligible collateral - Similar to BSP’s guidelines for RPs, peso-denominated issues of

the National Government, with maturities of up to ten (10) years, are eligible. As
such, these GS shall be free or unencumbered and dedicated for this specific purpose.
The government securities to be pledged should be part of “Investments in Bonds
and Other Debt Instruments” (IBODI) in the bank’s books.
6. Valuation of collateral - The GS shall be valued based on the 11:15 AM fixing rates
on Friday of the week when pledged documents are submitted to BSP Treasury (from
applicable Bloomberg’s MART pages).
7. Margins - Margins shall be applied based on the remaining life of the security and
on existing procedures of BSP Treasury.
8. Changes in collateral - Banks/NBQBs may increase or decrease their intraday facility

limit by adjusting the amount of GS delivered to the pool no later than 10:00 AM
each Thursday. BSP Treasury shall value the securities on Fridays, for use the following
week, i.e., starting Monday.
9. Transaction fee – In lieu of interest, BSP shall collect a transaction fee of P2,500 per
ILF access to be debited to the DDA account of banks/NBQBs at the close of the
transaction date.
10. Repayments of intraday availments
a. The unsettled ILF utilization, after BSP Accounting has settled the check clearing
results and the interbank lendings/borrowings among banks/NBQBs at 6:15 PM,
shall be automatically converted into an overnight (O/N) RP at 600 basis points
over the BSP’s overnight lending rate for the day.
b. Collaterals for the O/N RP shall be selected from the ILF pool based on the following
criteria:
i. Shortest remaining life

ii. Value less than par and closest to par
c. ILF utilizations that are converted into O/N RPs may be repaid the following
banking day through the unutilized balance in the facility should there be a shortfall
in the DDA balance.
d. Unsettled O/N RP arising from ILF utilization due to insufficient DDA balance
with BSP shall be converted automatically into an outright sale/purchase of the
pledged collateral.
e. Unsettled ILF utilization shall not be eligible for funding from the regular R/P window
of BSP.

APP. Q-13-b
02.12.31
11. System for earmarking/unearmarking collaterals – BSP Accounting shall maintain an

ILF collateral file which shall function in tandem with the FAS system. The ILF collateral
file shall be maintained for movement of collaterals from the ILF to O/N RPs and for
unearmarking of government securities which are transferred to the BSP main account
with BTR-RoSS on account of an absolute sale evidenced by the issue of Confirmation
of Sale (COS) by the bank/NBQB and the Confirmation of Purchase (COP) by the BSP
Treasury.
12. Availability of the facility - The ILF shall be available in its fully automated form after
completion of the user acceptance testing by market participants, BSP and the BTr.
Prior to full automation, there shall be physical delivery of pledge documents to the
BSP Treasury for GS to be utilized as collaterals for the ILF.

APP. Q-13-b
02.12.31
AGREEMENT TO PLEDGE/SELL GOVERNMENT SECURITIES

UNDER BANGKO SENTRAL NG PILIPINAS R/P WINDOW
_______________________________
(Date)
TO: The BUREAU OF TREASURY
In consideration for the establishment by the Bangko Sentral ng Pilipinas (BSP) Treasury
Department of an Intraday Liquidity Facility in its favor, the _________________________
(Transferee) hereby assigns, conveys and transfers all its right, titles and interest in the
government securities registered in its account with the BTR-RoSS and described hereinbelow,
free from encumbrance and liens whatsoever, to the BSP to be credited to BSP’s ILF sub-
account with the BTR-RoSS. For this purpose, the Transferee hereby authorizes you to effect
such transfers from/to the accounts mentioned. It is mutually agreed upon that said securities
shall serve and constitute as collaterals for whatever availments obtained by the Transferee
from the Intraday Liquidity Facility and granted by the BSP Treasury Department subject to the
appropriate documentations covering the same.
DETAILS OF THE SECURITIES
DESCRIPTION FACE AMOUNT

___________________________ ___________________________
Conforme:
Name(s) of Transferee’s Authorized Name(s) of BSP’s Authorized

Officer/Position Title Officer/Position Title
_____________________________ ____________________________
_____________________________ ____________________________
Terms and Conditions:

- CUSTODY OF SECURITIES
Held in custody by the Bureau of Treasury under the RoSS
- OTHER STIPULATIONS
a. Interest due or accruing on the aforesaid bonds/certificates of indebtedness is included in this
Agreement
b. The transferee will pay the taxes relevant to the transfer and availments.
c. The transferee waives its right to the Secrecy of Deposits Law in regard to this transaction
d. The transfer of securities and the availments of the Intraday Liquidity Facility are subject to the
provisions of App. Q-13, App Q-13-a and its implementing guidelines as they exist and as may
be amended.

ANNEX A
TIMELINE, POLICIES AND PROCEDURES FOR IMPLEMENTATION OF
INTRADAY LIQUIDITY FACILITY (ILF) TO SUPPORT MIPS 2

Date Time Participating Banks/FIs BSP Treasury Bureau of Treasury BSP Accounting
Establish collateral Pool -Including Subsequent Amendments
One week Not later Instructs BTr to move to BSP ILF Instructs BTr to open sub-account Implements Instructions of
before than sub-account to be pledged as for ILF participating banks/NBQBs
effectivity 10:00am collateral to a "Contract to 1. Unique to ILF
each Pledge/Sell under RP" 2. Securities are FREE or
Thursday UNENCUMBERED
3. Marked as non-tradeable
4. Remaining life not more
than ten (10) years
5. Booked as IBODI in bank's Transmit Electronic file to
books BSP Accounting
12:00 Using API of Bloomberg, Calls valuation program;

noon downloads latest prices and send Sets up Intraday Facility File
each extracted prices file to BSP for following week's
Friday Accounting; should show: settlement operations
1. Par value
2. Remaining Life Total collateral value -
3. Mark to Market value Individual bank/NBQB ILF
limit
Utilization of Intraday Liquidity

Day 1 10:00 am Transact ILF eligible interbank Settles interbank

to 4:00 pm transactions other than check transacrions using available
clearing DDA funds. In case of NSF
1. Primary auction of GS conditions, move funds
2. Secondary trading of GS from ILF
Q Regulations
3. Peso netting form $-P swap
APP. Q-13-b
4. Lending/borrowing and Prints transaction register Settles ILF cumulative
02.12.3 1
collection repayments availment thru DDA funds
remaining at close of 10 to
4 window
APP. Q-13-b
02.12.31
Q Regulations
11:30 am Using API of Bloomberg, downloads

latest prices and send collateral file to
BSP Accounting; should show:
1. Par value
2. Remaining Life
3. Mark to Market value
Prints register of unsettled ILF

4:00 to utilizations
4:30 pm
Updates DDA for

4:45 to previous hours'
5:00 pm transactions of BSP
internal departments,
including regional
clearing results
Updates DDA for PCHC

5:00 pm clearing results
Updates DDA for IBCL

5:30 to third trading window
6:15 pm Settles outstanding ILF
utilization thru DDA
6:15 pm Prints register of unsettled ILF Recognizes O/N RP

utilization using the price fixed at
11:15am
Selects securities based
Recognizes O/N RP
on following criteria and
updates collateral file
(mark)
Prints transaction register 1. shortest remaining life
2. value less than and
closest to par
Repayment of O/N RP
Day 2 10:00 am Sends maturing O/N RP to BSP Settles matured O/N

to 4:00pm Accounting RP thru DDA balances
at the start of day, if
sufficient
11:00 am Prints transactions register If DDA balance not

sufficient, and there is
an unutilized ILF,
access the amount
required. If settled,
updates collateral file
(unmark)
If not settled, unmark

and delist from
collateral file
Prints list of unsettled

O/N RP
11:00 am Converts unsettled O/N RP to Implements transfer from BSP Effects transfer from RP
to12:00 nn absolute sale of GS using Confirma- ILF sub-account to BSP main to sale of GS at
tion of Sale (COS)/Confirmation of acount realizable proceeds

Purchase (COP) provision in the
standby contract
Q Regulations
APP. Q-13-b
02.12.3 1
APP. Q-14
96.12.31
SAMPLE INVESTMENT MANAGEMENT AGREEMENT

IMA No. (Prenumbered)
INVESTMENT MANAGEMENT AGREEMENT
This AGREEMENT, made and executed this day of at

, Philippines by and between:
(Hereinafter referred to as the "PRINCIPAL")
and
, an institution authorized to perform trust

functions, organized and existing under and by virtue of the laws of the
Philippines, with principal office and place of business at
, , Philippines.
(Hereinafter referred to as the "INVESTMENT MANAGER")
WITNESSETH: THAT -
WHEREAS, the Principal desires to avail of the services of the Investment Manager
relative to the management and investment of Principal's investible funds.
WHEREAS, the Investment Manager is willing to render the services required by the
Principal relative to the management and investment of Principal's investible funds, subject
to the terms and conditions hereinafter stipulated;
NOW, THEREFORE, for and in consideration of the foregoing and of the mutual
conditions stipulated hereunder, the parties hereto hereby agree and bind themselves to the
following terms and conditions:

APP. Q-14
96.12.31
INVESTMENT PORTFOLIO
1. Delivery of the Fund - Upon execution of this Agreement, the Principal shall deliver
to the Investment Manager the amount of PHILIPPINE PESOS:
_____________________________________________ (P_____________).
2. Composition - The cash which the Principal has delivered to the Investment Manager
as well as such securities in which said sums are invested, the proceeds, interest, dividends
and income or profits realized from the management, investment and reinvestment thereof,
shall constitute the managed funds and shall hereafter be designated and referred to as the
Portfolio. For purposes of this Agreement, the term securities shall be deemed to include
commercial papers, shares of stock and other financial instruments.
3. Delivery of Additional Funds - At any time hereafter and from time to time at the
discretion of the Principal, the latter may deliver additional funds to the Investment Manager
which shall form part of the Portfolio and shall be subject to the same terms and conditions of
this Agreement. No formalities other than a letter from the Principal and physical delivery to
the Investment Manager of cash will be required for any addition to the Portfolio.
4. Nature of Agreement - THIS AGREEMENT IS AN AGENCY AND NOT A TRUST

AGREEMENT. AS SUCH, THE CLIENT SHALL AT ALL TIMES RETAIN LEGAL TITLE TO
FUNDS AND PROPERTIES SUBJECT OF THIS ARRANGEMENT.
THIS AGREEMENT IS FOR FINANCIAL RETURN AND FOR THE APPRECIATION OF

ASSETS OF THE ACCOUNT. THIS AGREEMENT DOES NOT GUARANTEE A YIELD,
RETURN OR INCOME BY THE INVESTMENT MANAGER. AS SUCH, PAST
PERFORMANCE OF THE ACCOUNT IS NOT A GUARANTY OF FUTURE PERFORMANCE
AND THE INCOME OF INVESTMENTS CAN FALL AS WELL AS RISE DEPENDING ON
PREVAILING MARKET CONDITIONS.
IT IS UNDERSTOOD THAT THIS INVESTMENT MANAGEMENT AGREEMENT IS NOT

COVERED BY THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) AND
THAT LOSSES, IF ANY, SHALL BE FOR THE ACCOUNT OF THE PRINCIPAL.
POWERS
5. Powers of the Investment Manager - The Investment Manager is hereby conferred

the following powers:
a. To invest or reinvest the Portfolio in (1) Evidences of indebtedness of the Republic of

the Philippines and of the Bangko Sentral ng Pilipinas, and any other evidences of
indebtedness or obligations the servicing and repayment of which are fully guaranteed
by the Republic of the Philippines or loans against such government securities; (2)
Loans fully guaranteed by the government as to the payment of principal and interest;
(3) Loans fully secured by hold-out on, assignment or pledge of, deposits or of deposit

APP. Q-14
96.12.31
substitutes, or mortgage and chattel mortgage bonds; (4) Loans fully secured by real
estate and chattels in accordance with Sec. 78 of R.A. No. 337, as amended, and
subject to the requirements of Secs. 75, 76 and 77 of R.A. No. 337, as amended; and
(5) Such other investments or loans as may be directed or authorized by the Principal
in a separate written instrument which shall form part of this Agreement: Provided,
That said written instrument shall contain the following minimum information: (a) The
transaction to be entered into; (b) The amount involved; and (c) The name of the
issuer, in case of securities and/or the name of the borrower and nature of security, in
the case of loans;
b. To endorse, sign or execute any and all securities, documents or contracts necessary
for or connected with the exercise of the powers hereby conferred or the performance
of the acts hereby authorized;
c. To cause any property of the Portfolio to be issued, held, or registered in the name of
the Principal or of the Investment Manager: Provided, That in case of the latter, the
instrument shall indicate that the Investment Manager is acting in a representative
capacity and that the Principal's name is disclosed thereat;
d. To open and maintain savings and/or checking accounts as may be considered

necessary from time to time in the performance of the agency and the authority herein
conferred upon the Investment Manager;
e. To collect and receive matured securities, dividends, profits, interest and all other
sums accruing to or due to the Portfolio;
f. To pay such taxes as may by due in respect of or on account of the Portfolio or in

respect of any profit, income or gains derived from the sale or disposition of securities
or other properties constituting part of the Portfolio;
g. To pay out of the Portfolio all costs, charges and expenses incurred in connection with
the investments or the administration and management of the Portfolio including the
compensation of the Investment Manager for its services relative to the Portfolio; and
h. To perform such other acts or make, execute and deliver all instruments necessary or
proper for the exercise of any of the powers conferred herein, or to accomplish any of
the purposes hereof.
LIABILITY OF INVESTMENT MANAGER
6. Exemption from Liability - In the absence of fraud, bad faith, or gross or willful
negligence on the part of the Investment Manager or any person acting in its behalf, the
Investment Manager shall not be liable for any loss or damage to the Portfolio arising out of
or in connection with any act done or performed or caused to be done or performed by the

APP. Q-14
96.12.31
Investment Manager pursuant to the terms and conditions herein agreed, to carry out the
powers, duties and purposes for which this Agreement is executed.
7. Advice of Counsel - The Investment Manager may seek the advice of lawyers. Any
action taken or suffered in good faith by the Investment Manager as a consequence of the
opinion of the said lawyers shall be conclusive and binding upon the Principal, and the
Investment Manager shall be fully protected from any liability suffered or caused to be suffered
by the Principal by virtue hereof.
ACCOUNTING AND REPORTING
8. The Investment Manager shall keep and maintain books of accounts and other
accounting records as required by law. The Principal or the authorized representative of the
Principal shall have access to and may inspect such books of accounts and all other records
related to the Portfolio, including the securities held in custody by the Investment Manager
for the Portfolio.
9. Reporting Requirements - The Investment Manager shall prepare and submit to the
Principal the following reports within ______________________________: (a) Balance
Sheet; (b) Income Statement; (c) Schedule of Earning Assets; (d) Investment Activity Report;
and (e) (such other reports as may be required by the Principal).
INVESTMENT MANAGER'S FEE
10. Investment Fee - The Investment Manager, in addition to the reimbursement of its
expenses and disbursements in the administration and management of the Portfolio including
counsel fees, shall be entitled to receive as compensation for its services a management fee
of (Specify amount or rate) .
WITHDRAWALS FROM THE PORTFOLIO
11. Withdrawal of Income/Principal - Subject to availability of funds and the non-diminution

of the Portfolio below P1 million, the Principal may withdraw the income/principal of the
Portfolio or portion thereof upon written instruction or order given to the Investment Manager.
The Investment Manager shall not be required to see as to the application of the income/
principal so withdrawn from the Portfolio. Any income of the Portfolio not withdrawn shall
be accumulated and added to the principal of the Portfolio for further investment and
reinvestment.
12. Non-alienation of Encumbrance of the Portfolio or Income - During the effectivity of

this Agreement, the Principal shall not assign or encumber the Portfolio or its income or any
portion thereof in any manner whatsoever to any person without the prior written consent of
the Investment Manager.

APP. Q-14
96.12.31
EFFECTIVITY AND TERMINATION
13. Term - This Agreement shall take effect from the date of signing hereof and shall be in
full force and effect until terminated by either party by giving written notice thereof to the
other at least _______(__) days prior to the termination date.
14. Powers upon Liquidation - The powers, duties and discretion conferred upon the
Investment Manager by virtue of this Agreement shall continue for the purpose of liquidation
and return of the Portfolio, after the notice of termination of this Agreement has been served
in writing, until final delivery of the Portfolio to the Principal.
15. Accounting of Transaction - Within _____ (__) days after the termination of this
Agreement, the Investment Manager shall submit to the Principal an accounting of all
transactions effected by it since the last report up to the date of termination. Upon the
expiration of the ________(__) days from the date of submission, the Investment Manager
shall forever be released and discharged from all liability and accountability to anyone with
respect to the Portfolio or to the propriety of its acts and transactions shown in such accounting,
except with respect to those objected to in writing by the Principal within the __________(__)
day period.
16. Remittance of Net Assets of the Portfolio - Upon termination of the Agreement, the
Investment Manager shall turn over all assets of the Portfolio which may or may not be in
cash to the Principal less the payment of the fees provided in this Agreement in carrying out
its functions or in the exercise of its powers and authorities.
This Agreement or any specific amendments hereto constitute the entire agreement
between the parties, and the Investment Manager shall not be bound by any representation,
agreement, stipulations or promise, written or otherwise, not contained in this Agreement or
incorporated herein by reference, except pertinent laws, circulars or regulations approved
by the Government or its agencies. No amendment, novation, modification or supplement
of this Agreement shall be valid or binding unless in writing and signed by the parties hereto.
IN WITNESS WHEREOF, the parties have hereunto set their hands on the date and at the
place first above set forth.
(PRINCIPAL) (INVESTMENT MANAGER)
By:
SIGNED IN THE PRESENCE OF:

APP. Q-15
96.12.31
RISK MANAGEMENT GUIDELINES FOR DERIVATIVES

I. Foreword
These guidelines, which are based on the "Risk Management Guidelines For
Derivatives" issued by the Basle Committee on Banking Supervision in July 1994, are
expected to facilitate the further development of a prudent approach to the risk
management of derivatives.
The Bangko Sentral recognizes that sound internal risk management is essential
to the prudent operations of financial institutions and that supervisory tools, such as
capital requirements, are not by themselves sufficient. Sound internal risk management
is also essential to promoting stability in the financial system as a whole.
While the precise applicability of these guidelines will depend on the size and
complexity of an institution's derivatives activities, we believe that the application of
the basic principles embodied therein are very relevant even for risks inherent in
more traditional activities.
II. Introduction and Basic Principles

1. Derivatives instruments have become increasingly important to the overall risk
profile and profitability of banking organizations throughout the world. Broadly
defined, a derivatives instrument is a financial contract whose value depends on
the values of one or more underlying assets or indices. Derivatives activities
include a wide assortment of financial contracts, including forwards, futures, swaps
and options. In addition, other traded instruments incorporate derivatives
characteristics, such as those with embedded options. While some derivatives
instruments may have very complex structures, all of them can be divided into
the basic building blocks of options, swaps, futures and forwards or some
combination thereof. The use of these basic building blocks in structuring
derivatives instruments allows the transfer of various financial risk to parties
who are more willing, or better suited, to take or manage them.
2. Derivatives are used by banking organizations both as risk management tools

and a source of revenue. From a risk management perspective, they allow
financial institutions and other participants to identify, isolate and manage
separately the market risks in financial instruments and commodities. When
used prudently, derivatives can offer managers efficient and effective methods
for reducing certain risks through hedging. Derivatives may also be used to
reduce financing costs and to increase the yield of certain assets. For a growing
number of banking organizations, derivatives activities are becoming a direct
source of revenue through "market-making" functions and "position-taking":
- "MARKET-MAKING" functions involve entering into derivatives activities with

customers and with other market-makers while maintaining a generally balanced

APP. Q-15
96.12.31
portfolio with the expectation of earning fees generated by a bid/offer spread;

and
- "POSITION-TAKING", on the other hand, represents efforts to profit by
accepting the risk that stems from taking outright positions in anticipation of
price movements.
3. Participants in the derivatives markets are generally grouped into two categories
based primarily on their motivations for entering into derivatives contracts. End-
users typically enter into derivatives activities to achieve specified objectives
related to hedging, financing or position-taking on the normal course of their
business operations. A wide variety of business enterprises are end-users. They
include, but are not limited to, a broad range of financial institutions such as
banks, securities firms and insurance companies; funds and specialized
investment partnerships; and corporations, local and state governments,
government agencies and international agencies.
4. Intermediaries, which are sometimes referred to as "Dealers", cater to the needs

of end-users by "making markets" in over-the-counter derivatives instruments.
In doing so, they expect to generate income from transaction fees, bid/offer
spreads and their own trading positions. Important intermediaries, or derivatives
dealers, include major banks and securities firms. As intermediaries, banks have
traditionally offered foreign exchange and interest rate risk management products
to their customers and generally view derivatives products as a financial risk
management service.
5. The basic risks associated with derivatives activities are not new to banking
organizations. In general, these risks are credit risk, market risk, liquidity risk,
operations risk and legal risk. Because they facilitate the specific identification
and management of these risks, derivatives have the potential to enhance the
safety and soundness of financial institutions and to produce a more efficient
allocation of financial risks. However, since derivatives also have these basic
risks in combinations that can be quite complex, they can also threaten the
safety and soundness of institutions if they are not clearly understood and properly
managed.
6. Recognizing the importance of sound risk management to the effective use of

derivatives instruments, the following guidelines are intended to highlight the
key elements and basic principles of sound management practice for both dealers
and end-users of derivatives instruments. These basic principles include:
a. appropriate oversight by Boards of Directors and/or Management Committee

and Senior Management;
b. adequate risk management process that integrates prudent risk limits, sound
measurement procedures and information systems, continuous risk
monitoring and frequent management reporting; and
c. comprehensive internal controls and audit procedures.

APP. Q-15
96.12.31
III. Oversight of the Risk Management Process

Written policies and procedures on derivatives activities must be set forth and
documented in a policy manual duly approved by its Board of Directors. The manual
should include the following minimum features:
1. Scope of derivatives activities and types of services and products offered

to clients;
2. Authorities and Responsibilities of:
a. Board of Directors
b. Management Committees
c. Chief Executive Officer
d. Other Senior Officers
e. Department Managers
f. Trading or Dealing Officers/Staff
3. Policies and procedures to govern trading, including trading, exposure and
gap limits, and documentation of transactions;
4. Policies and procedures for controlling and measuring risk;
5. Accounting policies and procedures;
6. Internal control system;
7. Internal audit policies;
8. Policy review;
9. Reporting requirements;
10. Job description of key position and minimum qualification standards; and
11. Client-oriented safety nets.
A. Oversight by Board of Directors and/or Management Committee

1. The Board of Directors or appropriate Management Committee should
approve all significant policies relating to the management of risks throughout
the institution. These policies, which should include those related to
derivatives activities, should be consistent with the organization's broader
business strategies, capital strength, management expertise and overall
willingness to take risk.
2. The Board of Directors or appropriate management committee shall
structure a compensation package for risk management officers and staff in
such a way that the said package is sufficiently independent of the
performance of trading activities.
B. Oversight by Senior Management

1. Senior management should be responsible for ensuring that there are
adequate policies and procedures for conducting derivatives operations on
both a long-range and day-to-day basis. This responsibility includes: a)
ensuring that there are clear delineations of lines of responsibility for
managing risk, adequate systems for measuring risk, appropriately structured
limits on risk taking, effective internal controls and a comprehensive risk-
reporting process; b) ensuring that all appropriate approvals are obtained
and that adequate operational procedures and risk control systems are in
place.

APP. Q-15
96.12.31
2. Any significant changes in any derivatives activities or any new derivatives

activities should be approved by the Board of Directors or an appropriate
level of senior management as designated by the Board of Directors.
3. Senior management should regularly evaluate the procedures in place to
manage risk to ensure that those procedures are appropriate and sound.
C. Independent Risk Management Functions

1. An independent body shall manage the measurement, monitoring and
control of risks consistent with established policies and procedures. It shall
directly report to the Board of Directors or to the appropriate management
committee.
2. The personnel performing independent risk management functions should
have a complete understanding of the risks associated with all of the bank's
derivatives activities. Accordingly, compensation policies for these
individuals should be adequate to attract and retain personnel qualified to
assess these risks.
IV. The Risk Management Process

1. The primary components of a sound risk management process are:
comprehensive risk measurement approach; detailed structure of limits,
guidelines and other parameters used to govern risk-taking; and strong
management information system for controlling, monitoring and reporting risks.
2. To enable an institution to manage its risk exposure more effectively, its risk
management process for derivatives activities should be integrated into its overall
risk management system using a conceptual framework common to its other
activities.
3. The risk exposures in derivatives activities should be fully supported by an
adequate capital position.
A. Risk Measurement
1. Risk should be measured and aggregated across trading and non-trading
activities on an institution-wide basis to the fullest extent possible. In
derivatives activities, assessment of the following risks should be included:
credit risk, market risk, liquidity risk, operations risk and legal risk (Section
VI of these Guidelines).
2. Risk measurement procedures should be understood by all relevant
personnel - from individual traders to the Board of Directors.
3. Mark-to-Market valuation of derivatives positions is fundamental to
measuring and reporting exposures accurately and on a timely basis. A
daily report to management indicating the gain or loss on derivatives
activities should be submitted. Monitoring of credit exposures, trading
positions and market improvements should be done at least daily.
4. Sound risk measurement practices include analysis of stress situations and
identification of changes in market behavior that could have unfavorable
effects on the institution and assessment of the ability of the institution to
withstand them.

APP. Q-15
96.12.31
B. Limiting Risks
1. A sound system of integrated institution-wide limits should set boundaries
for organizational risk-taking and should ensure that position which exceeds
pre-determined levels receive prompt management attention. Such a
system should define, among others, the following limits:
a. Earnings or capital-at-risk limits - This defines the limit on potential
loss which could be expressed as a percentage of projected earnings
or capital; and
b. Exposure limits - This defines maximum exposure to the various
derivatives products.
2. Should pre-determined limits be exceeded, a report to senior management
must be made for information and appropriate action.
C. Reporting
An accurate, informative, and timely reporting system to the appropriate
level of management is essential to the prudent operation of derivatives activities.
Top management should be provided with adequate and timely information, on
a regular basis, to judge the changing nature of the institution's risk profile.
D. Management Evaluation and Review

1. Risk management guidelines should be evaluated and reviewed regularly
since any change in either the institution's activities or the market
environment may have created exposure that requires additional attention.
2. The review should include assessment of the methodologies, models and
assumptions used in measuring risk. Limit structures should be altered
whenever necessary to reflect the institution's past performance and current
position. These reviews should be made at least annually, or more often
as market conditions dictate, to ensure that they are appropriate and
consistent.
3. Before being involved in new products, all relevant personnel (including
those in risk management, internal control, legal, accounting and auditing)
should understand the product and should be able to integrate it into the
institution's risk measurement and control systems.
V. Internal Controls and Audit

1. A sound system of internal controls should promote effective and efficient
operations, reliable financial and regulatory reporting, and compliance with
relevant laws, regulations and policies of the institution. In determining whether
internal controls meet those objectives, the institution should consider the overall
control environment of the organization; the process of identifying, analyzing
and managing risk; the adequacy of management information systems; and
adherence to control activities such as approvals, confirmations and
reconciliations. Reconciliation control is particularly important where there are
differences in the valuation methodologies or systems used by the front and
back offices.

APP. Q-15
96.12.31
2. Internal auditors should audit and test the risk management process and internal
controls on a periodic basis, with the frequency based on a careful risk assessment.
The depth and frequency of internal audits should be increased if weaknesses
and significant issues are discovered, or if significant changes have been made
to product lines, modeling methodologies, the risk oversight process, internal
controls or the over-all risk profile of the institution. To facilitate the development
of adequate controls, internal auditors should be brought into the product
development process at the earliest possible stage.
3. The institution should develop internal controls for key activities which should
include the following features:
a. A chart of subsidiary accounts adequately describing each account and
designed to complement the Manual of Accounts prescribed by the BSP;
and
b. Written policies/procedures for handling/ recording confirmation and
settlement of transactions; segregation of duties between the front office
and back room personnel; revaluation of positions indicating sources of
revaluation rates; documentation of review and approval of limits and sub-
limits; and evaluation and reporting to the Board of Directors/Senior
Management of audit findings/exceptions; and such other key activities the
institution is engaged in.
4. Internal auditors are expected to continuously evaluate the independence and
overall effectiveness of the institution's risk management functions. They should
be involved in the periodic review and evaluation of all bank policies, limits,
internal controls and procedures developed for the institution's key activities.
5. Bank management should ensure that a mechanism exists whereby financial
derivatives contract documentation is confirmed, maintained, and safeguarded.
Documentation exceptions should be properly monitored and resolved.
Controls must be in place to ensure that the appropriate contract
documentation is timely and properly executed and maintained. The bank should
establish a process through which documentation exceptions are monitored
and appropriately reviewed by senior management and legal counsel. Banks
with more active derivatives businesses may consider establishing a separate
documentation unit to control financial derivatives contracts and supporting
documents. Such a unit may be a part of a broader documentation unit of the
legal department.
VI. Sound Risk Management Practices for Each Type of Risk

A. Credit Risk - is the risk that a counterparty will fail to perform on an obligation to
the institution.
Credit risk management should parallel the prudent controls expected in

traditional lending activities. Policies and procedures should be formalized to
address concerns such as significant counterparty exposures, concentration of
credit, risk ratings, non-performing contracts, and allowance allocations.
An institution should include in its credit risk policy, the credit exposures
to an individual counter-party. Internal limits that are prudent in the light of its

APP. Q-15
96.12.31
financial condition and management expertise should be established. Policies

and procedures should reflect the Board of Director's risk tolerance for
concentration of credit. Policies addressing credit management functions, such
as risk ratings, non-performing contracts, and allowance allocations should be
consistent.
Credit Approval Function

1. Management should make sure that credit authorizations are provided by
personnel independent of the trading unit to ensure safe and sound management
of derivatives credit risk exposure. Credit officers and approving officers should
be: familiar with credit risk; able to analyze the impact of proposed derivatives
activities on the financial condition of the customer; responsible for establishing
and changing financial derivatives credit lines; and able to understand the
applicability of financial derivatives instruments to the risks the bank customer is
attempting to manage.
2. Credit analysis should be documented and necessary information should be
provided to customer/s.
Pre-settlement Risk
1. The system to be used to quantify the pre-settlement credit risk exposure should:
a) take into account current exposure ("mark-to-market") as well as potential
credit risk due to possible future changes in applicable market rates or prices
("add-on"); b) use a reliable source for determining the credit risk factor used to
calculate the credit risk add-on; and c) produce a number representing a reasonable
approximation of loan equivalency, that is, the amount of credit exposure inherent
in a comparable extension of credit.
The mark-to-market calculation should incorporate the same controls as
the mark-to-market calculation used to identify profits and losses. Prices should
be obtained independently from qualified sources on a periodic basis. The traders
should not be used as the source of market valuations.
2. The sophistication of credit risk measurement system should be consistent with
the level of activity and degree of risk assumed in derivatives activities. An
internal control system to determine potential credit risk should be in place.
Settlement Risk
This is the risk that an institution faces when it has performed its obligations
under a contract, but has not yet received value from its counterparty.
Management should establish limits and monitoring procedures for settlement
risk exposures. Settlement risk limits should be established separately from
pre-settlement credit limits and should consider capital adequacy, operations
efficiency and credit analysis expertise. Monitoring reports should provide
sufficient detail to identify credit risk arising from settlement versus pre-settlement
exposure.
Credit Risk Monitoring
1. Credit risk monitoring should be independent of the units that create financial
derivatives exposures. The risk monitoring unit should be responsible for

APP. Q-15
96.12.31
producing and distributing timely and accurate information about credit exposures,
such as concentration of credit, credit quality, limit exceptions, and significant
counterparty exposures.
2. This methodology adopted to measure and monitor credit risk should be
controlled by personnel independent of the trading unit.
B. Market Risk - is the risk that adverse movements in the level or volatility of
market prices will affect the institution's financial condition.
Dealers and Active Position-Takers
1. There should be a risk measurement system that can quantify risk exposures
arising from changes in market factors. This system should be structured to enable
management to initiate prompt remedial action, facilitate stress testing, and assess
the potential impact of various changes in market factors on earnings and capital.
At a minimum, all risk measurement applications and models should be reviewed
and validated annually, and management should maintain adequate
documentation to support the reliability of the validation process.
2. Statistical analyses should be used to characterize market scenarios and price
behavior. Before they are used, and whenever market conditions change
significantly, the analyses should be validated by a source independent of the
trading desk or risk assumption unit.
Limited End-Users
The senior management should ensure that all significant risks arising from
their derivatives activities can be quantified, monitored, and controlled. At a
minimum, risk management systems should evaluate the possible impact of
derivatives activities on earnings and capital which may result from adverse
changes in interest rates and other market conditions that are relevant to risk
exposure and the effectiveness of financial derivatives activities.
C. Liquidity Risk - is the risk that an institution will not be able to, or cannot easily,
exit or unwind its position at a desired market price (market/product liquidity
risk); or to meet its cash flow obligations as they fall due or upon margin calls
(cash flow/funding liquidity risk).
1. Management should evaluate these risks in the broader context of the institution's
overall liquidity because neither type of liquidity risk is necessarily unique to
derivatives activities.
2. In developing guidelines for controlling liquidity risks, an institution should
consider the possibility that it could lose access to one or more markets, either
because of concerns about the institution's own credit worthiness, the credit
worthiness of a major counterparty or because of generally stressful market
conditions. At such times, the institution may have less flexibility in managing
its market, credit and liquidity risk exposures. An institution that makes markets

APP. Q-15
96.12.31
in over-the-counter derivatives or that dynamically hedges1 its positions requires

constant access to financial markets and that need may increase in times of market
stress. The institution's liquidity plan should reflect its ability to turn to alternative
markets, such as futures or cash markets, or to provide sufficient collateral or
other credit enhancements in order to continue trading under a broad range of
scenarios.
3. An institution that participates in over-the-counter derivatives markets should

assess the potential liquidity risks associated with the early termination of
derivatives contracts. Many forms of standardized contracts for derivatives
activities allow counterparties to request collateral or to terminate their contracts
early if the institution experiences an adverse credit event or a deterioration in
its financial condition. In addition, under conditions of market stress, customers
may ask for the early termination of some contracts within the context of the
dealer's market making activities. In such situations, an institution that owes
money on derivatives activities may be required to deliver collateral or settle a
contract early and possibly at a time when it may face other funding and liquidity
pressures. Early terminations may also open up additional, unintended, market
positions. Management and directors should be aware of these potential liquidity
risks and should address them in the institution liquidity plan and in the broader
context of the institution's liquidity management process.
D. Operations Risk - is the risk that an institution will suffer an unexpected loss due
to deficiencies in information systems or internal controls.
1. The Board of Directors/Management Committee and senior management should

ensure the proper dedication of resources to support operations and systems
development and maintenance. The operation unit should report to an
independent unit and should be managed independently of the business unit.
The sophistication of the systems support and operational capacity should be
commensurate with the size and complexity of the derivatives business activity.
2. Systems support and operational capacity should be adequate to accommodate
the types of derivatives activities in which the institution engages. This includes
the ability to efficiently process and settle the volume transacted through the
business unit, to provide support for the complexity of the transactions booked
and to provide accurate and timely input.
Support systems and the systems developed to interface with the official databases
should generate accurate information sufficient to allow business unit
management and senior management to promptly monitor risk exposures.
3. Segregation of operational duties, exposure reporting and risk monitoring from
the business unit is critical to proper internal control.
4. Management should ensure that a mechanism exists whereby derivatives contract
documentation is confirmed, maintained and safeguarded. An institution should
establish a process through which documentation exceptions are monitored and
resolved and appropriately reviewed by senior management and legal counsel.
1
Dynamic hedging refers generally to the continuous process of buying and selling of instruments to
offset exposures as market conditions change (e.g., an option writer selling an underlying asset as its
price falls.)

APP. Q-15
96.12.31
The institution should also have approved policies that specify documentation
requirements for derivatives activities and formal procedures for savings and
safeguarding important documents that are consistent with legal requirements
and internal policies.
E. Legal Risk - is the risk that contracts are not legally enforceable or correctly
documented.
1. Before engaging in derivatives activities, an institution, in consultation with its

legal counsel, should be satisfied that its counterparties have the legal authority
to engage in such activities.
2. The terms of any contract governing derivatives activities should be legally sound.
3. The institution should use the International Swap Dealers Association, Inc. (ISDA)
Master Agreement insofar as the same is not inconsistent with existing laws,
rules and regulations.

APP. Q-16
96.12.31
RISK DISCLOSURE STATEMENT FOR DERIVATIVES ACTIVITIES

Similar to other financial transactions, derivatives activities may provide significant

benefits and involve a variety of significant risks.
Before entering into any derivatives activity, you should carefully consider whether the
transaction is appropriate for you in light of your objectives, experience, financial and
operational resources, and other relevant circumstances. You should ensure that you fully
understand the nature and extent of your exposure to risk of loss, which may significantly
exceed the amount of any initial payment by or to you.
In general, all derivatives activities involve risks, which include, among others, the
risk of adverse or unanticipated market, financial or political developments, risk of counterparty
or issuer default and other credit and enforcement risks, and risk of illiquidity and related
risks. In addition, you may be subject to operational risks in the event that you do not have
in place appropriate internal systems and controls to monitor the various risks, funding and
other requirements to which you may be subject by virtue of your activities in derivatives
and other financial markets.
As in any financial transaction, you should ensure that you understand the requirements
applicable to you that are established by your regulators or by your board of directors or
other governing body. You should also consider the legal, tax and accounting implications
of entering into any derivatives activity.
In entering into any derivatives activity with, or arranged by, us or any of our subsidiaries/
affiliates, you should also understand that ____________________ is acting solely in the
capacity of an arm's length contractual counterparty and not in the capacity of your financial
adviser or fiduciary unless _____________________ has so agreed in writing and then only
to the extent so provided. Whether or not you and ________________ have established a
written financial advisory or fiduciary relationship, ___________________ may, from time
to time, have substantial long or short positions in, and may make a market in or otherwise
buy or sell instruments identical or economically related to, the derivatives activity entered
into with you; _______________________ may also have an investment banking, corporate
advisory, or other commercial relationship with the issuer of any security or financial
instrument underlying the derivatives activity entered into with you.
THIS BRIEF STATEMENT DOES NOT PURPORT TO DISCLOSE ALL OF THE RISKS OR
OTHER RELEVANT CONSIDERATIONS OF ENTERING INTO DERIVATIVES ACTIVITIES.
YOU SHOULD REFRAIN FROM ENTERING INTO ANY SUCH ACTIVITY UNLESS YOU
FULLY UNDERSTAND ALL SUCH RISKS AND HAVE INDEPENDENTLY DETERMINED
THAT THE ACTIVITY IS APPROPRIATE FOR YOU.

Appendix Q-16
APP. Q-17
96.12.31
ACCOUNTING GUIDELINES FOR DERIVATIVES

The following guidelines shall be observed by any NBQB and/or its subsidiaries/affiliates
authorized to engage in derivatives activities:
a. Derivatives contracts shall be recorded in the books of accounts as contingent items

using the accounts prescribed in the Revised Manual of Accounts, whenever applicable.
The amounts to be recorded shall either be notional or actual, depending on the nature
of the contract. The purpose of the contract shall be specifically stated, i.e., for trading
or for hedging. At maturity of the contract the recorded entries shall be reversed.
b. Recognition of gains or losses shall be as follows:
1. For derivatives contracts entered into for trading purposes, gains and losses shall
be recognized/recorded in the books at the end of every month.
2. For derivatives contracts entered into for hedging purposes:
(a) During the life of the underlying contract/transaction, unrealized

gains and losses resulting from marking-to-market shall be recorded
under "Deferred Hedging Gain/Loss" account, and shall serve as
an adjustment to the gain/loss of the underlying contract/ transaction.
Upon maturity of the underlying contract/transaction, the deferred
gain/loss shall be realized, and shall then be recorded as trading
gain/loss.
(b) After the life of the underlying contract/transaction, gains and losses
shall be recorded directly as trading gain/loss.
A contract should be accounted for as a hedge when the

following conditions are met:
(1) The underlying contract/transaction exposes the

institution to risk/s (e.g., interest rate risks, exchange
rate risks, market risks).
(2) The institution designates the product as a hedge.
(3) The derivatives contract entered into is effective as a

hedge, meaning that there must be a high correlation
between the gains or losses on the derivatives
contract and the gains or losses caused by the change
of interest rates or exchange rates on the underlying
contract/transaction.

APP. Q-17
96.12.31
For a derivatives contract to qualify as a hedge of an

anticipated transaction, the following two (2)
additional criteria must be met:
i) Significant characteristics and expected terms of the

anticipated transaction must be identified; and
ii) The occurrence of the anticipated transaction must

be probable.
3. For derivatives contracts entered into as agent/broker, the notional amount shall
be recorded as a contingent item. Income therefrom shall be in the form of fees,
commissions or spreads only.
c. Any NBQB and/or its subsidiaries/affiliates shall disclose, by way of footnotes to its
audited financial statements, the following:
1. Accounting policy on derivatives;

2. Mark-to-market policy; and
3. Notional amount of outstanding contracts.

APP. Q-18
96.12.31
SEC BASIC RULES AND REGULATIONS TO IMPLEMENT

THE PROVISIONS OF PRESIDENTIAL
DECREE NO. 129, OTHERWISE KNOWN AS
"THE INVESTMENT HOUSES LAW"
(Appendix to Secs. 4604Q and 4656Q)
To effectively carry out the provisions of includes, but is not limited to, the instruments
Presidential Decree No. 129, otherwise enumerated in Section 2 of the Securities
known as "The Investment Houses Law", Act.
the Commission, pursuant to the powers d) Guarantee is any commitment and/
vested in it by said Decree, and by Republic or undertaking made by a person, firm or
Act Nos. 1143 and 5050, hereby entity to an issuer or holder of securities to
promulgates the following rules and raise funds for said issuer or holder, by the
regulations for the information and guidance distribution of such securities for sale, resale,
of the public: or subscription, either through an outright
purchase or through a corresponding
Sec. 1. Scope of Applicability. These commitment to purchase the balance not
rules and regulations shall apply to any subscribed or sold.
enterprise which engages or purports to e) Private placement refers to the
engage in the underwriting of securities. underwritten sale of securities to less than
20 persons or enterprises.
Sec. 2. Definitions. The following terms f) Public distribution refers to the
as used in Presidential Decree No. 129 and underwritten sale of securities to at least 20
these rules shall be understood to mean as persons or enterprises.
follows: g) Voting stock is that portion of the
a) Investment House is any enterprise authorized capital stock of an investment
which engages or purports to engage, house, as are subscribed and entitled to vote.
whether regularly or on an isolated basis, in h) Paid-in capital are all payments on
the underwriting of securities of another subscriptions to the authorized capital of an
person or enterprise, including securities of investment house, including premiums paid
the Government and its instrumentalities. in excess of par.
b) Underwriting of securities is the act i) Officer shall be understood to mean a
or process of guaranteeing the distribution senior officer of an Investment House or
and sale within the Philippines of securities bank, which includes the President,
issued by another person or enterprise, Executive Vice-President, General Manager,
including securities of the Government or Vice-President, Assistant Vice-President,
its instrumentalities. The distribution and Corporate Secretary, Head of an Operating
sale may be on a public or private placement Department and Branch Manager and such
basis. other officers as the Commission, in
c) Securities are written evidences of consultation with the BSP, shall determine.
ownership, interest or participation, in any j) Organizers are persons who
enterprise, or written evidences of undertake to form an Investment House,
indebtedness of a person or enterprise. It among themselves and others, and who are

APP. Q-18
96.12.31
indicated in the Articles of Incorporation as simultaneous with the registration with the
the incorporators and the incorporating Commission;
directors. 4) The corporation shall have a
k) Managerial staff are the officers of an minimum initial paid-in capital of
Investment House. Where an Investment P20,000,000 at the time of incorporation;
House is under a management contract the 5) Resident foreign directors or
terms shall be understood to include the technicians of an Investment House, if any,
officers of the management firm. shall register with the Bureau of Immigration
l) Unimpaired capital and surplus and Deportation;
means the total of the unimpaired paid-in 6) In no event shall an officer of an
capital, surplus, and undivided profits net of Investment House be at the same time an
such valuation reserves as may be required officer of a bank, as defined in Section 2 of
by the Commission provided that the R.A. 337, as amended;
Commission may include such other items 7) No director or officer of an
as it may deem appropriate. Investment House shall at the same time
m) Quasi-banking functions shall refer to be a director of a bank, and no director of an
the functions defined as such by law and Investment House shall at the same time
appropriate implementing rules and be an officer of a bank, except as may be
regulations. authorized as an exception by the Monetary
n) Commission shall mean the Board of the BSP.
Securities and Exchange Commission. B. Procedure - The organizers shall file
with the Commission, a sworn application
Sec. 3. Organization and Registration for registration in accordance with the
A. Investment Houses shall be prescribed form, together with the following
organized in the form of stock corporations documents:
in accordance with the provisions of the (1) All documents required for
Corporation Law, subject to the following registration as a stock corporation;
requirements: (2) An information sheet of the
1) At least a majority of the voting stock registrant corporation; [SEC Form 129-2]
of the corporation shall be owned by citizens (3) A statement under oath by the
of the Philippines. In determining the organizers and the proposed managerial
percentage of foreign-owned voting stocks staff, of their educational background and
in an Investment House, the basis of the work experience, as well as information on
computation shall be the citizenship of each any position currently held by them in
stockholder, and, with respect to corporate banking and other financial institutions, if
owners of voting stock, the citizenship of any (SEC Form 129-3);
the individual owners of voting stock in the (4) A one-year projected statement of
corporation holding shares in the Investment assets and liabilities of the proposed
House; Investment House;
2) The majority of the members of the (5) A tentative program of operation for
Board shall be citizens of the Philippines; one year, including its investment direction
3) Foreign equity participation shall be and volume, its expected sources and
registered or reported with the Board of intended uses of funds and its quasi-banking
Investment in accordance with the rules and functions, if any.
regulations of that Office, prior to or

APP. Q-18
96.12.31
C. Hearing on Application - The the Commission a license to operate a

Securities and Exchange Commission shall branch in a particular locality. All
conduct a hearing to determine whether the applications for a license to operate a branch
establishment of the proposed Investment shall be acted upon by the Commission
House will promote public interest and within ninety (90) days after submission of
economic growth. The BSP shall be officially such documents as may be required by the
notified. The SEC Commissioner shall not Commission in support of such application.
register any articles of incorporation unless G. Use of the Term "Investment
his Office shall have consulted the BSP and House" - No person, association, partnership
is satisfied on the basis of the evidence or corporation other than those duly licensed
submitted that: as an Investment House in accordance with
(1) All the requirements of Presidential these rules and regulations, shall advertise
Decree No. 129 and of existing laws relative or hold itself out as being engaged in the
to the organization of an Investment House business of an Investment House.
have been complied with;
(2) Public interest and economic growth Sec. 4. Underwriting Requirements
are promoted; Underwriting agreements entered into by
(3) The amount of capital, the proposed an Investment House, with respect to public
organization, direction and administration, distribution of securities, including the fees
as well as the integrity, experience and to be charged in connection therewith, shall
expertise of the organizers and the proposed be subject to the approval of the
managerial staff, provide reasonable Commission, it being understood that no
assurance that the enterprise will be public distribution of securities shall be
conducted with financial prudence. made without such approval. The
D. Issuance of Certificate of Commission may impose such terms and
Incorporation - Upon compliance with all conditions as may be necessary in the public
the requirements of law and implementing interest and for the protection of investors;
rules, and the Commission is satisfied that and it may require the submission of such
the formation of the Investment House will documents as may be necessary to ascertain
promote public interest and economic compliance with such standards of operation
growth, a Certificate of Incorporation will be as it may establish. Transactions which
issued to it. A license to operate shall also constitute quasi-banking functions shall be
be granted after it shall have adopted its by- subject to BSP regulation.
laws, elected its directors and appointed its As a gesture of faith in the issue, an
officers. Investment House may take for its own
E. Annual Fees - On or before the account a portion of the securities it
fifteenth day of January of each year, and for underwrites but shall sell such securities to
as long as its license to operate remains in the public.
effect, each Investment House shall pay a
fee of P200. At the time of payment, the Sec. 5. Management of Funds. The
Commission may require the licensee to Commission, by circular, shall provide
appear and inform the Commission of the limitations on investments of discretionary
results of its operations. accounts under the management of an
F. Branch Operations - No Investment Investment House.
House shall open, maintain or operate a Should the Investment House engage in
branch or agency without first securing from the management of funds, it must at all times

APP. Q-18
96.12.31
adhere to the prudent man's rule. The outstanding capital of an Investment House
Investment House shall ensure that the shall be allowed, unless sufficiently
interest of the funds managed is promoted collateralized.
and that the operation of the funds is
undertaken on an arms' length basis. Sec. 9. Reporting Requirements. Every
The Commission may require such registered Investment House shall file with
documents and reports as may be necessary, the Commission the following periodic
in order to determine if prudence and safety reports in triplicate:
of the principal have been paramount in the A. Progress Reports - a quarterly report
decision of the Investment House. of the results of its underwriting operations
and activities of funds managed on all
Sec. 6. Underwriting Fees. Except in commitments entered into in such form as
highly meritorious cases, as approved by the may be provided for the purpose, within
Commission, an Investment House shall not fifteen (15) days from the end of each
collect underwriting fees in excess of five quarter.
percent (5%) of the amount generated by B. Semi-Annual Financial Statement
the underwriter for the issuer. signed under oath by its chief accountant
and verified by the president, within a period
Sec. 7. Contingency Reserves. An of sixty (60) days after the end of each
Investment House shall provide annually a semester containing such data, and in such
reserve for contingencies in such reasonable form as the Commission shall require. A
amount as may be required by the copy shall be filed with the BSP.
Commission. C. Annual Report concerning its
operational activities for the year just ended,
Sec. 8. Prohibitions signed by its president (SEC Form 129-1)
(1) No Investment House shall within the month of March of each year. A
undertake underwriting commitments for copy shall be filed with the BSP.
its own account in an aggregate outstanding D. A Report on the composition of the
amount exceeding twenty (20) times its board of directors or any resignation,
unimpaired capital and surplus. dismissal, suspension, or filling of vacancies
(2) An Investment House shall not at therein, or of any officers or managerial staff,
any time allow its unimpaired capital and signed under oath by the secretary, within
surplus to fall below twenty million fifteen days after occurrence of the event.
(P20,000,000) pesos; otherwise, it shall be Every registered Investment House shall
prohibited from underwriting securities for maintain and preserve such records and
so long as such deficiency remains. documents as the Commission may
(3) Whenever an Investment House is prescribe by way of circulars. Such circulars
engaged in the management of funds, its shall provide for a reasonable degree of
officers and other personnel directly uniformity in accounting policies and
involved in the management of funds are principles to be followed by Investment
prohibited from simultaneously or Houses in maintaining their accounting
concurrently buying or selling the shares of records and in preparing statements as
stock of the same firm that the funds are required by these rules.
buying or selling.
(4) No advance to directors, officers and Sec. 10. Transitory Provisions
stockholders owning at least 10% of the A. All existing enterprises which have

APP. Q-18
96.12.31
been operating as Investment Houses, prior provisions of Presidential Decree No. 129
to February 15, 1973, shall: or of any applicable laws, rules and
(1) Within six (6) months from February regulations. It shall determine all the facts
15, 1973 file an information sheet with the and circumstances concerning the matter to
Commission in such form and containing be investigated for the imposition of
such data as may be required, pay the sanctions/penalties or remedial or
required fee under Sec. 3-E of these rules, preventive measures.
and the Commission in consultation with the
Monetary Board, after determining Sec. 14. General Exemption Power -
compliance with the requirements of The Commission may, upon proper petition
Presidential Decree No. 129 and of these and payment of a fee of P100, grant an
Rules, shall issue a License to Operate an exemption from compliance with any
Investment House. requirements of these rules as may be
(2) Within one (1) Year from February consistent with public interest and the
15, 1973 comply with the requirement of a protection of investors.
minimum paid-in capital of Twenty Million
Pesos (P20,000,000), citizenship Sec. 15. Penalties - Any violation of
requirements, and the prohibition on Presidential Decree No. 129 or of these rules
interlocking directorate or officership. and regulations, shall be penalized by
suspension or revocation of the License to
Sec. 11. Stockbrokerage or Dealership Operate, after proper notice and hearing. In
Functions - If an Investment House engages appropriate cases, a fine not exceeding P200
in the business of a stockbroker or dealer per day for every day during which such
pursuant to Presidential Decree No. 129, it violation continues, shall be imposed upon
shall comply with the provisions of C.A. No. the Investment House and the officer or
83, otherwise known as the Securities Act, director who ordered or authorized the
and the rules and regulations of the violation, without prejudice to the criminal
Commission promulgated pursuant thereto: liabilities provided in the second paragraph
Provided, however, that an Investment of Section 16 of Presidential Decree No.
House need not obtain a separate license 129.
under Section 14 of the Securities Act. In the exercise of its regulatory powers
under Section 12 of Presidential Decree No.
Sec. 12. Bangko Sentral Rules - Invest- 129, the Monetary Board may issue a cease-
ment Houses shall also be subject to the and-desist order upon an Investment House
rules and regulations promulgated by the BSP which is not complying with BSP rules and
for non-bank financial intermediaries as regulations pertaining to non-bank financial
provided by law. intermediaries or, in appropriate cases, rules
governing quasi-banking functions of
Sec. 13. Visitorial Power - The Investment Houses. Failure to comply with
Commission may, at its discretion, make the cease-and-desist order shall subject an
such investigations as it deems necessary Investment House to a fine to be imposed
to determine whether or not an Investment by the Monetary Board.
House is complying with any of the

APP. Q-18
96.12.31
Sec. 16. Effectivity - These rules shall take

effect immediately. They shall be published
in a newspaper of general circulation in the
Philippines and in the Official Gazette.
Manila, Philippines, July 9, 1973.
(SGD.) ARCADIO E. YABYABIN

Securities and Exchange Commissioner
APPROVED:
(SGD.) TROADIO T. QUIAZON, JR.

Acting Secretary of Trade
Date: July 13, 1973

APP. Q-19
96.12.31
Republic of the Philippines

Department of Finance
SECURITIES AND EXCHANGE COMMISSION
SEC Building, EDSA, Greenhills
Mandaluyong, Metro Manila
NEW RULES AND REGULATIONS TO IMPLEMENT

THE PROVISIONS OF REPUBLIC ACT NO. 5980
(THE FINANCING COMPANY ACT), AS AMENDED
To effectively carry out the provisions of more than 50% of its funds shall be used or
Republic Act No. 5980 (The Financing invested in financing company activities,
Company Act), as amended, the Securities Provided, That in the computation thereof
and Exchange Commission, pursuant to the direct loans and temporary investments in
powers vested in it under said Act, Republic government securities shall be taken into
No. 1143 and Presidential Decree No. 902- account.
A, as amended, hereby promulgates the c. FUNDS as used herein shall mean
following rules and regulations: total assets inclusive of allowance for
doubtful accounts and deferred income less
Section 1. Definition of Terms. The investment in real estate, shares of stock in
following definition of terms shall apply for a real estate development corporation and
purposes of these Rules: real estate based projects which shall not
a. FINANCING COMPANIES are exceed 25% of networth of the investing
corporations or partnerships, except those company, leasehold rights and
supervised by the Central Bank of the improvements, fixed assets inclusive of
Philippines, Office of the Insurance appraisal surplus, foreclosed properties and
Commissioner and the Bureau of prepayments.
Cooperatives Development, which are d. COMMISSION shall mean the
primarily organized for the purpose of Securities and Exchange Commission.
extending credit facilities to consumers and e. CREDIT shall mean any loan,
to industrial, commercial, or agricultural mortgage, deed of trust, advance or
enterprises: by discounting or factoring discount, any conditional sales contract, any
commercial papers or accounts receivable; contract to sell, or sale or contract of sale of
by buying and selling contracts, leases, property or service, either for present or
chattel mortgages, or other evidences of future delivery, under which, part or all of
indebtedness; or by leasing of motor the price is payable subsequent to the
vehicles, heavy equipment and industrial making of such sale or contract, any rental-
machinery, business and office machines purchase contract, any option, demand, lien,
and equipment, appliances and other pledge, or other claim against, or for the
movable property. delivery of, property or money, any
b. PRIMARILY ORGANIZED shall purchase, or other acquisition of or any credit
mean organized for the primary purpose of upon the security of any obligation or claim
operating as a financing company and that arising out of the foregoing; and any

APP. Q-19
96.12.31
transactions having a similar purpose or or acquisition cost, including any incidental

effect. expenses and a margin of profit, over the
f. PURCHASE DISCOUNT is the lease period. The contract shall extend over
difference between the value of the an obligatory period during which the lessee
receivables purchased or credit assigned, has the right to hold and use the leased
and the net amount paid by the finance property and shall bear the cost of repairs,
company for such purchase or assignment, maintenance, insurance and preservation
exclusive of fees, service charges, interest thereof, but with no obligation or option to
and other charges incident to the extension the part of the lessee to purchase the leased
of credit. property at the end of the lease contract.
g. RECEIVABLES FINANCING is a k. PAID-UP CAPITAL refers to the
mode of extending credit through the amount paid for the subscription of stock in
purchase by, or assignment to, a financing a corporation including the amount paid in
company of evidences of indebtedness or excess of par value, while CAPITAL
open accounts by the discounting or CONTRIBUTION refers to the total
factoring. contributions of the partners in a partnership.
h. DISCOUNTING is a type of l. NETWORTH is the excess of assets
receivables financing whereby evidences of over liabilities, net of appraisal surplus, and
indebtedness of a third party, such as booked valuation reserves, capital
installments contracts, promissory notes, and adjustments, overstatement of assets and
similar instruments, are purchased by, or unrecorded liabilities.
assigned to, a financing company in an
amount or for a consideration less than their Section 2. Form of Organization. Finan-
face value. cing companies shall be organized in the
i. FACTORING is a type of form of: stock corporations in accordance
receivables financing whereby open with the provisions of the Corporation Code
accounts, not evidenced by a written promise of the Philippines (Batas Pambansa Blg. 68)
to pay supported by documents such as but or general partnerships pursuant to the
not limited to invoices of manufacturers and provisions of the New Civil Code of the
suppliers, delivery receipts and similar Philippines and subject to the following:
documents, are purchased by, or assigned
to, a financing company in an amount or for a. At least sixty percentum (60%) of the
a consideration less than the outstanding outstanding capital stock of the corporation,
balance of the open accounts. and in case of a partnership, at least sixty
j. LEASING shall refer to the financial percentum (60%) of the total capital
leasing which is a mode of extending credit contributions of the partners, shall be owned
through a non-cancellable contract under by citizens of the Philippines.
which the lessor purchases or acquires at
the instance of the lessee heavy equipment, b. A minimum paid-up capital, in case
motor vehicles, industrial machinery, of corporations, and capital contribution in
appliances, business and office machines, case of partnerships, that shall maintain their
and other movable property in consideration principal offices in the areas hereunder
of the periodic payment by the lessee of a specified, shall be made in cash or in
fixed amount of money sufficient to property of at least:
amortize at least 70% of the purchase price

APP. Q-19
96.12.31
1) P10,000,000 - Metro Manila Area of the board of directors in the case of a

2) 5,000,000 - First Class Cities corporation and all the managing partners
outside in case of a partnership shall be citizens and
Metro Manila residents of the Philippines.
3) 2,500,000 - Second Class Cities Any change in the membership in, or
and First Class composition of, the board of directors,
Municipalities officers from the rank of VP and up or their
4) 1,000,000 - Third Class Cities equivalent, branch manager, cashier and
and Second Class administrative officer, or in the managing
Municipalities partners, as the case may be, shall be
5) 500,000 - Fourth Class Cities, reported to the Commission within seven
Third Class (7) working days thereafter, and the
Municipalities and requirement prescribed under Section 3.a.4
below and 7 and Section 5.a.3. and 4 hereof, shall
be submitted within thirty (30) working days
In case the area where the principal office from date of the aforesaid change..
of a financing company is located has been d. The corporate/partnership name of
upgraded, the corresponding increase in financing companies shall contain the term
capitalization requirement shall be "financing company", "finance company",
undertaken within such period as the or "finance and investment company" or
Commission shall fix. other title or word(s) descriptive of its
operations and activities as a financing
Unless otherwise authorized by the company.
Commission, all financing companies with
a paid-up capital or capital contribution less Section 3. Requirements for Registration
than that mentioned above shall be given a. Registration papers to be submitted
five (5) years within which to build up their to the Commission - Any corporation or
capital requirement according to the partnership may be registered as a financing
following schedule: company by filing with the Commission in
five (5) copies an application to operate as a
3rd Class
financing company under R.A. No. 5980, as
1st Class 2nd Class Cities & amended, signed under oath by its President/
Metro Cities Out Cities & 1st 2nd Class Managing Partner, together with the
Manila side Metro Class Muni- Munici-
Area Manila cipalities palities following documents in the prescribed
forms:
6-30-92 2,000,000 1,000,000 500,000 500,000 1) All documents required for
6-30-93 4,000,000 2,000,000 1,000,000 625,000 registration as a corporation or partnership;
2) By-laws;
6-30-94 6,000,000 3,000,000 1,500,000 750,000
3) Information Sheet of registrant
6-30-95 8,000,000 4,000,000 2,000,000 875,000 company;
4) Personal Information Sheet of each
6-30-96 10,000,000 5,000,000 2,500,000 1,000,000
of the directors, officers with the rank of
Any existing and/or new branch, agency, Vice-President and up or their equivalent or
extension office or unit may operate subject managing partners;
to the provision of Section 5 thereof. 5) Answers to the questionnaire of the
c. At least two-thirds of all the members Commission;

APP. Q-19
96.12.31
6) Projected balance sheet, income partnership, and the names and residences
statement and cash flow statement for three of its directors or managing partners.
(3) years, together with a schedule of c. Opposition to Registration, if any -
discounting, factoring, leasing and other Any interested party may oppose the
financing activities and all related income registration of a financing company in
therefrom. writing, personally or through counsel,
7) Documents required of each within fifteen (15) days after the last date of
director, officer to be appointed from the the publication of the notice. If after the
rank of Vice-President and up or their hearing, the Commission finds that the
equivalent, or managing partner such as the requirements of R. A. No. 5980, as
following: amended, its implementing rules and
a) Police clearance from local police of regulations and other pertinent laws have
the city or municipality of which he is a been complied with and that no valid reason
resident; exists for the disapproval of the application,
b) NBI clearance; the Commission shall take appropriate action
c) Certificate of good moral character to on said application.
be executed under oath by at least two (2)
reputable and disinterested persons in the Section 4. Issuance of Certificate of Filing
community; of Articles of Incorporation and By-Laws;
d) Bank credit information to be issued Certificate of Authority; Conditions for
by his depository or creditor bank(s), if any; Commencement of Operations
and a. The Commission, in consultation
8) Such other documents as may be with the Central Bank, shall register the
required by the Commission whenever it articles of incorporation and by-laws or
deems necessary. articles of partnership of, and issue the
b. Publication and Posting of Notice Certificate of Authority to Operate to, any
and Order for Registration - Upon receipt proposed financing company if it is satisfied
of the above registration papers of a that the establishment of such company will
proposed financing company, the promote public interest and convenience,
Commission shall cause the notice and order and on the basis of the documents and/or
to be published by the applicant company evidences submitted, that;
at its expense in a newspaper of general 1) All the requirements of R. A. No.
circulation in the Philippines once a week 5980, as amended, other existing laws, and
for two (2) consecutive weeks, and the notice applicable rules and regulations to engage
shall simultaneously be posted in a public in the business for which the applicant is
and conspicuous place where the principal proposed to be incorporated, or organized,
office of the company will be located and in have been complied with;
the Office of the Commission for the same 2) The organization, direction and
period. administration of the applicant, as well as
the integrity and responsibility of the
The notice shall state, among others, the organizers and administrators, presumably
name of the proposed financing company, assure the protection of the interest of the
the capital structure in case of a corporation general public; and
or the total capital contribution in case of a

APP. Q-19
96.12.31
3) Proof of the publication and posting 6) Such other documents as may be

of the notice and order for registration is in required by the Commission whenever it
accordance with Sec. 3.b. hereof. deems necessary.
b. A corporation or partnership which The above application shall be published
has been duly registered, and granted a in accordance with the provisions of Sec.
Certificate of Authority to Operate as a 3.b. of these Rules. However, the Notice
financing company in accordance with the and Order shall be posted in a public and
law and these Rules, shall commence conspicuous place where the aforesaid
operations within ninety (90) days from date branch, agency, extension office or unit shall
of grant of such certificate. Failure to operate be established.
within the prescribed ninety (90) days period b. Evaluation Guideposts - The number
shall subject the financing company to a fine of branches, agencies, extension offices or
of not less than One Thousand (P1,000.00) units to be established shall depend upon
Pesos unless its non-operation is reasonably the capacity of the company to conduct
justified, as determined by the Commission. expanded operations and/or upon the
c. The financing company may be capacity of the area wherein the proposed
granted a grace period of another ninety (90) branch, extension office, agency or unit will
days from the expiry date of the first ninety be established, to absorb new entities
(90) days within which to commence engaged in financing, as may be determined
operations notwithstanding its failure to by the Commission.
operate as aforestated. Failure to operate c. Additional Capital Requirement - A
within the extended period shall empower financing company may be required to put
the Commission, after notice and hearing, up additional capital for branches, agencies,
to revoke its Certificate of Authority. extension offices or units in an amount to
be determined by the Commission.
Section 5. Branches, Agencies, Extension d. Prescribed Period to Operate - Such
Offices or Units branch, agency, extension office or unit shall
a. Certificate of Authority - No operate within ninety (90) days from the
financing company shall establish or operate issuanc e of the certificate of authority and
a branch, agency, extension office or unit failure to operate within such period shall
without a prior certificate of authority to be subject said branch, agency, extension office
issued by the Commission. The application or unit to a fine of not less than One
for authority filed under this section shall be Thousand (P1,000) Pesos or revocation of the
accompanied by the following documents: certificate of authority, after due hearing at
1) Information Sheet of the proposed the discretion of the Commission, unless its
branch; non-operation is reasonably justified as
2) Answer to SEC questionnaire; determined by the Commission.
3) Police clearance of the manager, e. Term of Authority to Operate - The
cashier, and administrative officer of the certificate of authority to operate a branch,
proposed branch; agency, extension office or unit shall be co-
4) NBI clearance of the branch manager, terminous with that of the head office.
cashier and administrative officer of the
proposed branch; Section 6. Applicability of Central Bank
5) Copy of the proposed personnel Regulations - Financing companies duly
chart; and licensed to operate as such, their branches,

APP. Q-19
96.12.31
agencies, extension offices or units shall also negotiated to, a financing company shall not
be subject to applicable Central Bank be sold, assigned or transferred in any
regulations. manner except to banks including their trust
accounts, trust companies, non-bank
Section 7. Licensing Fees - A fee of 1/10 financial intermediaries authorized to
of 1% of the minimum paid-up capital or engage in quasi-banking functions,
capital contribution required under Section investment houses including their trust
2.b. shall be charged for the issuance of the accounts, financing companies, investment
Certificate of Authority to Operate as a companies, non-stock savings and loan
financing company. associations, insurance companies,
A fee of 1/10 of 1% of the additional government financial institutions, pension
required capital under Sec. 5.c., but in no and retirement funds approved by the
case less than P250.00 shall be charged Bureau of Internal Revenue, educational
likewise for the issuance of original assistance funds established by the National
Certificate of Authority of each branch, Government; Provided, That the
agency, extension office or unit of such negotiation of evidence of indebtedness to
financing company. pension funds or educational assistance funds
shall be on a recourse basis.
Section 8. Loans and Investments
a. Financing companies may engage Section 10. Other Activities
in direct lending if authorized by the a. Financing companies not duly
secondary purposes in its articles of authorized to perform quasi-banking
incorporation and in accordance with Section functions shall not act as dealers in
42 of the Corporation Code of the Philippines commercial papers but may act as dealers
(B.P. 68). in other securities provided they are duly
b. Unless otherwise authorized by the licensed by the Commission as such.
Commission, the total investment in real b. Financing companies shall not act as
estate and in shares of stock in a real estate dealers of certificates of time deposit.
development corporation and other real c. Except in cases of issuances to
estate based projects shall not at any time primary institutional lenders, financing
exceed twenty-five (25%) per cent of the companies without quasi-banking license
net worth of the investing financing shall not issue instruments other than
company. promissory notes, to cover placements with,
or borrowing by, them.
Section 9. Conveyance of Evidences of
Indebtedness and Financed Receivables Section 11. P u r c h a s e D i s c o u n t / F e e s /
a. The negotiation, sale or assignment Service and Other Charges - The purchase
by financing companies of evidences of discounts, fees, service and other charges
indebtedness shall be in accordance with the of financing companies on assignments of
rules of the Commission on registration of credit, purchases of installment papers,
commercial papers. accounts receivable or other evidences of
b. Accounts which have been factored indebtedness, factoring of accounts
or discounted by, the lease receivables of, receivable or other evidences of
and other evidences of indebtedness (not indebtedness, or leasing transactions shall
covered in item a. Above) issued or be in accordance with the rules prescribed

APP. Q-19
96.12.31
by the Monetary Board, in consultation with principal executive officer and principal
the Commission, pursuant to the provisions financial officer and shall be submitted
of Section 5 of R.A. 5980, as amended by within thirty (30) calendar days after the end
P.D. No. 1454. of each quarter. They shall, likewise, file
four (4) copies of their audited financial
Section 12. Networth for Operating statements within one hundred twenty (120)
Financing Companies - The company's days after the end of their fiscal years and
networth shall be maintained at an amount such other reports as may be required by
not less than that required under Sections the Commission.
2.b. and 5.c. hereof.
Section 15. Administrative Sanctions - If
Section 13. Prohibitions the Commission finds that there is a violation
a. No corporation shall be allowed to of these Rules and Regulations and their
include financing activities as herein defined implementing circulars or any of the terms
as one of its secondary purposes. and conditions of the Certificate of Authority
b. No person, association, partnership to operate as a financing company, or any
or corporation shall do or hold itself out as Commission order, decision or ruling, or
doing business as a financing company or refuses to have its books of accounts audited,
finance and investment company or under or continuously fail to comply with SEC
any other title or name tending to give the requirements, the Commission shall, in its
public the impression that it is a financing discretion, impose any or all of the following
company unless so authorized under R. A. sanctions:
5980, as amended. a. Suspension or revocation of the
certificate of authority to operate as a
Section 14. Periodic Reports - Every financing company after proper notice and
financing company shall file with the hearing;
Commission the following quarterly reports: b. A fine in accordance with the
a) Statement of Condition and Statement of guidelines that the Commission shall issue
Income and Expenses, together with the from time to time;
schedule of aging of receivables (indicating c. Other sanctions within the power of
the maturity pattern of the aforesaid the Commission and the Central Bank under
receivables under due within 1 year, due existing laws.
over 1 year to be applicable to long term The imposition of the foregoing
receivables only, past due accounts to administrative sanctions shall not preclude
subdivided further to past due accounts the institution of appropriate action against
within 1 year, over 1 year and litigation the officers and directors of the financing
items), payable (indicating likewise the company or any person who might have
same maturing pattern of within 1 year and participated therein, directly or indirectly,
over 1 year) and off-balance sheet items; in violation of R. A. No. 5980, as amended,
Provided, however, That respective and these Rules and Regulations.
collateral/s (if any) for past due accounts over Section 16. Cease and Desist Order -
1 year and litigation items shall be The Commission may, on its own motion
adequately disclosed in the aforementioned or upon verified complaint of any aggrieved
Schedules and b) list of officers, directors, party, issue a Cease and Desist Order ex-
and stockholders. These reports shall be parte, if the violation(s) mentioned in the
signed under oath by the company's preceding sections may cause grave or

APP. Q-19
96.12.31
irreparable injury to the public or may amount however, That financing companies with
to culpable fraud or violation of these Rules existing certificate of authority shall surrender
and Regulations, implementing circulars, the same to the Commission upon payment
certificates of authority issued by the of the annual fee pursuant to Section 7 hereof
Commission, or of any order, decision or to be replaced by new certificate of authority
ruling thereof. and, Provided, That where such corporation/
The issuance of such Cease and Desist partnership is affected by the new provisions
Order automatically suspends the authority hereof, said corporation/partnership shall,
to operate as a financing company. unless otherwise herein provided, be given a
Immediately upon the issuance of an ex- period of not more than one (1) year from the
parte Cease and Desist Order, the effectivity of these Rules within which to
Commission shall notify the parties involved comply with the same.
and schedule a hearing on whether to lift such
order or to impose administrative sanctions Section 18. Effectivity - These Rules and
provided for in Section 16 not later than fifteen Regulations shall take effect fifteen (15) days
(15) days after service of notice. after publication in two (2) newspapers of
general circulation in the Philippines.
Section 17. Transitory Provision - Any
corporation/partnership at the time of the Mandaluyong, Metro Manila, Philippines
effectivity of these Rules has been registered October 16, 1991.
and licensed by the Commission to operate
as a financing company, shall be considered
as registered and licensed under the
provisions of these Rules, subject to the terms (SGD.) ROSARIO N. LOPEZ
and conditions of the license, and shall be Chairman
governed by the provisions hereof; Provided, Securities and Exchange Commission

APP. Q-20
98.12.31
CLASSIFICATION, ACCOUNTING PROCEDURES,

VALUATION AND SALES AND TRANSFERS OF INVESTMENTS
IN DEBT SECURITIES AND MARKETABLE EQUITY SECURITIES
Section 1. Classification and Accounting effect on the security’s fair market value.
Investments in debt securities and marketable (2) The sale of a debt security occurs after
equity securities shall be classified into one the financial institution has already
of four categories and accounted for as follows: collected at least eighty-five percent (85%) of
a. Investments in Bonds and Other Debt the principal outstanding at acquisition due
Instruments (IBODI) - These are debt either to prepayments on the debt security or
securities where the NBQB has the intention to scheduled payments on a debt security
and ability to hold these securities to payable in installments (both principal and
maturity. Such investments shall be interest) over its term.
measured at amortized cost where any b. Trading Account Securities (TAS) -
realized gains or losses shall be included in These are debt securities and equity securities
reported current income. However, if a (TAS – equity securities applicable only to
decline in fair market value below the non-bank financial institutions with quasi-
amortized cost is other than temporary, i.e., banking functions) purchased and held
full collection of principal and interest is not principally with the intention of selling them
expected on a debt security, the amortized in the near term.
cost basis of the particular debt security shall TAS must have readily determinable fair
be adequately provided with allowance for market values and by their very nature daily
probable losses. The amount of investment mark-to-market where unrealized and
loss provision shall be accounted for as a realized gains and losses are recognized and
realized loss and charged to reported current booked against “Trading Gain/(Loss)” account.
income. c. Available for Sale Securities (ASS) -
The ability to hold to maturity is evidenced These are debt securities purchased and held
by the funding structure of such securities indefinitely, i.e., neither held to maturity nor
wherein IBODI shall not exceed fifty percent for trading purposes, where the financial
(50%) of adjusted net worth plus forty percent institution anticipates that the securities will
(40%) of total deposit substitute liabilities. be available to be sold in response to liquidity
Sales of debt securities that meet either of needs and/or to reduction in legal reserves,
the following two (2) conditions may be liquidity reserves, liquidity floor, security
considered as maturities for purposes of the deposits and/or allowable alternative
classification of securities under IBODI: investments.
(1) The sale of a debt security occurs near The daily valuations for these securities are,
enough to its maturity date (or call date if like TAS, at fair market values to account for
exercise of the call is probable) that interest both upward and downward market
rate risk is substantially eliminated as a pricing movements. However, unrealized gains or
factor. That is, the date of sale is so near the losses shall be excluded from reported
maturity or call date [for example, within earnings and reported as a separate
three (3) months] that changes in market component of stockholders’ equity until
interest rates would not have a significant realized.

APP. Q-20
98.12.31
d. Underwriting Accounts (UA) - These Sec. 4 Sales and Transfers Between

are available for sale underwritten debt Categories
securities and equity securities purchased and a. The following circumstances may
held principally with the intention of selling cause the financial institution to change its
them within a defined short-term period. intention to hold a certain IBODI to maturity
The daily valuations for these securities are, without calling into question its intent to hold
like ASS, at fair market values with unrealized other debt securities to maturity in the future.
gains or losses excluded from reported Thus, the sale or transfer of an IBODI security
earnings and reported as a separate due to one of the following changes in
component of stockholders’ equity until circumstances shall not be considered to be
realized. UA is applicable only to investment inconsistent with its original classification:
houses. (1) Evidence of a significant deterioration
For TAS, ASS and UA, a financial institution in the issuer’s creditworthiness
may opt to book the mark-to-market valuation (2) A change in tax law that eliminates or
every end of the month: Provided, That an reduces the tax-exempt status of interest on
adequate mechanism is in place to determine the debt security (but not a change in tax law
the daily fair market values of securities. that revises the marginal tax rates applicable
to interest income)
Sec. 2 Valuation. The valuation for the mark- (3) A major business combination or
to-market of TAS, ASS and UA shall be based major disposition (such as sale of a segment)
on the prices/rates supplied by independent that necessitates the sale or transfer of IBODI
sources such as the PHISIX, T-bills, T-bonds, securities to maintain the financial
Reuters, Telerate or Bloomberg. The institution’s existing interest rate risk position
estimated fair market value of each security or credit risk policy
is then compared to the book value to (4) A change in statutory or regulatory
measure unrealized profit or loss. requirements significantly modifying either
The recording of investments, gains and what constitutes a permissible investment or
losses shall be in accordance with the the maximum level of investment in certain
guidelines in Appendix 10. kinds of securities, thereby causing the
A control officer, who is independent of financial institution to dispose of an IBODI
trading and sales functions and their direct security
supervision, shall be responsible for (5) Unusual and unforeseen liquidity
reviewing the prices/rates. needs including occasional changes in the
IBODI duration in consideration of projected
Sec. 3 Profit and Loss Reconcilement. A liquidity and/or price risk
daily reconcilement of profit and loss In addition to the foregoing changes in
between the trading function and the circumstances, other events that are isolated,
independent accounting records for nonrecurring, and unusual for the reporting
investments in all debt securities and financial institution that could not have been
marketable equity securities must be done reasonably anticipated may cause the
and all differences must be followed up. financial institution to sell or transfer an

APP. Q-20
98.12.31
IBODI security without necessarily calling c. The transfer of the same type of
into question its intent to hold the debt securities between categories shall be rare
securities to maturity. and shall in no case be made within a
b. The transfer of a security between period of six (6) months reckoned from the
categories of investments shall be accounted original transaction date or last transfer
for at fair market value. At the date of the date.
transfer, the security’s unrealized holding gain
or loss shall be accounted for as follows: Sec. 5 Operations Manual
(1) For a security transferred from TAS, the a. Where applicable, the financial
unrealized holding gain or loss at the date of institution shall maintain an operations
the transfer will have already been recognized manual for booking and valuation of IBODI,
in earnings and shall not be reversed. TAS, ASS and UA with the following
(2) For a security transferred into TAS, the minimum contents:
unrealized holding gain or loss at the date of (1) Criteria for lodging purchased
the transfer shall be recognized in earnings securities to IBODI, TAS, ASS and UA
immediately. (2) Valuation procedures
(3) For a debt security transferred into ASS (a) Independent sources of prices/rates
from IBODI, the unrealized holding gain or (b) Sample computations and booking
loss at the date of transfer shall be excluded (3) Sales procedures
from reported earnings and reported as a Sample computations and booking
separate component of stockholders’ equity (4) Transfers between categories
until realized. (a) Criteria
(4) For a debt security transferred into (b) Recognition of unrealized gain or loss
IBODI from ASS and UA, the unrealized in income
holding gain or loss at the date of the transfer (c) Sample computations and booking
shall continue to be reported as a separate b. A copy of the operations manual shall
component of stockholders’ equity but shall be submitted to the appropriate super-
be amortized over the remaining life of the vising and examining department of the
security as an adjustment of yield in a manner BSP within thirty (30) business days from
consistent with the amortization of any September 30, 1998. Subsequent
premium or discount. The amortization of amendments thereto shall be submitted
an unrealized holding gain or loss reported within fifteen (15) business days prior to
in equity will offset or mitigate the effect on its implementation. A penalty of P500.00
interest income of the amortization of the per business day shall be imposed for
premium or discount for that security. delay or non-submission.

APP. Q-20-a
02.12.31
ESTABLISHING THE MARKET BENCHMARKS/REFERENCE PRICES AND

COMPUTATION METHOD USED TO MARK-TO-MARKET DEBT
AND MARKETABLE EQUITY SECURITIES
General Principle
As a general rule, to the extent a credible market pricing mechanism as determined by the
Bangko Sentral ng Pilipinas (BSP) exists for a given security, that market price shall be the
basis of mark-to-market. However, in the absence of a market price, a calculated price shall
be used as prescribed herein.
A financial institution may also be allowed, subject to the approval of the Deputy Gover-
nor, Supervision and Examination Sector, BSP, to use its own system for marking-to-market its
securities holdings: Provided, That this can be shown to be sufficiently transparent, objective,
reliable and consistent. The system should be approved by the financial institution’s board of
directors (or equivalent management committee in the case of foreign bank branches). The
model should be vetted by the financial institution’s risk management group, internal audit
group and systems group, properly documented and such documentation available for re-
view by external auditors and the BSP.
Mark-to-Market Guidelines
To ensure consistency, the following shall be used as bases in marking-to-market debt

and equity securities:
Type of Security Market Price Basis
A. Equity Securities Listed in the Stock Exchange
1. Traded in the Philippines Same day closing price as quoted at the Philippine
Stock Exchange. In case of halt trading/suspension or
holidays, use the last available closing price.
2. Traded Abroad Latest available closing price from the exchange

where the securities are traded.
B. Foreign Currency-Denominated Debt Securities Quoted in Major Information Systems

(Bloomberg, Reuters, Bridge)
1. US Treasuries Price as of end of day, Manila time.

APP. Q-20-a
02.12.31
Type of Security Market Price Basis
2. US Agency papers such as Latest available price for the day, Manila
Fannie Maes, Freddie Macs, time. In the absence of a price, use average
Ginnie Maes, Municipal papers quotes of at least three (3) regular brokers/
market makers.*
3. Brady Bonds Same as B.2.
4. For all US$-denominated Same as B.2.

government and corporate
securities
5. Other foreign-currency Same as B.2.

securities
C. Peso-Denominated Government Securities
1. Short-term Domestic Price as of end of day. Use the following

Government Securities sources as discount rate/yield to maturity:
a) Weighted average dealt rate for the day.

b) In the absence of a same day dealt rate, use
end of day indicative mid rate between best
bid and best offer.
c) In the absence of a same day indicative mid
rate, use end of day best bid rate.
2. Long-term Domestic Same as C.1.

Government Securities
____________________
* Based on done rates if available. If done rates are not available, use the mid rate between bid and
offer. If no mid rates are available, use the bid rate.

APP. Q-20-a
02.12.31
D. Peso-Denominated Private Debt Securities
1. Short-term securities Prices computed using the corresponding govern-

ment security benchmark + short-term risk premium
2. Long-term Fixed Rate Securities Prices computed using the corresponding govern-
ment security benchmark + long-term risk premium
3. Long-Term Securities - Floaters Prices computed using the corresponding govern-

ment security benchmark based on the reset period
+ risk premium. (Please refer to Technical Annex
for pricing formula.)
All the risk premia mentioned under Section D shall be recommended by a Risk Assess-
ment Committee (RAC) and updated regularly. The RAC shall be convened by the Bankers
Association of the Philippines (BAP) and composed of representatives from the BAP, Invest-
ment House Association of the Philippines (IHAP), Money Market Association of the Philip-
pines (MART), rating agencies and the BSP.
Other Guidelines
In pricing debt securities, interpolated yields shall be used for securities with odd
tenors.
The mark-to-market rules prescribed for securities from Sections A to C (Equity Securities
Listed in the Stock Exchange, Foreign Currency-Denominated Debt Securities Quoted in
Major Information Systems and Peso-Denominated Government Securities) shall take effect
on April 1, 2001. The effectivity date of the mark-to-market rules prescribed for securities
covered under Section D (Peso-Denominated Private Debt Securities) shall be announced
later.

APP. Q-20-a
02.12.31
Technical Annex:
Valuation of Floaters Formula:
n
Net price = C1______ +Σ ____________C____________ + _______ MV ____________ - MVxCpn x (1-Wht) x
A
[1+Yld x (1-Wht) DSC/E n-2[1 + Yld x (1-Wht) n-1+DSC/E (1 +Yld x (1-Wht)N-1 +DSC/E 360
F F F
Known Flow Unknown Flows Principal Accrued
Where:
C1 = MV x Cpn x (1-Wht) x E/360
E = No. of days in a coupon period
A = No. of accrued days
DSC = No. of days from valuation date to next coupon date (DSC=E-A)
F = No. of payments per year
N = No. of coupon periods between valuation date and maturity date
C = (Use the prevailing rate of the floating rate index + spread) x (1-Wht) x MV x E/
360
MV =Par value
Cpn =Current Coupon Rate
Yld =Corresponding government security benchmark based on reset or repricing +
long-term risk premium (gross)
Wht = Withholding tax

APP. Q-21
98.12.31
GUIDELINES ON THE USE OF SCRIPLESS (RoSS) SECURITIES

AS SECURITY DEPOSIT FOR THE FAITHFUL PERFORMANCE
OF TRUST DUTIES
(Appendix to Sec. 4405Q and Sec. 4415Q)
Definition of Terms and Acronyms A. Basic Requirements
Scripless securities and RoSS securities - 1. The BSP-SES shall file with BTr an
refers to uncertificated securities issued by the application to open a RoSS Principal
Bureau of Treasury (BTr) that are under the Securities Account where RoSS securities of
BTr’s Registry of Scripless Securities trust institutions used as security deposit for
trust duties shall be held. BSP-SES shall use
Trust institution - refers to an entity that is Annex 1 for this purpose.
authorized to engage in trust business
2. Using Annex 1-A, BSP-SES shall also
BTr - Bureau of Treasury apply for a Client Securities Account (sub-
account) for each trust institution under its
RoSS - Registry of Scripless Securities RoSS Principal Securities Account to enable
BSP-SES to keep track of the security
BSP - Bangko Sentral ng Pilipinas deposit. BTr shall maintain Client
Securities Accounts for P1,000 each month
BSP-SES - Supervision and Examination per account.
Sector of BSP
3. A trust institution which has a DDA
SRSO - Supervisory Reports and Studies with BSP-Accounting shall act as its own
Office of BSP-SES settlement bank.
BSP-Accounting - Accounting Depart- A trust institution which does not have a

ment of BSP DDA with the BSP-Accounting shall designate
a settlement bank which will act as conduit
GSED - Government Securities Eligible for transferring securities for trust duties to the
Dealer of the BTr BSP-SES account and for paying interest,
interest coupons and redemption proceeds.
DDA - refers to the regular demand deposit The trust institution shall inform the
account of a bank/NBQB with BSP- appropriate supervising and examining
Accounting department of the BSP of the designation of a
settlement bank.
MOR - Manual of Regulations for Non-Bank
Financial Institutions 4. Each trust institution shall accomplish
an “Autodebit/Autocredit Authorization” for
Appropriate supervising and examining its client securities account under the BSP-
department or responsible supervising and SES RoSS account. The document will
examining department - refers to the authorize the BTr and the BSP to credit the
Department of Thrift Banks and Non-Bank DDA of the trust institution with BSP-
Financial Institutions Accounting for coupons/interest payments

APP. Q-21
98.12.31
on securities in the BSP-SES RoSS accounts out of the deposit account and the
and to debit the DDA for the monthly fees corresponding sub-account of the trust
payable to BTr for maintaining its client institution only after receiving authorization
securities accounts with BSP-SES. It will also from the Director (or in his absence, the
authorize the BTR and BSP to credit the designated alternate officer) of the
deposit account of BSP-SES with BSP- appropriate supervising and examining
Accounting for the redemption proceeds of department of SES.
securities that mature while in the BSP-SES
RoSS account. 7. BSP-SES shall subscribe to the
Telerate electronic trading system which is
A trust institution with a DDA with BSP- linked to BTr’s RoSS and cause the
Accounting shall use Annex 2-A while a trust installation of a Telerate terminal at SRSO.
institution with a settlement arrangement Trust institutions may be required to
shall use Annex 2-B. reimburse BSP-SES for whatever expenses
that may be incurred in connection with the
5. BSP-SES shall open a deposit account subscription.
with BSP-Accounting where the redemption
value of securities shall be credited, in the 8. Every trust institution must ensure that
event such securities mature while lodged it has adequate security deposit for trust
in the RoSS account of BSP-SES. duties pursuant to the provisions of Subsecs.
4405Q.1, 4405Q.2, 4405Q.3 and 4405Q.4
6. SRSO shall be responsible for keeping of the MOR.
track of the deposit and withdrawal of
securities held under the BSP-SES Principal 9. BTr shall provide BSP-SES with the
Securities Account and the Client Securities end-of-day transaction report whenever a
Accounts of the trust institutions. SRSO shall transaction in any client securities account
instruct BTr to transfer securities out of the is made. BTr shall also provide BSP-SES a
BSP-SES account and the corresponding monthly report of balances of each client
client securities accounts of trust institutions securities account.
only after receiving authorization from the
Director (or in his absence, the designated 10. Every quarter, the responsible
alternate officer) of the appropriate supervising and examining department of
supervising and examining department of BSP-SES shall determine, based on the
SES. Report of Trust and Other Fiduciary
Business and Investment Management
SRSO shall also be responsible for keeping Activities (BSP 7-26-23) submitted by the
track of the BSP-SES deposit account with trust institution, whether or not the trust
the BSP-Accounting representing credits institution’s security deposit for trust duties
for the redemption value of security deposit is sufficient pursuant to the provisions of the
of trust institutions that have matured while MOR mentioned above. In case of
in the RoSS account of BSP-SES. SRSO shall deficiency, the department shall
maintain sub-accounts for each trust recommend the imposition of sanctions and/
institution for the purpose. SRSO shall or any other appropriate action to higher
instruct BSP-Accounting to transfer balances authorities.

APP. Q-21
98.12.31
B. Procedures for Assigning RoSS C. Procedures for Replacing RoSS

Securities as Security Deposit for Trust Securities
Duties
1. The trust institution shall advise the 1. The trust institution shall advise the
appropriate BSP-SES department that it will appropriate supervising and examining
transfer RoSS securities to BSP-SES. The department of BSP-SES that it will replace
advice should be received by the BSP-SES existing RoSS securities assigned as security
at least two (2) business days before the date deposit. The advice should be received by
of transfer using the prescribed form (Annex the BSP-SES at least two (2) business days
3) and checking Box “b” of said form. (Box before the date of replacement using the
“a” shall be checked by a new trust institution prescribed form (Annex 3). The trust
that is making an initial security deposit institution shall check Box “c” of the form
pursuant to Subsec. 4404Q.2 of the MOR.) and indicate the details of the securities to
The advice should be sent by cc mail or by be withdrawn. The advice should be sent by
fax to be followed by an official letter duly cc mail or by fax to be followed by an official
signed by an authorized trust officer. letter duly signed by an authorized trust
officer.
2. The trust institution shall electronically
instruct BTr to transfer securities from its 2. The responsible BSP-SES department
own RoSS accounts to the BSP-SES RoSS and shall verify whether the securities to be
its corresponding Client Securities Account replaced are in the RoSS account of BSP-SES
on the specified date. In the case of a trust and the sub-account of the trust institution
institution with a settlement arrangement, and whether the book value of the securities
the instruction shall be coursed through the to be deposited is equal to or greater than
settlement bank and the securities shall come those to be withdrawn. The department
from the RoSS account of the same bank. concerned shall immediately communicate
with the trust institution in case of a
3. BTr shall effect the transfer upon discrepancy.
verification of RoSS balances. At the end of
the day, BTr shall transmit a transaction report 3. The trust institution shall electronically
to SRSO containing the transfer. instruct BTr to transfer securities from its own
RoSS account to the BSP-SES RoSS accounts
4. SRSO shall provide the appropriate and its corresponding Client Securities
BSP-SES department a copy of the report. Account on the specified date. In the case of
a trust institution with a settlement
5. The BSP-SES department concerned arrangement, the instruction shall be coursed
shall check from the report whether BTr through the settlement bank and the
effected the transfer indicated in the advice securities shall come from the RoSS account
(Annex 3) sent earlier by the trust institution. of the same bank.

APP. Q-21
98.12.31
4. BTr shall effect the transfer upon 8. BTr shall effect the transfer/with-
verification of RoSS balances. At the end of drawal. At the end of the day, BTr shall send
the day, BTr shall transmit a transaction report a report to SRSO containing the transfer/
to SRSO containing the transfer. withdrawal.
5. SRSO shall immediately provide the 9. SRSO shall provide the appropriate
appropriate BSP-SES department a copy of the BSP-SES department a copy of the report.
report.
10. The responsible BSP-SES department
6. The BSP-SES department concerned shall check from the report whether BTr
shall immediately check from the report effected the transfer/withdrawal.
whether the securities transferred to the
BSP-SES account are the same securities D. Procedures for Withdrawing RoSS
described in the advice (Annex 3) sent Securities
earlier. If in order, the Director (or in his
absence, the designated alternate officer) of 1. The trust institution shall advise the
the department concerned shall authorize appropriate BSP-SES department that it will
SRSO to instruct BTr to transfer the securities withdraw existing RoSS securities assigned
specified to be withdrawn from the BSP-SES as security deposit. The advice should be
account to the trust institution’s (or the received by the BSP-SES at least two (2)
settlement bank’s) RoSS account. The banking days before the date of withdrawal
Department concerned shall use Annex 5 using the prescribed form (Annex 4) and
and check Boxes “a” and “d”. Should there indicating therein details of the securities to
be any discrepancy, the department shall be withdrawn. The advice should be sent
inform the trust institution immediately. The by cc mail or by fax to be followed by an
authority to allow the withdrawal should be official letter duly signed by an authorized
transmitted to SRSO not later than the day trust officer.
after the replacement securities were
transferred to the BSP-SES account. 2. The responsible BSP-SES department
shall verify whether the securities to be
The BSP-SES department concerned shall withdrawn are in the RoSS account of BSP-
also advise the trust institution that it has SES and the Client Securities Account of the
approved the replacement of security trust institution. The department shall also
deposit by using Annex 6 and checking Boxes determine whether the amount of remaining
“a” and “d” and the appropriate box under security deposit will still be adequate in spite
“d” depending on whether or not the trust of the proposed withdrawal. If in order, the
institution has a settlement arrangement. Director (or in his absence, the designated
alternate officer) of the department con-
7. On the same day, SRSO shall instruct cerned shall authorize SRSO to instruct BTr
BTr to transfer the securities specified to be to transfer the securities specified to be with-
withdrawn from the BSP-SES account to the drawn from the BSP-SES account to the trust
RoSS account of the trust institution (or its institution’s own RoSS account (or its settle-
settlement bank). ment bank). The Department concerned

APP. Q-21
98.12.31
shall use Annex 5 and check Boxes “b” and F. Procedures for Crediting and
“d”. Should there be any discrepancy, the Withdrawing the Redemption Value of
department shall inform the trust institution Matured Securities that are in the BSP-SES
immediately. The authority to allow the RoSS Account
withdrawal should be transmitted to SRSO
not later than the date of the withdrawal 1. On maturity date, BTr shall instruct
indicated in the advice (Annex 4) sent earlier BSP-Accounting to credit the deposit
by the trust institution. account of BSP-SES with BSP-Accounting for
The BSP-SES department concerned shall the redemption value of securities that
also advise the trust institution that it has mature while held as security deposit in the
approved the withdrawal of security deposit RoSS account of BSP-SES.
by using Annex 6 and checking Boxes “b”
and “d” and the appropriate box under “d” 2. BTr shall send to SRSO a copy of the
depending on whether or not the trust credit advice.
institution has a settlement arrangement.
3. SRSO shall immediately provide the
3. On the same date, SRSO shall appropriate BSP-SES department a copy of
instruct BTr to transfer the securities specified the credit advice.
to be withdrawn from the BSP-SES account
to the RoSS account of the trust institution 4. The responsible BSP-SES department
(or its settlement bank). shall immediately inform the trust
institution concerned of the cash credit and
4. BTr shall effect the transfer/ shall inquire whether the trust institution
withdrawal. At the end of the day, BTr shall intends to transfer securities to the RoSS
send to SRSO a report which contains the account of the BSP-SES to replace the
transfer/withdrawal. matured securities.
5. SRSO shall provide the appropriate 5. The trust institution shall advise the
BSP-SES department a copy of the report. appropriate BSP-SES department that it will
transfer RoSS securities to BSP-SES in place
6. The BSP-SES department concerned of the cash credited to the deposit account
shall check from the report whether BTr of BSP-SES with BSP-Accounting for
effected the withdrawal stated in the advice matured securities. The trust institution shall
(Annex 4) sent earlier by the trust institution. check Box “d” of the prescribed form (Annex
3). The concerned department shall
E. Procedures for Crediting Interest determine if the book value of the securities
Coupon Payments to be transferred is equal to or greater than
the cash credit.
On coupon or interest payment date, BTr
shall instruct BSP-Accounting to credit the 6. The trust institution shall
DDA of trust institutions or their designated electronically instruct BTr to transfer
settlement banks for coupon/interest securities from its own RoSS accounts to
payment of securities held under the RoSS the BSP-SES RoSS account and its
account of BSP-SES.

APP. Q-21
98.12.31
corresponding Client Securities Account on institution (or its designated settlement bank).
the specified date. In the case of a trust The Department concerned shall use Annex
institution with a settlement arrangement, the 5 and check Boxes “c” and “e”.
instruction shall be coursed through the
settlement bank and the securities shall come The BSP-SES department concerned shall
from the RoSS account of the same bank. also advise the trust institution that it has
approved the replacement of matured
7. BTr shall effect the transfer upon securities by using Annex 6 and checking
verification of RoSS balances. At the end of Boxes “c” and “e” and the appropriate box
the day, BTr shall send a report to SRSO under “e” depending on whether or not the
containing the transfer. trust institution has a settlement arrangement.
8. SRSO shall provide the appropriate 10. SRSO shall direct BSP-Accounting to
BSP-SES department a copy of the report. debit the BSP-SES deposit account and credit
the same amount to the DDA of the trust
9. The BSP-SES department concerned institution (or its designated settlement bank)
shall immediately check from the report using Annex 7.
whether the securities transferred to the BSP-
SES account are the same securities described 11. BSP-Accounting shall effect the
in the advice (Annex 3) sent earlier by the transaction and send a copy of the debit
trust institution. If in order, the Director (or advice to SRSO and a copy of the credit
in his absence, the designated alternate advice to the trust institution (or the
officer) of the Department shall direct the designated settlement bank).
SRSO to instruct BSP-Accounting Department
to debit the BSP-SES deposit account and 12. SRSO shall send a copy of the debit
transfer the funds to the DDA of the trust advice to the SES department concerned.

APP. Q-21
98.12.31
ANNEX 1
SUPERVISION AND EXAMINATION SECTOR
Date
_______________________
Treasurer of the Philippines
Bureau of Treasury
Palacio del Gobernador
Intramuros, Manila
Attention: Registry of Scripless Securities (RoSS)
Dear ________________________:
The Supervision and Examination Sector of the Bangko Sentral ng Pilipinas (BSP-SES)
hereby makes an application to open a Principal Securities Account in the Registry of Scripless
Securities (RoSS) for the purpose of holding the security deposit for the faithful performance of
trust duties of institutions engaged in trust business pursuant to Section 65 of R.A. No. 337, as
amended.
We understand that the Bureau of Treasury shall maintain the Principal Securities
Account of BSP-SES for free.
Very truly yours,
______________________
Deputy Governor

APP. Q-21
98.12.31
ANNEX 1-A
SUPERVISION AND EXAMINATION SECTOR
Date
______________________
Treasurer of the Philippines
Bureau of Treasury
Palacio del Gobernador
Intramuros, Manila
Attention: Registry of Scripless Securities (RoSS)
Dear Ms. _________________________
In connection with the Principal Securities Account of BSP-SES in the Registry of

Scripless Securities (RoSS), please open Client Securities Account for the following trust institu-
tions so we can keep track of their security deposit for the faithful performance of trust duties.
Please note that the settlement bank of the institution, if it is required, is also indicated.
Name of Settlement Bank,

Name of Trust Institution where required
1. _____________________ _______________________
2. _____________________ _______________________
n _____________________ _______________________
We understand that the Bureau of Treasury will maintain the Client Securities Account
for P1,000 per month per account.
Very truly yours,
(Signature)
Authorized Signatory

APP. Q-21
98.12.31
ANNEX 2-A
To be used by a trust institution with own demand deposit account with BSP-Accounting
Letterhead of Trust Institution
AUTODEBIT/AUTOCREDIT AUTHORIZATION
The (name of trust institution) hereby authorizes the Bureau

of Treasury (BTr) and the Bangko Sentral ng Pilipinas (BSP) to debit/credit our demand
deposit account with BSP-Accounting for coupons/interest payment of our securities in the
BSP-SES RoSS accounts; and to settle the payment of monthly maintenance fees to BTr of our
client securities account under the BSP-SES RoSS account. We also authorize the BTr and the
BSP to credit the Account of BSP-SES with BSP-Accounting for the redemption proceeds
of our securities in the event such securities mature while in the RoSS account of BSP-SES.
This authorization will take effect on (indicate date) .
(Signature)
(Authorized Signatory)

APP. Q-21
98.12.31
ANNEX 2-B
To be used by a trust institution with settlement arrangement with a bank
AUTODEBIT/AUTOCREDIT AUTHORIZATION
The (name of settlement bank) for the account of (name of trust

institution) hereby authorizes the Bureau of Treasury (BTr) and the Bangko Sentral ng
Pilipinas (BSP) to debit/credit our demand deposit account with BSP-Accounting for coupons/
interest payment of securities of the trust institution in the BSP-SES RoSS accounts; for maturing
securities of the trust institution held in our RoSS Principal Securities Account with BTr; and to
settle the payment of monthly maintenance fees to BTr of our client securities account under
the BSP-SES RoSS account.
The (name of trust institution) also authorizes the BTr and the BSP to credit the
Account of BSP-SES with BSP-Accounting for the redemption proceeds of our securities in the
event such securities mature while in the RoSS account of BSP-SES.
This authorization will take effect on (indicate date) .
(Signature)
(Authorized Signatory of Settlement Bank)
(Signature)
(Authorized Signatory of Trust Institution)

APP. Q-21
98.12.31
Annex 3
Date
The Director
DTBNBFI
A. Mabini St., Manila
Dear Sir:
We are transferring on (indicate date of transfer) the following securities to your Principal Securities
Account and our Client Securities Account (sub-account) as our security deposit for the faithful
performance of trust duties pursuant to Section 65 of R.A. No. 337, as amended.
Purchase Issue Due Remaining Face Purchase

Type ISIN Date__ Date Date Tenor a/ Amount Price
__________ _____ ______ ______ ______ _______ ________ ________

__________ _____ ______ ______ ______ _______ ________ ________
__________ _____ ______ ______ ______ _______ ________ ________
We are transferring the above securities:

a. As our initial deposit
b. As an additional security deposit
c. To replace the following securities which we deposited on (date) .

Type ISIN Date Date Date Tenor a/ Amount Price
__________ _____ ______ ______ ______ _______ ________ ________

__________ _____ ______ ______ ______ _______ ________ ________
__________ _____ ______ ______ ______ _______ ________ ________
d. To replace matured securities the redemption value of which P _________ is

credited to the deposit account of BSP-SES with BSP-Accounting.
Very truly yours,
(Signature)
Name and Designation of Authorized Signatory
__________
a / Reckoned from actual date of transfer/withdrawal

APP. Q-21
98.12.31
Annex 4
Date: _________________
The Director
DTBNBFI
A. Mabini St., Manila
Dear Sir:
We wish to withdraw on (indicate date of transfer) the following securities used as security deposit
for the faithful performance of trust duties from the Principal Securities Account and from our corresponding
Client Securities Account (sub-account).

__________ _____ ______ ______ ______ _______ ________ ________

__________ _____ ______ ______ ______ _______ ________ ________
__________ _____ ______ ______ ______ _______ ________ ________
Very truly yours,
(Signature)
Name and Designation of Authorized Signatory

APP. Q-21
98.12.31
Annex 5
MEMORANDUM
DTBNBFI
For : The Director

Supervisory Reports and Studies Office
From : The Director
Subject : Scripless Securities Used As Deposit for Trust Duties
Date :
In connection with the request of (indicate name of trust institution) dated ______________ to:
a. Replace outstanding RoSS securities

b. Withdraw RoSS securities
c. Replace cash credit of matured securities with outstanding RoSS securities,
you are hereby authorized to:
d. Instruct the Bureau of Treasury to transfer the following securities out of the BSP-
SES RoSS accounts to the RoSS Principal Securities Account of (indicate name of
trust institution or, where applicable, the name of its settlement bank)

__________ _____ ______ ______ ______ _______ ________ ________

__________ _____ ______ ______ ______ _______ ________ ________
__________ _____ ______ ______ ______ _______ ________ ________
e. Instruct BSP-Accounting to debit the BSP-SES deposit account in the amount of

P________ and to transfer said amount to the demand deposit account of (indicate
name of trust institution or, where applicable, the name of its designated settlement
bank).
(Signature)

APP. Q-21
98.12.31
Annex 6
DTBNBFI
Date
(Name of Trust Institution)

(Address)
Subject : Scripless Securities Used As Deposit for Trust Duties
Dear Mr. ____________:
We are pleased to inform you that we have approved your request dated _______________ to:
a. Replace outstanding RoSS securities

b. Withdraw RoSS securities
c. Replace cash credit of matured securities with outstanding RoSS securities.
Accordingly, we have authorized the Supervisory Reports and Studies Office to:
d. Instruct the Bureau of Treasury to transfer the following securities

out of the BSP-SES RoSS accounts to -
the RoSS Principal Securities Account

your settlement bank’s RoSS Principal Securities Account,
the securities described in your request.
e. Instruct BSP-Accounting to debit the BSP-SES deposit account in the

amount of P_______ and to credit said amount to -
your demand deposit account with BSP-Accounting

your settlement bank’s demand deposit account with BSP-Accounting
Very truly yours,
(Signature)

APP. Q-21
98.12.31
Annex 7
MEMORANDUM
DTBNBFI
For : The Director

Accounting Department
From : The Director
Date :
Subject : Security Deposit for Trust Duties
You are hereby instructed to debit our deposit account in the amount of P ___________ and to
credit said amount to the demand deposit account of (indicate name of trust institution or,
where applicable, the name of its settlement bank).
The trust institution has transferred RoSS securities to the Principal Securities Account of BSP-
SES to replace the matured securities.
(Signature)

APP. Q-22
98.12.31
PROFORMA PAYMENT FORM

PAYMENT FORM - (Department Name)
Date
The Director
Cash Department
P. Ocampo, Sr. Cor. A. Mabini, Manila
Sir:
Attached is ________________________ _________________ ____________
(Bank) (Check/DD/CC) Number
in the amount of P_________________ as payment for:
AMOUNT
1. LEGAL RESERVE _______________
2. SUPERVISORY FEES YEAR AMOUNT
______________ ______________
______________ ______________ _______________
3. FINES/PENALTIES
NATURE PERIOD COVERED AMOUNT
a) Late reporting ______________ ______________

b) Reserve deficiency ______________ ______________
c) SBL ______________ ______________
d) Others (Specify) ______________ ______________ ______________
TOTAL
______________
______________________________
Signature Over Printed Name
_______________________________
Position

APP. Q-23
03.12.31
ANTI-MONEY LAUNDERING REGULATIONS

Banks, quasi-banks, trust entities and all be based on official or other reliable
other institutions, and their subsidiaries and documents and records.
affiliates supervised or regulated by the BSP a. In cases of corporate and other legal
(covered institutions) shall strictly comply entities, the following measures should be
with the provisions of Section 9 of R.A. No. taken, when necessary:
9160 and the following rules and regulations (1) Verification of the legal existence and
on anti-money laundering. structure of the client from the appropriate
agency or from the client itself or both, proof
1. Customer identification. Covered of incorporation, including information
institutions shall establish and record the true concerning the customer’s name, legal form,
identity of its clients based on official address, directors, principal officers and
documents. They shall maintain a system of provisions regulating the power behind the
verifying the true identity of their clients and, entity.
in case of corporate clients, require a system (2) Verification of the authority and
of verifying their legal existence and identification of the person purporting to act
organizational structure, as well as the on behalf of the client.
authority and identification of all persons b. In case of doubt as to whether their
purporting to act on their behalf. purported clients or customers are acting for
The guidelines on Customer Due themselves or for another, reasonable
Diligence for NBQBs issued by the BASEL measures should be taken to obtain the true
Committee on Banking Supervision which identity of the persons on whose behalf an
highlights the Know-Your-Customer (KYC) account is opened or a transaction
standards to be observed in the design of KYC conducted.
programs are shown in Annex Q-23-c. c. The provisions of existing laws to the
The guidelines on the Account Opening contrary notwithstanding, anonymous
and Customer Identification issued by the accounts, accounts under fictitious names,
BASEL Committee on Banking Supervision and all other similar accounts shall be
represent the starting point, which can be absolutely prohibited. In case where
used by banks in the area of customer numbered accounts is allowed (i.e., peso and
identification are shown in Annex Q-23-d. foreign currency non-checking numbered
When establishing business relations or accounts), covered institutions should ensure
conducting transactions (particularly opening that the client is identified in an official or
of deposit accounts, accepting deposit other identifying documents.
substitutes, entering into trust and other The BSP may conduct annual testing
fiduciary transactions, renting of safety solely limited to the determination of the
deposit boxes, performing remittances and existence and the identity of the owners of
other large cash transactions) covered such accounts.
institutions should take reasonable measures Covered institutions shall phase out
to establish and record the true identity of within a period of one (1) year from April 2,
their clients. Said client identification may 2001 or upon their maturity, whichever is

APP. Q-23
03.12.31
earlier, anonymous accounts or accounts a. The development of internal policies,

under fictitious names as well as numbered procedures and controls, including the
accounts being kept or managed by them, designation of compliance officers at
which are not expressly allowed under management level, and adequate screening
existing law. procedures to ensure high standards when
d. The identity of existing clients or hiring employees;
beneficial owners of deposits and other funds b. An ongoing employee training
held or being managed by covered program; and
institutions should be renewed/updated at c. An audit function to test the system.
least every other year.
e. All records of all transactions of 3. Submission of plans of action.
covered institutions shall be maintained and Covered institutions shall submit a plan of
safely stored for five (5) years from the dates action on how to comply with the
of transactions. With respect to closed requirements of App. Q-23 nos. 1, 2 and 4
accounts, the records on customer within thirty (30) business days from July 31,
identification, account files and business 2000 or from opening of the institution.
correspondence, shall be preserved and
safely stored for at least five (5) years from 4. Required reporting of certain
the dates when they were closed. transactions. If there is reasonable ground
Such records must be sufficient to permit to believe that the funds are proceeds of an
reconstruction of individual transactions so unlawful activity as defined under R.A. No.
as to provide, if necessary, evidence for 9160 and/or its IRRs, the transactions
prosecution of criminal behaviour. involving such funds or attempts to transact
f. Special attention should be given to the same, should be reported to the Anti-
all complex, unusual large transactions, and Money Laundering Council (AMLC) in
all unusual patterns of transactions, which accordance with Rules 5.2 and 5.3 of the
have no apparent or visible lawful purpose. AMLA IRRs.
The background and purpose of such a. Report on suspicious transactions.1
transactions should, as far as possible, be Banks shall report covered transactions and
examined, the findings established in writing, suspicious transactions, as defined in Rules
and be available to help supervisors, auditors 5.2 and 5.3 of the AMLA IRRs, to the AMLC
and law enforcement agencies. using the forms prescribed by the AMLC.
g. Covered institutions should not, or Reportable transactions shall include the
should at least avoid, transacting business following:
with criminals. Reasonable measures should (1) Outward remittances without visible
be adopted to prevent the use of their facilities lawful purpose;
for laundering of proceeds of crimes and (2) Inward remittances without visible
other illegal activities. lawful purpose or without underlying trade
transactions;
2. Programs against money laundering. (3) Unusual purchases of foreign
Programs against money laundering should exchange without visible lawful purpose;
be developed. These programs, should (4) Unusual sales of foreign exchange
include, as a minimum: whose sources are not satisfactorily
established;
1
Amended by AMLC Resolution No. 292 dated 11.20.03 (Annex Q-23-b).

APP. Q-23
03.12.31
(5) Complex, unusual large transactions, institution, shall be criminally liable.

and all unusual patterns of transactions, However, no administrative, criminal or civil
which have no apparent or visible lawful proceedings, shall lie against any person for
purpose; having made a covered transaction report in
(6) Funds being managed or held as the regular performance of his duties and in
deposit substitutes if there is reasonable good faith, whether or not such reporting
ground to believe that the same are proceeds results in any criminal prosecution under R.A.
of criminal and other illegal activities; and 9160 or any other Philippine law.
(7) All other suspicious transactions/ c. Prohibition from disclosure of the
activities which can be reported without covered transaction report. When reporting
violating any law. covered transactions to the AMLC, covered
The report on suspicious transactions institutions and their officers, employees,
shall provide the following minimum representatives, agents, advisors, consultants
information: or associates are prohibited from
(a) Name or names of the parties communicating, directly or indirectly, in any
involved. manner or by any means, to any person,
(b) A brief description of the transaction entity, the media, the fact that a covered
or transactions. transaction report was made, the contents
(c) Date or date the transaction(s) thereof, or any other information in relation
occurred. thereto. Neither may such reporting be
(d) Amount(s) involved in every published or aired in any manner or form by
transaction. the mass media, electronic mail, or other
(e) Such other relevant information similar devices. In case of violation thereof,
which can be of help to the authorities should the concerned officer, employee,
there be an investigation. representative, agent, advisor, consultant or
b. Exemption from Bank Secrecy Law. associate of the covered institution, or media
When reporting covered transactions to the shall be held criminally liable.
AMLC, covered institutions and their officers,
employees, representatives, agents, advisors, 5. Certification of compliance with
consultants or associates shall not be deemed anti-money laundering regulations. Covered
to have violated R.A. No. 1405, as amended; institution shall submit annually to the BSP
R.A. No. 6426, as amended; R.A. No. 8791 thru the appropriate supervising and
and other similar laws, but are prohibited examining department a certification (Annex
from communicating, directly or indirectly, Q-23-a) signed by the President or officer of
in any manner or by any means, to any equivalent rank and by their Compliance
person the fact that a covered transaction Officer to the effect that they have monitored
report was made, the contents thereof, or any compliance with existing anti-money
other information in relation thereto. In case laundering regulations.
of violation thereof, the concerned officer, The certification shall be submitted in
employee, representative, agent, advisor, accordance with Appendix Q-3 and shall be
consultant or associate of the covered considered a Category A-2 report.

ANNEX Q-23-a
02.12.31
CERTIFICATION OF COMPLIANCE WITH ANTI-MONEY LAUNDERING

REGULATIONS
CERTIFICATION
Pursuant to the provisions of Section 2 of BSP Circular No. 279 dated 2 April 2001, we
hereby certify:
1. That we have monitored (Name of NBQB)’s compliance with R.A. No. 9160 (Anti-
Money Laundering Act of 2001) as well as with BSP Circular Nos. 251, 253, 259 and
302;
2. That the NBQB is complying with the required customer identification, documenta-
tion of all new clients, and continued monitoring of customer’s activities;
3. That the NBQB is also complying with the requirement to record all transactions and
to maintain such records including the record of customer identification for at least
five (5) years;
4. That the NBQB does not maintain anonymous or fictitious accounts; and
5. That we conduct regular anti-money laundering training sessions for all NBQB offic-
ers and selected staff members holding sensitive positions.
________________________ ___________________
(Name of President or officer (Name of Compliance
of equivalent rank) Officer)
SUBSCRIBED AND SWORN to before me, _____ this ____ day of ____________, affiant/s
exhibiting to me their Residence Certificates as follows:
Community Date/Place
Name Tax Cert. No Issued
Doc. No. _________; Notary Public

Page No. _________;
Book No. _________;
Series of 2002

Annex Q-23-a
ANNEX Q-23-b
03.12.31
AMLC Resolution No. 292
RULES ON SUBMISSION OF COVERED TRANSACTION REPORTS AND

SUSPICIOUS TRANSACTION REPORTS BY COVERED INSTITUTIONS
1. All covered institutions are required to file Suspicious Transaction Reports (STRs) on
transactions involving all kinds of monetary instruments or property.
2. Banks shall file covered transaction reports (CTRs) on transactions involving all kinds
of monetary instruments or property, i.e., in cash or non-cash, whether in domestic or foreign
currency.
3. Covered institutions, other than banks, shall file CTRs on transactions in cash or
foreign currency or other monetary instruments (other than checks) or properties. Due to the
nature of the transactions in the stock exchange, only the brokers-dealers shall be required to
file CTRs and STRs. The PSE, PCD, SCCP and transfer agents are exempt from filing CTRs.
They, are however, required to file STRs when the transactions that pass through them are
deemed to be suspicious.
4. Where the covered institution engages in bulk transactions with a bank, i.e., deposits
of premium payments in bulk or settlements of trade, and the bulk transactions do not distinguish
clients and their respective transaction amounts, said covered institutions shall be required to
file CTRs on its clients whose transactions exceed P500,000 and are included in the bulk
transactions.
5. With respect to insurance companies, when the total amount of the premiums for
the entire year, regardless of the mode of payment (monthly, quarterly, semi-annually or
annually), exceeds P500,000, such amount shall be reported as a covered transaction, even if
the amounts of the amortizations are less than the threshold amount. The CTR shall be filed
upon payment of the first premium amount, regardless of the mode of payment. Under this
rule, the insurance company shall file the CTR only once every year until the policy matures or
rescinded, whichever comes first.
6. The submission of CTRs is deferred until the AMLC directs otherwise. Submission
of STRs, however, are not deferred and covered institutions are mandated to submit such STRs
when the circumstances so require.

Annex Q-23-b
ANNEX Q-23-c
03.12.31
CUSTOMER DUE DILIGENCE FOR BANKS AND NON-BANK FINANCIAL

INTERMEDIARIES PERFORMING QUASI-BANKING FUNCTIONS (NBQBs)
1. Customer acceptance policy
Quasi-banks should develop clear customer acceptance policies and procedures,

including a description of the types of customer that are unacceptable to quasi-bank
management. In preparing such policies, factors such as customers’ background, country of
origin, public or high profile position, business activities or other risk indicators should be
considered. Quasi-banks should develop graduated customer acceptance policies and
procedures that require more extensive due diligence for high risk customers. For example,
the policies may require the most basic account-opening requirements for a working individual
with a small account balance, whereas quite extensive due diligence may be deemed essential
for an individual with a high net worth whose source of funds is unclear. Decisions to enter
into business relationships with high risk customers, such as individuals holding important/
prominent positions, public or private (see below), should be taken exclusively at senior
management level.
2. Customer identification
Customer identification is an essential element of KYC standards. A customer is defined

as any person or entity that keeps an account with a quasi-bank and any person or entity on
whose behalf an account is maintained, as well as the beneficiaries of transactions conducted
by professional financial intermediaries. Specifically, a customer should include an account-
holder and the beneficial owner of an account. A customer should also include the beneficiary
of a trust, an investment fund, a pension fund or a company whose assets are managed by an
asset manager, or the grantor of a trust.
Quasi-banks should establish a systematic procedure for verifying the identity of new
customers and should never enter a business relationship until the identity of a new customer
is satisfactorily established. Quasi-banks should “document and enforce policies for
identification of customers and those acting on their behalf”.1 The best documents for verifying
the identity of customers are those most difficult to obtain illicitly and to counterfeit, such as
passport, driver’s license or alien certificate of registration. Special attention should be exercised
in the case of non-resident customers and in no case should a quasi-bank short-circuit identity
procedures just because the new customer is unable to present himself for interview. The
quasi-bank should always ask itself why the customer has chosen to open an account in a
foreign jurisdiction.
The customer identification process applies naturally at the outset of the relationship,
but there is also a need to apply KYC standards to existing customer accounts. Where such
standards have been introduced only recently and do not as yet apply fully to existing customers,
1
Core Principles Methodology, Essential Criterion 2.

Annex Q-23-c - Page 1
ANNEX Q-23-c
03.12.31
a risk assessment exercise can be undertaken and priority given to obtaining necessary
information, where it is deficient, in respect of the higher risk cases. An appropriate time to
review the information available on existing customers is when a transaction of significance
takes place, or when there is a material change in the way that the account is operated. However,
if a quasi-bank is aware that it lacks sufficient information about an existing high-risk customer,
it should take steps to ensure that all relevant information is obtained as quickly as possible. In
addition, the supervisor needs to set an appropriate target date for completion of a KYC review
and regularization of all existing accounts. In any event, a quasi-bank should undertake regular
reviews of its customer base to establish that it has up-to-date information and a proper
understanding of its account holders’ identity and of their business.
Quasi- banks that offer private banking services are particularly exposed to reputational
risk. Private quasi-banking by nature involves a large measure of confidentiality. Private
quasi-banking accounts can be opened in the name of an individual, a commercial business,
a trust, an intermediary or a personalized investment company. In each case reputational risk
may arise if the quasi-bank does not diligently follow established KYC procedures. In no
circumstances should private quasi-banking operations function autonomously, or as a “quasi-
bank within a quasi-bank”2 , and no part of the quasi-bank should ever escape the required
procedures. This means that all new clients and new accounts should be approved by at least
one person other than the private quasi-banking relationship manager. If particular safeguards
are put in place internally to protect confidentiality of private quasi-banking customers and
their business, quasi-banks must still ensure that at least equivalent scrutiny and monitoring of
these customers and their business can be conducted, e.g. they must be open to review by
compliance officers and auditors.
2.1 General identification requirements
Quasi-banks need to obtain all information necessary to establish to their full

satisfaction the identity of each new customer and the purpose and intended nature of
the business relationship. The extent and nature of the information depends on the
type of applicant (personal, corporate, etc.) and the expected size of the account.
National supervisors are encouraged to provide guidance to assist quasi-banks in their
designing their own identification procedures. Examples of the type of information
that would be appropriate are set out in Annex Q-23-c-1.
Quasi-banks should apply their full KYC procedures to applicants that plan to
transfer an opening balance from another financial institution, bearing in mind that the
previous account manager may have asked for the account to be removed because of
a concern about dubious activities.
2
Some quasi-banks insulate their private quasi-banking functions or create Chinese walls as a means of providing
additional protection for customer confidentiality.

ANNEX Q-23-c
03.12.31
Quasi-banks should never agree to open an account or conduct ongoing business

with a customer who insists on anonymity or “bearer” status or who gives a fictitious
name. Nor should confidential numbered3 accounts function as anonymous accounts
but they should be subject to exactly the same KYC procedures as all other customer
accounts, even if the test is carried out by selected staff. Whereas a numbered account
can offer additional protection for the identity of the account-holder, the identity must
be known to a sufficient number of staff to operate proper due diligence. Such accounts
should in no circumstances be used to hide the customer identity from a quasi-bank’s
compliance function or from the supervisors.
Quasi-banks need to be vigilant in preventing corporate business entities from

being used by natural persons as a method of operating anonymous accounts. Personal
asset holding vehicles, such as international business companies (IBCs), may make
proper identification of customers or beneficial owners difficult. A quasi-bank should
take all steps necessary to satisfy itself that it knows the true identity of the ultimate
owner of all such entities.
2.2 Specific identification issues
There are a number of more detailed issues relating to customer identification

which need to be addressed. Particular comments are invited on the issues mentioned
in this section. Several of these are currently under consideration by the FATF as part
of a general review of its forty recommendations, and the Working Group recognizes
the need to be consistent with the FATF.
2.2.1 Trust, nominee and fiduciary accounts or client accounts opened by

professional intermediaries
Trust, nominee and fiduciary accounts can be used to avoid customer

identification procedures. While it may be legitimate under certain circumstances
to provide an extra layer of security to protect the confidentiality of legitimate
private quasi-banking customers, it is essential that the true relationship is
understood. Quasi-banks should establish whether the customer is acting on
behalf of another person as trustee, nominee or professional intermediary (e.g. a
lawyer or an accountant). If so, a necessary precondition is receipt of satisfactory
evidence of the identity of any intermediaries and of the persons upon whose
behalf they are acting, as well as details of the nature of the trust or other
arrangements in place.
3
In a numbered account, the name of the beneficial owner is known to the quasi-bank but is substituted by an
account number or code name in subsequent documentation.

ANNEX Q-23-c
03.12.31
Quasi-banks may hold “pooled’ accounts (e.g. client accounts managed

by law firms) or accounts opened on behalf of pooled entities, such as mutual
funds and money managers. In such cases, quasi-banks have to decide, given the
circumstances, whether the customer is the intermediary, or whether it would be
more appropriate to look through the intermediary to the ultimate beneficial
owners. In each case, the identity of the customer that is subject to due diligence
should be clearly established. The beneficial owners should be verified where
possible. Where not, the quasi-banks should perform due diligence on the
intermediary and establish to its complete satisfaction that the intermediary has a
sound due diligence process for each of its clients.
Special care needs to be exercised in initiating business transactions with

companies that have nominee shareholders or shares in bearer form. Satisfactory
evidence of the identity of beneficial owners of all companies needs to be obtained.
The above procedures may prove difficult for quasi-banks in some

countries to follow. In the case of professional intermediaries such as lawyers,
there might exist professional codes of conduct preventing the dissemination of
information concerning their clients. The FATF is currently engaged in a review
of KYC procedures governing accounts opened by lawyers on behalf of clients.
The Working Group has therefore not taken a definitive position on this issue.
2.2.2 Introduced business
The performance of identification procedures can be time consuming

and there is a natural desire to limit any inconvenience for new customers. In
some countries, it has therefore become customary for quasi-banks to rely on the
procedures undertaken by other quasi-banks or introducers when business is being
referred. In doing so, quasi-banks risk placing excessive reliance on the due
diligence procedures that they expect the introducers to have performed. Relying
on due diligence conducted by an introducer, however reputable, does not in
any way remove the ultimate responsibility of the recipient quasi-bank to know
its customers and their business. In particular, quasi-banks should not rely on
introducers that are subject to weaker standards than those governing the quasi-
banks’ own KYC procedures or that are unwilling to share copies of due diligence
documentation.
The FATF is currently engaged in a review of the appropriateness of eligible

introducers, i.e. whether they should be confined to reputable quasi-banks only
or should extend to other regulated institutions, whether a quasi-bank should
establish a contractual relationship with its introducers and whether it is appropriate
to rely on a third party introducer at all. The Working Group is still developing its
thinking on this topic.

ANNEX Q-23-c
03.12.31
2.2.3 Reputational risk
Business relationship with individuals holding important/prominent

positions, public or private, and with persons or companies clearly related to
them may expose a quasi-bank to significant reputational and/or legal risks.
Accepting and managing funds from such persons could put at risk the
quasi- bank’s own reputation and can undermine public confidence in the ethical
standards of an entire financial centre, since such cases usually receive extensive
media attention and strong political reaction, even if the illegal origin of the assets
is often difficult to prove. In addition, the quasi-bank may be subject to costly
information requests and seizure orders from law enforcement or judicial
authorities (including international mutual assistance procedures in criminal
matters) and could be liable to actions for damages by the state concerned or the
victims of a regime. Under certain circumstances, the quasi-bank and/or its officers
and employees themselves can be exposed to charges of money laundering, if
they know or should have known that the funds stemmed from corruption or
other serious crimes.
3. On-going monitoring of high risk accounts
On-going monitoring of accounts and transactions is an essential aspect of effective

KYC procedures. Quasi-banks can only effectively control and reduce their risk if they have
an understanding of normal and reasonable account activity of their customers. Without such
knowledge, they are likely to fail in their duty to report suspicious transactions to the appropriate
authorities in cases where they are required to do so. The on-going monitoring process includes
the following:
• Quasi-banks should develop “clear standards on what records must be kept on

customer identification and individual transactions and the retention period”.4 As the starting
point and natural follow-up of the identification process, quasi-banks should obtain and keep
up to date customer identification papers and retain them for at least five years after an account
is closed. They should also retain all financial transaction records for at least five years after
the transaction has taken place.
• Quasi-banks should ensure that they have adequate management information systems
to provide managers and compliance officers with timely information needed to identify, analyse
and effectively monitor higher risk customer accounts. The types of reports that may be needed
include reports of missing account opening documentation, transactions made through a
customer account that are unusual, and aggregations of a customer’s total relationship with
the quasi-bank.
• Senior management of a quasi-bank in charge of private quasi-banking business

should know the personal circumstances of the quasi-bank’s large/important customers and
be alert to sources of third party information. Every quasi-bank should draw its own distinction
4
Core Principles Methodology, Essential Criterion 2.

ANNEX Q-23-c
03.12.31
between large/important customers and others, and set threshold indicators for them
accordingly, taking into account the country of origin and other risk factors. Significant
transactions by high-risk customers should be approved by a senior manager.
• Quasi-banks should have systems in place to detect unusual or suspicious patterns

of activity. This can be done by establishing limits for a particular class or category of accounts.
Particular attention should be paid to transactions that exceed these limits. Certain types of
transactions should alert quasi-banks to the possibility that the customer is conducting
undesirable activities. They may include transactions that do not make economic or commercial
sense, or that involve large amounts of cash deposits that are not consistent with the normal
and expected transactions of the customer. Very high account turnover, inconsistent with the
size of the balance, may indicate that funds are being “washed” through the account. A list of
suspicious activities drawn up by supervisors can be very helpful to quasi-banks.
• Quasi-bank should develop a clear policy and internal guidelines, procedures and
controls and remain especially vigilant regarding business relationships with individuals holding
important/prominent positions, public or private, and high profile individuals or with persons
and companies that are clearly related to or associated with them.5
4. Risk Management
Effective KYC procedures embrace routines for proper management oversight, systems
and controls, segregation of duties, training and other related policies. The board of directors
of the quasi-bank should be fully committed to an effective KYC programme by establishing
appropriate procedures and ensuring their effectiveness. Quasi-banks should appoint a senior
officer with explicit responsibility for ensuring that the quasi-bank’s policies and procedures
are, at a minimum, in accordance with local supervisory practice. Quasi-banks should have
clear written procedures, communicated to all personnel, for staff to report suspicious
transactions to a specified senior manager. That manager must then assess whether the quasi-
bank’s statutory obligations under recognized suspicious activity reporting regimes require
the transaction to be reported to the appropriate law enforcement and supervisory authorities.
All quasi-banks must have an ongoing employee-training programme so that quasi-

bank staff is adequately trained in KYC procedures. The timing and content of training for
various sectors of staff will need to be adapted by the quasi-bank for its own needs. Training
requirements should have a different focus for new staff, front-line staff, compliance staff or
staff dealing with new customers. New staff should be educated in the importance of KYC
policies and the basic requirements at the quasi-bank. Front-line staff members who deal
5
It is unrealistic to expect the quasi-bank to know or investigate every distant family, political or business connection
of a foreign customer. The need to pursue suspicions will depend on the size of the assets or turnover, pattern
of transactions, economic background, reputation of the country, plausibility of the customer’s explanations etc.
It should however be noted that individuals holding important/prominent positions, public or private (or rather
their family members and friends) would not necessarily present themselves in that capacity, but rather as
ordinary (albeit wealthy) business people, masking the fact they owe their high position in a legitimate business
corporation only to their privileged relation with the holder of the public office.

ANNEX Q-23-c
03.12.31
directly with the public should be trained to verify the customer identity for new customers, to
exercise due diligence in handling accounts of existing customers on an ongoing basis and to
detect patterns of suspicious activity. Regular refresher training should be provided to ensure
that staff is reminded of their responsibilities and is kept informed of new developments. It is
crucial that all relevant staff fully understand the need for and implement KYC policies
consistently. A culture within quasi-banks that promotes such understanding is the key to
successful implementation.
Quasi-banks’ internal audit and compliance functions have important responsibilities

in evaluating and ensuring adherence to KYC policies and procedures. As a general rule, the
compliance function provides an independent evaluation of the quasi-bank’s own policies
and procedures, including legal and regulatory requirements. Its responsibilities should include
ongoing monitoring of staff performance through sample testing of compliance and review of
exception reports to alert senior management or the Board of Directors if it believes management
is failing to address KYC procedures in a responsible manner.
Internal audit plays an important role in independently evaluating the risk management
and controls, discharging its responsibility to the Audit Committee of the Board of Directors or
a similar oversight body through periodic evaluations of the effectiveness of compliance with
KYC policies and procedures. Management should ensure that audit functions are staffed
adequately with individuals who are well-versed in such policies and procedures. In addition,
internal auditors should be proactive in following-up their findings and criticisms.

ANNEX Q-23-c-1
03.12.31
GENERAL IDENTIFICATION REQUIREMENTS
This annex presents a suggested list of identification requirements for personal customers
and corporates. National supervisors are encouraged to provide guidance to assist quasi-
banks in designing their own identification procedures.
Personal customers
For personal customers, quasi-banks need to obtain the following information:
Name and/or names used,
permanent residential address,
date and place of birth,
name of employer or nature of self-employment/business,
specimen signature, and
source of funds.
Additional information would relate to nationality or country of origin, public or high

profile position, etc. Quasi-banks should verify the information against original documents of
identity issued by an official authority (examples including identity cards and passports). Such
documents should be those that are most difficult to obtain illicitly. In countries where new
customers do not possess the prime identity documents, e.g., identity cards, passports or driving
licenses, some flexibility may be required. However, particular care should be taken in
accepting documents that are easily forged or which can be easily obtained in false identities.
Where there is face to face contact, the appearance should be verified against an official
document bearing a photograph. Any subsequent changes to the above information should
also be recorded and verified.
Corporate and other business customers
For corporate and other business customers, quasi-banks should obtain evidence of
their legal status, such as an incorporation document, partnership agreement, association
documents or a business licence. For large corporate accounts, a financial statement of the
business or a description of the customer’s principal line of business should also be obtained.
In addition, if significant changes to the company structure or ownership occur subsequently,
further checks should be made. In all cases, quasi-banks need to verify that the corporation or
business entity exists and engages in its stated business. The original documents or certified
copies of certificates should be produced for verification.

Annex Q-23-c-1
ANNEX Q-23-d
03.12.31
GENERAL GUIDE TO ACCOUNT OPENING AND

CUSTOMER IDENTIFICATION
1. The Basel Committee on Banking Supervision in its paper on Customer Due Diligence
for Banks published in October 2001 referred to the intention of the Working Group on Cross-
border Banking1 to develop guidance on customer identification. Customer identification is
an essential element of an effective customer due diligence programme which banks need to
put in place to guard against reputational, operational, legal and concentration risks. It is also
necessary in order to comply with anti-money laundering legal requirements and a prerequisite
for the identification of bank accounts related to terrorism.
2. What follows is account opening and customer identification guidelines and a general
guide to good practice based on the principles of the Basel Committee’s Customer due diligence
for banks paper. This document, which has been developed by the Working Group on Cross-
border Banking, does not cover every eventuality, but instead focuses on some of the
mechanisms that banks can use in developing an effective customer identification programme.
3. These guidelines represent a starting point for supervisors and banks in the area of
customer identification. This document does not address the other elements of the Customer
Due Diligence for banks paper, such as the ongoing monitoring of accounts. However, these
elements should be considered in the development of effective customer due diligence, anti-
money laundering and combating the financing of terrorism procedures.
4. These guidelines may be adapted for use by national supervisors who are seeking to
develop or enhance customer identification programmes. However, supervisors should
recognize that any customer identification programme should reflect the different types of
customers (individual vs. institution) and the different levels of risk resulting from a customer’s
relationship with a bank. Higher risk transactions and relationships, such as those with politically
exposed persons or organizations, will clearly require greater scrutiny than lower risk transactions
and accounts.
5. Guidelines and best practices created by national supervisors should also reflect the
various types of transactions that are most prevalent in the national banking system. For
example, non-face-to-face opening of accounts may be more prevalent in one country than
another. For this reason the customer identification procedures may differ between countries.
6. Some identification documents are more vulnerable to fraud than others. For those
that are most susceptible to fraud, or where there is uncertainty concerning the validity of the
document(s) presented, the bank should verify the information provided by the customer through
additional inquiries or other sources of information.
1
The Working Group on Cross-border Banking is a joint group consisting of members of the Basel Committee and
of the Offshore Group of Banking Supervisors.

Annex Q-23-d - Page 1
ANNEX Q-23-d
03.12.31
7. Customer identification documents should be retained for at least five years after an
account is closed. All financial transaction records should be retained for at least five years
after the transaction has taken place.
8. These guidelines are divided into two sections covering different aspects of customer
identification. Section A describes what types of information should be collected and verified
for natural persons seeking to open accounts or perform transactions. Section B describes
what types of information should be collected and verified for institutions and is in two parts,
the first relating to corporate vehicles and the second to other types of institutions.
9. All the terms used in these guidelines have the same meaning as in the Customer due
diligence for banks paper.
A. Natural Persons
10. For natural persons the following information should be obtained, where applicable:
• legal name and any other names used (such as maiden name);
• correct permanent address (the full address should be obtained; a Post Office
box number is not sufficient);
• telephone number, fax number, and e-mail address;
• date and place of birth;
• nationality;
• occupation, public position held and/or name of employer;
• an official person identification number or other unique identifier contained in

an unexpired official document (e.g. passport, identification card, residence permit,
social security records, driving license) that bears a photograph of the customer;
• type of account and nature of the banking relationship;
• signature.
11. The bank should verify this information by at least one of the following methods:
• confirming the date of birth from an official document (e.g. birth certificate,
passport, identity card, social security records);
• confirming the permanent address (e.g. utility bill, tax assessment, bank statement,
a letter from a public authority);

ANNEX Q-23-d
03.12.31
• contacting the customer by telephone, by letter or by e-mail to confirm the

information supplied after an account has been opened (e.g. a disconnected
phone, returned mail, or incorrect e-mail address should warrant further
investigation);
• confirming the validity of the official documentation provided through

certification by an authorised person (e.g. embassy official, notary public).
12. The examples quoted above are not the only possibilities. In particular jurisdictions
there may be other documents of an equivalent nature which may be produced as satisfactory
evidence of customer’s identity.
13. Financial institutions should apply equally effective customer identification procedures
for non-face-to-face customers as for those available for interview.
14. From the information provided in paragraph 10, financial institutions should be able
to make an initial assessment of a customer’s risk profile. Particular attention needs to be
focused on those customers identified thereby as having a higher risk profile and additional
inquiries made or information obtained in respect of those customers to include the following:
• evidence of an individual’s permanent address sought through a credit reference

agency search, or through independent verification by home visits;
• personal reference (i.e. by an existing customer of the same institution);
• prior bank reference and contact with the bank regarding the customer;
• source of wealth;
• verification of employment, public position held (where appropriate).
15. For one-off or occasional transactions where the amount of the transaction or series
of linked transactions does not exceed an established minimum monetary value, it might be
sufficient to require and record only name and address.
16. It is important that the customer acceptance policy is not so restrictive that it results in
a denial of access by the general public to banking services, especially for people who are
financially or socially disadvantaged.
B. Institutions
17. The underlying principles of customer identification for natural persons have equal
application to customer identification for all institutions. Where in the following the
identification and verification of natural persons is involved, the foregoing guidance in respect
of such persons should have equal application.

ANNEX Q-23-d
03.12.31
18. The term institution includes any entity that is not a natural person. In considering
the customer identification guidance for the different types of institutions, particular attention
should be given to the different levels of risk involved.
I. Corporate Entities
19. For corporate entities (i.e. corporations and partnerships), the following information
should be obtained:
• name of institution;
• principal place of institution’s business operations;
• mailing address of institution;
• contact telephone and fax numbers;
• some form of official identification number, if available (e.g. tax identification

number);
• the original or certified copy of the Certificate of Incorporation and Memorandum

and Articles of Association;
• the resolution of the Board of Directors to open an account and identification of

those who have authority to operate the account;
• nature and purpose of business and its legitimacy.
20. The bank should verify this information by at least one of the following methods:
• for established corporate entities – reviewing a copy of the latest report and
accounts (audited, if available);
• conducting an enquiry by a business information service, or an undertaking

from a reputable and known firm of lawyers or accountants confirming the
documents submitted;
• undertaking a company search and/or other commercial enquiries to see that

the institution has not been, or is not in the process of being, dissolved, struck
off, wound up or terminated;
• utilising an independent information verification process, such as by accessing

public and private databases;

ANNEX Q-23-d
03.12.31
• obtaining prior bank references;
• visiting the corporate entity, where practical;
• contacting the corporate entity by telephone, mail or e-mail.
21. The bank should also take reasonable steps to verify the identity and reputation of
any agent that opens an account on behalf of a corporate customer, if that agent is not an
officer of the corporate customer.
Corporations/Partnerships
22. For corporations/partnerships, the principal guidance is to look behind the institution
to identify those who have control over the business and the company’s/partnership’s assets,
including those who have ultimate control. For corporations, particular attention should be
paid to shareholders, signatories, or others who inject a significant proportion of the capital or
financial support or otherwise exercise control. Where the owner is another corporate entity
or trust, the objective is to undertake reasonable measures to look behind that company or
entity and to verify the identity of the principals. What constitutes control for this purpose will
depend on the nature of a company, and may rest in those who are mandated to manage
funds, accounts or investments without requiring further authorisation, and who would be in
a position to override internal procedures and control mechanisms. For partnerships, each
partner should be identified and it is also important to identify immediate family members that
have ownership control.
23. Where a company is listed on a recognised stock exchange or is a subsidiary of such

a company then the company itself may be considered to be the principal to be identified.
However, consideration should be given to whether there is effective control of a listed company
by an individual, small group of individuals or another corporate entity or trust. If this is the
case then those controllers should also be considered to be principals and identified accordingly.
II. Other Types of Institution
24. For the account categories referred to paragraphs 26 to 34, the following information
should be obtained in addition to that required to verify the identity of the principals:
• name of account;
• mailing address;
• contact telephone and fax numbers;
• some form of official identification number, if available (e.g. tax identification

number);

ANNEX Q-23-d
03.12.31
• description of the purpose/activities of the account holder (e.g. in a formal

constitution);
• copy of documentation confirming the legal existence of the account holder

(e.g. register of charities).
25. The bank should verify this information by at least one of the following:
• obtaining an independent undertaking from a reputable and known firm of

lawyers or accountants confirming the documents submitted;
• obtaining prior bank references;
• accessing public and private databases or official sources.
Retirement Benefit Programmes

26. Where an occupational pension programme, employee benefit trust or share option
plan is an applicant for an account the trustee and any other person who has control over the
relationship (e.g. administrator, programme manager, and account signatories) should be
considered as principals and the bank should take steps to verify their identities.
Mutuals/Friendly Societies, Cooperatives and Provident Societies
27. Where these entities are an applicant for an account, the principals to be identified
should be considered to be those persons exercising control or significant influence over the
organisation’s assets. This will often include board members plus executives and account
signatories.
Charities, Clubs and Associations

28. In the case of accounts to be opened for charities, clubs, and societies, the bank
should take reasonable steps to identify and verify at least two signatories along with the
institution itself. The principals who should be identified should be considered to be those
persons exercising control or significant influence over the organisation’s assets. This will
often include members of a governing body or committee, the President, any board members,
the treasurer, and all signatories.
29. In all cases independent verification should be obtained that the persons involved
are true representatives of the institution. Independent confirmation should also be obtained
of the purpose of the institution.
Trusts and Foundations
30. When opening an account for a trust, the bank should take reasonable steps to verify
the trustee(s), the settler(s) of the trust (including any persons settling assets into the trust) any

ANNEX Q-23-d
03.12.31
protector(s), beneficiary(ies), and signatories. Beneficiaries should be identified when they are
defined. In the case of a foundation, steps should be taken to verify the founder, the managers/
directors and the beneficiaries.
Professional Intermediaries
31. When a professional intermediary opens a client account on behalf of a single client
that client must be identified. Professional intermediaries will often open “pooled” accounts
on behalf of a number of entities. Where funds held by the intermediary are not co-mingled
but where there are “sub-accounts” which can be attributable to each beneficial owner, all
beneficial owners of the account held by the intermediary should be identified. Where the
funds are co-mingled, the bank should look through to the beneficial owners; however, there
may be circumstances which should be set out in supervisory guidance where the bank may
not need to look beyond the intermediary (e.g. when the intermediary is subject to the same
due diligence standards in respect of its client base as the bank).
32. Where such circumstances apply and an account is opened for an open or closed
ended investment company, unit trust or limited partnership which is also subject to the same
diligence standards in respect of its client base as the bank, the following should be considered
as principals and the bank should take steps to identify:
• the fund itself;
• its directors or any controlling board where it is a company;
• its trustee where it is a unit trust;
• its managing (general) partner where it is a limited partnership;
• account signatories;
• any other person who has control over the relationship e.g. fund administrator
or manager.
33. Where other investment vehicles are involved, the same steps should be taken as in
paragraph 32 where it is appropriate to do so. In addition all reasonable steps should be taken
to verify the identity of the beneficial owners of the funds and of those who have control of the
funds.
34. Intermediaries should be treated as individual customers of the bank and the standing
of the intermediary should be separately verified by obtaining the appropriate information
drawn from the itemised lists included in paragraphs 19-20 above.

APP. Q-24
04.12.31
ACTIVITIES WHICH MAY BE CONSIDERED UNSAFE AND UNSOUND

PRACTICES
(Appendix to Secs. 4149Q and 4408Q and Subsec. 4301Q.6)
The following activities are considered k. Selling participations without

only as guidelines and are not irrebutably disclosing to the purchasers of those
presumed to be unsafe or unsound. participations material, non-public
Conversely, not all practices which might information known to the NBQB/trust entity.
under the circumstances be termed unsafe l. Failure to limit, control and
or unsound are mentioned here. The document contingent liabilities.
Monetary Board may consider any other acts/ m. Engaging in hazardous lending and
omissions as unsafe or unsound practices. lax collection policies and practices, as
a. Operating with management whose evidenced by:
policies and practices are detrimental to the (1) An excessive volume of loans
NBQB/trust entity and jeopardize the safety subject to adverse classification;
of its deposit substitutes/trust accounts. (2) An excessive volume of loans
b. Operating with total adjusted capital without adequate documentation, including
and reserves that are inadequate in relation credit information;
to the kind and quality of the assets of the (3) Excessive net loan losses;
NBQB/trust entity. (4) An excessive volume of loans in
c. Operating in a way that produces a relation to the total assets and deposit
deficit in net operating income. substitutes/trust liabilities of the NBQB/trust
d. Operating with a serious lack of entity;
liquidity, especially in view of the asset and (5) An excessive volume of weak and
deposit substitute/liability structure of the self-serving loans to persons connected with
NBQB/trust entity. the NBQB/trust entity, especially if a
e. Engaging in speculative and significant portion of these loans are adversely
hazardous investment policies. classified;
f. Paying excessive cash dividends in (6) Excessive concentrations of credit,
relation to the capital position, earnings especially if a substantial portion of this credit
capacity and asset quality of the NBQB/trust is adversely classified;
entity. (7) Indiscriminate participation in weak
g. Excessive reliance on large, high- and undocumented loans originated by other
interest or volatile borrowings. institutions;
h. Excessive reliance on letters of (8) Failing to adopt written loan
credit either issued by the NBQB/trust entity policies;
or accepted as collateral to loans advanced. (9) An excessive volume of past due or
i. Excessive amounts of loan non-performing loans;
participations sold. (10) Failure to diversify the loan portfolio/
j. Paying interest on participations asset mix of the institution; and
without advising participating institution that (11) Failure to make provision for an
the source of interest was not from the adequate reserve for possible loan losses.
borrower.

APP. Q-24
04.12.31
n. Permitting officers to engage in t. Continued and flagrant violation

lending practices beyond the scope of their of any law, rule, regulation or written
positions. agreement between the institution and
o. Operating the NBQB/trust entity with the BSP.
inadequate internal controls. u. Any action likely to cause insolvency
p. Failure to keep accurate and updated or substantial dissipation of assets or earnings
books and records. of the institution or likely to seriously weaken
q. Operating the institution with its condition or otherwise seriously prejudice
excessive volume of out-of-territory loans. the interest of its investors/clients.
r. Excessive volume of non-earning v. Non-observance of the principles
assets. and the requirements for managing
s. Failure to heed warnings and and monitoring large exposures and
admonitions of the supervisory authorities of credit risk concentrations under Subsec.
the institution. 4301Q.6a and b.

APP. Q-25
03.12.31
REVISED IMPLEMENTING RULES AND REGULATIONS

R.A. NO. 9160, AS AMENDED BY R.A. NO. 9194
RULE 1
Title
Rule 1.a. Title. - These Rules shall be known and cited as the “Revised Rules and Regulations
Implementing Republic Act No. 9160”, (the Anti-Money Laundering Act of 2001 [AMLA]), AS
AMENDED BY REPUBLIC ACT NO. 9194.
Rule 1.b. Purpose. - These Rules are promulgated to prescribe the procedures and guidelines
for the implementation of the AMLA, AS AMENDED BY REPUBLIC ACT NO. 9194.
RULE 2
Declaration of Policy
Rule 2. Declaration of Policy. - It is hereby declared the policy of the State to protect the
integrity and confidentiality of bank accounts and to ensure that the Philippines shall not be
used as a money-laundering site for the proceeds of any unlawful activity. Consistent with its
foreign policy, the Philippines shall extend cooperation in transnational investigations and
prosecutions of persons involved in money laundering activities wherever committed.
RULE 3
Definitions
Rule 3. Definitions. – For purposes of THIS ACT, the following terms are hereby defined as
follows:
Rule 3.a. “Covered Institution” refers to:
Rule 3.a.1. Banks, offshore banking units, quasi-banks, trust entities, non-stock savings
and loan associations, pawnshops, and all other institutions, including their subsidiaries
and affiliates supervised and/or regulated by the Bangko Sentral ng Pilipinas (BSP).
(a) A subsidiary means an entity more than fifty percent (50%) of the outstanding
voting stock of which is owned by a bank, quasi-bank, trust entity or any other institution
supervised or regulated by the BSP.
(b) An affiliate means an entity at least twenty percent (20%) but not exceeding fifty
percent (50%) of the voting stock of which is owned by a bank, quasi-bank, trust entity, or
any other institution supervised and/or regulated by the BSP.
Rule 3.a.2. Insurance companies, insurance agents, insurance brokers, professional

reinsurers, reinsurance brokers, holding companies, holding company systems and all other
persons and entities supervised and/or regulated by the Insurance Commission (IC).

APP. Q-25
03.12.31
(a) An insurance company includes those entities authorized to transact insurance

business in the Philippines, whether life or non-life and whether domestic, domestically
incorporated or branch of a foreign entity. A contract of insurance is an agreement
whereby one undertakes for a consideration to indemnify another against loss, damage
or liability arising from an unknown or contingent event. Transacting insurance business
includes making or proposing to make, as insurer, any insurance contract, or as surety,
any contract of suretyship as a vocation and not as merely incidental to any other
legitimate business or activity of the surety, doing any kind of business specifically
recognized as constituting the doing of an insurance business within the meaning of
Presidential Decree (P.D.) No. 612, as amended, including a reinsurance business and
doing or proposing to do any business in substance equivalent to any of the foregoing
in a manner designed to evade the provisions of P.D. No. 612, as amended.
(b) An insurance agent includes any person who solicits or obtains insurance on behalf
of any insurance company or transmits for a person other than himself an application
for a policy or contract of insurance to or from such company or offers or assumes to
act in the negotiation of such insurance.
(c) An insurance broker includes any person who acts or aids in any manner in soliciting,
negotiating or procuring the making of any insurance contract or in placing risk or
taking out insurance, on behalf of an insured other than himself.
(d) A professional reinsurer includes any person, partnership, association or corporation

that transacts solely and exclusively reinsurance business in the Philippines, whether
domestic, domestically incorporated or a branch of a foreign entity. A contract of
reinsurance is one by which an insurer procures a third person to insure him against
loss or liability by reason of such original insurance.
(e) A reinsurance broker includes any person who, not being a duly authorized agent,
employee or officer of an insurer in which any reinsurance is effected, acts or aids in
any manner in negotiating contracts of reinsurance or placing risks of effecting
reinsurance, for any insurance company authorized to do business in the Philippines.
(f) A holding company includes any person who directly or indirectly controls any
authorized insurer. A holding company system includes a holding company together
with its controlled insurers and controlled persons.
Rule 3.a.3. (i) Securities dealers, brokers, salesmen, associated persons of brokers or
dealers, investment houses, investment agents and consultants, trading advisors, and other
entities managing securities or rendering similar services, (ii) mutual funds or open-end
investment companies, close-end investment companies, common trust funds, pre-need
companies or issuers and other similar entities; (iii) foreign exchange corporations, money
changers, money payment, remittance, and transfer companies and other similar entities,
and (iv) other entities administering or otherwise dealing in currency, commodities or
financial derivatives based thereon, valuable objects, cash substitutes and other similar
monetary instruments or property supervised and/or regulated by the Securities and
Exchange Commission (SEC).

APP. Q-25
03.12.31
(a) A securities broker includes a person engaged in the business of buying and selling
securities for the account of others.
(b) A securities dealer includes any person who buys and sells securities for his/her
account in the ordinary course of business.
(c) A securities salesman includes a natural person, employed as such or as an agent,

by a dealer, issuer or broker to buy and sell securities.
(d) An associated person of a broker or dealer includes an employee thereof who

directly exercises control or supervisory authority, but does not include a salesman, or
an agent or a person whose functions are solely clerical or ministerial.
(e) An investment house includes an enterprise which engages or purports to engage,

whether regularly or on an isolated basis, in the underwriting of securities of another
person or enterprise, including securities of the Government and its instrumentalities.
(f) A mutual fund or an open-end investment company includes an investment company

which is offering for sale or has outstanding, any redeemable security of which it is the
issuer.
(g) A closed-end investment company includes an investment company other than

open-end investment company.
(h) A common trust fund includes a fund maintained by an entity authorized to perform
trust functions under a written and formally established plan, exclusively for the
collective investment and reinvestment of certain money representing participation in
the plan received by it in its capacity as trustee, for the purpose of administration,
holding or management of such funds and/or properties for the use, benefit or advantage
of the trustor or of others known as beneficiaries.
(i) A pre-need company or issuer includes any corporation supervised and/or regulated
by the SEC and is authorized or licensed to sell or offer for sale pre-need plans. Pre-
need plans are contracts which provide for the performance of future service(s) or
payment of future monetary consideration at the time of actual need, payable either in
cash or installment by the planholder at prices stated in the contract with or without
interest or insurance coverage and includes life, pension, education, internment and
other plans, which the Commission may, from time to time, approve.
(j) A foreign exchange corporation includes any enterprise which engages or purports
to engage, whether regularly or on an isolated basis, in the sale and purchase of foreign
currency notes and such other foreign-currency denominated non-bank deposit
transactions as may be authorized under its articles of incorporation.
(k) Investment Advisor/Agent/Consultant shall refer to any person:

APP. Q-25
03.12.31
(1) who for an advisory fee is engaged in the business of advising others, either
directly or through circulars, reports, publications or writings, as to the value of
any security and as to the advisability of trading in any security; or
(2) who for compensation and as part of a regular business, issues or promulgates,
analyzes reports concerning the capital market, except:
(a) any bank or trust company;

(b) any journalist, reporter, columnist, editor, lawyer, accountant,
teacher;
(c) the publisher of any bonafide newspaper, news, business or financial
publication of general and regular circulation, including their
employees;
(d) any contract market;
(e) such other person not within the intent of this definition, provided
that the furnishing of such service by the foregoing persons is solely
incidental to the conduct of their business or profession.
(3) any person who undertakes the management of portfolio securities of

investment companies, including the arrangement of purchases, sales or
exchanges of securities.
(l) A moneychanger includes any person in the business of buying or selling foreign
currency notes.
(m) A money payment, remittance and transfer company includes any person offering
to pay, remit or transfer or transmit money on behalf of any person to another person.
(n) “Customer” refers to any person or entity that keeps an account, or otherwise transacts
business, with a covered institution and any person or entity on whose behalf an account
is maintained or a transaction is conducted, as well as the beneficiary of said transactions.
A customer also includes the beneficiary of a trust, an investment fund, a pension fund
or a company or person whose assets are managed by an asset manager, or a grantor of
a trust. It includes any insurance policy holder, whether actual or prospective.
(o) “Property” includes any thing or item of value, real or personal, tangible or intangible,
or any interest therein or any benefit, privilege, claim or right with respect thereto.
Rule 3.b. “COVERED TRANSACTION” IS A TRANSACTION IN CASH OR OTHER

EQUIVALENT MONETARY INSTRUMENT INVOLVING A TOTAL AMOUNT IN EXCESS OF
FIVE HUNDRED THOUSAND PESOS (PHP500,000.00) WITHIN ONE (1) BANKING DAY.
Rule 3.b.1. SUSPICIOUS TRANSACTIONS ARE TRANSACTIONS, REGARDLESS OF

AMOUNT, WHERE ANY OF THE FOLLOWING CIRCUMSTANCES EXISTS:
(1) THERE IS NO UNDERLYING LEGAL OR TRADE OBLIGATION, PURPOSE OR

ECONOMIC JUSTIFICATION;

APP. Q-25
03.12.31
(2) THE CLIENT IS NOT PROPERLY IDENTIFIED;
(3) THE AMOUNT INVOLVED IS NOT COMMENSURATE WITH THE BUSINESS OR

FINANCIAL CAPACITY OF THE CLIENT;
(4) TAKING INTO ACCOUNT ALL KNOWN CIRCUMSTANCES, IT MAY BE PERCEIVED

THAT THE CLIENT’S TRANSACTION IS STRUCTURED IN ORDER TO AVOID BEING THE
SUBJECT OF REPORTING REQUIREMENTS UNDER THE ACT;
(5) ANY CIRCUMSTANCE RELATING TO THE TRANSACTION WHICH IS OBSERVED

TO DEVIATE FROM THE PROFILE OF THE CLIENT AND/OR THE CLIENT’S PAST
TRANSACTIONS WITH THE COVERED INSTITUTION;
(6) THE TRANSACTION IS IN ANY WAY RELATED TO AN UNLAWFUL ACTIVITY OR

ANY MONEY LAUNDERING ACTIVITY OR OFFENSE UNDER THIS ACT THAT IS ABOUT
TO BE, IS BEING OR HAS BEEN COMMITTED; OR
(7) ANY TRANSACTION THAT IS SIMILAR, ANALOGOUS OR IDENTICAL TO ANY

OF THE FOREGOING.
Rule 3.c. “Monetary Instrument” refers to:
(1) Coins or currency of legal tender of the Philippines, or of any other country;
(2) Drafts, checks and notes;
(3) Securities or negotiable instruments, bonds, commercial papers, deposit certificates,
trust certificates, custodial receipts or deposit substitute instruments, trading orders,
transaction tickets and confirmations of sale or investments and money market
instruments;
(4) Contracts or policies of insurance, life or non-life, and contracts of suretyship; and
(5) Other similar instruments where title thereto passes to another by endorsement,
assignment or delivery.
Rule 3.d. “Offender” refers to any person who commits a money laundering offense.
Rule 3.e. “Person” refers to any natural or juridical person.
Rule 3.f. “Proceeds” refers to an amount derived or realized from an unlawful activity. It
includes:
(1) All material results, profits, effects and any amount realized from any unlawful
activity;
(2) All monetary, financial or economic means, devices, documents, papers or things
used in or having any relation to any unlawful activity; and

APP. Q-25
03.12.31
(3) All moneys, expenditures, payments, disbursements, costs, outlays, charges,

accounts, refunds and other similar items for the financing, operations, and
maintenance of any unlawful activity.
Rule 3.g. “Supervising Authority” refers to the BSP, the SEC and the IC. Where the BSP, SEC
or IC supervision applies only to the registration of the covered institution, the BSP, the SEC or
the IC, within the limits of the AMLA, shall have the authority to require and ask assistance
from the government agency having regulatory power and/or licensing authority over said
covered institution for the implementation and enforcement of the AMLA and these Rules.
Rule 3.h. “Transaction” refers to any act establishing any right or obligation or giving rise to
any contractual or legal relationship between the parties thereto. It also includes any movement
of funds by any means with a covered institution.
Rule 3.i. “Unlawful activity” refers to any act or omission or series or combination thereof
involving or having relation, to the following:
(A) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the
Revised Penal Code, as amended;
(1) Kidnapping for ransom
(B) Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15 and 16 of Republic Act No. 9165, otherwise
known as the COMPREHENSIVE Dangerous Drugs Act of 2002;
(2) Importation of prohibited drugs;

(3) Sale of prohibited drugs;
(4) Administration of prohibited drugs;
(5) Delivery of prohibited drugs
(6) Distribution of prohibited drugs
(7) Transportation of prohibited drugs
(8) Maintenance of a Den, Dive or Resort for prohibited users
(9) Manufacture of prohibited drugs
(10) Possession of prohibited drugs
(11) Use of prohibited drugs
(12) Cultivation of plants which are sources of prohibited drugs
(13) Culture of plants which are sources of prohibited drugs
(C) Section 3 paragraphs b, c, e, g, h and i of Republic Act No. 3019, as amended,

otherwise known as the Anti-Graft and Corrupt Practices Act;
(14) Directly or indirectly requesting or receiving any gift, present, share, percentage
or benefit for himself or for any other person in connection with any contract
or transaction between the Government and any party, wherein the public
officer in his official capacity has to intervene under the law;
(15) Directly or indirectly requesting or receiving any gift, present or other pecuniary
or material benefit, for himself or for another, from any person for whom the

APP. Q-25
03.12.31
public officer, in any manner or capacity, has secured or obtained, or will

secure or obtain, any government permit or license, in consideration for the
help given or to be given, without prejudice to Section 13 of R.A. 3019;
(16) Causing any undue injury to any party, including the government, or giving
any private party any unwarranted benefits, advantage or preference in the
discharge of his official, administrative or judicial functions through manifest
partiality, evident bad faith or gross inexcusable negligence;
(17) Entering, on behalf of the government, into any contract or transaction manifestly
and grossly disadvantageous to the same, whether or not the public officer
profited or will profit thereby;
(18) Directly or indirectly having financial or pecuniary interest in any business
contract or transaction in connection with which he intervenes or takes part in
his official capacity, or in which he is prohibited by the Constitution or by any
law from having any interest;
(19) Directly or indirectly becoming interested, for personal gain, or having material
interest in any transaction or act requiring the approval of a board, panel or
group of which he is a member, and which exercise of discretion in such
approval, even if he votes against the same or he does not participate in the
action of the board, committee, panel or group.
(D) Plunder under Republic Act No. 7080, as amended;
(20) Plunder through misappropriation, conversion, misuse or malversation of public

funds or raids upon the public treasury;
(21) Plunder by receiving, directly or indirectly, any commission, gift, share,
percentage, kickbacks or any other form of pecuniary benefit from any person
and/or entity in connection with any government contract or project or by
reason of the office or position of the public officer concerned;
(22) Plunder by the illegal or fraudulent conveyance or disposition of assets belonging
to the National Government or any of its subdivisions, agencies, instrumentalities
or government-owned or controlled corporations or their subsidiaries;
(23) Plunder by obtaining, receiving or accepting, directly or indirectly, any shares
of stock, equity or any other form of interest or participation including the
promise of future employment in any business enterprise or undertaking;
(24) Plunder by establishing agricultural, industrial or commercial monopolies or
other combinations and/or implementation of decrees and orders intended to
benefit particular persons or special interests;
(25) Plunder by taking undue advantage of official position, authority, relationship,
connection or influence to unjustly enrich himself or themselves at the expense
and to the damage and prejudice of the Filipino people and the republic of the
Philippines.
(E) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the
(26) Robbery with violence or intimidation of persons;

(27) Robbery with physical injuries, committed in an uninhabited place and by a
band, or with use of firearms on a street, road or alley;

APP. Q-25
03.12.31
(28) Robbery in an uninhabited house or public building or edifice devoted to

worship.
(F) Jueteng and Masiao punished as illegal gambling under Presidential Decree No.
1602;
(29) Jueteng;
(30) Masiao.
(G) Piracy on the high seas under the Revised Penal Code, as amended and Presidential
Decree No. 532;
(31) Piracy on the high seas;

(32) Piracy in inland Philippine waters;
(33) Aiding and abetting pirates and brigands.
(H) Qualified theft under Article 310 of the Revised Penal Code, as amended;
(34) Qualified theft.
(I) Swindling under Article 315 of the Revised Penal Code, as amended;
(35) Estafa with unfaithfulness or abuse of confidence by altering the substance,

quality or quantity of anything of value which the offender shall deliver by
virtue of an obligation to do so, even though such obligation be based on an
immoral or illegal consideration;
(36) Estafa with unfaithfulness or abuse of confidence by misappropriating or
converting, to the prejudice of another, money, goods or any other personal
property received by the offender in trust or on commission, or for
administration, or under any other obligation involving the duty to make delivery
or to return the same, even though such obligation be totally or partially
guaranteed by a bond; or by denying having received such money, goods, or
other property;
(37) Estafa with unfaithfulness or abuse of confidence by taking undue advantage
of the signature of the offended party in blank, and by writing any document
above such signature in blank, to the prejudice of the offended party or any
third person;
(38) Estafa by using a fictitious name, or falsely pretending to possess power,
influence, qualifications, property, credit, agency, business or imaginary
transactions, or by means of other similar deceits;
(39) Estafa by altering the quality, fineness or weight of anything pertaining to his
art or business;
(40) Estafa by pretending to have bribed any government employee;
(41) Estafa by postdating a check, or issuing a check in payment of an obligation
when the offender has no funds in the bank, or his funds deposited therein
were not sufficient to cover the amount of the check;
(42) Estafa by inducing another, by means of deceit, to sign any document;

APP. Q-25
03.12.31
(43) Estafa by resorting to some fraudulent practice to ensure success in a gambling

game;
(44) Estafa by removing, concealing or destroying, in whole or in part, any court
record, office files, document or any other papers.
(J) Smuggling under Republic Act Nos. 455 and 1937;
(45) Fraudulent importation of any vehicle;

(46) Fraudulent exportation of any vehicle;
(47) Assisting in any fraudulent importation;
(48) Assisting in any fraudulent exportation;
(49) Receiving smuggled article after fraudulent importation;
(50) Concealing smuggled article after fraudulent importation;
(51) Buying smuggled article after fraudulent importation;
(52) Selling smuggled article after fraudulent importation;
(53) Transportation of smuggled article after fraudulent importation;
(54) Fraudulent practices against customs revenue.
(K) Violations under Republic Act No. 8792, otherwise known as the Electronic Commerce
Act of 2000;
K.1. Hacking or cracking, which refers to:
(55) unauthorized access into or interference in a computer system/server or

information and communication system; or
(56) any access in order to corrupt, alter, steal, or destroy using a computer or other
similar information and communication devices, without the knowledge and
consent of the owner of the computer or information and communications
system, including
(57) the introduction of computer viruses and the like, resulting in the corruption,
destruction, alteration, theft or loss of electronic data messages or electronic
document;
K.2. Piracy, which refers to:
(58) the unauthorized copying, reproduction,

(59) the unauthorized dissemination, distribution,
(60) the unauthorized importation,
(61) the unauthorized use, removal, alteration, substitution, modification,
(62) the unauthorized storage, uploading, downloading, communication, making
available to the public, or
(63) the unauthorized broadcasting,
of protected material, electronic signature or copyrighted works including legally
protected sound recordings or phonograms or information material on protected works,
through the use of telecommunication networks, such as, but not limited to, the internet,
in a manner that infringes intellectual property rights;

APP. Q-25
03.12.31
K.3. Violations of the Consumer Act or Republic Act No. 7394 and other relevant or
pertinent laws through transactions covered by or using electronic data messages or
electronic documents:
(64) Sale of any consumer product that is not in conformity with standards under
the Consumer Act;
(65) Sale of any product that has been banned by a rule under the Consumer Act;
(66) Sale of any adulterated or mislabeled product using electronic documents;
(67) Adulteration or misbranding of any consumer product;
(68) Forging, counterfeiting or simulating any mark, stamp, tag, label or other
identification device;
(69) Revealing trade secrets;
(70) Alteration or removal of the labeling of any drug or device held for sale;
(71) Sale of any drug or device not registered in accordance with the provisions of
the E-Commerce Act;
(72) Sale of any drug or device by any person not licensed in accordance with the
provisions of the E-Commerce Act;
(73) Sale of any drug or device beyond its expiration date;
(74) Introduction into commerce of any mislabeled or banned hazardous substance;
(75) Alteration or removal of the labeling of a hazardous substance;
(76) Deceptive sales acts and practices;
(77) Unfair or unconscionable sales acts and practices;
(78) Fraudulent practices relative to weights and measures;
(79) False representations in advertisements as the existence of a warranty or
guarantee;
(80) Violation of price tag requirements;
(81) Mislabeling consumer products;
(82) False, deceptive or misleading advertisements;
(83) Violation of required disclosures on consumer loans;
(84) Other violations of the provisions of the E-Commerce Act;
(L) Hijacking and other violations under Republic Act No. 6235; destructive arson and
murder, as defined under the Revised Penal Code, as amended, including those
perpetrated by terrorists against non-combatant persons and similar targets;
(85) Hijacking;
(86) Destructive arson;
(87) Murder;
(88) Hijacking, destructive arson or murder perpetrated by terrorists against non-
combatant persons and similar targets;
(M) Fraudulent practices and other violations under Republic Act No. 8799, otherwise
known as the Securities Regulation Code of 2000;
(89) Sale, offer or distribution of securities within the Philippines without a registration
statement duly filed with and approved by the SEC;

APP. Q-25
03.12.31
(90) Sale or offer to the public of any pre-need plan not in accordance with the
rules and regulations which the SEC shall prescribe;
(91) Violation of reportorial requirements imposed upon issuers of securities;
(92) Manipulation of security prices by creating a false or misleading appearance of
active trading in any listed security traded in an Exchange or any other trading
market;
(93) Manipulation of security prices by effecting, alone or with others, a series of
transactions in securities that raises their prices to induce the purchase of a
security, whether of the same or different class, of the same issuer or of a
controlling, controlled or commonly controlled company by others;
transactions in securities that depresses their price to induce the sale of a security,
whether of the same or different class, of the same issuer or of a controlling,
controlled or commonly controlled company by others;
transactions in securities that creates active trading to induce such a purchase
or sale though manipulative devices such as marking the close, painting the
tape, squeezing the float, hype and dump, boiler room operations and such
other similar devices;
(96) Manipulation of security prices by circulating or disseminating information that
the price of any security listed in an Exchange will or is likely to rise or fall
because of manipulative market operations of any one or more persons
conducted for the purpose of raising or depressing the price of the security for
the purpose of inducing the purchase or sale of such security;
(97) Manipulation of security prices by making false or misleading statements with
respect to any material fact, which he knew or had reasonable ground to believe
was so false and misleading, for the purpose of inducing the purchase or sale
of any security listed or traded in an Exchange;
(98) Manipulation of security prices by effecting, alone or with others, any series of
transactions for the purchase and/or sale of any security traded in an Exchange
for the purpose of pegging, fixing or stabilizing the price of such security, unless
otherwise allowed by the Securities Regulation Code or by the rules of the
SEC;
(99) Sale or purchase of any security using any manipulative deceptive device or
contrivance;
(100) Execution of short sales or stop-loss order in connection with the purchase or
sale of any security not in accordance with such rules and regulations as the
SEC may prescribe as necessary and appropriate in the public interest or the
protection of the investors;
(101) Employment of any device, scheme or artifice to defraud in connection with
the purchase and sale of any securities;
(102) Obtaining money or property in connection with the purchase and sale of any
security by means of any untrue statement of a material fact or any omission to
state a material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading;

APP. Q-25
03.12.31
(103) Engaging in any act, transaction, practice or course of action in the sale and
purchase of any security which operates or would operate as a fraud or deceit
upon any person;
(104) Insider trading;
(105) Engaging in the business of buying and selling securities in the Philippines as a
broker or dealer, or acting as a salesman, or an associated person of any broker
or dealer without any registration from the Commission;
(106) Employment by a broker or dealer of any salesman or associated person or by
an issuer of any salesman, not registered with the SEC;
(107) Effecting any transaction in any security, or reporting such transaction, in an
Exchange or using the facility of an Exchange which is not registered with the
SEC;
(108) Making use of the facility of a clearing agency which is not registered with the
SEC;
(109) Violations of margin requirements;
(110) Violations on the restrictions on borrowings by members, brokers and dealers;
(111) Aiding and Abetting in any violations of the Securities Regulation Code;
(112) Hindering, obstructing or delaying the filing of any document required under
the Securities Regulation Code or the rules and regulations of the SEC;
(113) Violations of any of the provisions of the implementing rules and regulations of
the SEC;
(114) Any other violations of any of the provisions of the Securities Regulation Code.
(N) Felonies or offenses of a similar nature to the afore-mentioned unlawful activities

that are punishable under the penal laws of other countries.
In determining whether or not a felony or offense punishable under the penal laws of
other countries, is “of a similar nature”, as to constitute the same as an unlawful activity
under the AMLA, the nomenclature of said felony or offense need not be identical to
any of the predicate crimes listed under Rule 3.i.
RULE 4
Money Laundering Offense
Rule 4.1. Money Laundering Offense - Money laundering is a crime whereby the proceeds of
an unlawful activity AS HEREIN DEFINED are transacted, thereby making them appear to
have originated from legitimate sources. It is committed by the following:
(a) Any person knowing that any monetary instrument or property represents, involves, or
relates to, the proceeds of any unlawful activity, transacts or attempts to transact said monetary
instrument or property.
(b) Any person knowing that any monetary instrument or property involves the proceeds of
any unlawful activity, performs or fails to perform any act as a result of which he facilitates the
offense of money laundering referred to in paragraph (a) above.

APP. Q-25
03.12.31
(c) Any person knowing that any monetary instrument or property is required under this Act to
be disclosed and filed with the Anti-Money Laundering Council (AMLC), fails to do so.
RULE 5
Jurisdiction of Money Laundering Cases and
Money Laundering Investigation Procedures
Rule 5.1. Jurisdiction of Money Laundering Cases. - The Regional Trial Courts shall have the
jurisdiction to try all cases on money laundering. Those committed by public officers and
private persons who are in conspiracy with such public officers shall be under the jurisdiction
of the Sandiganbayan.
Rule 5.2. Investigation of Money Laundering Offenses. - The AMLC shall investigate:
(a) SUSPICIOUS TRANSACTIONS;
(b) COVERED TRANSACTIONS DEEMED SUSPICIOUS AFTER AN INVESTIGATION

CONDUCTED BY THE AMLC;
(c) MONEY LAUNDERING ACTIVITIES; AND
(d) OTHER VIOLATIONS OF THIS ACT.
Rule 5.3. Attempts at Transactions. Section 4 (a) and (b) of the AMLA provides that any person
who attempts to transact any monetary instrument or property representing, involving or relating
to the proceeds of any unlawful activity shall be prosecuted for a money laundering offense.
Accordingly, the reports required under Rule 9.3 (a) and (b) of these Rules shall include those
pertaining to any attempt by any person to transact any monetary instrument or property
representing, involving or relating to the proceeds of any unlawful activity.
RULE 6
Prosecution of Money Laundering
Rule 6.1. Prosecution of Money Laundering. -
(a) Any person may be charged with and convicted of both the offense of money laundering
and the unlawful activity as defined under Rule 3 (i) of the AMLA.
(b) Any proceeding relating to the unlawful activity shall be given precedence over the
prosecution of any offense or violation under the AMLA without prejudice to the APPLICATION
EX-PARTE by the AMLC TO THE COURT OF APPEALS FOR A FREEZE ORDER with respect to
the MONETARY INSTRUMENT OR PROPERTY involved therein and resort to other remedies
provided under the AMLA, THE RULES OF COURT AND OTHER PERTINENT LAWS AND
RULES.

APP. Q-25
03.12.31
Rule 6.2. When the AMLC finds, after investigation, that there is probable cause to charge any
person with a money laundering offense under Section 4 of the AMLA, it shall cause a complaint
to be filed, pursuant to Section 7 (4) of the AMLA, before the Department of Justice or the
Ombudsman, which shall then conduct the preliminary investigation of the case.
Rule 6.3. After due notice and hearing in the preliminary investigation proceedings before the
Department of Justice, or the Ombudsman, as the case may be, and the latter should find
probable cause of a money laundering offense, it shall file the necessary information before
the Regional Trial Courts or the Sandiganbayan.
Rule 6.4. Trial for the money laundering offense shall proceed in accordance with the Code of
Criminal Procedure or the Rules of Procedure of the Sandiganbayan, as the case may be.
Rule 6.5. Knowledge of the offender that any monetary instrument or property represents,
involves, or relates to the proceeds of an unlawful activity or that any monetary instrument or
property is required under the AMLA to be disclosed and filed with the AMLC, may be
established by direct evidence or inferred from the attendant circumstances.
Rule 6.6. All the elements of every money laundering offense under Section 4 of the AMLA
must be proved by evidence beyond reasonable doubt, including the element of knowledge
that the monetary instrument or property represents, involves or relates to the proceeds of any
unlawful activity.
Rule 6.7. No element of the unlawful activity, however, including the identity of the perpetrators
and the details of the actual commission of the unlawful activity need be established by proof
beyond reasonable doubt. The elements of the offense of money laundering are separate and
distinct from the elements of the felony or offense constituting the unlawful activity.
RULE 7
Creation of Anti-Money Laundering Council (AMLC)
Rule 7.1.a. Composition. - The Anti-Money Laundering Council is hereby created and shall be
composed of the Governor of the Bangko Sentral ng Pilipinas as Chairman, the Commissioner
of the Insurance Commission and the Chairman of the Securities and Exchange Commission
as members.
Rule 7.1.b. Unanimous Decision. - The AMLC shall act unanimously in discharging its functions
as defined in the AMLA and in these Rules. However, in the case of the incapacity, absence or
disability of any member to discharge his functions, the officer duly designated or authorized
to discharge the functions of the Governor of the BSP, the Chairman of the SEC or the Insurance
Commissioner, as the case may be, shall act in his stead in the AMLC.
Rule 7.2. Functions. - The functions of the AMLC are defined hereunder:
(1) to require and receive covered OR SUSPICIOUS transaction reports from covered institutions;

APP. Q-25
03.12.31
(2) to issue orders addressed to the appropriate Supervising Authority or the covered institution
to determine the true identity of the owner of any monetary instrument or property subject of
a covered OR SUSPICIOUS transaction report, or request for assistance from a foreign State,
or believed by the Council, on the basis of substantial evidence, to be, in whole or in part,
wherever located, representing, involving, or related to, directly or indirectly, in any manner
or by any means, the proceeds of an unlawful activity;
(3) to institute civil forfeiture proceedings and all other remedial proceedings through the
Office of the Solicitor General;
(4) to cause the filing of complaints with the Department of Justice or the Ombudsman for the
prosecution of money laundering offenses;
(5) TO INVESTIGATE SUSPICIOUS TRANSACTIONS AND COVERED TRANSACTIONS

DEEMED SUSPICIOUS AFTER AN INVESTIGATION BY THE AMLC, money laundering
activities and other violations of this Act;
(6) TO APPLY BEFORE THE COURT OF APPEALS, EX-PARTE, FOR THE FREEZING OF any
monetary instrument or property alleged to be proceeds of any unlawful activity AS DEFINED
UNDER SECTION 3(i) HEREOF;
(7) to implement such measures as may be inherent, necessary, implied, incidental and justified
under the AMLA to counteract money laundering. Subject to such limitations as provided for
by law, the AMLC is authorized under Rule 7 (7) of the AMLA to establish an information
sharing system that will enable the AMLC to store, track and analyze money laundering
transactions for the resolute prevention, detection and investigation of money laundering
offenses. For this purpose, the AMLC shall install a computerized system that will be used in
the creation and maintenance of an information database;
(8) to receive and take action in respect of any request from foreign states for assistance in their
own anti-money laundering operations as provided in the AMLA. The AMLC is authorized
under Sections 7 (8) and 13 (b) and (d) of the AMLA to receive and take action in respect of any
request of foreign states for assistance in their own anti-money laundering operations, in respect
of conventions, resolutions and other directives of the United Nations (UN), the UN Security
Council, and other international organizations of which the Philippines is a member. However,
the AMLC may refuse to comply with any such request, convention, resolution or directive
where the action sought therein contravenes the provisions of the Constitution, or the execution
thereof is likely to prejudice the national interest of the Philippines.
(9) to develop educational programs on the pernicious effects of money laundering, the methods
and techniques used in money laundering, the viable means of preventing money laundering
and the effective ways of prosecuting and punishing offenders.
(10) to enlist the assistance of any branch, department, bureau, office, agency or instrumentality
of the government, including government-owned and -controlled corporations, in undertaking
any and all anti-money laundering operations, which may include the use of its personnel,

APP. Q-25
03.12.31
facilities and resources for the more resolute prevention, detection and investigation of money
laundering offenses and prosecution of offenders. The AMLC may require the intelligence
units of the Armed Forces of the Philippines, the Philippine National Police, the Department
of Finance, the Department of Justice, as well as their attached agencies, and other domestic
or transnational governmental or non-governmental organizations or groups to divulge to the
AMLC all information that may, in any way, facilitate the resolute prevention, investigation
and prosecution of money laundering offenses and other violations of the AMLA.
(11) TO IMPOSE ADMINISTRATIVE SANCTIONS FOR THE VIOLATION OF LAWS, RULES,

REGULATIONS AND ORDERS AND RESOLUTIONS ISSUED PURSUANT THERETO.
Rule 7.3. Meetings. - The AMLC shall meet every first Monday of the month, or as often as may
be necessary at the call of the Chairman.
RULE 8
Creation of a Secretariat
Rule 8.1. The Executive Director. - The Secretariat shall be headed by an Executive Director
who shall be appointed by the AMLC for a term of five (5) years. He must be a member of the
Philippine Bar, at least thirty-five (35) years of age, must have served at least five (5) years
either at the BSP, the SEC or the IC and of good moral character, unquestionable integrity and
known probity. He shall be considered a regular employee of the BSP with the rank of Assistant
Governor, and shall be entitled to such benefits and subject to such rules and regulations, as
well as prohibitions, as are applicable to officers of similar rank.
Rule 8.2. Composition. - In organizing the Secretariat, the AMLC may choose from those who
have served, continuously or cumulatively, for at least five (5) years in the BSP, the SEC or the
IC. All members of the Secretariat shall be considered regular employees of the BSP and shall
be entitled to such benefits and subject to such rules and regulations as are applicable to BSP
employees of similar rank.
Rule 8.3. Detail and Secondment. - The AMLC is authorized under Section 7 (10) of the AMLA
to enlist the assistance of the BSP, the SEC or the IC, or any other branch, department, bureau,
office, agency or instrumentality of the government, including government-owned and
controlled corporations, in undertaking any and all anti-money laundering operations. This
includes the use of any member of their personnel who may be detailed or seconded to the
AMLC, subject to existing laws and Civil Service Rules and Regulations. Detailed personnel
shall continue to receive their salaries, benefits and emoluments from their respective mother
units. Seconded personnel shall receive, in lieu of their respective compensation packages
from their respective mother units, the salaries, emoluments and all other benefits to which
their AMLC Secretariat positions are entitled to.
Rule 8.4. Confidentiality Provisions. - The members of the AMLC, the Executive Director, and
all the members of the Secretariat, whether permanent, on detail or on secondment, shall not
reveal, in any manner, any information known to them by reason of their office. This prohibition

APP. Q-25
03.12.31
shall apply even after their separation from the AMLA. In case of violation of this provision, the
person shall be punished in accordance with the pertinent provisions of the Central Bank Act.
RULE 9
Prevention of Money Laundering;
Customer Identification Requirements and Record Keeping
Rule 9.1. Customer Identification Requirements
Rule 9.1.a. Customer Identification. - Covered institutions shall establish and record the
true identity of its clients based on official documents. They shall maintain a system of verifying
the true identity of their clients and, in case of corporate clients, require a system of verifying
their legal existence and organizational structure, as well as the authority and identification of
all persons purporting to act on their behalf. Covered institutions shall establish appropriate
systems and methods based on internationally compliant standards and adequate internal
controls for verifying and recording the true and full identity of their customers.
Rule 9.1.b. Trustee, Nominee and Agent Accounts. - When dealing with customers who
are acting as trustee, nominee, agent or in any capacity for and on behalf of another, covered
institutions shall verify and record the true and full identity of the person(s) on whose behalf a
transaction is being conducted. Covered institutions shall also establish and record the true
and full identity of such trustees, nominees, agents and other persons and the nature of their
capacity and duties. In case a covered institution has doubts as to whether such persons are
being used as dummies in circumvention of existing laws, it shall immediately make the
necessary inquiries to verify the status of the business relationship between the parties.
Rule 9.1.c. Minimum Information/Documents Required for Individual Customers. -

Covered institutions shall require customers to produce original documents of identity issued
by an official authority, bearing a photograph of the customer. Examples of such documents
are identity cards and passports. The following minimum information/documents shall be
obtained from individual customers:
1) Name;
2) Present address;
3) Permanent address;
4) Date and place of birth;
5) Nationality;
6) Nature of work and name of employer or nature of self-employment/business;
7) Contact numbers;
8) Tax identification number, Social Security System number or Government
Service and Insurance System number;
9) Specimen signature;
10) Source of fund(s); and
11) Names of beneficiaries in case of insurance contracts and whenever applicable.

APP. Q-25
03.12.31
Rule 9.1.d. Minimum Information/Documents Required for Corporate and Juridical

Entities. - Before establishing business relationships, covered institutions shall endeavor to
ensure that the customer is a corporate or juridical entity which has not been or is not in the
process of being, dissolved, wound up or voided, or that its business or operations has not
been or is not in the process of being, closed, shut down, phased out, or terminated. Dealings
with shell companies and corporations, being legal entities which have no business substance
in their own right but through which financial transactions may be conducted, should be
undertaken with extreme caution. The following minimum information/documents shall be
obtained from customers that are corporate or juridical entities, including shell companies
and corporations:
(1) Articles of Incorporation/Partnership;

(2) By-laws;
(3) Official address or principal business address;
(4) List of directors/partners;
(5) List of principal stockholders owning at least two percent (2%) of the capital
stock;
(6) Contact numbers;
(7) Beneficial owners, if any; and
(8) Verification of the authority and identification of the person purporting to act
on behalf of the client.
Rule 9.1.e. Prohibition against Certain Accounts. Covered institutions shall maintain
accounts only in the true and full name of the account owner or holder. The provisions of
existing laws to the contrary notwithstanding, anonymous accounts, accounts under fictitious
names, and all other similar accounts shall be absolutely prohibited.
Rule 9.1.f. Prohibition against opening of Accounts without Face-to-face Contact. - No

new accounts shall be opened and created without face-to-face contact and full compliance
with the requirements under Rule 9.1.c of these Rules.
Rule 9.1.g. Numbered Accounts. - Peso and foreign currency non-checking numbered
accounts shall be allowed: Provided, That the true identity of the customers of all peso and
foreign currency non-checking numbered accounts are satisfactorily established based on official
and other reliable documents and records, and that the information and documents required
under the provisions of these Rules are obtained and recorded by the covered institution. No
peso and foreign currency non-checking accounts shall be allowed without the establishment
of such identity and in the manner herein provided. The BSP may conduct annual testing for
the purpose of determining the existence and true identity of the owners of such accounts. The
SEC and the IC may conduct similar testing more often than once a year and covering such
other related purposes as may be allowed under their respective charters.
Rule 9.2. Record Keeping Requirements
Rule 9.2.a. Record Keeping: Kinds of Records and Period for Retention. – All records of
all transactions of covered institutions shall be maintained and safely stored for five (5) years

APP. Q-25
03.12.31
from the dates of transactions. Said records and files shall contain the full and true identity of
the owners or holders of the accounts involved in the covered transactions and all other
customer identification documents. Covered institutions shall undertake the necessary adequate
security measures to ensure the confidentiality of such file. Covered institutions shall prepare
and maintain documentation, in accordance with the aforementioned client identification
requirements, on their customer accounts, relationships and transactions such that any account,
relationship or transaction can be so reconstructed as to enable the AMLC, and/or the courts to
establish an audit trail for money laundering.
Rule 9.2.b. Existing and New Accounts and New Transactions. - All records of existing
and new accounts and of new transactions shall be maintained and safely stored for five (5)
years from October 17, 2001 or from the dates of the accounts or transactions, whichever is
later.
Rule 9.2.c. Closed Accounts. With respect to closed accounts, the records on customer
identification, account files and business correspondence shall be preserved and safely stored
for at least five (5) years from the dates when they were closed.
Rule 9.2.d. Retention of Records in Case a Money Laundering Case has been Filed in
Court. – If a money laundering case based on any record kept by the covered institution
concerned has been filed in court, said file must be retained beyond the period stipulated in
the three (3) immediately preceding sub-Rules, as the case may be, until it is confirmed that
the case has been finally resolved or terminated by the court.
Rule 9.2.e. Form of Records. – Records shall be retained as originals in such forms as are
admissible in court pursuant to existing laws and the applicable rules promulgated by the
Supreme Court.
Rule 9.3. Reporting of Covered Transactions.
Rule 9.3.a. Period of Reporting Covered Transactions and SuspiciousTransactions. -

COVERED INSTITUTIONS SHALL REPORT TO THE AMLC ALL COVERED TRANSACTIONS
AND SUSPICIOUS TRANSACTIONS WITHIN FIVE (5) WORKING DAYS FROM
OCCURRENCE THEREOF, UNLESS THE SUPERVISING AUTHORITY CONCERNED
PRESCRIBES A LONGER PERIOD NOT EXCEEDING TEN (10) WORKING DAYS.
SHOULD A TRANSACTION BE DETERMINED TO BE BOTH A COVERED AND A

SUSPICIOUS TRANSACTION, THE COVERED INSTITUTION SHALL REPORT THE SAME
AS A SUSPICIOUS TRANSACTION.
THE REPORTING OF COVERED TRANSACTIONS BY COVERED INSTITUTIONS SHALL

BE DEFERRED FOR A PERIOD OF SIXTY (60) DAYS AFTER THE EFFECTIVITY OF REPUBLIC
ACT NO. 9194, OR AS MAY BE DETERMINED BY THE AMLC, IN ORDER TO ALLOW THE
COVERED INSTITUTIONS TO CONFIGURE THEIR RESPECTIVE COMPUTER SYSTEMS;
PROVIDED THAT, ALL COVERED TRANSACTIONS DURING SAID DEFERMENT PERIOD
SHALL BE SUBMITTED THEREAFTER.

APP. Q-25
03.12.31
Rule 9.3.b. Covered AND SUSPICIOUS Transaction Report Forms. - The Covered
Transaction Report (CTR) AND THE SUSPICIOUS TRANSACTION REPORT (STR) shall be in
the forms prescribed by the AMLC.
Rule 9.3.b.1. COVERED INSTITUTIONS SHALL USE THE EXISTING FORMS FOR
COVERED TRANSACTION REPORTS AND SUSPICIOUS TRANSACTION REPORTS, UNTIL
SUCH TIME AS THE AMLC HAS ISSUED NEW SETS OF FORMS.
Rule 9.3.b.2. COVERED TRANSACTION REPORTS AND SUSPICIOUS

TRANSACTION REPORTS SHALL BE SUBMITTED IN A SECURED MANNER TO THE AMLC
IN ELECTRONIC FORM, EITHER VIA DISKETTES, LEASED LINES, OR THROUGH INTERNET
FACILITIES, WITH THE CORRESPONDING HARD COPY FOR SUSPICIOUS
TRANSACTIONS. THE FINAL FLOW AND PROCEDURES FOR SUCH REPORTING SHALL
BE MAPPED OUT IN THE MANUAL OF OPERATIONS TO BE ISSUED BY THE AMLC.
Rule 9.3.c. Exemption from Bank Secrecy Laws. – When reporting covered OR
SUSPICIOUS transactions to the AMLC, covered institutions and their officers and employees,
shall not be deemed to have violated R.A. No. 1405, as amended, R.A. No. 6426, as amended,
R.A. No. 8791 and other similar laws, but are prohibited from communicating, directly or
indirectly, in any manner or by any means, to any person the fact that a covered or suspicious
transaction report was made, the contents thereof, or any other information in relation thereto.
In case of violation thereof, the concerned officer and employee of the covered institution,
shall be criminally liable.
Rule 9.3.d. Confidentiality Provisions. – When reporting covered transactions or suspicious

transactions to the AMLC, covered institutions and their officers, employees, representatives,
agents, advisors, consultants or associates are prohibited from communicating, directly or
indirectly, in any manner or by any means, to any person, entity, or the media, the fact that a
covered transaction report was made, the contents thereof, or any other information in relation
thereto. Neither may such reporting be published or aired in any manner or form by the mass
media, electronic mail, or other similar devices. In case of violation hereof, the concerned
officer, employee, representative, agent, advisor, consultant or associate of the covered
institution, or media shall be held criminally liable.
Rule 9.3.e. Safe Harbor Provisions. – No administrative, criminal or civil proceedings,

shall lie against any person for having made a covered transaction report OR A SUSPICIOUS
transaction report in the regular performance of his duties and in good faith, whether or not
such reporting results in any criminal prosecution under this Act or any other Philippine law.
RULE 10
APPLICATION FOR FREEZE ORDERS
Rule 10.1. WHEN THE AMLC MAY APPLY FOR THE FREEZING OF ANY MONETARY
INSTRUMENT OR PROPERTY. -
(a) AFTER AN INVESTIGATION CONDUCTED BY THE AMLC AND UPON DETERMINATION

THAT PROBABLE CAUSE EXISTS THAT A MONETARY INSTRUMENT OR PROPERTY IS IN

APP. Q-25
03.12.31
ANY WAY RELATED TO ANY UNLAWFUL ACTIVITY AS DEFINED UNDER SECTION 3 (i),
THE AMLC MAY FILE AN EX-PARTE APPLICATION BEFORE THE COURT OF APPEALS FOR
THE ISSUANCE OF A FREEZE ORDER ON ANY MONETARY INSTRUMENT OR PROPERTY
subject thereof prior to the institution or in the course of, the criminal proceedings involving
the unlawful activity to which said MONETARY INSTRUMENT OR PROPERTY is any way
related.
(b) Considering the intricate and diverse web of related and interlocking accounts PERTAINING
TO THE MONETARY INSTRUMENT(S) OR PROPERTY(IES) that any person may create in the
different covered institutions, their branches and/or other units, the AMLC may APPLY TO
THE COURT OF APPEALS FOR THE FREEZING, NOT ONLY OF THE MONETARY
INSTRUMENTS OR PROPERTIES IN THE NAMES OF THE REPORTED OWNER(S)/HOLDER(S),
AND MONETARY INSTRUMENTS OR PROPERTIES NAMED IN THE APPLICATION OF
THE AMLC BUT ALSO ALL OTHER RELATED WEB OF ACCOUNTS PERTAINING TO OTHER
MONETARY INSTRUMENTS AND PROPERTIES, THE FUNDS AND SOURCES OF WHICH
ORIGINATED FROM OR ARE RELATED TO THE MONETARY INSTRUMENT(S) OR
PROPERTY(IES) SUBJECT OF THE FREEZE ORDER(S).
(c) THE FREEZE ORDER SHALL BE EFFECTIVE FOR TWENTY (20) DAYS UNLESS EXTENDED
BY THE COURT OF APPEALS UPON APPLICATION BY THE AMLC.
Rule 10.2. Definition of Probable Cause. - Probable cause includes such facts and circumstances
which would lead a reasonably discreet, prudent or cautious man to believe that an unlawful
activity and/or a money laundering offense is about to be, is being or has been committed and
that the account or any monetary instrument or property subject thereof sought to be frozen is
in any way related to said unlawful activity and/or money laundering offense.
Rule 10.3. DUTY OF COVERED INSTITUTION UPON RECEIPT THEREOF. –
Rule 10.3.a. Upon receipt of the notice of the freeze order, the covered institution
concerned shall immediately freeze the monetary instrument or property AND RELATED WEB
OF ACCOUNTS subject thereof.
Rule 10.3.b. THE COVERED INSTITUTION SHALL LIKEWISE IMMEDIATELY FURNISH

A COPY OF THE NOTICE OF THE FREEZE ORDER UPON THE OWNER OR HOLDER OF
THE MONETARY INSTRUMENT OR PROPERTY OR RELATED WEB OF ACCOUNTS SUBJECT
THEREOF.
Rule 10.3.c. Within twenty-four (24) hours from receipt of the freeze order, the covered
institution concerned shall submit to the COURT OF APPEALS AND THE AMLC, by personal
delivery, a detailed written return on the freeze order, specifying ALL THE PERTINENT AND
RELEVANT INFORMATION WHICH SHALL INCLUDE THE FOLLOWING:
1. THE ACCOUNT NUMBER(S);

2. THE NAME(S) OF THE ACCOUNT OWNER(S) OR HOLDER(S);
3. THE AMOUNT OF THE MONETARY INSTRUMENT, PROPERTY OR RELATED WEB
OF ACCOUNTS AS OF THE TIME THEY WERE FROZEN;

APP. Q-25
03.12.31
4. ALL RELEVANT INFORMATION AS TO THE NATURE OF THE MONETARY

INSTRUMENT OR PROPERTY;
5. ANY INFORMATION ON THE RELATED WEB OF ACCOUNTS PERTAINING TO
THE MONETARY INSTRUMENT OR PROPERTY SUBJECT OF THE FREEZE ORDER;
AND
6. THE TIME WHEN THE FREEZE THEREON TOOK EFFECT.
Rule 10.4. DEFINITION OF RELATED WEB OF ACCOUNTS.-
“RELATED WEB OF ACCOUNTS PERTAINING TO THE MONEY INSTRUMENT OR

PROPERTY SUBJECT OF THE FREEZE ORDER” IS DEFINED AS THOSE ACCOUNTS, THE
FUNDS AND SOURCES OF WHICH ORIGINATED FROM AND/OR ARE MATERIALLY
LINKED TO THE MONETARY INSTRUMENT(S) OR PROPERTY(IES) SUBJECT OF THE FREEZE
ORDER(S).
UPON RECEIPT OF THE FREEZE ORDER ISSUED BY THE COURT OF APPEALS AND UPON
VERIFICATION BY THE COVERED INSTITUTION THAT THE RELATED WEB OF ACCOUNTS
ORIGINATED FROM AND/OR ARE MATERIALLY LINKED TO THE MONETARY
INSTRUMENT OR PROPERTY SUBJECT OF THE FREEZE ORDER, THE COVERED
INSTITUTION SHALL FREEZE THESE RELATED WEB OF ACCOUNTS WHEREVER THESE
FUNDS MAY BE FOUND.
THE RETURN OF THE COVERED INSTITUTION AS REQUIRED UNDER RULE 10.3.c SHALL
INCLUDE THE FACT OF SUCH FREEZING AND AN EXPLANATION AS TO THE GROUNDS
FOR THE IDENTIFICATION OF THE RELATED WEB OF ACCOUNTS.
Rule 10.5. Extension of the Freeze Order. - BEFORE THE TWENTY (20) DAY PERIOD OF
THE FREEZE ORDER ISSUED BY THE COURT OF APPEALS EXPIRES, THE AMLC MAY APPLY
IN THE SAME COURT FOR AN EXTENSION OF SAID PERIOD. UPON THE TIMELY FILING
OF SUCH APPLICATION AND PENDING THE DECISION OF THE COURT OF APPEALS
TO EXTEND THE PERIOD, SAID PERIOD SHALL BE DEEMED SUSPENDED AND THE FREEZE
ORDER SHALL REMAIN EFFECTIVE.
HOWEVER, THE COVERED INSTITUTION SHALL NOT LIFT THE EFFECTS OF THE FREEZE
ORDER WITHOUT SECURING OFFICIAL CONFIRMATION FROM THE AMLC.
Rule 10.6. Prohibition against Issuance of Freeze Orders against candidates for an electoral
office during election period. - No assets shall be frozen to the prejudice of a candidate for an
electoral office during an election period.
RULE 11
Authority to Inquire into Bank Deposits
Rule 11.1. Authority to Inquire into Bank Deposits WITH COURT ORDER. - Notwithstanding
the provisions of Republic Act No. 1405, as amended; Republic Act No. 6426, as amended;
Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any particular
deposit or investment with any banking institution or non-bank financial institution AND THEIR

APP. Q-25
03.12.31
SUBSIDIARIES AND AFFILIATES upon order of any competent court in cases of violation of
this Act, when it has been established that there is probable cause that the deposits or investments
involved are related to AN UNLAWFUL ACTIVITY AS DEFINED IN SECTION 3 (i) HEREOF
OR a money laundering offense UNDER SECTION 4 HEREOF; EXCEPT IN CASES AS
PROVIDED UNDER RULE 11.2.
Rule 11.2. Authority to Inquire into Bank Deposits WITHOUT COURT ORDER. - The AMLC
MAY INQUIRE INTO OR EXAMINE DEPOSIT AND INVESTMENTS WITH ANY BANKING
INSTITUTION OR NON-BANK FINANCIAL INSTITUTION AND THEIR SUBSIDIARIES AND
AFFILIATES WITHOUT A COURT ORDER WHERE ANY OF THE FOLLOWING UNLAWFUL
ACTIVITIES ARE INVOLVED:
(a) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised
Penal Code, as amended;
(b) Sections 4,5,6, 8, 9, 10. 12, 13, 14, 15 AND 16 of Republic Act No. 9165, otherwise
(c) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder,
as defined under the Revised Penal Code, as amended, including those perpetrated by terrorists
against noncombatant persons and similar targets
Rule 11.2.a. PROCEDURE FOR EXAMINATION WITHOUT A COURT ORDER. - WHERE

ANY OF THE UNLAWFUL ACTIVITIES ENUMERATED UNDER THE IMMEDIATELY
PRECEDING RULE 11.2 ARE INVOLVED, AND THERE IS PROBABLE CAUSE THAT THE
DEPOSITS OR INVESTMENTS WITH ANY BANKING OR NON-BANKING FINANCIAL
INSTITUTION AND THEIR SUBSIDIARIES AND AFFILIATES ARE IN ANYWAY RELATED
TO THESE UNLAWFUL ACTIVITIES THE AMLC SHALL ISSUE A RESOLUTION
AUTHORIZING THE INQUIRY INTO OR EXAMINATION OF ANY DEPOSIT OR
INVESTMENT WITH SUCH BANKING OR NON-BANKING FINANCIAL INSTITUTION AND
THEIR SUBSIDIARIES AND AFFILIATES CONCERNED.
Rule 11.2.b. DUTY OF THE BANKING INSTITUTION OR NON- BANKING

INSTITUTION UPON RECEIPT OF THE AMLC RESOLUTION. - THE BANKING INSTITUTION
OR THE NON-BANKING FINANCIAL INSTITUTION AND THEIR SUBSIDIARIES AND
AFFILIATES SHALL, IMMEDIATELY UPON RECEIPT OF THE AMLC RESOLUTION, ALLOW
THE AMLC AND/OR ITS AUTHORIZED REPRESENTATIVE(S) FULL ACCESS TO ALL
RECORDS PERTAINING TO THE DEPOSIT OR INVESTMENT ACCOUNT.
Rule 11.3. - BSP Authority to Examine deposits and investments; Additional Exception to the
Bank Secrecy Act. - TO ENSURE COMPLIANCE WITH THIS ACT, THE BANGKO SENTRAL
NG PILIPINAS (BSP) MAY INQUIRE INTO OR EXAMINE ANY PARTICULAR DEPOSIT OR
INVESTMENT WITH ANY BANKING INSTITUTION OR NON-BANK FINANCIAL
INSTITUTION AND THEIR SUBSIDIARIES AND AFFILIATES WHEN THE EXAMINATION
IS MADE IN THE COURSE OF A PERIODIC OR SPECIAL EXAMINATION, IN ACCORDANCE
WITH THE RULES OF EXAMINATION OF THE BSP.

APP. Q-25
03.12.31
Rule 11.3.a. BSP Rules of Examination. - THE BSP SHALL PROMULGATE ITS RULES OF
EXAMINATION FOR ENSURING COMPLIANCE BY BANKS AND NON-BANK FINANCIAL
INSTITUTIONS AND THEIR SUBSIDIARIES AND AFFILIATES WITH THE AMLA AND THESE
RULES.
ANY FINDINGS OF THE BSP WHICH MAY CONSTITUTE A VIOLATION OF ANY

PROVISION OF THIS ACT SHALL BE TRANSMITTED TO THE
AMLC FOR APPROPRIATE ACTION.
RULE 12
Forfeiture Provisions
Rule 12.1. Authority to Institute Civil Forfeiture Proceedings. – The AMLC is authorized
under Section 7 (3) of the AMLA to institute civil forfeiture proceedings and all other remedial
proceedings through the Office of the Solicitor General.
Rule 12.2. When Civil Forfeiture May be Applied. – When there is a SUSPICIOUS
TRANSACTION REPORT OR A COVERED TRANSACTION REPORT DEEMED SUSPICIOUS
AFTER INVESTIGATION BY THE AMLC, and the court has, in a petition filed for the purpose,
ordered the seizure of any monetary instrument or property, in whole or in part, directly or
indirectly, related to said report, the Revised Rules of Court on civil forfeiture shall apply.
Rule 12.3. Claim on Forfeited Assets. - Where the court has issued an order of forfeiture
of the monetary instrument or property in a criminal prosecution for any money laundering
offense under Section 4 of the AMLA, the offender or any other person claiming an interest
therein may apply, by verified petition, for a declaration that the same legitimately belongs to
him, and for segregation or exclusion of the monetary instrument or property corresponding
thereto. The verified petition shall be filed with the court which rendered the judgment of
conviction and order of forfeiture within fifteen (15) days from the date of the order of forfeiture,
in default of which the said order shall become final and executory. This provision shall apply
in both civil and criminal forfeiture.
Rule 12.4. Payment in lieu of Forfeiture. - Where the court has issued an order of forfeiture of
the monetary instrument or property subject of a money laundering offense under Section 4 of
the AMLA, and said order cannot be enforced because any particular monetary instrument or
property cannot, with due diligence, be located, or it has been substantially altered, destroyed,
diminished in value or otherwise rendered worthless by any act or omission, directly or
indirectly, attributable to the offender, or it has been concealed, removed, converted or
otherwise transferred to prevent the same from being found or to avoid forfeiture thereof, or it
is located outside the Philippines or has been placed or brought outside the jurisdiction of the
court, or it has been commingled with other monetary instruments or property belonging to
either the offender himself or a third person or entity, thereby rendering the same difficult to
identify or be segregated for purposes of forfeiture, the court may, instead of enforcing the
order of forfeiture of the monetary instrument or property or part thereof or interest therein,
accordingly order the convicted offender to pay an amount equal to the value of said monetary
instrument or property. This provision shall apply in both civil and criminal forfeiture.

APP. Q-25
03.12.31
RULE 13
Mutual Assistance among States
Rule 13.1. Request for Assistance from a Foreign State. - Where a foreign state makes a
request for assistance in the investigation or prosecution of a money laundering offense, the
AMLC may execute the request or refuse to execute the same and inform the foreign state of
any valid reason for not executing the request or for delaying the execution thereof. The
principles of mutuality and reciprocity shall, for this purpose, be at all times recognized.
Rule 13.2. Powers of the AMLC to Act on a Request for Assistance from a Foreign State. - The
AMLC may execute a request for assistance from a foreign state by: (1) tracking down, freezing,
restraining and seizing assets alleged to be proceeds of any unlawful activity under the
procedures laid down in the AMLA and in these Rules; (2) giving information needed by the
foreign state within the procedures laid down in the AMLA and in these Rules; and (3) applying
for an order of forfeiture of any monetary instrument or property in the court: Provided, That
the court shall not issue such an order unless the application is accompanied by an authenticated
copy of the order of a court in the requesting state ordering the forfeiture of said monetary
instrument or property of a person who has been convicted of a money laundering offense in
the requesting state, and a certification or an affidavit of a competent officer of the requesting
state stating that the conviction and the order of forfeiture are final and that no further appeal
lies in respect of either.
Rule 13.3. Obtaining Assistance from Foreign States. - The AMLC may make a request to any
foreign state for assistance in (1) tracking down, freezing, restraining and seizing assets alleged
to be proceeds of any unlawful activity; (2) obtaining information that it needs relating to any
covered transaction, money laundering offense or any other matter directly or indirectly related
thereto; (3) to the extent allowed by the law of the foreign state, applying with the proper court
therein for an order to enter any premises belonging to or in the possession or control of, any
or all of the persons named in said request, and/or search any or all such persons named
therein and/or remove any document, material or object named in said request: Provided,
That the documents accompanying the request in support of the application have been duly
authenticated in accordance with the applicable law or regulation of the foreign state; and (4)
applying for an order of forfeiture of any monetary instrument or property in the proper court
in the foreign state: Provided, That the request is accompanied by an authenticated copy of the
order of the Regional Trial Court ordering the forfeiture of said monetary instrument or property
of a convicted offender and an affidavit of the clerk of court stating that the conviction and the
order of forfeiture are final and that no further appeal lies in respect of either.
Rule 13.4. Limitations on Requests for Mutual Assistance. - The AMLC may refuse to comply
with any request for assistance where the action sought by the request contravenes any provision
of the Constitution or the execution of a request is likely to prejudice the national interest of
the Philippines, unless there is a treaty between the Philippines and the requesting state relating
to the provision of assistance in relation to money laundering offenses.
Rule 13.5. Requirements for Requests for Mutual Assistance from Foreign States. - A request
for mutual assistance from a foreign state must (1) confirm that an investigation or prosecution
is being conducted in respect of a money launderer named therein or that he has been convicted

APP. Q-25
03.12.31
of any money laundering offense; (2) state the grounds on which any person is being investigated
or prosecuted for money laundering or the details of his conviction; (3) give sufficient particulars
as to the identity of said person; (4) give particulars sufficient to identify any covered institution
believed to have any information, document, material or object which may be of assistance to
the investigation or prosecution; (5) ask from the covered institution concerned any information,
document, material or object which may be of assistance to the investigation or prosecution;
(6) specify the manner in which and to whom said information, document, material or object
obtained pursuant to said request, is to be produced; (7) give all the particulars necessary for
the issuance by the court in the requested state of the writs, orders or processes needed by the
requesting state; and (8) contain such other information as may assist in the execution of the
request.
Rule 13.6. Authentication of Documents. - For purposes of Section 13 (f) of the AMLA and
Section 7 of the AMLA, a document is authenticated if the same is signed or certified by a
judge, magistrate or equivalent officer in or of, the requesting state, and authenticated by the
oath or affirmation of a witness or sealed with an official or public seal of a minister, secretary
of state, or officer in or of, the government of the requesting state, or of the person administering
the government or a department of the requesting territory, protectorate or colony. The certificate
of authentication may also be made by a secretary of the embassy or legation, consul general,
consul, vice consul, consular agent or any officer in the foreign service of the Philippines
stationed in the foreign state in which the record is kept, and authenticated by the seal of his
office.
Rule 13.7. Suppletory Application of the Revised Rules of Court. –
Rule 13.7.1. For attachment of Philippine properties in the name of persons convicted of
any unlawful activity as defined in Section 3 (i) of the AMLA, execution and satisfaction of
final judgments of forfeiture, application for examination of witnesses, procuring search warrants,
production of bank documents and other materials and all other actions not specified in the
AMLA and these Rules, and assistance for any of the aforementioned actions, which is subject
of a request by a foreign state, resort may be had to the proceedings pertinent thereto under
the Revised Rules of Court.
Rule 13.7.2. Authority to Assist the United Nations and other International Organizations
and Foreign States. – The AMLC is authorized under Section 7 (8) and 13 (b) and (d) of the
AMLA to receive and take action in respect of any request of foreign states for assistance in
their own anti-money laundering operations. It is also authorized under Section 7 (7) of the
AMLA to cooperate with the National Government and/or take appropriate action in respect
where the action sought therein contravenes the provision of the Constitution or the execution
Rule 13.8. Extradition. – The Philippines shall negotiate for the inclusion of money laundering
offenses as defined under Section 4 of the AMLA among the extraditable offenses in all future
treaties. With respect, however, to the state parties that are signatories to the United Nations

APP. Q-25
03.12.31
Convention Against Transnational Organized Crime that was ratified by the Philippine Senate
on October 22, 2001, money laundering is deemed to be included as an extraditable offense
in any extradition treaty existing between said state parties, and the Philippines shall include
money laundering as an extraditable offense in every extradition treaty that may be concluded
between the Philippines and any of said state parties in the future.
RULE 14
Penal Provisions
Rule 14.1. Penalties for the Crime of Money Laundering.
Rule 14.1.a. Penalties under Section 4 (a) of the AMLA. - The penalty of imprisonment
ranging from seven (7) to fourteen (14) years and a fine of not less than Three Million Philippine
Pesos (Php3,000,000.00) but not more than twice the value of the monetary instrument or
property involved in the offense, shall be imposed upon a person convicted under Section 4
(a) of the AMLA.
Rule 14.1.b. Penalties under Section 4 (b) of the AMLA. - The penalty of imprisonment
from four (4) to seven (7) years and a fine of not less than One Million Five Hundred Thousand
Philippine Pesos (Php1,500,000.00) but not more than Three Million Philippine Pesos
(Php3,000,000.00), shall be imposed upon a person convicted under Section 4 (b) of the
AMLA.
Rule 14.1.c. Penalties under Section 4 (c) of the AMLA. - The penalty of imprisonment
from six (6) months to four (4) years or a fine of not less than One Hundred Thousand Philippine
Pesos (Php100,000.00) but not more than Five Hundred Thousand Philippine Pesos
(Php500,000.00), or both, shall be imposed on a person convicted under Section 4(c) of the
AMLA.
Rule 14.1.d. Administrative Sanctions. - (1) AFTER DUE NOTICE AND HEARING, THE
AMLC SHALL, AT ITS DISCRETION, IMPOSE FINES UPON ANY COVERED INSTITUTION,
ITS OFFICERS AND EMPLOYEES, OR ANY PERSON WHO VIOLATES ANY OF THE
PROVISIONS OF REPUBLIC ACT NO. 9160, AS AMENDED BY REPUBLIC ACT NO. 9194
AND RULES, REGULATIONS, ORDERS AND RESOLUTIONS ISSUED PURSUANT THERETO.
THE FINES SHALL BE IN AMOUNTS AS MAY BE DETERMINED BY THE COUNCIL, TAKING
INTO CONSIDERATION ALL THE ATTENDANT CIRCUMSTANCES, SUCH AS THE NATURE
AND GRAVITY OF THE VIOLATION OR IRREGULARITY, BUT IN NO CASE SHALL SUCH
FINES BE LESS THAN ONE HUNDRED THOUSAND PESOS (PHP100,000.00) BUT NOT TO
EXCEED FIVE HUNDRED THOUSAND PESOS (PHP500,000.00). THE IMPOSITION OF THE
ADMINISTRATIVE SANCTIONS SHALL BE WITHOUT PREJUDICE TO THE FILING OF
CRIMINAL CHARGES AGAINST THE PERSONS RESPONSIBLE FOR THE VIOLATIONS.
Rule 14.2. Penalties for Failure to Keep Records - The penalty of imprisonment from six (6)
months to one (1) year or a fine of not less than One Hundred Thousand Philippine Pesos
(Php100,000.00) but not more than Five Hundred Thousand Philippine Pesos (Php500,000.00),
or both, shall be imposed on a person convicted under Section 9 (b) of the AMLA.

APP. Q-25
03.12.31
Rule 14.3. Penalties for Malicious Reporting. - Any person who, with malice, or in bad faith,
reports or files a completely unwarranted or false information relative to money laundering
transaction against any person shall be subject to a penalty of six (6) months to four (4) years
imprisonment and a fine of not less than One Hundred Thousand Philippine Pesos (Php100,
000.00) but not more than Five Hundred Thousand Philippine Pesos (Php500,000.00), at the
discretion of the court: Provided, That the offender is not entitled to avail the benefits of the
Probation Law.
Rule 14.4. Where Offender is a Juridical Person. - If the offender is a corporation, association,
partnership or any juridical person, the penalty shall be imposed upon the responsible officers,
as the case may be, who participated in, or ALLOWED BY THEIR GROSS NEGLIGENCE the
commission of the crime. If the offender is a juridical person, the court may suspend or revoke
its license. If the offender is an alien, he shall, in addition to the penalties herein prescribed, be
deported without further proceedings after serving the penalties herein prescribed. If the offender
is a public official or employee, he shall, in addition to the penalties prescribed herein, suffer
perpetual or temporary absolute disqualification from office, as the case may be.
Rule 14.5. Refusal by a Public Official or Employee to Testify. - Any public official or employee
who is called upon to testify and refuses to do the same or purposely fails to testify shall suffer
the same penalties prescribed herein.
Rule 14.6. Penalties for Breach of Confidentiality. – The punishment of imprisonment ranging
from three (3) to eight (8) years and a fine of not less than Five Hundred Thousand Philippine
Pesos (Php500,000.00) but not more than One Million Philippine Pesos (Php 1,000,000.00),
shall be imposed on a person convicted for a violation under Section 9(c). IN CASE OF A
BREACH OF CONFIDENTIALITY THAT IS PUBLISHED OR REPORTED BY MEDIA, THE
RESPONSIBLE REPORTER, WRITER, PRESIDENT, PUBLISHER, MANAGER AND EDITOR-
IN-CHIEF SHALL BE LIABLE UNDER THIS ACT.
RULE 15
Prohibitions Against Political Harassment
Rule 15.1. Prohibition against Political Persecution. - The AMLA and these Rules shall not be
used for political persecution or harassment or as an instrument to hamper competition in
trade and commerce. No case for money laundering may be filed to the prejudice of a candidate
for an electoral office during an election period.
Rule 15.2. Provisional Remedies Application; Exception. –
Rule 15.2.a. - The AMLC may apply, in the course of the criminal proceedings, for
provisional remedies to prevent the monetary instrument or property subject thereof from
being removed, concealed, converted, commingled with other property or otherwise to prevent
its being found or taken by the applicant or otherwise placed or taken beyond the jurisdiction
of the court. However, no assets shall be attached to the prejudice of a candidate for an

APP. Q-25
03.12.31
Rule 15.2.b. - Where there is conviction for money laundering under Section 4 of the
AMLA, the court shall issue a judgment of forfeiture in favor of the Government of the Philippines
with respect to the monetary instrument or property found to be proceeds of one or more
unlawful activities. However, no assets shall be forfeited to the prejudice of a candidate for an
RULE 16
Restitution
Rule 16. Restitution. - Restitution for any aggrieved party shall be governed by the provisions
of the New Civil Code.
RULE 17
Implementing Rules and Regulations and
Money Laundering Prevention Programs
Rule 17.1. Implementing Rules and Regulations. –
(a) Within thirty (30) days from the effectivity of REPUBLIC ACT NO. 9160, as amended by
REPUBLIC ACT NO. 9194, the Bangko Sentral ng Pilipinas, the Insurance Commission and
the Securities and Exchange Commission shall promulgate the Implementing Rules and
Regulations of the AMLA, which shall be submitted to the Congressional Oversight Committee
for approval.
(b) The Supervising Authorities, the BSP, the SEC and the IC shall, under their own respective
charters and regulatory authority, issue their Guidelines and Circulars on anti-money laundering
to effectively implement the provisions of REPUBLIC ACT NO. 9160, AS AMENDED BY
REPUBLIC ACT NO. 9194.
Rule 17.2. Money Laundering Prevention Programs. –
Rule 17.2.a. Covered institutions shall formulate their respective money laundering
prevention programs in accordance with Section 9 and other pertinent provisions of the AMLA
and these Rules, including, but not limited to, information dissemination on money laundering
activities and their prevention, detection and reporting, and the training of responsible officers
and personnel of covered institutions, subject to such guidelines as may be prescribed by their
respective supervising authority. Every covered institution shall submit its own money laundering
program to the supervising authority concerned within the non-extendible period that the
supervising authority has imposed in the exercise of its regulatory powers under its own charter.
Rule 17.2.b. Every money laundering program shall establish detailed procedures
implementing a comprehensive, institution-wide “know-your-client” policy, set-up an effective
dissemination of information on money laundering activities and their prevention, detection
and reporting, adopt internal policies, procedures and controls, designate compliance officers
at management level, institute adequate screening and recruitment procedures, and set-up an
audit function to test the system.

APP. Q-25
03.12.31
Rule 17.2.c. Covered institutions shall adopt, as part of their money laundering programs,
a system of flagging and monitoring transactions that qualify as suspicious transactions,
regardless of amount or covered transactions involving amounts below the threshold to facilitate
the process of aggregating them for purposes of future reporting of such transactions to the
AMLC when their aggregated amounts breach the threshold. All covered institutions, including
banks insofar as non-deposit and non-government bond investment transactions are concerned,
shall incorporate in their money laundering programs the provisions of these Rules and such
other guidelines for reporting to the AMLC of all transactions that engender the reasonable
belief that a money laundering offense is about to be, is being, or has been committed.
Rule 17.3. Training of Personnel. - Covered institutions shall provide all their responsible
officers and personnel with efficient and effective training and continuing education programs
to enable them to fully comply with all their obligations under the AMLA and these Rules.
Rule 17.4. Amendments. - These Rules or any portion thereof may be amended by unanimous
vote of the members of the AMLC and submitted to the Congressional Oversight Committee as
provided for under Section 19 of REPUBLIC ACT NO. 9160, as amended BY REPUBLIC ACT
NO. 9194.
RULE 18
Congressional Oversight Committee
Rule 18.1. Composition of Congressional Oversight Committee. - There is hereby created a

Congressional Oversight Committee composed of seven (7) members from the Senate and
seven (7) members from the House of Representatives. The members from the Senate shall be
appointed by the Senate President based on the proportional representation of the parties or
coalitions therein with at least two (2) Senators representing the minority. The members from
the House of Representatives shall be appointed by the Speaker also based on proportional
representation of the parties or coalitions therein with at least two (2) members representing
the minority.
Rule 18.2. Powers of the Congressional Oversight Committee. - The Oversight Committee
shall have the power to promulgate its own rules, to oversee the implementation of this Act,
and to review or revise the implementing rules issued by the Anti-Money Laundering Council
within thirty (30) days from the promulgation of the said rules.
RULE 19
Appropriations For and Budget of the AMLC
Rule 19.1. Budget. – The budget of Php25,000,000.00 appropriated by Congress under the
AMLA shall be used to defray the initial operational expenses of the AMLC. Appropriations for
succeeding years shall be included in the General Appropriations Act. The BSP shall advance
the funds necessary to defray the capital outlay, maintenance and other operating expenses
and personnel services of the AMLC subject to reimbursement from the budget of the AMLC
as appropriated under the AMLA and subsequent appropriations.

APP. Q-25
03.12.31
Rule 19.2. Costs and Expenses. - The budget shall answer for indemnification for legal costs
and expenses reasonably incurred for the services of external counsel in connection with any
civil, criminal or administrative action, suit or proceedings to which members of the AMLC
and the Executive Director and other members of the Secretariat may be made a party by
reason of the performance of their functions or duties. The costs and expenses incurred in
defending the aforementioned action, suit or proceeding may be paid by the AMLC in advance
of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or
on behalf of the member to repay the amount advanced should it be ultimately determined
that said member is not entitled to such indemnification.
RULE 20
Separability Clause
Rule 20. Separability Clause. – If any provision of these Rules or the application thereof to any
person or circumstance is held to be invalid, the other provisions of these Rules, and the
application of such provision or Rule to other persons or circumstances, shall not be affected
thereby.
RULE 21
Repealing Clause
Rule 21. Repealing Clause. – All laws, decrees, executive orders, rules and regulations or parts
thereof, including the relevant provisions of Republic Act No. 1405, as amended; Republic
Act No. 6426, as amended; Republic Act No. 8791, as amended, and other similar laws, as
are inconsistent with the AMLA, are hereby repealed, amended or modified accordingly.
RULE 22
Effectivity of The Rules
Rule 23.1. Effectivity. – These Rules shall take effect after its approval by the Congressional
Oversight Committee and fifteen (15) days after its complete publication in the Official Gazette
or in a newspaper of general circulation.
RULE 23
Transitory Provisions
Rule 23.1. - Transitory Provisions. - EXISTING FREEZE ORDERS ISSUED BY THE AMLC SHALL
REMAIN IN FORCE FOR A PERIOD OF THIRTY (30) DAYS AFTER EFFECTIVITY OF THIS
ACT, UNLESS EXTENDED BY THE COURT OF APPEALS.
Rule 23.2. - EFFECT OF REPUBLIC ACT NO. 9194 ON CASES FOR EXTENSION OF FREEZE
ORDERS RESOLVED BY THE COURT OF APPEALS. - ALL EXISTING FREEZE ORDERS WHICH
THE COURT OF APPEALS HAS EXTENDED SHALL REMAIN EFFECTIVE, UNLESS
OTHERWISE DISSOLVED BY THE SAME COURT.

APP. Q-26
02.12.31
INVESTMENT HOUSES AND FINANCING COMPANIES (IH/FC)

WITH QUASI-BANKING FUNCTIONS
REVERSE REPURCHASE AGREEMENTS WITH BSP

PRO-FORMA ACCOUNTING ENTRIES
1. To record the purchase by IH/FC from BSP of government securities under reverse REPO
agreement.
DR Trading Account Securities – Loans

- Government Securities Purchased under Reverse Repurchase Agreements
with BSP
CR Due from BSP (or any appropriate account)
2. To record the subsequent sale by IH/FC of reverse REPO with BSP to clients
DR Cash (or any appropriate account)
CR Bills Payable – Others

- Reverse Repurchase Agreements with BSP Sold to Clients
3. To record payment of client’s claim on the IH/FC
DR Bills Payable – Others

- Reverse Repurchase Agreements with BSP Sold to Clients
DR Interest Expense on Borrowed Funds – Bills Payable – Others
CR Cash (or any appropriate account)
4. To record BSP’s payment of the reverse REPO agreement
DR Due from BSP (or any appropriate account)
CR Trading Account Securities – Loans

- Government Securities Purchased under Reverse Repurchase Agree-
ments with BSP
CR Interest Income – Trading Account Securities - Loans

APP. Q-27
03.12.31
DETAILS ON THE COMPUTATION OF QUARTERLY INTEREST PAYMENTS

CREDITED TO THE DEMAND DEPOSIT ACCOUNTS (DDAs) OF
QUASI-BANKS’ LEGAL RESERVE DEPOSITS WITH BSP
The following are the pertinent through EFTIS (for PhilPaSS participants) or
information on the computation of quarterly monthly through the DDA statements sent by
interest payments credited to the demand mail (for non-PhilPaSS participants).
deposit accounts (DDAs) of quasi-banks’ 3. The data on reserve requirements are
legal reserve deposits with BSP. based on the institutions’ Consolidated Report
1. BSP Circular No. 262, as amended, of Condition Required and Available Reserves
(for regular DDA) and Memorandum to All against deposit substitutes and special
Banks and Other Financial Intermediaries financing submitted to the SRSO on a weekly
Performing Trust, Other Fiduciary Business basis. Unless SRSO furnishes an amended
and Investment Management Activities (for data, the quasi-bank’s computation is used
CTF and TOFA), as amended, both dated in determining the forty percent (40%) of the
October 18, 2000 state that computation of reserve requirement that shall be compared
quarterly interest payments due on quasi- with the outstanding daily balance, in arriving
banks’ legal reserve deposits with the BSP is at the amount of interest credit.
based on the lower of their outstanding daily 4. The interest credit to each DDA is
DDA balance and forty percent (40%) of the supported by a credit advice which indicates
reserve requirement (excluding liquidity the period covered by the payment. For
reserve). Interest rate is at four percent (4%) PhilPaSS participants, the credit advices are
per annum and interest base at 365 days. released through their authorized quasi-bank
2. The daily DDA balance used in the representatives together with the cancelled
computation of interest may be obtained checks drawn against the institutions’ DDA
from the semi-monthly demand deposit with the BSP while for non-PhilPaSS partici-
statements of account balances that are pants, the credit advices are sent by mail to-
available electronically to quasi-banks gether with their DDA Statement of Accounts.

Appendix Q-27
APP. Q-28
03.12.31
TRANSFER/SALE OF NON-PERFORMING ASSETS TO A

SPECIAL PURPOSE VEHICLE OR TO AN INDIVIDUAL
The following procedures shall govern c. For applications involving more than
the transfer/sale of non-performing assets ten (10) NPA accounts, the list of NPAs to be
(NPAs) to a Special Purpose Vehicle (SPV) or transferred/sold shall be submitted in soft
to an individual that involves a single family copy (by electronic mail or diskette) in excel
residential unit, or transactions involving format using the prescribed data structure/
dacion en pago by the borrower or third party format for NPLs and ROPOAs to the
of a non-performing loan (NPL), for the appropriate SED of the applicant quasi-bank
purpose of obtaining the Certificate of at the following addresses:
Eligibility (COE) which is required to avail of
the incentives provided under R.A. No. 9182. SEDI-SPV@bsp.gov.ph
a. Prior to the filing of any application SEDII-SPV@bsp.gov.ph
for transfer/sale of NPAs, a quasi-bank shall SEDIII-SPV@bsp.gov.ph
coordinate with the BSP through the SRSO SEDIV-SPV@bsp.gov.ph
and the appropriate supervising and
examining department (SED) to develop a For applications involving ten (10) NPA
reconciled and finalized master list of its accounts or less, it is preferable that the list
eligible NPAs. be submitted also in soft copy. The applicant
For this purpose, quasi-banks were may opt to submit the list in hard copy,
requested to submit a complete inventory of provided all the necessary information shown
their NPAs in the format prescribed under in the prescribed data structure that are
Circular Letter dated January 7, 2003. Only relevant to each NPL or ROPOA to be
NPAs included in the master list that meet transferred/sold will be indicated. The list to
the definition of NPA, NPL and ROPOA be submitted in hard copy would be ideal
under R.A. No. 9182 may qualify for the COE. for the sale/transfer of NPAs that involve one
The quasi-banks shall be provided a copy of (1) promissory note and/or one (1) asset item
their reconciled and finalized master list for per account.
their guidance. d. The application shall be accompanied
b. An application for eligibility of by a written certification signed by a senior
specific NPAs shall be filed in writing (hard officer with a rank of at least Senior Vice
copy) by the selling quasi-bank with the BSP President or equivalent, who is authorized
through the appropriate SED for each by the board of directors, or by the country
proposed transfer of asset/s. Although no head, in the case of foreign banks, that:
specific form is prescribed, the applicant shall (1) the assets to be sold/transferred are
describe in sufficient detail its proposed NPAs as defined under the SPV Act of 2002;
transaction, identifying its counterparty/ies (2) the proposed sale/transfer of said
and disclosing the terms, conditions and all NPAs is under a true sale;
material commitments related to the (3) the notification requirement to the
transaction. borrowers has been complied with; and

APP. Q-28
03.12.31
(4) the maximum ninety (90)-day an individual or in the case of a dacion en

period for renegotiation and restructuring pago arrangement by an individual or
has been complied with. corporate borrower. The processing fee shall
Items (3) and (4) above shall not apply be charged/collected by BSP upon issuance
if the NPL has become a ROPOA after June of the COE.
30, 2002. h. An SPV that intends to transfer/sell
e. In the case of dacion en pago by the to a third party an NPA that is covered by a
borrower or a third party to a quasi-bank, COE previously issued by the BSP shall file
the application for COE on the NPL being an application for such transfer/sale with the
settled shall be accompanied by a Deed of SEC which shall issue the corresponding COE
Dacion executed by the borrower, the third based on the data base of COEs maintained
party, the registered owner of the property at the BSP.
and the quasi-bank. An individual who intends to transfer/
f. The appropriate SED may conduct sell an NPA that involves a single family
an on-site review of the NPLs and ROPOAs residential unit he had acquired that is
proposed to be transferred/sold. After the covered by a COE shall file an application
on-site review, the application for transfer/ for the another COE with the BSP through
sale shall be submitted to the Deputy the quasi-bank from which the NPA was
Governor, Supervision and Examination acquired. The individual shall indicate in
Sector (SES) for approval and for the issuance his application the previous COE issued for
of the corresponding COE. the NPA he had acquired and the name,
g. A processing fee for each COE address and Taxpayer’s Identification
issued shall be charged equivalent to 1/100 Number (TIN) of the transferee/buyer of the
of one percent (1%) of the transfer price but NPA. A processing fee of P3,000 shall be
not below P10,000 if the transfer is made to collected by BSP upon issuance of the COE.
an SPV, or P3,000 if the transfer is made to

APP. Q-28-a
04.12.31
ACCOUNTING GUIDELINES ON THE SALE OF NON-PERFORMING ASSETS

TO SPECIAL PURPOSE VEHICLES AND TO QUALIFIED INDIVIDUALS
FOR HOUSING UNDER “THE SPECIAL PURPOSE
VEHICLE (SPV) ACT OF 2002”
General Principles of a “true sale” pursuant to Section 13 of the
SPV Law and its Implementing Rules and
These guidelines set out alternative Regulations.
regulatory accounting treatment of the sale
of non-performing assets (NPAs) by banks I. Derecognition of NPAs Sold and Initial
and other financial institutions (FIs) under Recognition of Financial Instruments
BSP supervision to Special Purpose Vehicles Received
(SPVs) and to qualified individuals for
housing under Republic Act No. 9182, A bank/FI should derecognize an NPA
otherwise known as “The Special Purpose when, and only when, the bank/FI loses
Vehicle (SPV) Act of 2002”. control of the contractual rights of that NPA,
The guidelines recognize that banks/FIs as in a “true sale” transaction.
may need temporary regulatory relief, in On derecognition, any excess of the
addition to tax relief under the SPV Law, carrying amount of the NPA (i.e., net of
particularly in the timing of recognition of specific allowance for probable loss after
losses, so that they may be encouraged to booking the BSP recommended valuation
maximize the sale of their NPAs even at reserve) over the proceeds received in the
substantial discounts: Provided, however, form of cash and/or financial instruments
That in the interest of upholding full issued by the SPV represents an actual loss
transparency and sustaining market that should be charged to current period’s
discipline, banks/FIs that avail of such operations.
regulatory relief shall fully disclose its impact However, a bank/FI may use any existing
in all relevant financial reports. specific allowance for probable losses on
The guidelines cover the following areas: NPA sold:
(1) Derecognition of NPAs sold/ (1) to cover any unbooked (specific
transferred to an SPV and initial recognition general) allowance for probable losses; and
of financial instruments issued by the SPV to (2) to apply the excess, if any, as
the selling bank/FI as partial or full settlement additional (specific/general) allowance for
of the NPAs sold/transferred to the SPV; probable losses,
(2) Subsequent measurement of the on remaining assets, in which case the
carrying amount of financial instruments carrying amount of the NPA (which is
issued by the SPV to the selling bank/FI; compared with the proceeds received for
(3) Capital adequacy ratio (CAR) purposes of determining the actual loss) shall
calculation; and be the gross amount of the NPA: Provided,
(4) Disclosure requirement on the That the use of such existing specific
selling bank/FI. allowance for probable losses on the NPA
The sale/transfer of NPAs to SPV referred sold as provisions against remaining assets
to in these guidelines shall be in the nature shall be properly disclosed.

APP. Q-28-a
04.12.31
The loss may, moreover, be booked II. Subsequent Measurement of Financial

under “Deferred Charges” account which Instruments Received
should be written down over the next ten
(10) years based on the following schedule: (a) A bank/FI should assess at end of
each fiscal year or more frequently whether
End of Period Cumulative there is any objective evidence or indication
From Date of Write-down of based on analysis of expected net cash
Transaction Deferred Charges inflows that the carrying amount of financial
instruments issued by an SPV may be
Year 1 5% impaired. A financial instrument is impaired
Year 2 10% if its carrying amount (i.e., net of specific
Year 3 15% allowance for probable loss) is greater than
Year 4 25% its estimated recoverable amount. The
Year 5 35% estimated recoverable amount is determined
Year 6 45% based on the net present value of expected
Year 7 55% future cash flows discounted at the current
Year 8 70% market rate of interest for a similar financial
Year 9 85% instrument.
Year 10 100% In applying discounted cash flow
analysis, a bank/FI should use the discount
Provided, That the staggered booking of rate(s) equal to the prevailing rate of return
actual loss on sale/transfer of the NPA shall for financial instruments having substantially
be properly disclosed. the same terms and characteristics, including
In case the face amounts of the financial the creditworthiness of the issuer.
instruments exceed the excess of the carrying (b) Alternatively, the estimated r
amount of the NPA over the cash proceeds, ecoverable amount of the financial
the same shall be adjusted by setting up instruments may be determined based on an
specific allowance for probable losses so that updated estimate of residual net present value
no gain shall be recognized from the (NPV) of the issuing SPV.
transaction. The estimated recoverable amount of the
The carrying amount of the NPA shall be financial instrument shall be the present value
initially assumed to be the NPA’s fair value. of the excess of expected cash inflows (e.g.,
The excess of the carrying amount of the NPA proceeds from the sale of collaterals and/or
over the cash proceeds or the face amounts ROPOAs, which in no case shall exceed the
of the financial instruments, whichever is contract price of the NPAs sold/transferred,
lower, shall then be the initial cost of financial interest on the reinvestment of proceeds) over
instruments received. expected cash outflows (e.g., direct costs to
Banks/FIs shall book such financial sell, administrative expenses, principal and
instruments under the general ledger account interest payments on senior obligations,
“Investments in Bonds and Other Debt interest payments on the financial
Instruments” for debt instruments or “Equity instruments).
Investments in Allied Undertakings” for The fair market value of the collateral and/
equity instruments. or ROPOAs should under this method be

APP. Q-28-a
04.12.31
considered only under the following Year 9 85%

conditions: Year 10 100%
(1) The appraisal was performed by an Provided, That the staggered booking of
independent appraiser acceptable to the BSP; impairment, if any, upon remeasurement of
and financial instruments at end of the fiscal year
(2) The valuation of the independent the sale/transfer of the NPA occurred shall
appraiser is based on current market be properly disclosed.
valuation of similar assets in the same locality After initially recognizing an impairment
as underlying collateral rather than other loss, the bank/FI should review the financial
valuation methods such as replacement cost, instruments for future impairment in
etc. subsequent financial reporting date.
The assumptions regarding the timing of If in a subsequent period, the estimated
sale, the direct cost to sell, administrative recoverable amount of the financial
expenses, reinvestments rate and current instrument decreases, the bank/FI should
market rate should be disclosed in sufficient immediately book additional allowance for
detail in the audited financial statements. The probable losses corresponding to the
applicable discount rate should be based on decrease. However, a bank/FI may stagger
the implied stripped yield of the Treasury the booking of such additional allowance for
note or bond for the tenor plus an appropriate probable losses in such a way that it catches
risk premium. up and keeps pace with the original deferral
(c) In case of impairment, the carrying schedule (e.g., if the impairment occurred in
amount of the financial instrument should Year 8, a bank/FI should immediately book
be reduced to its estimated recoverable 70 percent (70%) at end of Year 8, and
amount, through the use of specific thereafter, additional 15 percent (15%) each
allowance for probable losses account that at end of Year 9 and Year 10, respectively):
should be charged to current period’s Provided, That the staggered booking of
operations. However, at the end of the fiscal impairment, if any, upon remeasurement of
year the sale/transfer of NPA occurred, such financial instruments shall be properly
setting up of specific allowance for probable disclosed.
losses account may be booked on a staggered If in a subsequent period, the estimated
basis over the next ten (10) years based on recoverable amount of the financial
the following schedule: instrument increases exceeding its carrying
amount, and the increase can be objectively
End of Period Cumulative Booking related to an event occurring after the write-
From Date of of Allowance for down, the write-down of the financial
Transaction Probable Losses instruments should be reversed by adjusting
the specific allowance for probable losses
Year 1 5% account. The reversal should not result in a
Year 2 10% carrying amount of the financial instrument
Year 3 15% that exceeds what the cost would have been
Year 4 25% had the impairment not been recognized at
Year 5 35% the date the write-down of the financial
Year 6 45% instrument is reversed. The amount of the
Year 7 55% reversal should be included in the profit for
Year 8 70% the period.

APP. Q-28-a
04.12.31
Illustrative accounting entries for NPA and/or impairment, if any, on the re-
derecognition of NPAs, initial recognition of measurement of financial instruments at end
financial instruments issued by the SPV, and of the first fiscal year following the sale/
subsequent measurement of the carrying transfer of NPA exist.
amount of the financial instrument are in The financial instruments received by the
Annex 1. selling bank/FI shall be risk weighted in
accordance with Sec. 4116Q.
III. Capital Adequacy Ratio (CAR) A bank/FI may declare cash dividend on
Calculation common and/or preferred stock
notwithstanding deferred recognition of loss
Banks/FIs may, for purposes of calculating duly authorized by the BSP.
capital adequacy ratio (CAR), likewise stagger
over a period of seven (7) years the IV. Disclosure
recognition of:
Banks/FIs should disclose as ”Additional
(1) actual loss on sale/transfer of NPAs; Information” in periodic reports submitted
and to the BSP, as well as in published reports
(2) impairment, if any, upon and audited financial statements and all
remeasurement of financial instruments, in relevant financial reports the specific
accordance with the following schedule: allowance for probable losses on NPAs sold
used as provisions against remaining assets,
End of Period Cumulative the staggered recognition of actual loss on
From Date of Recognition of sale/transfer of NPAs” and/or impairment, if
Transaction Losses/Impairment any, on the remeasurement of financial
instruments.
Year 1 5% In addition, banks/FIs which receive
Year 2 10% financial instruments issued by the SPVs as
Year 3 15% partial or full settlement of the NPAs
Year 4 25% transferred to the SPVs should disclose in
Year 5 35% the audited financial statements the method
Year 6 45% used and the significant assumptions applied
Year 7 55% in estimating the recoverable amount of the
Year 8 70% financial instruments, including the timing
Year 9 85% of the sale, the direct cost to sell, administrative
Year 10 100% expenses, reinvestment rate, current market
rate, etc. (The pro-forma disclosure
Provided, That no cash dividend on common requirements on the staggered recognition of
stock and/or preferred stock shall be declared actual loss on sale/transfer of NPAs and/or
by the bank/FI while the staggered impairment, if any, on the remeasurement of
recognition of actual loss on sale/transfer of financial instruments are shown in Annex Q-
28-a-2.)

Annex Q-28-a-1
04.12.31
ILLUSTRATIVE ACCOUNTING ENTRIES TO RECORD SALE OF NPAs TO SPV UNDER

THE SPV LAW OF 2002 UNDER DEFERRED RECOGNITION OF LOSS/IMPAIRMENT OF
FINANCIAL INSTRUMENTS
Mode of Payment
(Cash, Financial Instruments)
Financial Part Cash, Part Part Cash, Part Part Cash, Part
Cash Only
Instruments Financial Financial Financial
Only Instruments 1 Instruments2 Instruments
(30, 0)
(0, 120) (30,100) (30, 90) (30, 70)
Assumptions:
Loans/ROPOAs, gross 120 120 120 120 120

Allowance for probable 20 20 20 20 20
losses
Loans/ROPOAs, net 100 100 100 100 100
Cash payment received 30 0 30 30 30
Financial instruments 0 120 100 90 70
received
Unbooked valuation 15 15 15 15 15
reserves on remain-
ing assets
---------------------------------------------------------------------------------------------------------------------
1
Face amounts of financial instruments exceed the excess of the gross amount of the NPAs over the cash
proceeds.
2
Face amounts of financial instruments do not exceed the excess of the gross amount of the NPAs over the cash
proceeds.

Annex Q-28-a-1 - Page 1
Annex Q-28-a-1
04.12.31
Part Cash, Part Cash, Part Cash,

Financial Part Part Part
Cash Only Instruments Financial Financial Financial
Only Instruments 1 Instruments 2 Instruments
Accounting Entries (30, 0) (0, 120) (30, 100) (30, 90) (30, 70)
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
1 Allowance for Probable Losses –
NPAs sold Allowance For 20 20 20 20 20
Probable Losses - Remaining
Assets
(For unbooked provisions) 15 15 15 15 15
(As additional provisions) 5 5 5 5 5
To record the reclassification of

existing specific allowance for
probable losses on NPAs sold as
provisions against remaining
assets.
2 Cash 30 0 30 30 30
IBODI/Equity Investments 0 120 100 90 70
Deferred Charges 90 0 0 0 20
Allowance for Probable Losses –
NPAs sold
Loans/ROPOAs 120 120 120 120 120
Allowance for Probable Losses 0 0 10 0 0
- IBODI/Equity Investments
To record the sale of NPAs,

receipt of cash and/or financial
instruments, and deferred
recognition of loss, if any.
3 Amortization – Deferred Charges xxx 0 0 0 xxx

Deferred Charges xxx 0 0 0 xxx
To record annual write down of

deferred charges based on
schedule of staggered booking of
losses.
1
proceeds.
2
Face amounts of financial instruments do not exceed the excess of the gross amount of the NPAs over the
cash proceeds.

Annex Q-28-a-1
04.12.31
Part Cash, Part Cash, Part Cash,

Financial Part Part Part
Accounting Entries Cash Only Instruments Financial Financial Financial
Only Instruments 1 Instruments 2 Instruments
(30, 0) (0, 120) (30, 100) (30, 90) (30, 70)
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
4 Provision for Probable Losses 0 xxx xxx xxx xxx

– IBODI/Equity Investments
Allowance for Probable 0 xxx xxx xxx xxx
Losses – IBODI/Equity
Investments
To record annual build up of

allowance for probable
losses on financial instru-
ments based on schedule of
staggered booking of
allowance for probable
losses.
1
proceeds.
2
Face amounts of financial instruments do not exceed the excess of the gross amount of the NPAs over the
cash proceeds.

ANNEX Q-28-a-2
04.12.31
PRO-FORMA DISCLOSURE REQUIREMENT
A. Statement of Condition Amount
Particulars
Additional Information:
NPAs sold, gross xxx

Allowance for probable losses
(specific) on NPAs sold xxx
Allowance for probable losses (specific) on NPAs sold

applied to:
Unbooked allowance for probable losses:
Specific xxx
General xxx
Additional allowance for probable losses
Specific xxx
General xxx
Cash received xxx
Financial instruments received, gross xxx

Less: Allowance for probable losses (specific) xxx
Carrying amount of financial instruments received xxx
Less: Unbooked allowance for probable losses (specific) xxx
Adj. carrying amount of financial instruments received xxx
Deferred charges, gross xxx

Less: Deferred charges written down xxx
Carrying amount of deferred charges xxx

Annex Q-28-a-2
04.12.31
B. Statement of Income and Expenses
Particulars Amount
Additional Information:
Net income after income tax (with regulatory relief) xxx
Less: Deferred charges not yet written down xxx

Unbooked allowance for probable losses
(specific) on financial instruments received xxx
Total deduction xxx
Add: Deferred tax liability, if applicable xxx
Net deductions xxx
Net income after income tax (without regulatory xxx

relief)

APP. Q-29
03.12.31
GUIDELINES AND MINIMUM DOCUMENTARY REQUIREMENTS FOR FOREIGN

EXCHANGE (FX) FORWARD AND SWAP TRANSACTIONS
(Appendix to Subsecs. 4603Q.16 - 4603Q.18)
The following is a list of minimum documentary requirements for FX forward and swap
transactions to cover FX obligations and exposures. Unless otherwise indicated, original
documents* shall be presented on or before deal date to banks, non-banks with quasi-banking
functions and their subsidiaries/affiliates authorized to engage in financial derivatives activities.
A. FORWARD SALE OF FX TO COVER OBLIGATIONS – DELIVERABLE AND NON-

DELIVERABLE
1. FORWARD SALE OF FX – TRADE (includes trades with banks other than the issuing
booking bank)
1.1 Trade Transactions
1.1.1 Under Letters of Credit

a. Copy of LC opened; and
b. Accepted draft, or
Commercial invoice/Bill of Lading
1.1.2 Under Documents against Acceptances (DA)/Open Account (OA)

Arrangements
a. BSP registration letter or copy of Records of Goods Imported (RGI) received
and acknowledged by the BSP;
b. Copy of commercial invoice; and
c. Copy of Bill of lading, or Shipping guarantee.
In addition to the above requirements, the bank/quasi-bank and their subsidiaries/affiliates

shall require the purchaser to submit a notarized Letter of Undertaking that:
i. At maturity date of the forward contract, it shall comply with the documentation
requirements on sale of FX for trade transactions under Circular-Letter dated January 24, 2002,
as amended; and
ii. No double hedging has been obtained by the client for the covered transactions.
1.1.3 Direct Remittance
Original shipping documents indicated in item II.a of Circular Letter dated

January 24, 2002.
*
If copy is indicated, it shall mean photocopy, electronic copy or facsimile of original.

APP. Q-29
04.12.31
2. NON-TRADE TRANSACTIONS
Only non-trade transactions with specific due dates shall be eligible for forward contracts,
subject to the same documentation requirements under Circular No. 388 dated May 26, 2003
on the sale of FX for non-trade purposes.
2.1 Foreign Currency Loans owed to non-residents or AABs
2.1.1 Deliverable Forwards
The maturing portion of the outstanding eligible obligation, i.e., those that are
registered by the BSP, including interest and fees thereon as indicated in the
BSP registration letter, may be covered by a deliverable forward subject to the
documentary requirements under Circular No. 388 dated May 26, 2003, except
that the creditor’s billing statement shall be submitted only on or before the
maturity date of the contract.
2.1.2 NDFs
The outstanding eligible obligation, i.e., those that are registered by the BSP,
including interests and fees thereon as indicated in the BSP registration letter
may be covered by a non-deliverable forward subject to the documentary
requirements under Circular No. 388 dated May 26, 2003 except the creditor’s
billing statement which need not be submitted.
The amount of the forward contract shall not exceed the outstanding amount
of the underlying obligation during the term of the contract.
2.2 Inward Foreign Investments
The outstanding amount of sales/maturity proceeds due for repatriation to non-resident

investors pertaining to BSP - registered investments in:
a. PSE-listed shares of stock;

b. Government securities;
c. Money market instruments; and
d. Peso time deposits with a minimum tenor of 90 days may be covered by forward
FX contracts subject to the presentation of the original BSRD on or before deal
date, except that for Item 2.2.a above, the original BSRD or BSRD Letter-Advice
together with the local broker’s sales invoice shall be presented on or before
maturity date of the FX forward contract which coincides with the settlement
date of the PSE sale transaction.

APP. Q-29
04.12.31
Sales proceeds of BSP-registered investments in shares of stock that are not listed
in the PSE may be covered by a deliverable forward contract only if determined to be
outstanding and payable on a specific future date as indicated in the Contract To Sell/
Deed of Absolute Sale and subject to the same documentary requirements under Circular
No. 388 dated May 26, 2003.
B. FORWARD SALE OF FX TO COVER EXPOSURES – DELIVERABLE AND NON-

DELIVERABLE
1. TRADE (includes trades with banks other than the issuing/booking bank)
1.1 Under LC
a. Copy of LC opened; and

b. Proforma Invoice, or
Sales Contract / Purchase Order
1.2 Under DA/OA, Documents Against Payment (DP) or Direct Remittance (DR)
Any of the following where delivery or shipment shall be made not later than one (1)
year from deal date:
a. Sales Contract
b. Confirmed Purchase Order
c. Accepted Proforma Invoice
d. Shipment/Import Advice of the Supplier
In addition to the above requirements, the bank/quasi-bank and their subsidiaries/

affiliates shall require the purchaser to submit a notarized Letter of Undertaking that:
i. At maturity of the forward contract, it shall comply with the documentation

requirements on the sale of FX for trade transactions under Circular-Letter dated
January 24, 2002, as amended; and
ii. No double hedging has been obtained by the client for the covered transactions.
2. NON-TRADE (NON-DELIVERABLE)
BSP-registered foreign investments without specific due dates are considered FX exposures.
As such, the outstanding balance of this investment, appearing in the covering BSRD may
only be covered by an NDF contract, based on its market/book value on deal date, subject
to prior BSP approval under Circular No. 135 dated July 22, 1997 and presentation of the
covering BSRD and the proof that the investment still exists (e.g. stock certificate, or broker’s
buy invoice, or confirmation of sale, or certificate of investment in money market
instruments, or certificate of peso time deposits). Hedging for permanently assigned capital
required for Philippine branches of foreign banks/firms is not allowed.

APP. Q-29
03.12.31
C. FORWARD PURCHASE OF FX
FX forward contracts shall be subject to the institution’s “Know Your Customer” policy of
the institution and the AMLA guidelines of the BSP. In addition, counterparties must be
limited to those which are manifestly eligible to engage in FX forwards as part of the
normal course of their operations and which satisfy the institution’s suitability and eligibility
rules for such transactions.
D. FX SWAP TRANSACTIONS
1. FX SALE (first leg)/FORWARD FX PURCHASE (second leg) (with nonblank counterparties)-
The same minimum documentary requirements for sale of FX under BSP Circular No. 388
dated May 26, 2003 for non-trade transactions, and Circular-Letter dated January 24, 2002 for
trade transactions, as amended, shall be presented on or before deal date.
2. FX PURCHASE (first leg)/FORWARD FX SALE (second leg) (with nonblank counterparties)-
The first leg of the swap will be subject to the institution’s “Know Your Customer” policy
and the AMLA guidelines of the BSP and will require the conversion of foreign currency to
pesos. The second leg of the swap transaction will be subject to the swap contract between the
counterparties.
Banks/quasi-banks and their subsidiaries/affiliates shall: (a) retain copies of supporting

documents pertaining to the underlying transaction (e.g., BSP approval or registration [for BSP-
approved/registered foreign currency loans and investments], promissory note, loan agreement,
stock certificate, certificate of time deposit, proof of FCDU deposit, shipping documents) which
shall be made available to the BSP for verification; and (b) submit copies of the covering swap
contracts to the BSP-Treasury Department within three (3) days from the execution of the swap
contract.
Swap contracts of this type with non-residents shall, however, require prior BSP approval.

APP. Q-30
03.12.31
GUIDELINES TO GOVERN THE SELECTION, APPOINTMENT AND THE REPORTING

REQUIREMENT FOR EXTERNAL AUDITORS OF QUASI-BANKS
A. GENERAL REQUIREMENTS 2. The external auditor and the

members of the audit team do not have/shall
Only external auditors included in the not have outstanding loans or any credit
list of BSP selected external auditors shall be accommodations (except credit card
engaged by banks, quasi-banks, trust entities obligations which are normally available to
or NSSLAs for regular audit or special other credit card holders and fully secured
engagements. The external auditor to be auto loans and housing loans which are not
hired shall also be in-charge of the audit of past due) with the bank, quasi-bank, trust
the entity’s subsidiaries and affiliates engaged entity or NSSLA, its subsidiaries and affiliates
in allied activities: Provided, That the external at the time of signing the engagement and
auditor shall be changed or the lead and during the engagement. In the case of
concurring partner shall be rotated every five partnership, this prohibition shall apply to
(5) years or earlier: Provided, further, That the partners and the auditor-in-charge of the
the rotation of the lead and concurring partner engagement;
shall have an interval of at least two (2) years. 3. The external auditor must not be
Banks, quasi-banks, trust entities or currently engaged nor was engaged during
NSSLAs which have engaged their respective the preceding year in providing the following
external auditors for a consecutive period of services to the bank, quasi-bank, trust entity
five (5) years or more as of November 26, or NSSLA its subsidiaries and affiliates:
2003 (effectivity of Circular No. 410) shall a. Internal audit functions;
have a one (1) year period from said date b. Information systems design,
within which to either change their external implementation and assessment; and
auditors or rotate the lead and/or concurring c. Such other services which could
partner. The following are the selection affect his independence as may be
requirements for external auditors: determined by the Monetary Board;
1. No external auditor may be engaged 4. The external auditor, auditor-in-
by a bank, quasi-bank, trust entity or NSSLA charge and members of the audit team must
if he or any member of his immediate family adhere to the highest standards of
has or has committed to acquire any direct professional conduct and shall carry out
or indirect financial interest in the bank, services in accordance with relevant ethical
quasi-bank, trust entity or NSSLA, its and technical standards, such as the
subsidiaries and affiliates, or if his Generally Accepted Auditing Standards
independence is considered impaired under (GAAS) and the Code of Professional Ethics
the circumstances specified in the Code of for Certified Public Accountants;
Professional Ethics for Certified Public 5. The external auditor should have the
Accountants (CPAs). In the case of a following track record in conducting external
partnership, this limitation shall apply to the audits:
partners, associates and the auditor-in-charge a. The external auditor for a UB or KB
of the engagement and members of their must have at least twenty (20) existing
immediate family; corporate clients with resources of at least

APP. Q-30
03.12.31
P50 million each and at least one (1) existing upon request. Working papers shall include,
client UB or KB in the regular audit or in lieu but shall not be limited to, pre-audit analysis,
thereof, the external auditor or the auditor- audit scope and detailed work program.
in-charge of the engagement must have at
least five (5) years experience in the regular B. APPLICATION AND PRE-
audit of UBs or KBs; QUALIFICATION REQUIREMENTS
b. The external auditor for a TB, quasi-
bank, trust entity and national Coop Bank The application for BSP selection shall be
must have at least ten (10) existing corporate signed by the external auditor or the
clients with resources of at least P25 million managing partner, in case of partnership and
each and at least one (1) existing client TB, shall be submitted to the appropriate
quasi-bank, trust entity or national Coop Bank supervising and examining department of the
in the regular audit or in lieu thereof, the BSP together with the following documents/
external auditor or the auditor-in-charge of information:
the engagement must have at least five (5) 1. An undertaking:
years experience in the regular audit of TBs, a. That the external auditor, partners,
quasi-banks, trust entities or national Coop associates, auditor-in-charge of the
Banks: Provided, That an external auditor engagement and the members of their
who has been selected by the BSP to audit a immediate family shall not acquire any direct
UB or KB is automatically qualified to audit or indirect financial interest with a bank,
a TB, quasi-bank, trust entity or national Coop quasi-bank, trust entity, NSSLA, its
Bank; and subsidiaries and affiliates. Neither shall the
c. The external auditor for an RB or external auditor, partners, associates and
local Coop Bank must have at least three (3) auditor-in-charge accept an audit engagement
years track record in conducting external with a bank, quasi-bank, trust entity, NSSLA,
audit: Provided, That an external auditor who its subsidiaries and affiliates where they or
has been selected by the BSP to audit a UB, any member of their immediate family have
KB, TB, quasi-bank, trust entity and national any direct or indirect financial interest and
Coop bank is automatically qualified to audit that their independence is not considered
an RB, local Coop Bank and NSSLA; impaired under the circumstances specified
6. A bank, quasi-bank, trust entity or in the Code of Professional Ethics for CPAs;
NSSLA shall not engage the services of an b. That the external auditor, partners,
external auditor whose partner or auditor-in- associates, auditor-in-charge and members of
charge of audit engagement during the the audit team do not have nor shall apply
preceding year had been hired or employed for loans or any credit accommodations
by the bank, quasi-bank, trust entity, NSSLA, (except normal credit card obligations and
its subsidiaries and affiliates as Chief fully secured auto loans and housing loans)
Executive Officer, Chief Financial Officer, nor shall accept an audit engagement with a
Controller, Chief Accounting Officer or any bank, quasi-bank, trust entity, NSSLA, its
position of equivalent rank; and subsidiaries and affiliates where they have
7. The external auditor must undertake outstanding loans or any credit
to keep for at least five (5) years all audit or accommodations (except normal credit card
review working papers in sufficient detail to obligations and fully secured auto loans and
support the conclusions in the audit report housing loans which are not past due);
which shall be made available to the BSP

APP. Q-30
03.12.31
c. That the external auditor shall not g. That the external auditor shall keep
accept an audit engagement with a bank, all audit or review working papers for at least
quasi-bank, trust entity, NSSLA, its five (5) years in sufficient detail to support
subsidiaries and affiliates where he was the conclusions in the audit report; and
engaged during the preceding year in h. That the audit work shall include
providing the following services: assessment of the audited institution’s
1. Internal audit functions; compliance with BSP rules and regulations,
2. Information systems design, such as, but not limited to the following:
implementation and assessment; and 1. Capital adequacy ratio; and
3. Such other services, which could 2. Loans and other risk assets review
affect his independence as may be and classification.
determined by the Monetary Board from time 2. Other documents/information:
to time. a. List of existing corporate clients with
This requirement shall not, however, resources of at least P50 million each for
affect audit engagement existing as of external auditor of a UB or KB; for a TB, quasi-
November 26, 2003 (effectivity of Circular bank, trust entity, NSSLA, and national Coop
No. 410). Bank, list of existing corporate clients with
d. That the external auditor and resources of at least P25 million each; and
members of the audit team shall adhere to list of existing clients and/or details of three
the highest standards of professional conduct (3) years track record in external audit for
and shall carry out their services in external auditors of an RB, NSSLA and a local
accordance with relevant ethical and Coop Bank;
technical standards of the accounting b. If the external auditor for a UB or
profession; KB has no existing UB or KB client, and the
e. That the lead or concurring partner external auditor for a TB, quasi-bank, trust
and auditor-in-charge shall not accept entity and national Coop Bank, has no
employment with the bank, quasi-bank, trust existing client TB or national Coop Bank, a
entity, NSSLA, its subsidiaries and affiliates notarized certification that the external
being audited during the engagement period auditor or the auditor-in-charge of the
and within a period of one (1) year after the engagement has at least five (5) years
audit engagement; experience in the regular audit of banks of
f. That the external auditor shall not appropriate category mentioning the banks
accept an audit engagement with a bank, they have audited;
quasi-bank, trust entity, NSSLA, its c. Updated Professional Regulation
subsidiaries and affiliates where an officer Commission (PRC) license (for individual
(i.e., Chief Executive Officer, Chief Financial auditors) and business license for the
Officer, Controller, Chief Accounting Officer partnership;
or other senior officer of equivalent rank) had d. Copy of the proposed engagement
been a partner of the external auditor or had contract between the bank, quasi-bank, trust
worked for the audit firm and had been the entity or NSSLA and the external auditor
auditor-in-charge of the audit engagement of where applicable; and
said entities during the year immediately e. Certification from PRC that the
preceding the engagement; external auditor, lead partner, concurring

APP. Q-30
03.12.31
partner, auditor-in-charge and members of The management of the bank, quasi-

the audit team have no derogatory bank, trust entity, NSSLA, its subsidiaries and
information, previous conviction or any affiliates shall be informed of the adverse
pending investigation. However, in the event findings and the external auditor’s report to
that the certification cannot be obtained the BSP shall include its explanation and/or
because of the pendency of a case, the BSP corrective action.
may dispense with this requirement upon The management of the bank, quasi-
determination by the Monetary Board that bank, trust entity, NSSLA, its subsidiaries and
the case involves purely legal question, or affiliates shall be given the opportunity to be
does not, in any way, negate the auditor’s present in the discussions between the BSP
adherence to the highest standards of and the external auditor regarding the audit
professional conduct nor degrade his integrity findings, except in circumstances where the
and objectivity. external auditor believes that the entity’s
management is involved in fraudulent con-
C. REQUIRED REPORTS duct.
1. To enable the BSP to take timely D. DEFINITION OF TERMS

and appropriate remedial action, the
external auditor must report to the BSP For purposes of these guidelines, the
within thirty (30) calendar days after following terms shall be defined as follows:
discovery, the following cases: 1. Subsidiary. A corporation or firm
a. Any material finding involving more than fifty percent (50%) of the
fraud or dishonesty (including cases that outstanding voting stock of which is directly
were resolved during the period of audit); or indirectly owned, controlled or held with
and power to vote by a bank, quasi-bank, trust
b. Any potential losses the aggregate entity or NSSLA,
of which amounts to at least one percent 2. Affiliate. A corporation, not more
(1%) of the capital. than fifty percent (50%) but not less than ten
2. The external auditor shall report percent (10%) of the outstanding voting stock
directly to the BSP within fifteen (15) of which is directly or indirectly owned,
calendar days the occurrence of the controlled or held with power to vote by a
following: bank, quasi-bank, trust entity, NSSLA and a
a. Termination or resignation as juridical person that is under common control
external auditor and stating the reason with the bank, quasi-bank, trust entity or
therefor; NSSLA.
b. Discovery of a material breach of 3. Control. Exists when the parent owns
laws or BSP rules and regulations such as, directly or indirectly more than one half of
but not limited to: the voting power of an enterprise unless, in
1. Capital adequacy ratio; and exceptional circumstance, it can be clearly
2. Loans and other risk assets review demonstrated that such ownership does not
and classification. constitute control. Control may also exist
c. Findings on matters of corporate even when ownership is one half or less of
governance that may require urgent action the voting power of an enterprise when there
by the BSP. is:

APP. Q-30
03.12.31
a. Power over more than one-half of the liable for any damage or loss that may arise
voting rights by virtue of an agreement with from its selection of the external auditors to
other stockholders; be engaged by banks, quasi-banks, trust
b. Power to govern the financial and entities, or NSSLAs, for regular audit or special
operating policies of the enterprise under a engagements.
statute or an agreement;
c. Power to appoint or remove the F. SPECIFIC REVIEW
majority of the members of the board of
directors or equivalent governing body; When warranted by supervisory concern,
d. Power to cast the majority votes at the Monetary Board may, at the expense of
meetings of the board of directors or the bank, quasi-bank, trust entity, NSSLA, its
equivalent governing body; or subsidiaries and affiliates require the external
e. Any other arrangement similar to any auditor to undertake a specific review of a
of the above. particular aspect of the operations of these
4. Associate. Any director, officer, institutions. The report shall be submitted to
manager or any person occupying a similar the BSP and the audited institution
status or performing similar functions in the simultaneously, within thirty (30) calendar
audit firm including employees performing days after the conclusion of said review.
supervisory role in the auditing process.
5. Partner. All partners including those G. AUDIT ENGAGEMENT CONTRACT
not performing audit engagements.
6. Lead Partner. Also referred to as the Banks, quasi-banks, trust entities, and
engagement partner/partner-in-charge/ NSSLAs, shall submit the audit engagement
managing partner who is responsible for contract between them, their subsidiaries and
signing the audit report on the consolidated affiliates and the external auditor to the
financial statements of the audit client, and appropriate supervising and examining
where relevant, the individual audit report department of the BSP within fifteen (15)
of any entity whose financial statements form calendar days from signing thereof. Said
part of the consolidated financial statements. contract shall include the following
7. Concurring Partner. The partner who provisions:
is responsible for reviewing the audit report. 1. That the bank, quasi-bank, trust
8. Auditor-in-charge. Refers to the team entity, or NSSLA shall be responsible for
leader of the audit engagement. keeping the auditor fully informed of existing
and subsequent changes to prudential,
E. INCLUSION IN BSP LIST regulatory and statutory requirements of the
BSP and that both parties shall comply with
In case of partnership, inclusion in the said requirements;
list of BSP selected external auditors shall 2. That disclosure of information by the
apply to the audit firm only and not to the external auditor to the BSP as required under
individual signing partners or auditors under Items "C" and "F" hereof, shall be allowed;
its employment. The BSP will circularize to and
all banks, quasi-banks, trust entities and 3. That both parties shall comply with
NSSLAs the list of selected external auditors all of the requirements under these
once a year. The BSP, however, shall not be guidelines.

APP. Q-30
03.12.31
H. DELISTING OF EXTERNAL AUDITORS apply for BSP selection after the period
prescribed by the Monetary Board.
1. Grounds for delisting
External auditors may be delisted from I. AUDIT BY THE BOARD OF DIRECTORS
the list of BSP selected external auditor for
the bank, quasi-bank, trust entity or NSSLA Pursuant to Section 58 of R.A. No. 8791,
for violation of, or non-compliance with any otherwise known as “The General Banking
provision of these guidelines or in case of Law of 2000” the Monetary Board may also
dissolution of the audit firm except when said direct the board of directors of a bank, quasi-
dissolution was solely for the purpose of bank, trust entity, NSSLA or the individual
admitting new partner/s and the new partner/ members thereof, to conduct, either
s have complied with the requirements of personally or by a committee created by the
these guidelines. board, an annual balance sheet audit of the
2. Procedure for delisting bank, quasi-bank, trust entity or NSSLA to
An external auditor shall only be delisted review the internal audit and the internal
upon prior notice to him and after giving him control system of the concerned entity and
the opportunity to be heard and defend to submit a report of such audit to the
himself by presenting witnesses/evidence in Monetary Board within thirty (30) calendar
his favor. Delisted external auditor may re- days after the conclusion thereof.

APP. Q-31
04.12.31
QUALIFICATION REQUIREMENTS
FOR A BANK/NBFI APPLYING FOR ACCREDITATION TO ACT AS
TRUSTEE ON ANY MORTGAGE OR BOND ISSUED BY ANY
MUNICIPALITY, GOVERNMENT-OWNED OR CONTROLLED
CORPORATION, OR ANY BODY POLITIC
A bank/NBFI applying for accreditation e. The articles of incorporation or

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

APP. Q-31
04.12.31
(2) attendance by every member of the l. It has established a risk management

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

APP. Q-32
04.12.31
RULES AND REGULATIONS ON

COMMON TRUST FUNDS1
1. The administration of CTFs shall be c. Investment powers of the trustee with

subject to the provisions of Subsecs. 4409Q.1 respect to the plan, including the character
up to 4409Q.6 and to the following and kind of investments which may be
regulations. purchased;
As an alternative compliance with the d. Allocation, apportionment and
required prior authority and disclosure under distribution dates of income, profit and losses;
Subsecs. 4409Q.2 and 4409Q.3, a list which e. Terms and conditions governing the
shall be updated quarterly of prospective and/ admission or withdrawal as well as expansion
or outstanding investment outlets may be or contraction of participations in the plan
made available by the trustee for the review including the minimum initial placement and
of all CTF clients. (Sec. 4410Q) account balance to be maintained by the
trustor;
2. Establishment of common trust f. Auditing and settlement of accounts
funds. Any trust company or investment of the trustee with respect to the plan;
house authorized to engage in trust business g. Detailed information on the basis,
may establish, administer and maintain one frequency, and method of valuing and
(1) or more CTFs. (Subsec. 4410Q.1) accounting of CTF assets and each
participation in the fund;
3. Minimum documentary require- h. Basis upon which the plan may be
ments for common trust funds. In addition terminated;
to the trust agreement or indenture required i. Liability clause of the trustee;
under Subsec. 4409Q.1, each CTF shall be j. Schedule of fees and commissions
established, administered and maintained in which shall be uniformly applied to all
accordance with a written declaration of trust participants in a fund and which shall not be
referred to as the plan, which shall be ap- changed between valuation dates; and
proved by the board of directors of the trustee k. Such other matters as may be
and a copy submitted to the appropriate su- necessary or proper to define clearly the rights
pervising and examining department of the of participants under the plan.
BSP within thirty (30) business days prior to The legal capacity of the institution
its implementation. administering a CTF shall be indicated in the
The plan shall make provisions on the plan and other related agreements or contracts
following matters: as trustee of the fund and not in any other
a. Title of the plan; capacity such as fund manager, financial
b. Manner in which the plan is to be manager, or like terms.
operated;
--------------------------------------------------------------------------------------------------------
1
The rules and regulations on common trust funds (CTFs) were previously under Sec. 4410Q and the subsections
enclosed in parentheses. The UIT Funds regulations which are now in said section/subsections took effect on 01
October 2004 (effectivity of Circular 447 dated 03 September 2004).

APP. Q-32
04.12.31
The provisions of the plan shall control interest in the fund as a whole. (Subsec.
all participations in the fund and the rights 4410Q.3)
and benefits of all parties in interest.
The plan may be amended by resolution 5. Trustee as participant in common
of the board of directors of the trustee: trust funds. A trustee administering a CTF
Provided, however, That participants in the shall not have any interest in such fund other
fund shall be immediately notified of such than in its capacity as trustee of the CTF nor
amendments and shall be allowed to grant any loan on the security of a
withdraw their participations if they are not participation in such fund: Provided,
in conformity with the amendments made: however, That a trustee which administers
Provided, further, That amendments to the funds representing employee benefit plans
plan shall be submitted to the appropriate under trust or investment management may
supervising and examining department of the invest funds in the CTF: Provided, further,
BSP within ten (10) business days from That in the case of employee benefit plans
approval of the amendments by the board of under trust belonging to employees of entities
directors. other than that of the trustee, the trustee may
A copy of the plan shall be available at invest such funds in its own CTF only on a
the principal office of the trustee during temporary basis in accordance with Subsec.
regular office hours for inspection by any 4409Q.5. (Subsec. 4410Q.4)
person having an interest in a trust whose
funds are invested in the plan or by his 6. Exposure limit of common trust fund
authorized representative. Upon request, a to a single person or entity. No investment
copy of the plan shall be furnished such for a CTF shall be made in stocks, bonds,
person. (Subsec. 4410Q.2) bank deposits or other obligations of any one
(1) person, firm or corporation, if as a result
4. Management of common trust of such investment the total amount invested
funds. The trustee shall have the exclusive in stocks, bonds, bank deposits or other
management and control of each CTF obligations issued or guaranteed by such
administered by it, and the sole right at any person, firm or corporation shall aggregate
time to sell, convert, reinvest, exchange, to an amount in excess of fifteen percent
transfer or otherwise change or dispose of (15%) of the market value of the CTF:
the assets comprising the fund. Provided, That this limitation shall not apply
The trustee shall designate clearly in its to investments in government securities or
records the trust accounts owning other evidences of indebtedness of the
participation in the CTF and the extent of the Republic of the Philippines and of the BSP,
interests of such account. The trustee shall and any other evidences of indebtedness or
not negotiate nor assign the trustor’s obligations the servicing and repayment of
beneficial interest in the CTF without prior which are fully guaranteed by the Republic
written consent of the trustor or beneficiary. of the Philippines. (Subsec. 4410Q.5)
No trust account holding a participation in a
CTF shall have or be deemed to have any 7. Operating and accounting method-
ownership or interest in any particular asset ology. By its inherent nature, a CTF shall be
or investment in the common trust fund but operated and accounted for in accordance
shall have only its proportionate beneficial with the following:

APP. Q-32
04.12.31
a. The trustee shall have exclusive e. The interest of each participant shall
management and control of each CTF be determined by a formal method of
administered by it and the sole right at any participation valuation established in the
time to sell, convert, reinvest, exchange, written plan of the CTF, and no participation
transfer or otherwise change or dispose of shall be admitted to or withdrawn from the
the assets comprising the fund; fund except on the basis of such valuation.
b. The total assets and accountabilities (Subsec. 4410Q.6)
of each fund shall be accounted for as a single
account referred to as pooled fund 8. (Reserved)
accounting;
c. Contributions to each fund by clients 9. Custody of Securities. Investments in
shall always be through participations in the securities of all existing CTFs shall be
fund; delivered to a BSP-accredited third party
d. All such participations shall be custodian not later than 31 October 2004.
pooled and invested as one (1) account
(referred to as collective investments); and

APP. Q-33
04.12.31
CHECKLIST OF BSP REQUIREMENTS IN THE SUBMISSION OF

AUDITED FINANCIAL STATEMENTS AND ANNUAL REPORT
The external independent auditor (Included in the List of BSP Selected External Auditors)
shall start the audit not later than thirty (30) calendar days after the close of the calendar/fiscal
year adopted by the bank and quasi-bank. Audited financial statements (AFS) of banks/quasi-
banks with subsidiaries shall be presented side by side on a solo basis and on a consolidated
basis (banks/quasi-banks and subsidiaries). The AFS shall be submitted to the appropriate
supervising and examining department of the BSP not later than ninety (90) calendar days
after start of audit, together with the following:
Information/Data Required Deadline for submission
1. Certification on the following: For submission together with the audited

financial statements (AFS). (Not later than
a. The dates of commencement and ninety (90) calendar days after start of audit)
termination of audit.
b. The date when the audit report was

submitted to the bank’s/institution’s
board of directors/executive officer or
country head.
c. That the external auditor, partners,

associates, auditor-in-charge of the
engagement and the members of
their immediate family do not have
any direct or indirect financial
interest with a bank, quasi-bank, trust
entity, NSSLA, its subsidiaries and
affiliates where they or any member
of their immediate family member
have any direct or indirect financial
interest and their independence is
not considered impaired under the
circumstances specified in the Code
of Professional Ethics for Certified
Public Accountants.

APP. Q-33
04.12.31
2. Reconciliation for the differences in For submission together with the audited
amounts between the audited financial financial statements (AFS). (Not later than
statements and the submitted ninety (90) calendar days after start of audit)
Consolidated Statement of Condition
(CSOC) and Consolidated Statement of
Income and Expenses (CSIE) for bank
proper (regular and FCDU) and trust
department, including copies of adjusting
entries effected by the external auditor.
Note: Please see pro-forma comparative

analysis (Annex Q-33-a).
3. Letter of Comments (LOC) by the external Within thirty (30) banking days after the
auditor and Certification of the external receipt of the LOC by the Board of Directors/
auditor on the Date when the Letter of Chief Executive Officer or Country Head.
Comments was submitted to the bank/
institution’s board of directors.
Note: The Letter of Comments

embodies the external auditor’s findings
and comments on the bank’s material
weakness on the internal control
systems and other aspects of operations.
In case no material weakness is noted

to warrant the issuance of an LOC, a
formal statement issued by the external
auditor confirming said fact shall be
submitted by the bank/quasi-bank.
4. Copies of the board resolutions showing Within thirty (30) banking days after the
the: receipt of the audit report (AFS) by the Board
of Directors/Chief Executive Officer or
a. Action taken on the financial audit Country Head. (AFS to be submitted within
report and among other things, the Ninety (90) days after start of audit)
names of the directors present and
absent.
b. Action taken on the findings and Within thirty (30) banking days after the
recommendations in the Letter of receipt of the LOC by the Board of Directors/
Comments (LOC) and among other Chief Executive Officer or Country Head.
things, the names of the directors
present and absent.

APP. Q-33
04.12.31
Note: Foreign banks with branch in the

Philippines having no board of directors
in the country may submit a certification
from the authorized officers that the
management had acted on the AFS and
LOC in lieu of the board resolution.
5. All the required disclosures in the audited (Information is an integral part of the AFS)
financial statements provided under
Subsecs. 4172Q.3 to 4172Q.5.
6. Annual report of management to stock Within one hundred eighty (180) calendar
holders days after the close of the calendar year or
fiscal year adopted by the bank.
i. For UBs, KBs and TBs with at least
P1billion resources.
ii. For Quasi-Banks
7. All the required disclosures in the annual (Information is an integral part of the Annual
report provided under Subsec. 4172Q.4 Report)
(Circular No. 212 dated 20 October
1999).
8. Reports required to be submitted by the Within thirty (30) calendar days after
external auditor under Item “C” of Ap- discovery.
pendix Q-30.
a. To enable the BSP to take timely and

appropriate remedial action, the
external auditor must report to the
BSP, the following cases:
1. Any material finding involving fraud

or dishonesty (including cases that
were resolved during the period of
audit); and
2. Any potential losses the aggregate of

which amounts to at least one percent
(1%) of the capital.
b. The external auditor shall report Within fifteen (15) calendar days after the
directly to the BSP the following: occurrence/discovery.

APP. Q-33
04.12.31
1. Termination or resignation as
external auditor and starting the
reason therefore;
2. Discovery of a material breach of

laws or BSP rules and regulations
such as, but not limited to:
a. Capital adequacy ratio; and
b. Loans and other risk assets review

and classification.
3. Findings on matters of corporate

governance that may require
urgent action by the BSP.
Note: In case there are no matters to For submission together with the audited
report (e.g. fraud, dishonesty, breach of financial statements (AFS).
laws, etc.), the external auditor shall
submit a notarized certification that there
is none to report with regard to the items
enumerated under Item “C” of Appendix
Q-30.

ANNEX Q-33-a
04.12.31
Name of Quasi-Bank
Comparison of Audited Financial Statements and
Submitted Consolidated Statement of Condition and Income and Expenses
As of (end of calendar or fiscal year)
(In Thousand Pesos)
Audited Submitted Reasons for

FS Report Discrepancy Discrepancy
Cash and Other Cash Items

Due from BSP
Due from Other Banks
IBODI
Loans and Discounts, net
Interbank Loans Receivable
Equity Investments
Property and Equipment, net
ROPOA, net
Other Assets
Total Assets
Deposit Liabilities
Bills Payable
Accrued Interest, Taxes and Other Expenses
Other Liabilities
Total Liabilities
Total Capital Accounts
Total Liabilities and Capital
Contingent Accounts
Total Income
Total Expenses
Net Income before Income Tax

Annex Q-33-a
APP. Q-34
04.12.31
QUARTERLY INVESTMENT DISCLOSURE STATEMENT

Name of Unit Investment Trust Fund:

For the Quarter ended:
Net Asset Value, end of quarter:
Net Asset Value Per Unit (NAVPu):
Short Description:
(e.g., The Fund is a peso denominated fixed-income fund. The investment objective of the
Fund is to generate a steady stream of income by investing in a diversified portfolio of high-
grade marketable securities)
Administrative Details:
Trust Fee:
Minimum Investment:
Holding Period:
Participation/Redemption Conditions:
Special Reimbursable Expenses, if any:
Outstanding Investments:
The Fund has investments in the following:
(may be in graph format showing weightings per investment type or class of security)
Prospective Investments:
The following names/securities are among the fund’s approved investment outlets where
the Trustee intends to invest in depending on its availability or other market driven
circumstances:

04.12.31
A originator VI - 4e
residual certificates VI - 4e
Acquired assets in settlement of loans III - 21 seller VI - 4e
booking III - 21 servicer VI - 4e
sales contract receivable III - 22 special purpose trust VI - 4e
trustee VI - 4e
Aggregate ceiling III - 16 underwriter VI - 4e
exclusions from III - 17 disclosures VI - 5
sanctions III - 18 guarantor VI - 7
management oversight VI - 4e
Annual fees on banks VI - 10 minimum documents required VI - 4e
average assessable assets VI - 10 prospectus VI - 4e
total assessable assets VI - 10 specimen of application to purchase ABS
VI - 5
Anti-money laundering regulations VI - 16 see specimen of certificate VI - 5
also App. Q-23 trust indenture VI - 4e
ALMC Resolution No. 292 Annex Q-23-b minimum features of ABS VI - 5
certification of compliance with Annex Q-23-a miscellaneous provision VI - 8
customer due diligence for Banks and NBFIs originator and seller VI - 6
performing quasi-banking functions prohibited activities VI - 8
(NBQBs) Annex Q-23-c report to BSP VI - 9
general identification requirements representations and warranties VI - 6
Annex Q-23-c-1 servicer VI - 6
general guide to account opening and customer third party review VI - 6
identification Annex Q-23-d trustee and issuer VI - 6
revised implementing rules and regulations underwriter VI - 7
R.A. No. 9160 as amended by
R.A. No. 9194 App. Q-25
sanctions and penalties VI - 16 B
Applicability of expanded commercial banking Basic laws governing investment houses and
rules on NBQBs VI - 12 financing companies VI - 12
financing companies VI - 12 see also
Asset-backed securities VI - 4d App. Q-19
amendment VI - 8 investment houses VI - 12 see also App. Q-18
authority VI - 4e new rules and regulations to implement the
clean-up call VI - 8 provisions of R.A. No. 5980 App. Q-19
conveyance of assets VI - 5
credit enhancement VI - 7 Bonds II – 4
definition of terms VI - 4d bond issues of NBQBs II - 4
asset pool VI - 4d compliance with SEC rules II - 5 see also
asset-backed securities VI - 4d App. Q-8
assets VI - 4d definition of terms II - 4
clean-up call VI - 4d affiliate II - 4
credit enhancement VI - 4d current market value II - 4
guarantor VI - 4d government securities II - 4
investible funds VI - 4e net book value II - 4
issuer VI - 14e subsidiary II - 4
inapplicability of certain regulations II - 6

Index - Page 1
04.12.31
minimum features II - 5 responsibilities of the board of directors and

new rules on the registration of long-term senior management on compliance I - 34
commercial papers App. Q-8 role and responsibilities of the compliance
notice to BSP II - 5 function I - 35
reserve requirement II - 6 status I - 34
underwriting II - 5 see also App. Q-8
Consolidated statement of condition I - 32
Borrowings from the BSP II - 10, VI - 1 publication requirements I - 32
repurchase agreements with the BSP II - 10,
VI - 1 Credit card operations III - 10
accrual of interest earned III - 10c
Branches and other offices I - 24d applicability to III - 15
additional capital, if required I - 24e see also confidentiality of information III - 10c
App. Q-2 deferral charges III - 10c
conditions precluding processing of definition of terms III - 10
applications I - 25 acceleration clause III - 10a
determination of amount of additional capital affiliate III - 10a
the entity must put up App. Q-2 credit card III - 10
documentary requirements I - 25 credit card receivables III - 10
establishment I - 24d default or delinquency III - 10a
evaluation guideposts I - 24d minimum amount due or minimum payment
filing of applications I - 25 required III -10a
other requirements/factors to be considered subsidiary III - 10a
I - 25 finance charges III - 10c
period within which to submit complete general policy III - 10
requirements I - 25 handling of complaints III - 10d
prohibition against operating without SEC information to be disclosed III - 10b
license I - 25 inspection of records covering credit card
transactions III - 10d
C late payment/penalty fees III - 10c
minimum requirements III - 10b
offsets III - 10d
Capitalization I - 5 risk management system III - 10a
minimum I - 5 sanctions III - 10e
combined capital accounts I - 5 suspension, termination of effectivity and
sanctions I - 5 reactivation III - 10d
unfair collection practices III - 10e
Common trust funds (CTFs) IV - 6, IV - 15
reserves against peso-denominated IV - 6 Credit accommodations under officers’ fringe
rules and regulations on CTFs App. Q-32 benefit plans III - 17
procedural requirement III - 17
Compliance officer I - 33, I - 34
Compliance risk I - 34 D
Compliance system I - 33 Delivery of securities I - 3, II - 2

cross-border issues I - 35 securities custodianship operations I - 4
independence I - 35 without recourse basis I - 3, I - 4
outsourcing I - 35

Index - Page 2
04.12.31
Deposit Substitute II - 1 see also App. Q-8 guidelines and minimum documentary
borrowings from trust departments or managed requirements for foreign exchange (FX)
funds of banks or investment houses II - 3 forward and swap transactions App. Q-29
call slips/tickets for 24-hour loan II - 2a non-deliverable forward contracts with non-
compliance with SEC rules II - 3 residents VI - 4c
instruments II - 1 renewals VI - 4
operations II - 1 reporting requirements VI - 4
matured and unclaimed II - 9 risk disclosure statement for derivatives
maturity II - 3 activities App. Q-16
minimum features II - 1 risk management guidelines VI - 4 see also
minimum trading lot II - 3 App. Q-15
negotiations of promissory notes II - 1 tenor/maturity of FX forward or swap VI - 4b
new rules on registration of short-term commer- see also App. Q-29
cial papers App. Q-7 transactions between parent and subsidiary
payment II - 3 VI - 4
prohibition against use of certain instruments sanctions VI - 4a
II - 1 scope and pre-qualification requirements VI - 3
recording II - 3
regulation on additional stipulation II - 2a Direct borrowings III - 15
renewal II - 3
requirements to state nature of underlying Directors I - 11
securities II - 2a compensation and other benefits of I - 24b
reserves against II - 6 confirmation of the election/appointment of
standardized deposit substitute instruments I - 19
App. Q-6 definition I - 11
substitution of underlying securities II - 2a disqualification of I - 20
disqualification procedures I - 22
Derivatives VI - 2 effect of non-possession of qualifications or
accounting guidelines VI - 4 see also possession of disqualifications I - 22
App. Q -17 interlocking directorships I - 24
cancellations, roll-overs or non-delivery of FX limits on the number of the members of the
forward contracts VI - 4b board of directors I - 11
counterparty test VI - 4b independent director I - 11
eligibility test VI - 4b monetary board confirmation of I - 24b
frequency test VI - 4b persons disqualified to become I - 20
mark-to-market test VI - 4c powers/responsibilities and duties of board of
compliance with AML rules VI - 4c directors and directors I - 11, I - 13
reporting requirements VI - 4c profit sharing I - 24b
definition of terms VI - 4a qualifications I - 11
foreign exchange exposure VI - 4a reports required I - 19
foreign exchange forward VI - 4a representatives of government I - 24a
foreign exchange obligation VI - 4a sanctions I - 19
foreign exchange swap VI - 4a watchlisting I - 23
non-deliverable forward (NDF) VI - 4b
non-resident VI - 4a Dividends I - 9
resident VI - 4a definition of terms I - 9
documentation VI - 4b bad debts I - 9
forward and swap transactions VI - 4a in process of collection I - 9
sanctions VI - 4c well secured I - 9

Index - Page 3
04.12.31
recording I - 11 F
rules on declaration of stock I - 11
reporting and verification I - 10 Financial audit I - 29 see also App. Q-33
requirements on the declaration/net amount checklist of BSP requirements in the submis-
available I - 10 sion of audited financial statements and
annual report App. Q-33
Domestic credit ratings agencies VI - 12 disclosure of external auditor’s adverse
derecognition of credit rating agencies VI - 15 findings to the BSP I - 29
inclusion in BSP list VI - 15 disclosure requirements in the annual report
minimum eligibility criteria VI - 12 I - 31
pre-qualification requirements VI - 14 disclosure requirement in the notes to the
recognition and derecognition for bank audited financial statements I - 30
supervisory purposes VI - 12 posting and submission of annual report I - 31
recognition of PhilRatings for bank supervisory posting of audited financial statements I - 29
purposes VI - 15 sanction I - 29
statement of policy VI - 12
Foreign exchange operations V - 1
E aggregate ceiling on issuance of guarantees
V-1
Employees I - 11 applicability of pertinent BSP rules V - 1
disqualification procedures I - 22 authority V - 1
prohibitions against foreign employees of coverage V - 1
financing companies I – 24 general provision on sanctions V - 2
profit sharing of I - 24b separate department V - 1
specific foreign exchange activities V - 1
Equity investments III - 20
investments abroad III - 20 I
investment in non-allied undertakings III - 20
treatment of equity investment with reciprocal
stockholdings I - 8j Indirect borrowings III - 15
underwriting exempted III - 20
Individual ceilings III - 16
Examination by the BSP VI – 11, VI - 15 sanctions III - 18
definition VI – 11 Interbank borrowings II - 3 see also Interbank
affiliate VI – 11 loans
financial allied undertakings VI - 11
non-financial allied undertakings VI - 11 Interbank loans III - 19
subsidiary VI - 11 accounting procedures III - 19
agreement for the enhanced interbank call loan
External auditors I - 31 see also App. Q-30 funds transfer system App. Q-13
appointment and reporting requirements I - 31 intraday liquidity facility App. Q-13-b
effectivity I - 31 settlement procedures III - 20 see also
guidelines to govern the selection, appointment App. Q-13-a
and the reporting requirement for external settlement procedures for interbank loan
auditors of quasi-banks App. Q-30 transactions App. Q-13-a
sanction I - 31 systems and procedures for interbank call loan
selection I - 31 transactions III -19
transfer of excess funds III - 19

Index - Page 4
04.12.31
Internal control systems I - 28 L

minimum internal control standards for NBQBs
App. Q-5 Loan limit III - 3
contingent liabilities included III - 3
Investment house I- 5 see also App. Q- 1 exclusions from III - 3
guidelines to evaluate App. Q- 1 sanctions III - 3
licensing I – 5 to a single borrower III - 3
minimum capital of I - 5
sanctions I - 5 Loans III - 1
"The Investment Houses Law" App. Q-18 ceiling on IV - 13
underwriting by VI - 4d see also App. Q-18 demand loans III - 6
interest and other charges III - 4
Investment management activities IV - 20, accrual of interest earned on loans III - 5
IV - 20c escalation clause III - 4a
authority to perform IV - 20c effect of prepayment III - 4
ceilings on loans IV - 20b loan prepayment III - 4
commingling of funds IV - 20a floating rates of interest III - 4
conduct of IV - 21 rate of interest in the absence of stipulation
lending and investment disposition IV - 20a III - 5
minimum documentary requirements IV - 20 when allowable III - 4a
see also App. Q-14 non-performing III - 9
minimum size of each investment management restructured III - 6, III - 10e see also
account IV - 20a past due accounts
non-investment management activities IV - 21 unsecured III - 10
operating and accounting methodology write-off of loans as bad debts III - 7
IV - 20b
organization and management IV - 20e Loan portfolio and other risk assets review
pre-operating requirements IV - 20d system III - 2b
prerequisites for engaging in IV - 20c booking III - 2b
required retained earnings appropriation guidelines in identifying and monitoring
IV - 20c, IV-21 problem loans and other risk assets and
sample investment management agreement setting up of allowance for probable losses
App. Q-14 App. Q-10
security for the faithful performance of provisions for losses III - 2b see also
IV - 20d App. Q-10
basic security deposit IV - 20d see also sanctions III - 2b
App. Q-21
compliance period IV - 20e Loans in general III - 3
eligible securities IV - 20e
valuation of securities and basis of Loans/credit accommodations to DOSRIs III – 13
computation of the basic security deposit general policy III - 13
requirement IV - 20e definitions III – 13
sanctions IV - 20e book value of the paid-in capital contribu-
title to securities and other properties IV - 20b tion III - 13
transactions requiring prior authority IV - 20a directors III – 13

Index - Page 5
04.12.31
officers III - 13 allowance for uncollected interest on loans

outstanding loans to and placements with III - 9 see also App. Q-10
the quasi-bank III - 13 definitions III - 9
secured loan, borrowing, or credit accom- reporting requirement III - 9
modation III - 13
stockholders III - 13 O
unsecured loan, borrowing or credit
accommodation III - 14
sanctions III - 18 Officers I - 11
compensation and other benefits I - 24b
confirmation of the election/appointment of
M I - 19
definition and qualifications I - 19
Management contracts I - 33 disqualification I - 20
disqualification procedures I - 22
Management of risk assets III - 1 effect of non-possession of qualifications or
large exposures and credit risk concentrations possession of disqualifications I - 22
III - 2 see also App. Q-24 interlocking officerships I - 24
monetary board confirmation of senior officers
Minimum guidelines on lending operations I - 24b
III - 1 persons disqualified to become I - 22
prohibition against foreign officers of financing
Merger/consolidation I - 5 companies I - 24
incentives I - 6 profit sharing I – 24b
representatives of government I – 24a
Money market placements of RBs II - 3 watchlisting I - 23
conditions required on accepted placements
II - 4 Other operations VI - 1
definition of terms II - 3
government securities II - 3 Open market operations VI - 1
money market placements II - 3 repurchase agreements with BSP VI - 1
sanctions II - 4 reverse repurchase agreements with BSP
III -21, VI - 2
N settlement procedures VI - 2 see also
App. Q-13-a & b
NBQB premises and other fixed assets VI - 9
appreciation or increase in book value VI - 9 P
batas pambansa bldg. 344 - VI - 9
reclassification of real and other properties Past due accounts III – 5
owned or acquired as NBQB premises VI - 9 accounts considered past due III – 6
demand loans III - 6
Net worth deficiency I - 8j renewal/extension III - 6
sanctions I - 8j restructured loans III - 6
write-off of loans as bad debts III - 7
Non-performing loans III – 9
accounts considered III – 9 Payment of fines and other charges VI - 10
accrual of interest earned on loans III - 9 see check/demand draft payments to the BSP
also when to consider performing /non- VI - 10
performing

Index - Page 6
04.12.31
payment of fines VI - 10 format of resolution for signatories of category

proforma payment form App. Q-22 A-2 reports Annex Q-4-b
format of resolution for signatories of category
Purchase of receivables and other obligations A-3 and B reports Annex Q-4-c
III - 20 guidelines governing the consolidation of
classification, accounting procedures, valuation financial statements of financial intermediar-
and sales and transfers of investments in ies and their allied undertakings/subsidiaries/
debt securities and marketable equity affiliates Annex Q-3-b
securities App. Q-20 guidelines on calculating additional information
establishing the market benchmarks/reference required in published statement of condition
prices and computation method used to Annex Q-3-f
mark-to-market debt and marketable equity guidelines on prescribed reports signatories and
securities App. Q-20-a signatory authorization App. Q-4
investments in debt and marketable equity list of reports required from NBFIs engaged in
securities III - 21 see also Appendices Q-20 quasi-banking functions App. Q-3
& Q-20-a manner of filing I – 26
purchase of commercial paper III - 21 reporting guidelines on crimes/losses
yield on purchase of receivables III - 20 Annex Q-3-c
sanctions in case of willful delay in the
Q submission of reports/refusal to permit
examination I - 27
Quasi-banking functions I - 1 Repurchase agreements with the BSP VI - 1
BSP certificate of authority I – 4b delivery VI - 2
certificate of authority from the BSP I - 4b rate VI - 1
financial intermediaries I -1 security VI - 1
guidelines on lender count I - 2 term VI - 1
preconditions for the exercise of I - 4a
transactions not considered quasi-banking I -3 Reserves II - 6
against deposit substitutes II - 6
R against peso-denominated Common Trust
Funds (CTFs) and Trust and Other Fiduciary
Records I - 26 Accounts (TOFA)-Others IV – 6
adoption of statements of financial accounting report of compliance IV - 8
standards I - 26 book entry method for reserve securities II - 9
uniform system of accounts I - 26 composition II – 7, IV - 7
computation II – 8, IV - 8
Reports I - 26 see also App. Q-3 details on the computation of quaterly interest
categories and signatories of I – 26 payments credited to the demand deposit
documentary requirements on directors/officers/ accounts (DDAs) of quasi-banks' legal
major individual stockholders Annex Q-3-d reserve deposits with bsp App. Q-27
documents/information on organizational exemptions II - 9
structure and operational policies guidelines in calculating and reporting II - 9
Annex Q-3-e interest income on reserve deposit with BSP
information on one-year borrowing-investment II - 9 see also App. Q-27
program to be submitted by NBQBs list of reserve-eligible and non-eligible securi-
Annex Q-3-a ties App. Q-9
format of resolution for signatories of category matured and unclaimed deposit substitutes
A-1 reports Annex Q-4-a II - 9

Index - Page 7
04.12.31
reserve deficiencies II - 8, IV - 8 substitutes maintained in the lending

sanctions II - 8 quasi-bank I - 8h
multilateral development banks I - 8i
Restructured loans III - 10e non-central government public sector entity
classification III - 12 of a foreign country I - 8i
definition III - 11 note issuance facilities and revolving
general policy III - 10e underwriting facilities I - 8i
procedural requirements III - 11 other commitments I - 8i
when to consider performing/non-performing other commitments with an original maturity
III - 11 of up to one (1) year I - 8i
partly-paid shares and securities I - 8i
Reverse repurchase agreements with the BSP perpetual preferred stock I - 8i
III - 21, VI - 2 Philippine local government units I - 8i
delivery VI - 2 Philippine national government I - 8i
rate VI - 2 Private sector I - 8i
reservation VI - 2 quasi-bank premises, furniture, fixtures and
security VI - 2 equipment net depreciation I - 8g
term VI - 2 redeemable preferred stock I - 8i
investment houses and financing companies sale and repurchase agreements and asset
(IH/FC) with quasi-banking functions sales with recourse I - 8i
App. Q-26 solo basis I - 8i
subsidiary I - 8i
Risk-based capital adequacy ratio I -8 treasury shares I - 8j
definitions I - 8g minimum ratio I - 8
amount due from the BSP I - 8g qualifying capital I - 8
appraisal increment reserve I - 8g required reports I - 8j
cash on hand I - 8g risk-weighted assets I - 8d
central government of a foreign country sanctions I - 8j
I - 8g temporary relief I - 8j
claims I - 8g
consolidated basis I - 8h S
debt capital instruments I - 8h
equity investments I - 8h Securities custodianship and securities registry
exchange rate contracts I - 8h operations IV - 24
financial allied undertakings I - 8h applicability IV - 24
foreign country/foreign incorporated application for authority IV - 25
bank and Philippine incorporated bank/ basic security deposit IV - 28
quasi-bank with the highest credit compliance with anti-money laundering laws/
quality I - 8h regulations IV - 28
forward asset purchases I - 8h confidentiality IV - 28
goodwill I - 8h functions and responsibilities of a securities
interest rate contracts I - 8h custodian IV - 26
loans for housing purpose, fully secured by independence of the registry and custodian
first mortgage on residential property IV - 27
that is or will be occupied or leased out pre-qualification requirements for a securities
by the borrower I - 8h custodian/registry IV - 25
loans to the extent covered by hold-out on, prior BSP approval IV - 25
or assignment of, deposits or deposit protection of securities of the customer IV - 26

Index - Page 8
04.12.31
registry of scripless securities of the Bureau of security for the faithful performance of IV - 5
the Treasury IV - 27 basic security deposit IV - 5 App. Q-21
reportorial requirements IV - 28 compliance period IV - 6
sanctions IV - 28 eligible securities IV - 5
statement of policy IV - 24 guidelines on the use of scripless (RoSS)
securities App. Q-21
Single-borrower limit III - 16 reserves against peso-denominated CTFs and
sanctions III - 18 TOFA - Others IV - 6
sanctions IV - 6
Special Purpose Vehicle (SPV) III - 23 valuation of securities and basis of
accounting guidelines on the sale of non- computation of the basic security deposit
performing assets App. Q-28-a requirement IV - 6
illustrative accounting entries to record sale of trust and other fiduciary business regulations
NPAs under the SPV Law of 2002 IV - 12
Annex Q-28-a-1 ceilings on loans IV - 13
pro-forma disclosure requirement funds awaiting investment or distribution
Annex Q-28-a-2 IV - 13
transfer/sale of non-performing assets to a lending and investment disposition IV - 12a
special purpose vehicle or to an individual minimum documentary requirements IV - 12
III - 23 see also Appendices Q-28 & Q-28-a operating and accounting methodology
IV - 13
Special types of loans III - 19 other applicable regulations on loans and
investments IV - 13
Stock, stockholders and dividends I - 9 qualification and accreditation of quasi-
banks acting as trustee on any mortgage
Sundry provisions VI - 9 or bond issuance by any municipality,
government-owned or controlled
T corporation, or any body politic IV - 14
qualification requirements for bank/NBFI
applying for accreditation to act as trustee
Transactions III - 14 on any mortgage or bond issued by any
covered III - 14 municipality, government-owned or -
not covered III - 14a controlled corporation, or any body
politic App. Q-31
Trust and other fiduciary accounts (TOFA) - transactions requiring prior authority
other IV - 6 IV - 12a
reserves against peso-denominated IV - 6,
IV - 7 Trust, other fiduciary business and investment
management activities IV - 1
Trust and other fiduciary business IV - 3, IV - 12 definitions IV - 1
authority to perform trust and other fiduciary agency IV - 2
business IV - 3 agent IV - 2
organization and management IV - 8, IV - 20e beneficiary IV - 2
composition of trust committee IV - 8a common trust fund IV - 2
qualifications of committee members, fiduciary IV - 2
officers and staff IV - 8b fiduciary account IV - 2
responsibilities of administration IV - 8b investment management account IV - 2
prerequisites for engaging IV - 3 investment management activity IV - 2
pre-operating requirements IV - 4

Index - Page 9
04.12.31
investment management department IV - 2 format-disclosure statement of loan/credit

investment management officer IV - 2 transaction App. Q-11
investment manager IV - 2 information to be disclosed III - 8a see also
other fiduciary business IV - 1 App. Q-11
principal IV - 2 inspection of contracts covering credit transac-
trust IV - 2 tions III - 9
trust account IV - 2 poster III - 9 see also App. Q-12
trust agreement IV - 2
trust business IV - 1 U
trust department IV - 2
trust officer IV - 2
trustee IV - 2 Unit Investment Trust Funds IV - 15
trustor IV - 2 administration IV - 16
general provisions IV - 21 administration support IV - 19
audits IV - 23 allowable investments and valuation IV - 19
board action IV - 23 counterparties IV - 20
external audit IV - 23 definition IV - 15
internal audit IV - 23 board of directors IV - 15
authority resulting from merger or trust entity IV - 15
consolidation IV - 23 unit investment trust funds IV - 15
books and records IV - 21 establishment IV - 16
custody of assets IV - 21 exemptions from statutory and liquidity
fees and commissions IV - 22 reserves, single borrowers limit, DOSRI
receivership IV - 24 IV - 20
reports required IV - 23 exposure limit to single person/entity IV - 19
to trustor, beneficiary, principal IV - 22 foreign currency-denominated Unit Investment
to the BSP IV - 23 Trust Funds IV - 20
surrender of trust or investment management minimum disclosure requirements IV - 17 see
license IV - 24 also App. Q-34
non-trust, non-fiduciary and/or non-investment operating and accounting methodology IV - 16
management activities IV - 10 other related guidelines on valuation of
scope of regulations IV - 1 allowable investments IV - 19
general provisions IV - 1 plan rules IV - 16
investment management activities IV - 1 relationship of trustee IV - 16
trust and other fiduciary business IV - 1
statement of principles IV - 1 Unsafe and unsound practices IV - 11
activities which may be considered App. Q-24
“Truth in Lending Act” disclosure requirement conducting business in an unsafe/unsound
III – 7 manner I - 24c see also App. Q-24
abstract of "Truth in Lending Act" App. Q-12 sanctions IV - 12, I - 24d
definition of terms III - 8
amount to be financed III - 8 Unsecured loans III - 10
cash price or delivered price III - 8 ceiling on III - 16
down payment III - 8 loans against personal security III - 10
finance charge III - 8 general guidelines III - 10
non-finance charges III - 8 proof of financial capacity of borrower III - 10
person III – 8 sanctions III - 10
simple annual rate III - 8 signatories III - 10
trade-in III – 8

Index - Page 10
S REGULATIONS
(Regulations Governing Non-Stock Savings and Loan Associations)
TABLE OF CONTENTS
PART ONE - ORGANIZATION, MANAGEMENT AND

ADMINISTRATION
SECTION 4101S Scope of Authority of Non-Stock Savings and Loan

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

4106S.1 Revaluation surplus
C. (RESERVED)
D. NET WORTH-TO-RISK ASSETS RATIO
SECTION 4116S Capital-to-Risk Assets
SECTION 4117S Withdrawable Share Reserve
SECTION 4118S Surplus Reserve for Ledger Discrepancies
ix
SECTION 4119S Reserve for Office Premises, Furniture, Fixtures and
Equipment
SECTION 4120S (Reserved)
E. (RESERVED)
F. DIVIDENDS
SECTION 4126S Limitations on Declaration of Dividends
G. TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS
SECTION 4141S Definition; Qualifications; Responsibilities and Duties of

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

4142S.1 Definition of officers
4142S.2 Qualifications of officers
SECTION 4143S Disqualifications of Trustees and Officers

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

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

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

4161S.1 Uniform system of accounts
4161S.2 Adoption of statements of financial
accounting standards
SECTION 4162S Reports

4162S.1 Categories and signatories of reports
4162S.2 Manner of filing
4162S.3 Sanctions and procedures for filing and
payment of fines
xi
K. INTERNAL CONTROL
SECTION 4171S External Auditor
SECTION 4180S Selection, Appointment and Reporting Requirements for

SECTION 4181S Publication Requirements
SECTION 4182S Business Name
SECTION 4183S Prohibitions
SECTION 4199S General Provision on Sanctions
PART TWO - DEPOSIT AND BORROWING OPERATIONS
A. DEMAND DEPOSITS
SECTION 4201S Checking Accounts
B. SAVINGS DEPOSITS
SECTION 4206S Definition
SECTION 4207S Minimum Deposit
SECTION 4208S Withdrawals
SECTION 4209S Dormant Savings Deposits
xii
C. (RESERVED)
D. TIME DEPOSITS
SECTION 4222S Minimum Term and Size of Time Deposits
SECTION 4223S Withdrawals of Time Deposits
E. - F. (RESERVED)
G. INTEREST ON DEPOSITS
SECTION 4241S Interest on Savings Deposits
SECTION 4242S Interest on Time Deposits

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

4261S.1 Who may open deposit accounts
4261S.2 Identification of member-depositors
4261S.3 Number of deposit accounts
4261S.4 Signature card
4261S.5 Passbook and certificate of time deposit
4261S.6 Deposits in checks and other cash items
xiii
J. (RESERVED)
K. OTHER BORROWINGS
SECTION 4286S Borrowings
PART THREE - LOANS AND INVESTMENTS
A. LOANS IN GENERAL
SECTION 4301S Authority; Loan Limits; Maturity of Loans
SECTION 4302S Basic Requirements in Granting Loans
SECTION 4303S Loan Proceeds
SECTION 4304S Loan Repayment
SECTION 4305S Interest and Other Charges

4305S.1 Rate ceilings
4305S.2 Payment of loan before maturity
4305S.3 Interest in the absence of contract
4305S.4 Escalation clause; when allowable
4305S.5 Accrual of interest earned on loans
SECTION 4306S Past Due Accounts

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

4307S.1 Definition of terms
4307S.2 Information to be disclosed
4307S.3 Inspection of contracts covering
credit transactions
xiv
4307S.4 Posters
4307S.5 Penal provisions
B. SECURED LOANS
SECTION 4321S Kinds of Security
C. – D. (RESERVED)
E. LOANS/CREDIT ACCOMMODATIONS TO TRUSTEES,

OFFICERS, STOCKHOLDERS AND THEIR RELATED INTERESTS
SECTION 4356S General Policy
SECTION 4357S Direct/Indirect Borrowings; Ceilings
SECTION 4358S Records; Reports
SECTION 4370S Sanctions
F. - I. (RESERVED)
J. OTHER OPERATIONS
SECTION 4391S Fund Investments
xv
PART FOUR - (RESERVED)
PART FIVE - (RESERVED)
A. OTHER OPERATIONS
SECTION 4601S Payment of fines
SECTION 4631S Revocation/Suspension of NSSLA License
SECTION 4651S Notice of Dissolution
SECTION 4652S Confidential Information
SECTION 4653S Examination by the BSP
SECTION 4654S Applicability of Other Rules
SECTION 4655S Annual Fees on Non-Stock Savings and Loan Association
SECTION 4656S Basic Law Governing Non-Stock Savings and Loan

Associations
SECTION 4657S NSSLA Premises and Other Fixed Assets

4657S.1 - 4657S.2 (Reserved)
4657S.3 Reclassification of real and other properties
owned or acquired as NSSLA premises
4657S.4 - 4657S.8 (Reserved)
xvi
4657S.9 Batas Pambansa Blg. 344 - An Act To Enhance
The Mobility Of Disabled Persons By Requiring
Certain Buildings, Institutions, Establishments
And Public Utilities To Install Facilities And
Other Devices
SECTION 4691S Anti-Money Laundering Regulations

4691S.1 - 4691S.8 (Reserved)
4691S.9 Sanctions and Penalties
xvii
03.12.31
LIST OF APPENDICES
No. SUBJECT MATTER
S-1 Safeguards in Bonding of NSSLA Accountable Officers and Employees
S-2 List of Reports Required from NSSLAs

Annex S-2-a Reporting Guidelines on Crimes/Losses
S-3 Guidelines on Prescribed Reports Signatories and Signatory Authori-

zation
Annex S-3-a Format of Resolution for Signatories of Category A-1
Reports
Annex S-3-b Format of Resolution for Signatories of Category A-2
Reports
Annex S-3-c Format of Resolution for Signatories of Categories A-3
and B Reports
S-4 Format-Disclosure Statement of Loan/Credit Transaction
S-5 Abstract of "Truth in Lending Act"
S-6 Anti-Money Laundering Regulations

Annex S-6-a Certification of Compliance with Anti-Money Laun-
dering Regulations
Annex S-6-b Rules on Submission of Covered Transaction Reports
Institutions
S-7 Revised Implementing Rules and Regulations - R.A. No. 9160, as

S-8 Guidelines to Govern the Selection, Appointment and the Reporting

Requirement for External Auditors of NSSLAs
Manual of Regulations for Non-Bank Financial Institutions S Regulations

Appendices - Page 1
§§ 4101S - 4101S.2
02.12.31
PART ONE
A. SCOPE OF AUTHORITY which limit and/or allow membership

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

Part I - Page 1
§§ 4101S.2 - 4116S
02.12.31
trustees and officers, with a statement of their capital contribution of at least P1,000,000.
character, experience, and general fitness to The minimum capital contribution
engage in the non-stock savings and loan requirement shall also apply to all pending
business; applications to establish NSSLAs received
(2) An itemized statement of the prior to August 14, 2001.
estimated receipts and expenditures of the Members who have contributed P1,000
proposed NSSLA for the first year; or more to the capital of an NSSLA may
(3) Filing fee of P1,000; increase their capital contribution. Partial
(4) Such other information as the withdrawal from the amount paid by a
Monetary Board may require. member as capital contribution, during his
c. Grounds for disapproval of membership, may be allowed unless the by-
application. The Monetary Board may deny laws of the NSSLA provide otherwise, and
the application to organize an NSSLA on the subject to such rules and regulations as the
basis of a finding that: Monetary Board may prescribe in the matter
(1) The NSSLA is being organized for of such withdrawal of capital contribution.
any purpose other than to engage in the However, in no case, shall such partial
business of a legitimate NSSLA; withdrawal diminish the member’s capital
(2) The NSSLA’s financial program is contribution to less than P1,000.
unsound; Members of NSSLAs may participate in
(3) The proposed members are the profits of the NSSLA on the basis of their
adequately served by one (1) or more existing capital contributions on the date dividends
NSSLAs; and are declared.
(4) There exist other reasons which the
Monetary Board may consider as sufficient § 4106S.1 Revaluation surplus. In
ground for such disapproval. cases of both retiring and new members, a
d. Certificate of authority to operate; revaluation surplus shall be added to their
revocation or suspension thereof. NSSLAs, contributions by imputing their respective
prior to transacting business, shall procure a proportionate shares in the withdrawable
certificate of authority to transact business share reserve and the reserve for furniture,
from the Monetary Board. After due notice fixtures, and furnishings.
and hearing, the Monetary Board may revoke
or suspend, for such period as it determines, Secs. 4107S - 4110S (Reserved)
the certificate of authority of any NSSLA, the
solvency of which is imperiled by losses or
irregularities, or of any NSSLA which willfully C. (RESERVED)
violates any provision of R. A. No. 8367,
these rules or any pertinent law or regulation. Secs. 4111S - 4115S (Reserved)
Secs. 4102S - 4105S (Reserved)

D. NET WORTH-TO-RISK
ASSETS RATIO
B. CAPITALIZATION
Sec. 4116S Capital-to-Risk Assets. The
Sec. 4106S Capital. NSSLAs established after combined capital accounts of each NSSLA
August 14, 2001, shall have a minimum shall not be less than an amount equal to ten
S Regulations Manual of Regulations for Non-Bank Financial Institutions

Part I - Page 2
§§ 4116S - 4118S
99.12.31
percent (10%) of its risk assets which is the deficiency justifies it, restrict or prohibit
defined as its total assets minus the following the making of new investments of any sort
assets: by the NSSLA with the exception of the
a. Cash on hand; purchases of the evidence of indebtedness
b. Evidences of indebtedness of the included under Item "b" of this Section until
Republic of the Philippines and of the BSP the minimum required capital ratio has been
and any other evidences of indebtedness/ restored.
obligations, the servicing and repayment of
which are fully guaranteed by the Republic Sec. 4117S Withdrawable Share Reserve
of the Philippines; NSSLAs shall create a withdrawable share
c. Loans to the extent covered by hold- reserve which shall consist of two percent
out on, or assignment of, deposits maintained (2%) of the total capital contributions of the
in the lending NSSLA and held in the members.
Philippines; An amount corresponding to the
d. Office premises, depreciated; withdrawable share reserve shall be set up
e. Furniture, fixtures and equipment, by the NSSLA, such amount invested in
depreciated; bonds or evidences of indebtedness of the
f. Real estate mortgage loans insured Republic of the Philippines or of its
by the Home Insurance Guarantee subdivisions, agencies or instrumentalities,
Corporation to the extent of the amount of the servicing and repayment of which are fully
the insurance; and guaranteed by the Republic of the Philippines,
g. Other non-risk items as the and evidences of indebtedness of the BSP.
Monetary Board may, from time to time, For a uniform interpretation of the
authorize to be deducted from total assets. provisions of this Section, the following shall
The Monetary Board shall prescribe the serve as guidelines:
manner of determining the total assets of such a. The withdrawable share reserve
NSSLA for the purpose of this Section, but shall be set up from the profits of the NSSLA
contingent accounts shall not be included and shall be funded in the form of cash
among total assets. deposited as a separate account and/or an
Whenever the capital accounts of an investment allowed under this Section;
NSSLA are deficient with respect to the b. Should there be an increase in the
requirement of the preceding paragraph, the capital contribution, the reserve shall be
Monetary Board, after considering a report correspondingly adjusted at the end of each
of the appropriate supervising and examining month from undivided profits, if any; and
department of the BSP on the state of c. The reserve shall be adjusted first
solvency of the NSSLA concerned, shall limit before the NSSLA shall declare and pay out
or prohibit the distribution of net profits and dividends at any time of the year.
shall require that part or all of net profits be
used to increase the capital accounts of the Sec. 4118S Surplus Reserve for Ledger
NSSLA until the minimum requirement has Discrepancies. Whenever an NSSLA has a
been met. The Monetary Board may, after discrepancy between its general ledger
considering the aforesaid report of the accounts and their respective subsidiary
appropriate supervising and examining ledgers, the board of trustees of the NSSLA
department of the BSP, and if the amount of shall set up from the net profits of the NSSLA,

Part I - Page 3
§§ 4118S - 4141S
03.12.31
if any, a surplus reserve, in an amount F. DIVIDENDS

equivalent to the amount of discrepancy, and
this reserve shall not be available for Sec. 4126S Limitations on Declaration of
distribution as dividends or for any other Dividends
purpose unless and until the discrepancy is a. Basis for participation in profits.
accounted for. The board of trustees shall Member-depositors of an NSSLA may
also direct the employee responsible for the participate in the profits of the NSSLA on the
discrepancy to account for said discrepancy: basis of their capital contributions on the date
Provided, That the failure of the employee dividends are declared.
to do so shall constitute as ground for his b. Level of withdrawable share
dismissal if the discrepancy is of serious or reserve. NSSLAs shall not pay any dividend
recurring nature. or distribute any profit to its members if the
NSSLAs shall report such discrepancies withdrawable share reserve required under
to the appropriate supervising and examining Sec. 4117S is less than, or if by such payment
department of the BSP within fifteen (15) days or distribution would be reduced below, the
from discovery. amount specified in said Section. The reserve
shall be adjusted first before the NSSLA shall
Sec. 4119S Reserve for Office Premises, declare and pay out dividends at any time of
Furniture, Fixtures and Equipment. NSSLAs the year.
shall set aside five percent (5%) of their yearly c. Capital-to-risk assets ratio. NSSLAs
net profits until it amounts to at least five shall not pay any dividend or distribute any
percent (5%) of the total assets as a reserve profit to their members if their capital-to-risk
for a building fund to cover the cost of assets ratio is below the level required under
construction or acquisition of office premises, Sec. 4116S.
and of the purchase of office furniture, d. Discrepancies between general
fixtures and equipment. ledger and subsidiary ledger accounts. The
An NSSLA which, as determined by its surplus reserve set up as required under Sec.
board of trustees, has adequate office 4118S shall not be reverted for distribution
premises, furniture, fixtures and equipment as dividends unless and until the discrepancy
necessary for the conduct of its business need between the general ledger accounts and
not set up the reserve: Provided, That this their respective subsidiary ledgers for which
fact should be certified by its board of trustees the surplus reserve has been set up ceases to
in a resolution to be submitted to the exist.
department of the BSP for verification and Secs. 4127S - 4140S (Reserved)
approval: Provided, however, That in case
reserves had been set up, the NSSLA so
exempted may revert the reserves to free G. TRUSTEES, OFFICERS, EMPLOYEES
surplus. AND AGENTS
Sec. 4120S (Reserved) Sec. 4141S Definition; Qualifications;

Responsibilities and Duties of Trustees. For
E. (RESERVED) purposes of this Section, the following shall
be the definition, qualifications,
Secs. 4121S - 4125S (Reserved) responsibilities and duties of trustees.

Part I - Page 4
§§ 4141S.1 - 4141S.5
03.12.31
§ 4141S.1 Definition of trustees § 4141S.3 Powers and authority of the

Trustees shall include: (a) those who are board of trustees. The corporate powers of
named as such in the articles of an NSSLA shall be exercised, its business
incorporation; (b) those duly elected in conducted, and all its property shall be
subsequent meetings of the NSSLA’s controlled and held by its board of trustees.
members; and (c) those elected to fill The powers of the board of trustees as
vacancies in the board of trustees. conferred by law are original and cannot be
revoked by the members. The trustees hold
§ 4141S.2 Qualifications of trustees their office charged with the duty to act for
No person shall be eligible as trustee of an the NSSLA in accordance with their best
NSSLA unless he is a member of good judgment.
standing of such NSSLA.
In addition, such person shall have the § 4141S.4 General responsibility of the
qualifications and none of the board of trustees. The position of an NSSLA
disqualifications as provided in pertinent trustee is a position of trust. A trustee assumes
laws and BSP rules. certain responsibilities to different
A trustee shall have the following constituencies or stakeholders (e.g. the
minimum qualifications: NSSLA itself, its member-depositors and other
a. He shall be at least twenty-five (25) creditors, its management and employees
years of age at the time of his election/ and the public at large). These constituencies
appointment; or stakeholders have the right to expect that
b. He shall at least a college graduate the institution is being run in a prudent and
or have at least five (5) years experience in sound manner.
business, or shall have undergone any BSP The board of trustees is primarily
training in NSSLA or banking operations: responsible for the corporate governance of
Provided, however, That undergraduates the NSSLA. To ensure good governance of
eligible to be elected as trustees in the the NSSLA, the board of trustees should
NSSLA’s by-laws may be allowed as may be establish strategic objectives, policies and
approved by the Monetary Board; procedures that will guide and direct the
c. He must have attended a special activities of the NSSLA and the means to
seminar on corporate governance for board attain the same as well as the mechanism for
of trustees conducted or accredited by the monitoring management’s performance.
BSP; and While the management of the day-to-day
d. He must be fit and proper for the affairs of the institution is the responsibility
position of a trustee of the NSSLA. In of the management team, the board of
determining whether a person is fit and trustees is, however, responsible for
proper for the position of a trustee, the monitoring and overseeing management
following matters must be considered: action.
integrity/probity; competence; education;
diligence; and experience/training § 4141S.5 Duties and responsibilities of
The foregoing qualifications for trustees the board of trustees. To ensure prudent and
shall be in addition to those already required efficient administration of NSSLAs, the
or prescribed by R.A. No. 8367, as amended, following guidelines shall govern the
and other existing applicable laws and responsibilities and duties of the board of
regulations. trustees of NSSLAs:

Part I - Page 5
§ 4141S.5
03.12.31
a. Specific duties and responsibilities of or unethical conduct shall be strictly

the board of trustees prohibited. It shall provide policies that will
(1) To select and appoint officers who prevent the use of the facilities of the NSSLA
are qualified to administer the NSSLA affairs in furtherance of criminal and other illegal
effectively and soundly and to establish activities.
adequate selection process for all personnel. (4) To prescribe a clear assignment of
It is the primary responsibility of the board responsibilities and decision-making
of trustees to appoint competent authorities, incorporating a hierarchy of
management team at all times. The board of required approvals from individuals to the
trustees should apply fit and proper standards board of trustees. The board of trustees shall
on key personnel. Integrity, technical establish in writing the limits of the
expertise and experience in the institution’s discretionary powers of each officer,
business, either current or planned, should committee, sub-committee and such other
be the key considerations in the selection group for the purpose of lending, investing
process. And because mutual trust and a or committing the NSSLA to any financial
close working relationship are important, the undertaking or exposure to risk at any time.
board of trustees’ choice should share its The board of trustees shall have a schedule
general operating philosophy and vision for of matters and authorities reserved to it for
the institution. The board of trustees shall decision, such as major capital expenditures,
establish an appropriate compensation equity investments and divestments.
package for all personnel which shall be (5) To effectively supervise the NSSLA’s
consistent with the interest of all affairs. The board of trustees shall establish
stakeholders. a system of checks and balances which
(2) To establish objectives and draw up applies in the first instance to the board itself.
a business strategy for achieving them. Among the members of the board, an
Consistent with the institution’s objectives, effective system of checks and balances must
business plans should be established to direct exist. The system shall also provide a
its on-going activities. The board of trustees mechanism for effective check and control
should ensure that performance against plan by the board of trustees over the chief
is regularly reviewed, with corrective action executive officer and key managers and by
taken as needed. the latter over the line officers of the NSSLA.
(3) To conduct the affairs of the (6) To monitor, assess and control the
institution with high degree of integrity. performance of management. The board of
Since reputation is a very valuable asset, it is trustees shall put in place an appropriate
in the institution’s best interest that in reporting system so that it is provided with
dealings with its members, it observes a high relevant and timely information to be able to
standard of integrity. The board of trustees effectively assess the performance of
should prescribe corporate values, codes of management. For this purpose, it may
conduct and other standards of appropriate constitute a governance committee.
behavior for itself, the senior management (7) To adopt and maintain adequate risk
and other employees. Among other matters, management policy. The board of trustees
activities and transactions that could result shall be responsible for the formulation and
or potentially result in conflict of interest, maintenance of written policies and
personal gain at the expense of the institution, procedures relating to the management of

Part I - Page 6
§ 4141S.5
03.12.31
risks throughout the institution. The risk (11) To ensure that the NSSLA has
management policy shall include: beneficial influence on the economy. The
(a) a comprehensive risk management board of trustees has a continuing
approach; responsibility to provide those services and
(b) a detailed structure of limits, facilities which will be supportive of the
guidelines and other parameters used to national economy.
govern risk-taking; (12) To assess at least annually its
(c) a clear delineation of lines of performance and effectiveness as a body, as
responsibilities for managing risk; well as its various committees, the chief
(d) an adequate system for measuring executive officer and the NSSLA itself. The
risk; and composition of the board of trustees shall also
(e) effective internal controls and a be reviewed regularly with the end in view
comprehensive risk-reporting process. of having a balanced membership. Towards
The board of trustees may constitute a this end, a system and procedure for
committee for this purpose. evaluation shall be adopted which may
(8) To constitute the Audit Committee. include, but not limited to, the setting of
The Audit Committee shall be composed of benchmark and peer group analysis.
trustees, preferably with accounting and (13) To keep their authority within the
finance experience. Said audit committee powers of the institution as prescribed in the
provides oversight of the institution’s internal articles of incorporation, by-laws and in
and external auditors. It shall be responsible existing laws, rules and regulations. To
for the setting up of the internal audit conduct and maintain the affairs of the
department and for the appointment of the institution within the scope of its authority
internal auditor as well as the independent as prescribed in its charter and in existing
external auditor. It shall monitor and evaluate laws and regulations, the board of trustees
the adequacy and effectiveness of the internal shall appoint a compliance officer who shall
control system. be responsible for coordinating, monitoring
(9) To meet regularly. To properly and facilitating compliance with existing laws
discharge its function, the board of trustees and regulations. The compliance officer shall
shall meet regularly. Independent views in be vested with appropriate authority and
board meetings shall be given full provided with appropriate support and
consideration and all such meetings shall be resources. It may also constitute a compliance
duly minuted. committee.
(10) To keep the individual members of b. Specific duties and responsibilities
the board and the members informed. It is of a trustee
the duty of the board of trustees to present to (1) To conduct fair business
all its members and to the stakeholders a transactions with the NSSLA and to ensure
balanced and understandable assessment of that personal interest does not bias board
the NSSLA’s performance and financial decisions. Trustees should, whenever
condition. It should also provide appropriate possible, avoid situations that would give rise
information that flows internally and to the to a conflict of interest. If transactions with
public. All members of the board shall have the institution cannot be avoided, it should
reasonable access to any information about be done in the regular course of business and
the institution. upon terms not less favorable to the

Part I - Page 6a
§§ 4141S.5 - 4142S.1
03.12.31
institution than those offered to others. The it might be unpopular. Corollarily, he should
basic principle to be observed is that a trustee support plans and ideas that he thinks will
should not use his position to make profit or be beneficial to the institution.
to acquire benefit or advantage for himself (6) To have a working knowledge of the
and/or his related interests. He should avoid statutory and regulatory requirements
situations that would compromise his affecting the NSSLA, including the content
impartiality. of its articles of incorporation and by-laws,
(2) To act honestly and in good faith, the requirements of the BSP, and where
with loyalty and in the best interest of the applicable, the requirements of other
NSSLA, its members, regardless of the regulatory agencies. A trustee also keeps
amount of their capital contributions, and himself informed of the industry
creditors, if any. A trustee must always act developments and business trends in order
in good faith, with the care which an to safeguard the institution’s competitiveness.
ordinarily prudent man would exercise under (7) To observe confidentiality. Trustees
similar circumstances. While a trustee should must observe the confidentiality of non-
always strive to promote the interest of all public information acquired by reason of
members, he shall also give due regard to their position as trustees. They may not
the rights and interests of other stakeholders. disclose said information to any other person
(3) To devote time and attention without the authority of the board.
necessary to properly discharge their duties
and responsibilities. Trustees shall devote Sec. 4142S Definition and Qualifications
sufficient time to familiarize themselves with of Officers. Officers shall include the
the institution’s business. They must be President, Vice-President, General Manager,
constantly aware of the institution’s condition Corporate Secretary, Treasurer and others
and be knowledgeable enough to contribute mentioned as officers of the NSSLA, or whose
meaningfully to the board’s work. They must duties as such are defined in the by-laws.
attend and actively participate in board and The minimum qualifications for trustees
committee meetings, request and review prescribed in Sec. 4141S are also applicable
meeting materials, ask questions and request to officers.
explanations. If a person cannot give
sufficient time and attention to the affairs of § 4142S.1 Definition of officers. Officers
the institution, he shall neither accept his shall include the President, Executive Vice
nomination nor run for election as member President, Senior Vice President, Vice
of the board of trustees. President, General Manager, Secretary,
(4) To act judiciously. Before deciding Treasurer, and others mentioned as officers
on any matter brought before the board of of the NSSLA, or those whose duties as such
trustees, every trustee should thoroughly are defined in the by-laws, or are generally
evaluate the issues, ask questions and seek known to be the officers of the NSSLA (or
clarifications when necessary. any of its branches and offices other than the
(5) To exercise independent judgment. head office) either through announcement,
A trustee should view each problem/situation representation, publication or any kind of
objectively. When a disagreement with communication made by the NSSLA.
others occurs, he should carefully evaluate A person holding the position of
the situation and state his position. He should chairman, vice-chairman or any other
not be afraid to take a position even though position of the board who also performs

Part I - Page 6b
§§ 4142S.1 - 4143S.1
03.12.31
functions of management such as those involving dishonesty or breach of trust, such

ordinarily performed by regular officers shall as estafa, embezzlement, extortion, forgery,
also be considered an officer. malversation, swindling and theft;
(2) Persons who have been convicted
§ 4142S.2 Qualifications of officers by final judgment of the court for violation
An officer shall have the following of banking/quasi-banking/NSSLA laws;
minimum qualifications: (3) Persons who have been judicially
a. He shall be at least twenty-one (21) declared insolvent, spendthrift or incapaci-
years of age; tated to contract; or
b. He shall be at least a college graduate (4) Directors/trustees, officers or em-
or have at least five (5) years experience in ployees of closed banks/quasi-banks/trust
NSSLA or banking operations or related entities, NSSLAs or other financial institutions
activities or in a field related to his position (FIs) under BSP supervision/ regulation who
and responsibilities, or have undergone were responsible for such institution’s closure
training in NSSLA or banking operations as determined by the Monetary Board.
acceptable to the appropriate supervising and b. Temporarily disqualified
examining department of the BSP; Persons disqualified from holding a
c. He must be fit and proper for the trustee position for a specific/indefinite period
position of an officer of the NSSLA. In of time are:
determining whether a person is fit and (1) Persons who refuse to fully disclose
proper for the position of an officer, the the extent of their business interest to the ap-
following matters must be considered: propriate supervising and examining depart-
integrity/probity; competence; education; ment when required pursuant to a provision
diligence; and experience/training. of law or of a circular, memorandum or rule
The foregoing qualifications for officers or regulation of the BSP. This disqualifica-
shall be in addition to those already required tion shall be in effect as long as the refusal
or prescribed by R.A. No. 8367, as amended, persists;
and other existing applicable laws and (2) Trustees who have been absent or
regulations. who have not participated for whatever rea-
sons in more than fifty percent (50%) of all
Sec. 4143S Disqualification of Trustees and meetings, both regular and special, of the
Officers. The following regulations shall board of trustees during their incumbency,
govern the disqualification of NSSLAs’ or any twelve (12)-month period during said
trustees and officers. incumbency. This disqualification applies for
purposes of the succeeding election;
§ 4143S.1 Persons disqualified to (3) Persons who are delinquent in the
become trustees. Without prejudice to payment of their obligations as defined here-
specific provisions of laws prescribing under:
disqualifications for trustees, the following are (a) Delinquency in the payment of
disqualified from becoming trustees: obligations means that an obligation of a
a. Permanently disqualified person with an NSSLA where he/she is a
The following persons are permanently trustee or officer, or at least two (2) obligations
disqualified from holding a trustee position: with other banks/financial institutions, under
(1) Persons who have been convicted different credit lines or loan contracts, are past
by final judgment of the court for offenses due pursuant to existing regulations;

Part I - Page 6c
§§ 4143S.1 - 4143S.2
03.12.31
(b) Obligations shall include all (7) Trustees who failed to attend the
borrowings from a bank/NBQB/trust entity/ special seminar on corporate governance for
NSSLA/other FIs obtained by: board of trustees required by BSP. This
(i) A trustee or officer for his own disqualification applies until the trustee
account or as the representative or agent of concerned had attended such seminar;
others or where he/she acts as a guarantor, (8) Persons dismissed/terminated from
endorser or surety for loans from such employment for cause. This disqualification
financial institutions; shall be in effect until they have cleared
(ii) The spouse or child under the themselves of involvement in the alleged
parental authority of the trustee or officer; irregularity;
(iii) Any person whose borrowings or (9) Those under preventive suspension;
loan proceeds were credited to the account or
of, or used for the benefit of a director, trustee (10) Persons with derogatory records
or officer; with the National Bureau of Investigation
(iv) A partnership of which a trustee or (NBI), court, police, Interpol and monetary
officer, or his/her spouse is the managing authority (central bank) of other countries (for
partner or a general partner owning a foreign trustees and officers) involving
controlling interest in the partnership; and violation of any law, rule or regulation of the
(v) A corporation, association or firm Government or any of its instrumentalities
wholly-owned or majority of the capital of adversely affecting the integrity and/or ability
which is owned by any or a group of persons to discharge the duties of an NSSLA trustee/
mentioned in the foregoing Items “(i)”, “(ii)” officer. This disqualification applies until they
and “(iv)”; have cleared themselves of involvement in
This disqualification shall be in effect as the alleged irregularity.
long as the delinquency persists.
(4) Persons convicted for offenses § 4143S.2 Persons disqualified to
involving dishonesty, breach of trust or become officers
violation of banking/quasi-banking and a. The disqualifications for trustees
NSSLA laws and regulations but whose mentioned in Subsec. 4143S.1 shall likewise
conviction has not yet become final and apply to officers, except those stated in Items
executory; “b(2)” and “b(7)”.
(5) Directors/trustees and officers of b. Except as may be authorized by the
closed banks/NBQBs/trust entities/NSSLAs Monetary Board or the Governor, the spouse
and other FIs under BSP supervision/ or a relative within the second degree of
regulation pending their clearance by the consanguinity or affinity of any person
Monetary Board; holding the position of Chairman, Vice
(6) Trustees disqualified for failure to Chairman, President, Executive Vice
observe/discharge their duties and President or any position of equivalent rank,
responsibilities prescribed under existing General Manager, Treasurer, Chief Cashier
regulations. This disqualification applies until or Chief Accountant is disqualified from
the lapse of the specific period of holding or being elected or appointed to any
disqualification or upon approval by the of said positions in the same NSSLA; and the
Monetary Board on recommendation by the spouse or relative within the second degree
appropriate supervising and examining of consanguinity or affinity of any person
department of such trustees’ election/re- holding the position of Manager, Cashier, or
election;

Part I - Page 6d
§§ 4143S.2 - 4143S.6
03.12.31
Accountant of a branch or office of an NSSLA concerned shall be eligible to become trustee

is disqualified from holding or being or officer of any NSSLA only upon prior
appointed to any of said positions in the same approval by the Monetary Board.
branch or office;
c. Except as may otherwise be allowed § 4143S.4 Effect of non-possession of
under C.A. No. 108, otherwise known as qualifications or possession of disqualifica-
“The Anti-Dummy Law,” as amended, tions. Trustees/officers elected or appointed
foreigners cannot be officers or employees without possessing the qualifications in
of NSSLAs; and Subsecs. 4141S.2/4142S.2 or possessing any
d. Any appointive or elective public of the disqualifications as enumerated in
official, whether full time or part time, except Subsecs.4143S.1/4143S.2, shall vacate their
in cases where such service is incident to respective positions immediately.
financial assistance provided by the
government or government-owned or § 4143S.5 (Reserved)
controlled corporations or in cases allowed
under existing law. § 4143S.6 Watchlisting. To provide the
BSP with a central information file to be used
§ 4143S.3 Disqualification procedures as reference in passing upon and reviewing
a. Upon the establishment of any of the the qualifications of persons elected or ap-
grounds for disqualification, the office of the pointed as trustee or officer of an NSSLA, the
disqualified trustee or officer shall SES shall maintain a watchlist of disqualified
immediately become vacant, except in the NSSLA trustees/officers under the following
case of delinquency in the payment of procedures:
obligations wherein the trustee or officer a. Watchlist categories. Watchlisting
concerned shall be given a grace period of shall be categorized as follows:
thirty (30) days after such ground for (1) Disqualification File “A” (Permanent)
disqualification has been established. - Trustees/officers/employees permanently
b. All cases of disqualification shall be disqualified by the Monetary Board from
immediately reported to the board of trustees holding a director/trustee/officer position in
of the NSSLA concerned. If the ground for any institution under the supervision/
disqualification is delinquency in the regulation of BSP.
payment of obligations, the report shall be (2) Disqualification File “B” (Temporary)
made at the expiry of the thirty (30)-day grace - Trustees/officers/employees temporarily
period mentioned in Item “a” above. disqualified by the Monetary Board from
The board of trustees shall act on the holding a director/trustee/officer position in
report not later than the following board of any institution under the supervision/
trustees’ meeting. Within seventy-two (72) regulation of BSP.
hours thereafter, the corporate secretary shall b. Inclusion of trustees/officers/
report to the Governor of the BSP through employees in the watchlist. Upon
the appropriate supervising and examining recommendation by the appropriate
department the name of the trustee or officer supervising and examining department, the
involved, the ground for his disqualification inclusion of trustees/officers/employees in
and the action taken by the board. watchlist disqualification files “A” and “B”
c. When the ground for disqualification on the basis of decisions, actions or reports
ceases to exist, the trustee or officer of the courts, banks, NBQBs, other NSSLAs

Part I - Page 6e
§§ 4143S.6 - 4144S.2
03.12.31
and FIs under BSP supervision, BSP, NBI or agency/body where the concerned individual
any other administrative agencies shall first had derogatory record.
be approved by the Monetary Board. Trustees/officers/employees delisted from
c. Notification of trustees/officers/ the Watchlist – Disqualification File “B” other
employees. Upon approval by the Monetary than those upgraded to Watchlist –
Board, the concerned trustee/officer/ Disqualification File “A” shall be eligible for
employee shall be informed through re-employment with any bank, NBQB, trust
registered mail, with registry return receipt entity, NSSLA or other FI under BSP
card at his/her last known address of his/her supervision.
inclusion in the masterlist of watchlisted
persons disqualified to be a trustee/officer in Sec. 4144S Compensation of Trustees,
any financial institution under the supervision Officers and Employees. No trustee, officer
of the BSP. or employee of an NSSLA shall receive from
d. Confidentiality. Watchlisting shall be such NSSLA and no NSSLA shall pay to any
for internal use only and may not be accessed trustee, officer, or employee of such NSSLA,
or queried upon by outside parties including any commission, emolument, gratuity or
banks, NBQBs, trust entities, NSSLAs or other reward based on the volume or number of
FIs under BSP supervision except with the loans made, or based on the interest or fees
authority of the person concerned and with collected thereon. Nothing in this Section,
the approval of the Deputy Governor, SES, however, prohibits or limits any of the
or the Governor, or the Monetary Board. following:
e. Delisting. All delistings shall be a. Receipt or payment of salaries of
approved by the Monetary Board upon trustees, officers and employees;
recommendation of the appropriate b. Receipt or payment of commissions
supervising and examining department to agents whether or not based on the volume
except in cases of persons known to be dead, or number of loans or on the interest and
where delisting shall be automatic upon fees collected thereon; or
proof of death and need not be elevated to c. Receipt or payment of bonuses of
the Monetary Board. Delisting may be trustees, officers or employees if such
approved by the Monetary Board in the bonuses are based on the profits and not on
following cases: the volume or number of loans made or on
(1) Watchlist – Disqualification File “B” the interest or fees collected thereon.
(Temporary) –
(a) After the lapse of the specific period § 4144S.1 Compensation increases
of disqualification; All increases in compensation, in any form,
(b) When the conviction by the court for of all trustees and trustee-officers in excess
crimes involving dishonesty, breach of trust of ten percent (10%) thereof per annum shall
and/or violation of banking laws becomes require the approval of the BSP.
final and executory, in which case the trustee/
officer/employee is relisted to Watchlist – § 4144S.2 Liability for loans contrary
Disqualification File “A” (Permanent); to law. No NSSLA shall make or purchase
(c) Upon favorable decision or clearance any loan or investment not authorized or
by the appropriate body, i.e., court, NBI, permitted under R.A. No. 8367, and any
bank, NBQB, trust entity or such other trustee, officer or employee, who on behalf

Part I - Page 6f
§§ 4144S.2 - 4151S
03.12.31
of any such NSSLA, knowingly makes or Monetary Board may impose the following
purchases any such loan or investment or restrictions in the compensation and other
who knowingly consents thereto shall be benefits of trustees and officers:
personally liable to the NSSLA for the full (a) Except for the financial assistance to
amount of any such loan or investment. meet expenses for the medical, maternity,
education and other emergency needs of the
Sec. 4145S Bonding of Officers and trustees or officers or their immediate family,
Employees. All officers and employees of other forms of financial assistance may be
an NSSLA who, in the regular discharge of suspended.
their duties have access to money or (b) When the total compensation
negotiable securities shall, before entering package including salaries, allowances, fees
upon such duties, furnish to the employing and bonuses of trustees and officers are
NSSLA a good and sufficient bond and significantly excessive as compared with
providing for indemnity to the NSSLA against industry averages, the Monetary Board may
the loss of money or securities, by reason of order their reduction to reasonable levels.
their dishonesty.
The bond of the cashier, assistant cashier, Sec. 4146S Agents and Representatives. No
treasurer, and other employees having person shall act as an agent or sales
money accountability shall not be less than representative of an NSSLA or operate an
their average daily accountability. The bond agency without obtaining a license from the
must be issued by a reputable bonding Monetary Board. No license is required for
company duly licensed by the Insurance a collector of an NSSLA but no person shall
Commission and approved by the BSP. hold himself out or act as collector unless he
Capital contribution or a cash bond deposited is authorized as a collector in writing by such
with the NSSLA or with a bank, may also be NSSLA.
allowed.
To protect the funds of depositors and Sec. 4147S (Reserved)
creditors, the Monetary Board may regulate/
restrict the payment by the NSSLA of Sec. 4148S Full-Time Manager for NSSLAs
compensation, allowances, fees, bonuses, NSSLAs with total assets of at least
and fringe benefits to its trustees and officers P5,000,000 shall maintain a full-time
in exceptional cases and when the manager to take charge of the operations of
circumstances warrant, such as, but not the NSSLA. The manager shall possess all the
limited to the following: qualifications and shall not have any
a. When the NSSLA is found by the disqualification under Subsecs. 4142S.2 and
Monetary Board to be conducting business 4143S.2, respectively.
in an unsafe or unsound manner;
b. When the NSSLA is found by the Secs. 4149S - 4150S (Reserved)
Monetary Board to be in an unsatisfactory
financial condition such as, but not limited
to, the following cases: H. BRANCHES AND OTHER OFFICES
(1) Its capital is impaired; and
(2) It has suffered continuous losses Sec. 4151S Establishment of Branches/
from operations for the past three (3) years. Extension Offices. Prior BSP authority shall
In the presence of any one (1) or more of be obtained before operating a branch or
the circumstances mentioned above, the other offices.

Part I - Page 6g
§§ 4151S.1 - 4161S
99.12.31
§ 4151S.1 Application. The application § 4151S.3 Internal control system.

shall be prescribed by the appropriate The NSSLA shall submit to the appropriate
supervising and examining department of the supervising and examining department of the
BSP and accompanied by the following BSP a system of internal safeguards and
minimum requirements: control measures to be adopted for
a. Sketch of the location of the compliance by the staff of the proposed
proposed office which shall be within the branch/extension office.
compound of the mother firm’s branch office;
b. Itemized statement of estimated § 4151S.4 Permit to operate. Actual
receipts and expenses of the NSSLA in operation shall commence only after a permit
connection with such branch or extension to operate has been issued by the BSP.
office;
c. Description or enumeration of Secs. 4152S - 4155S (Reserved)
service facilities that will cater to the deposit
and credit needs of members of the NSSLA;
d. Financial statements for the year I. BUSINESS DAYS AND HOURS
immediately preceding the date of
application; Sec. 4156S Business Days and Hours
e. Certification as to the actual number NSSLAs may, with the prior approval of the
of members that will be serviced by the appropriate supervising and examining
branch/extension office; and department of the BSP, adopt such business
f. Undertaking that the branch/ days and hours as may be convenient for
extension office will service only members them.
of the NSSLA. NSSLAs shall be open for business
during business hours and days except when
§ 4151S.2 Conditions precluding extraordinary instances caused by unforeseen,
acceptance/processing of application. The unavoidable event directly affect the NSSLA’s
application shall not be accepted/processed ability to open for business.
in any of the following cases: NSSLAs shall post conspicuously at all
a. The NSSLA’s operation during the times in their place of business their schedule
year immediately preceding the date of filing of regular business hours and days.
of application was unprofitable;
b. Total capital accounts of the NSSLA Secs. 4157S - 4160S (Reserved)
are less than P100 million as of the date of
filing of the application; J. REPORTS
c. Total number of members to be
served in the proposed branch/extension Sec. 4161S Records. NSSLAs shall have a
office is less than 500; or true and accurate account, record or
d. Non-compliance by the NSSLA with statement of their daily transactions. The
any of the pertinent provisions of banking making of any false entry or the willful
laws, rules, regulations and policies of the omission of entries relevant to any transaction
BSP. is a ground for the Monetary Board for the

Part I - Page 7
§§ 4161S - 4162S.1
99.12.31
imposition of administrative sanctions under Sec. 4162S Reports. NSSLAs shall submit to
Section 37 of R.A. No. 7653, without the appropriate supervising and examining
prejudice to the criminal liability of the department of the BSP the reports in
director or officer responsible therefor under prescribed form listed in Appendix S-2.
Sections 35 and 36 of R.A. No. 7653 and/or
the applicable provisions of the Revised Penal § 4162S.1 Categories and signatories of
Code. Records shall be up-to-date and shall reports. For purposes of designating the
contain sufficient detail so that an audit trail signatories of reports, certain weekly,
is established. monthly, quarterly, semi-annual, and annual
statements/reports required to be submitted
§ 4161S.1 Uniform System of to the BSP are hereby grouped into Category
Accounts. NSSLAs are required to pattern A-1, A-2, A-3 and Category B, as enumerated
their charts of accounts and recording systems in Appendix S-3.
after the Uniform System of Accounts Category A-1 reports shall be signed by
prescribed for NSSLAs including reportorial the NSSLA’s Chief Executive Officer (who
and publication requirements. may be the President or Chairman of the
The voucher system of accounting or Board, or designated in the by-laws), or in
the ticket system, or such other accounting his absence, by the Executive Vice President
system acceptable to the BSP as well as the or the officer duly authorized under a
prescribed chart of accounts shall be adopted resolution approved by the board of trustees
for use by NSSLAs. and by the Chief Finance Officer (i.e.,
Controller or Chief Accountant, who shall
§ 4161S.2 Adoption of Statements of likewise be duly authorized by the NSSLA’s
Financial Accounting Standards. NSSLAs are board of trustees in a format prescribed in
hereby required to adopt the Statements of Appendix S-3a.
Financial Accounting Standards (SFAS) in Category A-2 reports of the head office
their financial statements and reports to the of the NSSLA shall be signed by the NSSLA’s
BSP prepared in accordance with the President or Senior Vice-President/equivalent
generally accepted accounting principles. position. Offices/units (such as branch)
However, in cases where there are reports in this category shall be signed by
differences between BSP regulations and their respective managers/officers-in-charge.
SFAS as when more than one (1) option are Likewise, the signing authority in this
allowed or certain maximum or minimum category shall be contained in a resolution
limits are prescribed by the SFAS, the option approved by the board of trustees in the
or limit prescribed by BSP regulations shall format prescribed in Appendix S-3b.
be adopted by NSSLAs. Category A-3 and B reports are those
For purposes hereof, the SFAS shall refer required to be submitted to the BSP and are
to the issuances of the Accounting Standards not included in Categories A-1 and A-2. They
Council (ASC) and approved by the shall be signed by officers or their alternates,
Professional Regulation Commission (PRC). who shall be duly designated by the board
Copies of the aforesaid SFAS may be of trustees. A copy of the board resolution
obtained from the PICPA House, Shaw Blvd., with format as prescribed in Appendix S-3c,
Mandaluyong, Metro Manila. covering the initial designation and

Part I - Page 8
§§ 4162S.1 - 4162S.3
99.12.31
subsequent changes in signatories and (2) Willful delay in the submission of

alternates, shall be submitted to the reports shall refer to the failure of any NSSLA
appropriate supervising and examining to submit on time the report defined in Item
department of the BSP within three (3) days "(1)" above. Failure to submit a report on time
from the date of resolution. due to fortuitous events, such as fire and other
If a report is submitted to the BSP under natural calamities and public disorders, shall
the signature of an officer who is not listed not be considered as willful delay.
or included in any of the resolutions (3) Examination shall include, but need
mentioned above, the supervising and not be limited to, the verification, review,
examining department shall refuse to audit, investigation and inspection of the
acknowledge the report as valid or consider books and records, business affairs,
the report as not having been submitted at administration and financial condition of any
all. If such a report is not resubmitted by the NSSLA including the reproduction of the
NSSLA under the signature of a duly records as well as the taking possession of
authorized signing officer, administrative the books and records and keeping them
sanctions/penalties shall be imposed on the under BSP custody after giving proper
erring NSSLA for the late reporting or failure receipts therefor. It shall also include the
to submit the required report, as the case may interview of the directors and personnel of
be. any NSSLA.
(4) Refusal to permit examination shall
§ 4162S.2 Manner of filing. The mean any act or omission which impedes,
submission of the reports shall be effected delays or obstructs the duly
by filing them personally with the appropriate authorized BSP officer/examiner/employee
supervising and examining department of the from conducting an examination, including
BSP or with the BSP Regional Offices or by the act of refusing to honor a letter of authority
sending them registered mail or special to examine presented by any officer/
delivery, unless otherwise specified in the examiner/employee of the BSP.
circular or memorandum of the Monetary b. Fines for willful delay in submission
Board or the BSP. of reports. NSSLAs incurring willful delay in
the submission of required reports shall pay
§ 4162S.3 Sanctions and procedures a fine in accordance with the following
for filing and payment of fines. Failure to schedule:
submit the above reports on or before the
specified dates shall subject the person I. For Categories A-1, A-2 and A-3 reports
responsible or entity concerned to the
penalties provided by law. Per business day of default
For willful delay in the submission of Until the report is filed P180
reports, the following rules shall apply:
II. For Category B reports
a. Definition of Terms. The following Per business day of default
definitions shall apply: Until the report is filed 60
(1) Report shall refer to all written
reports/statements required of an NSSLA to Delay or default shall start to run on the
be submitted to the BSP periodically or within day following the last day required for the
a specified period. submission of reports. However, should the

Part I - Page 9
§§ 4162S.3 - 4171S
03.12.31
last day of filing fall on a non-working day in (2) Procedures in imposing the fine
the locality where the reporting NSSLA is (a) The BSP officer/examiner/
situated, delay or default shall start to run employee shall report the refusal of the
on the day following the next working day. NSSLA to permit examination to the head of
The due date/deadline for submission of the appropriate department of BSP, who shall
reports to BSP as prescribed under Sec. 4162S forthwith make a written demand upon the
governing the frequency and deadlines NSSLA concerned for such examination. If
indicated in Appendix S-2 shall be the NSSLA continues to refuse said
automatically moved to the next business day examination without any satisfactory
whenever a half-day suspension of business explanation therefor, the BSP officer/
operations in government offices is declared examiner/employee concerned shall submit
due to an emergency such as typhoon, floods, a report to that effect to the appropriate
etc. department head.
For the purpose of establishing delay or (b) The fine shall be imposed starting
default, the date of acknowledgment by the on the day following the receipt by the
appropriate supervising and examining appropriate department of the written report
department of the BSP or the BSP Regional submitted by the BSP officer/examiner/
Offices/Units appearing on the copies of such employee concerned regarding the
reports filed or submitted or the date of continued refusal of the NSSLA to permit the
mailing postmarked on the envelope/the date desired examination.
of registry or special delivery receipt, as the d. Manner of payment or collection
case may be, shall be considered as the date of fines. The regulations embodied in Sec.
of filing. 4601S shall be observed in the collection of
Delayed schedules/attachments and the fines from NSSLAs.
amendments shall be considered late e. Appeal to the Monetary Board.
reporting subject to above penalties. NSSLAs may appeal to the Monetary Board
c. Sanctions for willful refusal to from a ruling of the appropriate department
permit examination/making of false imposing a fine.
statement f. Other penalties. The foregoing
(1) Any NSSLA which shall willfully penalties shall not preclude the application
refuse to permit examination shall pay a fine of, or shall be without prejudice to, other
of P3,000 daily from the day of refusal and administrative sanctions as well as to the
for as long as such refusal lasts. filing of criminal case as provided for in the
The provisions of Section 34 of R. A. other provisions of the law, as may be
No. 7653 shall apply to any agent, manager, warranted by the nature of the offense.
or other officer-in-charge of any NSSLA who
willfully refuses any lawful examination into Secs. 4163S - 4170S (Reserved)
the affairs of such NSSLA.
The willful making of a false statement
or misleading statement on a material fact to K. INTERNAL CONTROL
the Monetary Board or to the director of the
department of the BSP charged with the Sec. 4171S External Auditor. NSSLAs
regulation of NSSLAs or to his examiner shall except those with total resources of
be punished in accordance with Section 36 P10,000,000 or less, shall engage the
of R. A. No. 7653. services of an independent Certified

Part I - Page 10
§§ 4171S - 4180S
04.12.31
Public Accountant to audit their books of The Supervision and Examination Sector
accounts at least once a year, or as often as (SES) shall make an annual assessment of the
necessary. performance of external auditors and will
recommend deletion from the list even prior
Secs. 4172S - 4179S (Reserved) to the three-year renewal period, if based on
assessment, the external auditors’ report did
Sec. 4180S Selection, Appointment and not comply with BSP requirements.
Reporting Requirements for External External auditors who meet the
Auditors; Sanction; Effectivity. Under requirements specified in this Section shall
Section 58, R.A. No. 8791, the Monetary be included in the list of BSP selected external
Board may require an NSSLA to engage the auditors. In case of partnership, inclusion in
services of an independent auditor to be the list of BSP selected external auditors shall
chosen by the NSSLA concerned from a list apply to the audit firm only and not to the
of certified public accountants acceptable to individual signing partners or auditors under
the Monetary Board. its employment.
It is the policy of the BSP to promote The BSP will circularize to all banks,
high ethical and professional standards in quasi banks, trust entities and NSSLAs the
public accounting practice and to encourage list of selected external auditors once a year.
coordination and sharing of information The BSP, however, shall not be liable for any
between external auditors and regulatory damage or loss that may arise from its
authorities of banks, quasi-banks, NSSLAs, selection of the external auditors to be
and/or trust entities to ensure effective audit engaged by banks, quasi-banks, trust entities
and supervision of these institutions and to or NSSLAs for regular audit or special
avoid unnecessary duplication of efforts. In engagements.
furtherance of this policy and to ensure that a. Rules and regulations. The rules and
reliance by regulatory authorities and the regulations to govern the selection and
public on the opinion of external auditors is delisting by the BSP of external auditors of
well placed, the BSP hereby prescribes the NSSLAs and their subsidiaries and affiliates
rules and regulations that shall govern the engaged in allied activities are shown in
selection, appointment, reporting Appendix S-8.
requirements and delisting for external b. Sanctions. The applicable sanctions/
auditors of banks, quasi-banks, NSSLAs, and/ penalties prescribed under Sections 36 and
or trust entities, their subsidiaries and 37 of R. A. No. 7653 to the extent applicable
affiliates engaged in allied activities and other shall be imposed on the NSSLA, its audit
financial institutions which under special committee and the directors approving the
laws are subject to BSP supervision. hiring of external auditors who are not in the
The selection of external auditors shall BSP list of selected auditors for banks, quasi-
be valid for a period of three years. BSP banks, NSSLAs, and trust entities or for hiring,
selected external auditors shall apply for the and/or retaining the services of the external
renewal of their selection every three years. auditor in violation of any of the provisions
The provisions of Items “A” and “B” of of this Section and for non-compliance with
Appendix S-8 shall likewise apply for each the Monetary Board directive under Item “I”
application for renewal. in Appendix S-8. Erring external auditors may

Part I - Page 11
§§ 4180S - 4199S
04.12.31
also be reported by the BSP to the PRC for Sec. 4183S Prohibitions
appropriate disciplinary action. a. No person, association, partnership
or corporation shall do business as an NSSLA,
or shall use the terms “Savings and Loan
L. MISCELLANEOUS PROVISIONS Association” or any other title or name
tending to give the public impression that it
Sec. 4181S Publication Requirements is engaged in the operations and activities of
NSSLAs shall, within 120 calendar days after an NSSLA unless so authorized under R.A.
the close of the calendar year or their fiscal No. 8367 and these regulations.
year, as the case may be, furnish the b. The use by an NSSLA of any other
Monetary Board and post in any of the name or title or combination of names and
NSSLAs’ bulletin boards or in any other titles or any other deviation from the
conspicuous place a copy of their financial requirements of this Section shall not be
statements showing, in such form and detail authorized except upon prior approval of the
as the Monetary Board shall require, the Monetary Board.
amount and character of the assets and c. NSSLAs shall not issue, publish or
liabilities of the NSSLAs at the end of the cause or permit to be issued or published,
preceding fiscal year. The Monetary Board any advertisement that it is doing or permitted
may, in addition to the foregoing, require the to do business which is prohibited by law to
disclosure of such other information as it shall an NSSLA.
deem necessary for the protection of the d. No NSSLA shall advertise or
members of the NSSLA. represent itself to its members or to the public
as a bank, or as a trust company.
Sec. 4182S Business Name. NSSLAs
organized or operating under R.A. No. 8367 Secs. 4184S - 4198S (Reserved)
and licensed by the BSP shall include in their
names the words “Savings and Loan Sec. 4199S General Provision on Sanctions
Association”. Such NSSLAs shall display in Unless otherwise provided, any violation of
a conspicuous place at their business offices the provisions of this Part shall be subject to
a sign including, among other things, the the sanctions provided in Sections 34, 35,
following words: “Authorized by the Bangko 36 and 37 of Republic Act No. 7653,
Sentral ng Pilipinas”. whenever applicable.

Part I - Page 12
§§ 4201S - 4223S
99.12.31
PART TWO
DEPOSIT AND BORROWING OPERATIONS
A. DEMAND DEPOSITS NSSLA and approved by the BSP, may be

charged by the NSSLA for every withdrawal
Section 4201S Checking Accounts. No made in excess of the maximum number
NSSLA shall have or carry upon its books for allowed in any one (1) month.
any person any demand, commercial or
checking account, or any credit to be Sec. 4209S Dormant Savings Deposits
withdrawn upon the presentation of any NSSLAs may charge a fee, the amount of
negotiable check or draft. which shall be approved by the BSP for the
maintenance of dormant savings deposits.
Secs. 4202S - 4205S (Reserved) Savings deposit shall be classified as dormant
if no deposit or withdrawal has been made
B. SAVINGS DEPOSITS for the last two (2) years.
Sec. 4206S Definition. Savings deposits Secs. 4210S – 4215S (Reserved)

are deposits evidenced by a passbook
consisting of funds deposited to the credit of
one (1) or more individuals with respect to C. (RESERVED)
which the depositor may withdraw anytime,
unless prior notice in writing of an intended Secs. 4216S - 4220S (Reserved)
withdrawal is required by the NSSLA.
Sec. 4207S Minimum Deposit. Savings D. TIME DEPOSITS

deposits with NSSLAs may be opened with
a minimum deposit of P100. Sec. 4221S (Reserved)
Sec. 4208S Withdrawals. Withdrawal from Sec. 4222S Minimum Term and Size of Time
a savings deposit shall be made through the Deposits
presentation to the NSSLA of a duly a. Term - No time deposit shall be
accomplished withdrawal slip together with accepted for a term of less than thirty (30)
the depositor’s passbook. days.
NSSLAs shall reserve the right to require b. Minimum Size - NSSLAs shall not
the depositor to give prior written notice of require a minimum amount of time deposit
withdrawal of not more than thirty (30) days. greater than P1,000.
NSSLAs may limit the number of
withdrawals that a depositor may make: Sec. 4223S Withdrawals of Time Deposits
Provided, That the number of the The withdrawal of a time deposit can be
withdrawals allowed shall not be less than made only by presentation of the certificate
three (3) times a month. A service charge to of time deposit on the day of or after its
be determined by the board of trustees of the maturity.

Part II - Page 1
§§ 4224S - 4261S.5
99.12.31
Secs. 4224S - 4230S (Reserved) § 4261S.1 Who may open deposit

accounts. Only members who have
E. - F. (RESERVED) contributed P1,000 or more to the capital of
the NSSLA may open deposit accounts with
Secs. 4231S - 4240S (Reserved) NSSLAs. A natural person, although lacking
capacity to contract, may nevertheless open
G. INTEREST ON DEPOSITS a savings or time deposit account for himself,
provided he has sufficient discretion.
Sec. 4241S Interest on Savings Deposits However, he cannot withdraw therefrom,
Savings deposits of NSSLAs shall not be except through, or with the assistance of a
subject to any interest rate ceiling. guardian authorized to act for him. Parents
may deposit for their minor children, and
Sec. 4242S Interest on Time Deposits guardians for their wards.
Interest on time deposits shall not be subject Notwithstanding the provisions of the
to any interest rate ceiling. preceding paragraph, the cashier, bookkeeper
and their assistants, and other employees of
§ 4242S.1 Time of payment. Interest an NSSLA whose duties entail the handling
on time deposits may be paid at maturity or of cash or checks are prohibited from opening
upon withdrawal or in advance: Provided, savings deposit accounts with the head office
however, That interest paid in advance shall or branch of the NSSLA in which they are
not exceed the interest for one (1) year. assigned as such.
§ 4242S.2 Treatment of matured time § 4261S.2 Identification of member-

deposits. A time deposit not withdrawn or depositors. NSSLAs shall be responsible for
renewed on its due date shall be treated as a the proper identification of their member-
savings deposit and shall earn an interest from depositors.
maturity to the date of actual withdrawal or
renewal at a rate applicable to savings § 4261S.3 Number of deposit accounts
deposits. A member-depositor may open and have
more than one (1) savings deposit in his own
Secs. 4243S - 4250S (Reserved) name in the same capacity, and he may open
and have various deposits in different
capacities such as guardian, agent, or trustee
H. (RESERVED) for others.
Secs. 4251S – 4260S (Reserved) § 4261S.4 Signature card. A signature

card bearing at least three (3) specimen
I. SUNDRY PROVISIONS ON signatures of each member-depositor shall be
DEPOSIT OPERATIONS required upon opening of a deposit account.
Sec. 4261S Opening and Operation of § 4261S.5 Passbook and certificate of

Deposit Accounts. The following are basic time deposit. A savings deposit passbook,
provisions on the opening and operation of signed by the receiving teller and an
deposit accounts of NSSLAs. authorized officer, shall be issued to a

Part II - Page 2
§§ 4261S.5 - 4299S
99.12.31
member-depositor showing, among other K. OTHER BORROWINGS

things, his name and address, account
number, date, amount of deposit, interest Sec. 4286S Borrowings. An NSSLA may
credits and balance. NSSLAs shall pre- borrow money or incur such obligation up
number their savings deposit passbooks. In to not more than twenty percent (20%) of
the case of a time deposit, a certificate of time the total assets of the NSSLA, from any public
deposit signed by two (2) authorized officers, lending institution, and from private banking
shall be issued to the member-depositor institutions, and such private lending
containing, among other things, his name, institutions as may be approved by the
amount of deposit, date when the deposit was Monetary Board: Provided, That the proceeds
made, its due date and interest rate. of such loan shall be used exclusively to meet
the normal credit requirements of its
§ 4261S.6 Deposits in checks and members. The Monetary Board may, in
other cash items. Checks and other cash meritorious cases, raise the ceiling on the
items may be accepted for deposit by borrowing capacity of an NSSLA to not more
NSSLAs: Provided, That withdrawals from than thirty percent (30%) of its total assets.
such deposits shall not be made until the NSSLAs organized by employees of an entity
check or other cash item is collected. or a corporation may borrow funds from said
entity or corporation, but not vice-versa.
J. (RESERVED) Sec. 4299S General Provision on Sanctions

Unless otherwise provided, any violation of
Secs. 4281S - 4285S (Reserved) the provisions of this Part shall be subject to
the sanctions provided in Sections 34, 35,
36 and 37 of Republic Act No. 7653,
whenever applicable.

Part II - Page 3
§§ 4301S - 4302S
99.12.31
PART THREE
LOANS AND INVESTMENTS
A. LOANS IN GENERAL (2) Amount of cash which can be

readily realized upon the sale or redemption
Section 4301S Authority; Loan Limits; of permissible investments made by NSSLAs;
Maturity of Loans. The board of trustees and
of NSSLAs shall prescribe their own rules (3) Amount of credit available for loan
and regulations governing credit operations purposes from government or private
of the NSSLAs within the framework of the financing institutions.
terms and conditions embodied in this c. Maximum loan maturity. No loan
Section. granted by NSSLAs shall have a maturity
a. Loan limit to a single borrower. An date of more than five (5) years except loans
NSSLA may grant loans not exceeding the on the security of unencumbered real estate
amount deposited and/or contributed by the for the purpose of home building and home
member-borrower plus his twelve (12) development which may be granted with
months salary or retirement pension from maturities not exceeding twenty-five (25)
his employment, or up to seventy percent years and medium or long-term loans to
(70%) of the fair market value of any property finance agricultural projects.
acceptable as collateral on first mortgage that
he may put up by way of security: Provided, Sec. 4302S Basic Requirements in Granting
That direct indebtedness to an NSSLA of Loans
any member-borrower for money borrowed a. Application. A member-borrower
with the exception of money borrowed applying for a loan must submit an
against obligations of the BSP or of the application stating the purpose of the loan
Philippine Government, or borrowed with and such other information as may be
the full guarantee of the Philippine required by the NSSLA. The loan application
Government in the payment of principal and and other required documents shall form part
interest, shall not exceed fifteen percent of credit information file of the member-
(15%) of the unimpaired capital and surplus borrower in the NSSLA.
of the NSSLA. b. Credit investigation. No loan shall
For purposes of this Section, regular be approved unless prior investigation has
income of persons who are self-employed been made to determine the credit standing
shall be their average monthly income during of the applicant and/or the fair market value
the twelve (12)-month period immediately of the property offered as security and the
preceding the date of loan application. report thereon shall be made part of the loan
b. Limitations on lending authority. application: Provided, however, That this
NSSLAs shall not commit to make any loan requirement may be waived by an NSSLA in
for amounts in excess of the total of the the case of permanent employee or wage
following amounts: earner who is borrowing an amount not
(1) Amount of cash available for loan exceeding his deposit plus his twelve (12)
purposes; months regular salary or retirement pension.

Part III - Page 1
§§ 4302S - 4305S.4
99.12.31
c. Credit information file/collateral Sec. 4304S Loan Repayment. The treasurer,

file. An NSSLA shall maintain as far as cashier or paymaster of the firm employing
practicable, a credit information file which a member-borrower shall be required,
must contain, among other things, the pursuant to R.A. No. 8367, to make
member-borrower’s application and financial deductions from the salary, wage, income
record. Other information relative to the or retirement pension of the member-
member-borrower, where applicable, shall borrower in accordance with the terms of
also be maintained which must contain his loan, and all other deductions authorized
among other things, the collateral and other by the member-borrower, to remit such
documents pertinent to the loan. deductions to the NSSLA concerned and to
d. Loan approvals. Loans shall be collect such reasonable fee for his services
approved by the NSSLA’s board of trustees as may be authorized by rules promulgated
or if approved by a body or officer/s duly by the Monetary Board.
authorized by the board, such loan must be
confirmed by the board of trustees. Sec. 4305S Interest and Other Charges. The
e. Loan agreements. For each loan following rules shall govern the rates of
granted by an NSSLA, a promissory note must interest and other charges on loans granted
be executed by the member-borrower in by NSSLAs.
favor of the NSSLA expressing such
particulars as the amount of the loan, date § 4305S.1 Rate ceilings. (Deleted by
granted, due date, interest rate and other Cir. 192.)
similar information.
f. Inscription of lien. In case of § 4305S.2 Payment of loan before
mortgage loans, no release against an maturity. (Deleted by Cir. 192.)
approved loan shall be made before the
inscription of the mortgage. § 4305S.3 Interest in the absence of
contract. In the absence of express contract,
Sec. 4303S Loan Proceeds. NSSLAs shall in the rate of interest for the loan or forbearance
no case require member-borrowers to of any money, goods or credit and the rate
deposit a portion of the loan proceeds, allowed in judgment shall be twelve percent
whether in the form of savings or time (12%) per annum.
deposits. Where, subsequent to the release
of the loan proceeds, member-borrowers § 4305S.4 Escalation clause; when
open deposit accounts or make additional allowable. Parties to an agreement pertaining
deposits to their existing accounts, no part of to a loan or forbearance of money, goods or
such new deposits shall be covered by a credits may stipulate that the rate of interest
stipulation prohibiting or limiting withdrawal agreed upon may be increased in the event
while new portion of their loans are that the applicable maximum rate of interest
outstanding: Provided, however, That this is increased by the Monetary Board:
prohibition shall not apply in cases of loans Provided, That such stipulations are valid only
secured by a hold-out on deposits to the if there is also a stipulation in the agreement
extent of the unencumbered amount of the that the rate of interest agreed upon shall be
deposit existing at the time of the filing of reduced in the event that the applicable
the above-mentioned loan application. maximum rate of interest is reduced by law

Part III - Page 2
§§ 4305S.4 - 4306S.3
99.12.31
or by the Monetary Board: Provided, further, Provided, however, That when the total
That the adjustment in the rate of interest amount of arrearages reaches twenty percent
agreed upon shall take effect on or after the (20%) of the total outstanding balance of the
effectivity of the increase or decrease in the loan, the entire total outstanding balance of
maximum rate of interest. the loan shall be considered as past due,
irrespective of the number of installments in
§ 4305S.5 Accrual of interest earned arrears: Provided, further, That the modes of
on loans. NSSLAs shall not accrue interest payment other than those listed above (e.g.
income on loans which are already past due daily, weekly or semi-monthly), the entire
or on loan installments which are in arrears, outstanding balance of the loan/receivable
regardless of whether the loans are secured shall be considered as past due when the total
or unsecured. Interest on past due loans or amount of arrearages reaches ten percent
loans installments in arrears shall be taken (10%) of the total loan/receivable balance;
up as income only when actual payments c. Any due and unpaid loan installment
thereon are received. or portion hereof, from the time the obligor
defaults for the purpose of obligations as
Sec. 4306S Past Due Accounts. Past due defined in Sec. 4143S(d); and
accounts of an NSSLA shall, as a general rule, d. All items in litigation as defined in
refer to all accounts which are not paid at the Manual of Accounts for NSSLAs.
maturity.
§ 4306S.2 Extension/renewal of loans
§ 4306S.1 Accounts considered past Extension of the period of payment of loans
due. The following shall be considered as may be allowed under the following
past due: circumstances:
a. A loan or receivable payable on a. For production loans, the extension
demand not paid upon written demand as shall not exceed one-half (1/2) of the original
required herein or within one (1) year from period: Provided, That thirty percent (30%)
date of grant or renewal whichever comes of the loan shall have been paid. A second
earlier. extension shall not exceed one-half (1/2) of
NSSLAs shall in case of non-payment the period of the first extension.
of a demand loan, make a written demand b. For consumer loans, the extension
within six (6) months following the grant of shall not exceed one-half (1/2) of the original
such loan. The demand shall indicate a period: Provided, That thirty percent (30%)
period of payment which shall not be later of the loan shall have been paid.
than six (6) months from date of said demand. Loans payable in periodical installments
b. The total outstanding balance of a may be renewed for the full amount of loans:
loan or receivable payable in installments, Provided, That at least thirty percent (30%)
in accordance with the following schedules: of the loan shall have been paid.
Mode of Payment Installments in Arrears § 4306S.3 Write-off of loans as bad

Monthly 6 or more debts. To maximize the protection of
Quarterly 2 or more members of NSSLAs against misfeasance and
Semestral 1 or more
malfeasance of the trustees and officers
Annual 1 or more
thereof, the Monetary Board adopted the

Part III - Page 3
§§ 4306S.3 - 4307S.1
99.12.31
following regulations on writing off of loans the price is payable subsequent to the making
by NSSLAs. of such sale or contract;
a. The term loan shall include all types (3) Any option, demand, lien, pledge,
of credit accommodations granted to, and or other claim against, or for delivery of,
advances made by the NSSLA for the account property or money;
of the borrowers/debtors, including the (4) Any purchase, or other acquisition
interest thereon recorded in the books; of, or any credit upon the security of any
b. Writing-off of loans by an NSSLA obligation or claim arising out of any of the
shall be made not more than twice a year by foregoing; and
its board of trustees; (5) Any transaction or series of
c. Notice/application for write-off of transactions having a similar purpose or
loans shall be submitted, in the prescribed effect.
form to the appropriate supervising and b. Transactions not covered
examining department of the BSP at least Considering that the specific purpose of
thirty (30) days prior to the intended date of the law is the full disclosure of the true cost
write-off: Provided, That no such loans with of credit, the following categories of credit
an aggregate outstanding amount of P15,000 transactions are outside the scope of the
or more, as certified in said notice/application above regulations:
shall be written-off without the prior approval (1) Credit transactions which do not
of: involve the payment of any finance charge
(1) The Monetary Board in case of loans by the debtor; and
to trustees and officers of the NSSLA, direct (2) Credit transactions in which the
or indirect; or debtor is the one specifying a definite and
(2) The head of the appropriate fixed set of credit terms such as bank deposits,
supervising and examining department of the insurance contracts, sale of bonds, etc.
BSP, subject to confirmation by the Monetary
Board, in case of loans other than those § 4307S.1 Definition of terms
mentioned in Item “(1)” above. a. Creditor (who shall furnish the
information) means any person engaged in
Sec. 4307S “Truth in Lending Act” the business of extending credit (including
Disclosure Requirements. NSSLAs are any person who as a regular business practice
required to strictly adhere to the provisions makes loans or sells or rents property or
of R. A. No. 3765, otherwise known as the services on a time, credit, or installment basis,
“Truth in Lending Act,” and shall make the either as principal or as agent), who requires
true and effective cost of borrowing an as an incident to the extension of credit, the
integral part of every loan contract. payment of a finance charge.
a. Transactions covered The term creditor shall include, but shall
(1) Any loan, mortgage, deed of trust, not be limited to, banks and banking
advance and discount; institutions, insurance and bonding
(2) Any conditional sales contract, any companies, savings and loan associations,
contract to sell, or sale or contract of sale of credit unions, financing companies,
property or services, either for present or installment houses, real estate dealers,
future delivery, under which, part or all of lending investors, pawnshops, and any other

Part III - Page 4
§ 4307S.1
99.12.31
person or entity engaged in the business of the amount of the down payment and value
extending credit who requires as an incident of the trade-in.
to the extension of credit, the payment of a h. Finance charge represents the
finance charge. amount to be paid by the debtor incident to
b. Person means any individual, the extension of credit such as interest or
corporation, partnership, NSSLA, or other discounts, collection fees, credit investigation
organized group of persons, or the legal fees, attorney’s fees, and other service
successor or representative of the foregoing, charges. The total finance charge represents
and includes the Philippine Government or the difference between (i) the aggregate
any agency thereof, or any other government, consideration (down payment plus
or any of its political subdivisions, or any installments) on the part of the debtor, and
agency of the foregoing. (ii) the sum of the cash price and non-finance
c. Cash price or delivered price (in charges.
case of trade transactions) is the amount of i. Simple annual rate is the uniform
money which would constitute full payment percentage which represents the ratio, on an
upon delivery of the property (except money) annual basis, between the finance charges
or service purchased at the creditor’s place and the amount to be financed.
of business. In the case of financial In the case of single payment upon
transactions, cash price represents the maturity, the simple annual rate (R) in percent
amount of money received by the debtor is determined by the following method:
upon consummation of the credit transaction,
net of finance charges collected at the time finance charge 12
the credit is extended (if any). R = amount to x maturity period x 100
d. Down payment represents the be financed in months
amount paid by the debtor at the time of the
In the case of the normal installment
transaction in partial payment for the property
type of credit of at least one (1) year in
or service purchased.
duration, where installment payments of
e. Trade-in represents the value of an
equal amount are made in regular time
asset, agreed upon by the creditor and debtor,
periods spaced not more than one (1) year
given at the time of the transaction in partial
apart, R in percent is computed by the
payment for the property or service
following method:
purchased.
Number of
f. Non-finance charges correspond to payments
the amounts advanced by the creditor for finance charge in a year
items normally associated with the ownership R = 2 x amount to x total number x 100
of the property or of the availment of the be financed of payments
service purchased which are not incident to plus one
the extension of credit. For example, in the
case of the purchase of an automobile on In cases where the credit matures in less
credit, the creditor may advance the than one (1) year [e.g., installment payments
insurance premium as well as the registration are required every month for six (6) months],
fee for the account of the debtor. the same formula will apply except that the
g. Amount to be financed consists of number of payments in a year would refer to
the cash price plus non-finance charges less the number of installment periods, as defined

Part III - Page 5
§§ 4307S.1 - 4307S.5
99.12.31
in the credit contract, as if the credit matures The contract covering the credit
in one (1) year. For example, the number of transaction, or any other document to be
payments in a year would be twelve (12) for acknowledged and signed by the debtor,
this purpose in cases where six (6) monthly shall indicate the above seven (7) items of
installment payments are called for in the information. In addition, the contract or
credit transaction. 1 document shall specify additional charges,
In cases where credit terms provide for if any, which will be collected in case certain
premium or penalty charges depending on, stipulations in the contract are not met by
say, the timelines of the debtor’s payments, the debtor.
the annual rate to be disclosed in writing shall In case the seven (7) items of
be the rate for regular payments, i.e., the information mentioned in this Section are not
premium and penalty need not be taken into disclosed in the contract covering the credit
account in the determination of the annual transaction, said items to the extent
rate. Such premium or penalty charges shall, applicable, shall be disclosed in another
however, be indicated in the credit contract. document in the form (Appendix S-4)
prescribed by the Monetary Board, to be
§ 4307S.2 Information to be disclosed signed by the debtor and appended to the
NSSLAs shall furnish to each person to whom main contract. A copy of the disclosure
credit is extended, prior to the consummation statement shall be furnished the borrower.
of the transaction, a clear statement in writing
setting forth the following information to be § 4307S.3 Inspection of contracts
disclosed. covering credit transactions. NSSLAs shall
a. The cash price or delivered price of keep in their office or place of business copies
the property or service to be acquired; of contracts covering all credit transactions
b. The amounts, if any, to be credited entered into by them which involve the
as down payment and/or trade-in; extension of credit to another and the
c. The difference between the payment of finance charges therefor. Such
amounts set forth under Items “a” and “b”; copies shall be available for inspection or
d. The charges, individually itemized, examination by the appropriate supervising
which are paid or to be paid by such person and examining departments of the BSP.
in connection with the transaction but which
are not incident to the extension of credit; § 4307S.4 Posters. An abstract of
e. The total amount to be financed; R.A. No. 3765 otherwise known as the “Truth
f. The finance charges expressed in in Lending Act” (Appendix S-5) shall be
terms of pesos and centavos; and reproduced in a format which is sixty (60)
g. The percentage that the finance cm. wide and seventy-five (75) cm. long, and
charge bears to the total amount to be posted on a conspicuous place in the
financed expressed as a simple annual rate NSSLAs’ place(s) of business.
on the outstanding unpaid balance of the
obligation. § 4307S.5 Penal provisions
a. NSSLAs which in connection with
1This can be determined by dividing twelve
any credit transaction fail to disclose to any
(12), the number of months in a year, by the person any information in violation of this
number or fraction of months between installment Section or any regulation issued hereafter
payments.

Part III - Page 6
§§ 4307S.5 - 4357S
02.12.31
shall be liable to such person in the amount d. Assignment of quedans which gives
of P100 or in an amount equal to twice the the right of disposal of readily marketable
finance charge required by such NSSLAs in products;
connection with such transactions, e. Time and/or savings deposits and/
whichever is the greater, except that such or capital contribution;
liability shall not exceed P2,000 on any credit f. Pledge of bonds, stock and other
transaction. Action to recover such penalty securities of the government or government-
may be brought by such person within one owned or controlled corporations and other
(1) year from the date of the occurrence of bonds, stocks or securities which are non-
the violation, in any court of competent speculative in nature;
jurisdiction. In any action under this g. Land transfer certificates issued by
Subsection in which any person is entitled the government to tenant farmers, under the
to a recovery, the NSSLAs shall be liable for agrarian reform program to the extent of sixty
reasonable attorney’s fees and court costs as percent (60%) of the value of the farm
determined by the court. holdings: Provided, That a certification shall
b. Except as specified in Item “a” be first secured from the office of the Registry
above, nothing contained in this rule shall of Deeds to the effect that the Land Transfer
affect the validity or enforceability of any Certificate being presented is valid; and
contract or transaction. h. Other securities as may be approved
c. Any person who willfully violates by the Monetary Board.
any provision of this Section or regulation
issued hereafter shall be fined by not less than Secs. 4322S - 4335S (Reserved)
P1,000 nor more than P5,000 or
imprisonment for not less than six (6) months, C. - D. (RESERVED)
nor more than one (1) year or both.
d. No punishment or penalty provided Secs. 4336S - 4355S (Reserved)
by this Section shall apply to the Philippine
Government or any agency or any political E. LOANS/CREDIT ACCOMMODATIONS
subdivision thereof. TO TRUSTEES, OFFICERS,
STOCKHOLDERS
Secs. 4308S - 4320S (Reserved) AND THEIR RELATED INTERESTS
Sec. 4356S General Policy. The transactions

B. SECURED LOANS of all trustee or officers with the NSSLA shall
not be under terms more favorable than those
Sec. 4321S Kinds of Security. Loans by an transacted with other members.
NSSLA may be secured by any or all of the
following: Sec. 4357S Direct/Indirect Borrowings;
a. Mortgages on registered real estate; Ceilings. No NSSLA shall directly or indirectly
b. Chattel mortgages on harvested or make any loan to any trustee or officer of
stored crops of non-perishable character; such NSSLA, either for himself or as agent or
c. Chattel mortgages on livestock, as partner of another, except with the written
tools, equipment or machinery, supplies or approval of the majority of the trustees of the
materials, merchandise and other personal NSSLA, excluding the trustee concerned:
properties; Provided, That the aggregate loans to such

Part III - Page 7
§§ 4357S - 4399S
02.12.31
trustees and officers shall not exceed twenty of ten percent (10%) of total assets in sound
percent (20%) of the total capital non-speculative enterprise, particularly in
contributions of the NSSLA. readily marketable and high grade
commercial papers, bonds and securities
Sec. 4358S Records; Reports. In all cases issued by the Government of the Philippines
of accommodations granted to trustees and or any of its political subsidiaries,
officers under Sec. 4357S, the written instrumentalities or corporations including
approval of the majority of the trustees of the government-owned or -controlled
NSSLA, excluding the trustee concerned, shall corporations, subject to the following
be entered upon the records of the NSSLA conditions:
and a copy of such entry shall be transmitted (1) The credit needs of the members
forthwith to the appropriate supervising and shall be served/satisfied first;
examining department of the BSP within (2) The investment in any one (1)
twenty (20) business days from the date of corporation (excluding the Government of
approval. the Philippines, any of its political
subdivisions, instrumentalities, or
Secs. 4359S - 4369S (Reserved) corporations including government-owned
or -controlled corporations), shall not exceed
Sec. 4370S Sanctions. The office of any twenty-five percent (25%) of the Association’s
trustee or officer of an NSSLA who violates combined capital accounts; and
the provisions of these rules on (3) The additional investment may be
accommodations granted to trustee and up to another ten percent (10%) of the
officers shall immediately become vacant and Association’s total assets;
said trustees or officer shall be punished by b. In real property, in an aggregate
imprisonment of not more than one (1) year amount not exceeding at any one time five
nor more than ten (10) years and by a fine of percent (5%) of the total assets of such NSSLA;
not less than P5,000 nor more than and
P50,000.00 pursuant to Section 15 of R.A. c. In furniture, fixtures, furnishings and
No. 8367. equipment, and leasehold improvements for
its offices, in amount not exceeding at any
F. - I. (RESERVED) one time ten percent (10%), of its total capital
contribution.
J. OTHER OPERATIONS
Sec. 4391S Fund Investments. An NSSLA
may invest its funds in any or all of the Secs. 4396S - 4398S (Reserved)
following:
a. In bonds and securities in an Sec. 4399S General Provision on Sanctions
aggregate amount not exceeding ten percent Unless otherwise provided, any violation of
(10%) of its total assets; any investment in the provisions of this Part shall be subject to
excess of ten percent (10%) shall require the the sanctions provided in Sections 34, 35,
prior approval of the BSP: Provided, That 36 and 37 of Republic Act No. 7653,
NSSLAs may invest available funds in excess whenever applicable.

Part III - Page 8
§§ 4401S - 4499S
96.12.31
PART FOUR
Sections 4401S - 4499S (Reserved)

Part IV - Page 1
§§ 4501S - 4599S
96.12.31
PART FIVE
Sections 4501S - 4599S (Reserved)

Part V - Page 1
§§ 4601S - 4631S
03.12.31
PART SIX
MISCELLANEOUS
A. OTHER OPERATIONS Lifting of the suspension of license shall

be approved by the Monetary Board upon
Section 4601S Payment of Fines recommendation of the appropriate BSP
(1) NSSLAs shall, within thirty (30) supervising department.
calendar days from receipt of the statement b. Revocation of license:
of account from the BSP, pay the fines (1) When the solvency of the NSSLA is
imposed thereon for willful failure or refusal imperiled by losses and irregularities;
to comply with, or violation of, any law or (2) When the NSSLA willfully violates
any order, instruction or regulation issued by any provision of R.A. No. 8367, any rule or
the Monetary Board, or any order, instruction regulation promulgated to implement said
or ruling by the Governor. law and BSP directives and/or instructions;
(2) Failure to settle the full amount of (3) When the NSSLA is conducting
the fines within the period or on the day business in an unsafe and unsound manner;
prescribed herein shall make an NSSLA, its (4) When it is unable to pay its liabilities
trustees and officers liable to the sanctions as they become due in the ordinary course
imposed under Sec. 4199S. of business;
(5) When it has insufficient realizable
Secs. 4602S - 4630S (Reserved) assets, as determined by the BSP, to meet its
liabilities;
Sec. 4631S Revocation/Suspension of NSSLA (6) When it cannot continue in business
License. In reference to Section 22 of R.A. without involving probable losses to its
No. 8367 or the Revised Non-Stock Savings members or creditors; and
and Loan Association Act of 1997, the (7) When it has willfully violated a
Monetary Board, upon due notice and cease and desist order of the Monetary Board
hearing, has the authority to either revoke or involving acts or transactions which amount
suspend the license of any NSSLA for such to fraud or a dissipation of assets of the
period as it deems necessary, based on any institution.
of the following grounds: As to the effects of the revocation/
a. Suspension of license: suspension of license of the NSSLA, the
(1) Repeated violations (uncorrected NSSLA is prohibited from engaging in the
similar examination findings for the last two business of accumulating the savings of its
examinations, regular or special,) of any of members and using such accumulations for
the provisions of R.A. No. 8367, and/or any loans to its members, subject to applicable
rules or regulations promulgated to sanctions and penalties provided by law in
implement said law, or BSP directives and/ case of violation thereof. After the cessation
or instructions;and of its operations due to revocation of its
(2) Paid-up capital is impaired by license, the NSSLA should proceed with its
continuing losses for the last two (2) fiscal dissolution, in accordance with the
years. provisions under the Corporation Code. The

Part VI - Page 1
§§ 4631S - 4655S
03.12.31
dissolution of a corporation involves the examining department of the BSP may furnish
termination of its corporate existence, at least, findings of examination to the office or firm
as far as the right to go on doing ordinary where such NSSLAs do business.
business is concerned, and the winding up All deposits of whatever nature with
its affairs, the payments of its debts and NSSLAs are considered absolutely
distribution of its assets among the members confidential in nature, and may not be
or stakeholders or other persons involved. examined, inquired or looked into by any
The board of trustees of the corporation also person, government official, bureau or office,
has the option of adopting a plan for the except upon written permission of the
distribution of its assets, as stated under depositor, or in cases of impeachment, or
Section 95 of the Corporation Code. upon order of competent court in cases of
After the revocation/suspension of its bribery or dereliction of duty of public
license, the Monetary Board may direct the officials or in cases where the money
board of trustees of the NSSLA to proceed deposited or invested is the subject matter
with the voluntary dissolution of the of litigation.
corporation. In the event that the board of No official or employee of NSSLAs shall
trustees refuses to effectuate such dissolution, disclose to any person any information
the Monetary Board may refer the matter to concerning said deposits, except in cases
the Solicitor General for the filing of a quo mentioned in the preceding paragraph. Any
warranto case against the corporation in official or employee of NSSLAs who violates
accordance with the provision under the this Section shall be punished under R. A.
Corporation Code. No. 1405, as amended.
Secs. 4632S - 4650S (Reserved) Sec. 4653S Examination by the BSP. The
head of the appropriate supervising and
examining department of the BSP, personally
B. SUNDRY PROVISIONS or by deputy, shall make at least once a year
and at such other times as he or the Monetary
Sec. 4651S Notice of Dissolution. NSSLAs Board may deem necessary and expedient,
contemplating to dissolve shall give written an examination, inspection or investigation
notice thereof to the Monetary Board through of the books and records, business affairs,
the appropriate supervising and examining administration and financial condition of
department of the BSP at least thirty (30) days NSSLAs.
before taking steps to effect dissolution.
Sec. 4654S Applicability of Other Rules
Sec. 4652S Confidential Information. No Other rules and regulations applicable to the
trustee, officer or employee of NSSLAs or examination of thrift banks, insofar as they
of the BSP shall disclose any information are applicable and not inconsistent with these
relating to member-borrowers and their rules shall apply to NSSLAs.
applications or to the operations of the
NSSLAs unless permitted by the Monetary Sec. 4655S Annual Fees on Non-Stock
Board of the BSP: Provided, however, That Savings and Loan Association. For purposes
in the case of NSSLAs under examination, of computing the annual fees chargeable
the head of the appropriate supervising and against NSSLAs, the term Total Assessable

Part VI - Page 2
§§ 4655S - 4690S
03.12.31
Assets shall be the amount referred to as the portion thereof that will be immediately used
total assets under Section 28 of R.A. No. 7653 or earmarked for future use may be
{end-of-quarter total assets per balance sheet, reclassified and booked as Real Property-
after deducting cash on hand and amounts Land/Building.
due from banks, including the BSP and banks NSSLAs, prior to the reclassification of
abroad}. their ROPOA accounts to Real Property-
Average Assessable Assets (AAAs) shall Land/Building, shall first secure prior BSP
be the summation of end-of-quarter total approval before effecting the reclassification
assessable assets divided by the number of and shall submit, in case of future use,
quarters in operation during the particular justification and plans for expansion/use.
assessment period.
The prescribed rate of annual fees for §§ 4657S.4 - 4657S.8 (Reserved)
NSSLAs, assessable only when actual
examination is conducted for the year, shall § 4657S.9 Batas Pambansa Blg. 344 –
be one-fortieth of one percent (1/40 of 1%) An Act To Enhance The Mobility Of Disabled
of AAAs for 2002 or P100,000 whichever is Persons By Requiring Certain Buildings,
lower, payable within thirty (30) days from Institutions, Establishments And Public
receipt of the bill. Failure to pay the bill within Utilities To Install Facilities And Other
the prescribed period shall subject the Devices. In order to promote the realization
NSSLAs to administrative sanctions. of the rights of disabled persons to participate
fully in the social life and the development
Sec. 4656S Basic Law Governing Non-Stock of the societies in which they live and the
Savings and Loan Associations. R.A. No. enjoyment of the opportunities available to
8367, as amended, known as the “Revised other citizens, no license or permit for the
Non-Stock Savings and Loan Association Act construction, repair or renovation of public
of 1997”, regulates the organization and and private buildings for public use,
operation of NSSLAs. educational institutions, airports, sports and
recreation centers and complexes, shopping
Sec. 4657S NSSLA Premises and Other centers or establishments, public parking
Fixed Assets. The following rules shall govern places, workplaces, public utilities, shall be
the premises and other fixed assets of granted or issued unless the owner or
NSSLAs. operator thereof shall install and incorporate
in such building, establishment or public
§§ 4657S.1 - 4657S.2 (Reserved) utility, such architectural facilities or
structural features as shall reasonably
§ 4657S.3 Reclassification of real and enhance the mobility of disabled persons
other properties owned or acquired as such as sidewalks, ramps, railings and the
NSSLA premises. Real and other properties like. If feasible, all such existing buildings,
owned or acquired (ROPOA) reclassified institutions, establishments, or public utilities
either as Real Property-Land or Real Property- may be renovated or altered to enable the
Building shall be booked at their ROPOA disabled persons to have access to them.
balance, net of any valuation reserves:
Provided, That only such acquired asset or a Secs. 4658S - 4690S (Reserved)

Part VI - Page 3
§§ 4691S- 4699S
03.12.31
Sec. 4691S Anti-Money Laundering imprisonment of not less than two (2) years
Regulations. Banks, offshore banking units nor more than ten (10) years, or both, at the
(OBUs), quasi-banks (QBs), trust entities, non- discretion of the court pursuant to Section
stock savings and loan associations (NSSLAs), 36 of R.A. No. 7653, otherwise known as
pawnshops, and all other institutions, “The New Central Bank Act”.
including their subsidiaries and affiliates b. Without prejudice to the criminal
supervised and/or regulated by the BSP, sanctions prescribed above against the
otherwise known as “covered institutions” culpable persons, the Monetary Board may,
shall comply with the provisions of R.A. No. at its discretion, impose upon any covered
9160, as amended, otherwise known as the institution, its directors and/or officers for any
“Anti-Money Laundering Act of 2001” and violation of Section 9 of R.A. No. 9160, the
its Implementing Rules and Regulations (IRRs) administrative sanctions provided under
in Appendix S-7 and those in Appendix S-6. Section 37 of R.A. No. 7653.
§§ 4691S.1 - 4691S.8 (Reserved) Secs. 4692S - 4698S (Reserved)
§ 4691S.9 Sanctions and penalties Sec. 4699S General Provision on Sanctions

a. Whenever a covered institution Unless otherwise provided, any violation of
violates the provisions of Section 9 of R.A. the provisions of this Part shall be subject to
No. 9160 or of this Section, the officer(s) or the sanctions provided in Sections 34, 35,
other persons responsible for such violation 36 and 37 of Republic Act No. 7653,
shall be punished by a fine of not less than whenever applicable.
P50,000 nor more than P200,000 or by

Part VI - Page 4
APP. S-1
96.12.31
SAFEGUARDS IN BONDING OF NSSLA ACCOUNTABLE

OFFICERS AND EMPLOYEES
(Appendix to Sec. 4145S)
1. The Teller. He should not be them and solely for deposit to its account.
allowed to accumulate more than a specific Thus, even in the remote possibility that
maximum amount to be determined by the someone presents a COCI stolen from the
association but in no case to exceed P10,000 association to one of its depository banks, it
in cash at any given time while in the will not be accepted for encashment.
performance of his duties. The procedures
in this regard are as follows: 2. The COCIs Clerk. In view of the
fact that all COCIs received by the tellers are
a. Cash. All cash in excess of the stamped “NON-NEGOTIABLE” as detailed
maximum amount determined by the above, the COCIs clerk who records and
association shall be turned over to the processes these checks carries no
cashier. When deposits received by a teller accountabilities whatsoever. From the
will increase his cash in excess of the moment that a check is received up to the
maximum limit, the teller shall immediately moment that it is deposited to the account of
make a cash turn-over of, at least, the excess. the association with one of its depository
Thus, although his transactions during the day banks, that check is just a piece of paper to
may total more than the maximum limit, the be processed and recorded. It will only
amount of money directly in his custody at reassume its negotiability upon its receipt by
any given time will never exceed the limit. the association’s depository bank. In cases,
however, where checks are received by mail,
b. Checks and Other Cash Items the COCIs clerk shall be charged with the duty
(COCIs). All COCIs received by a teller should of stamping the checks as “NON-
be stamped as “NON-NEGOTIABLE.” The NEGOTIABLE.”
stamping should be made diagonally on the
face of the check. Thus, all checks that are 3. As an added precautionary measure,
received by the tellers lose their further the manager/accountant/loan officer should
negotiability. There should, however, be an check from time to time whether all COCIs
agreement with the association’s depository received are stamped “NON-NEGOTIABLE.”
banks whereby they will accept for deposit In the event that a COCI is not so stamped
only to the account of the association the and results in financial loss on the part of the
COCI previously stamped by the tellers as association, the employee charged with the
“NON-NEGOTIABLE.” Therefore, only the duty to stamp and who failed to do so, shall
association and nobody else can further be held personally responsible, together with
negotiate these checks, and only the the manager/accountant/loan officer, for the
association’s depository bank will accept loss.

Appendix S-1
LIST OF REPORTS REQUIRED FROM NON-STOCK SAVINGS AND LOAN ASSOCIATIONS
Frequency of Deadline for

Report Submission
Category BSP Form No. Subject of Report Reporting Submission Procedure
A-2 BSP 7-26-02H Consolidated Statement of Condition Quarterly 30th day after end of Original - SED III
each quarter
A-3 BSP 7-26-03H Consolidated Statement of Income and -do- -do- -do-
Expenses
A-3 BSP 7-26-18.1H Copy of entry in NSSLA records of written ap- As 20th business day -do-
proval of majority of directors on credit ac- approved from date of approval
commodation to directors and officers with
accompanying Certification on Loans Granted
to Directors/Officers
B Audited/Unaudited Financial Statements re- Annually 120th/60th day after -do-

quired in Sec. 4181S accompanied by annual end of fiscal year as
report* (to members, if any) required in Sec.
4181S
B BSP 7-26-01H Information Sheet Annually** 30th day after -do-

calendar year-end
B BSP 7-26-01.1H Biographical Data of Directors/Officers Annually** 30th day after -do-
calendar year-end or
15th day following
creation or filling up
of vacancy in Board
of Directors,
sub-bodies or Board
Appendix S-2 - Page 1
or managerial staff of
NSSLAs
B BSP 7-26-20H Report on Crimes/Losses As crime/ See Annex S-2-a for -do-
S Regulations
incident guidelines on
occurs reporting crimes and
04.12.31
APP. S-2
losses
*
Required of NSSLAs with total resources of P 10 million or more
**
Not required where no change occurs
04.12.31
APP. S-2
S Regulations
Report Frequency of Deadline for Submission
B BSP 7-26-25H Dividends Declaration As declared 10th business day Original - SED III
after date of
declaration
B - Report of Discrepancies of Accounts Everytime a 15th day from -do-

discrepancy discovery of
occurs*** discrepancy
B - Notice/Application for Write-Off of Loans As write-off 30th day prior to the -do-
occurs intended date of
write-off
B - Board Resolution on NSSLA's signatories to As 3rd day from date of -do-

reports submitted to Bangko Sentral authorized resolution
transaction from date of Anti-Money Laundering
occurs transaction/ Council
knowledge
B Unnumbered Report on Covered Transactions -do- -do- -do-
A-2 Unnumbered Plan of action to comply with Anti-Money - 30th business day -do-
Laundering requirements from July 31, 2000
or from opening of
the institution
Unnumbered (no Certification of compliance with existing anti- Annually 20th business day -do-
prescribed form) money laundering regulations after end of reference
year
Audit Engagement Contract As contract 15th calendar day -do-

is signed from date of signing
of contract
***
Not required where the discrepancies do not exceed 1% of NSSLA's net worth or P100,000, whichever is lower
Annex S-2-a
96.12.31

(Annex to Appendix S-2)
1. NSSLAs shall report on the 2. The following guidelines shall be

following matters through the appropriate observed in the preparation and submission
supervising and examining department: of the report.
a. Crimes whether consummated, a. The report shall be prepared in two
frustrated or attempted against property/ (2) copies and shall be submitted within five
facilities (such as robbery, theft, swindling or (5) business days from knowledge of the
estafa, forgery and other deceits) and other crime or incident, the original to the
crimes involving loss/destruction of property appropriate supervising department and the
of the NSSLA when the amount involved in duplicate to the BSP Security Coordinator,
each crime is P20,000 or more. thru the Director, Security Investigation and
Crimes involving NSSLA personnel, Transport Department.
regardless of whether or not such crimes b. Where a thorough investigation
involve the loss/destruction of property of the and evaluation of facts is necessary to
NSSLA, even if the amount involved is less complete the report, an initial report
than those above specified, shall likewise be submitted within the five (5)-business day
reported to the BSP. deadline may be accepted: Provided, That
b. Incidents involving material loss, a complete report is submitted not later than
destruction or damage to the institution’s fifteen (15) business days from termination
property/facilities, other than arising from a of investigation.
crime, when the amount involved per
incident is P20,000 or more.

Annex S-2-a
APP. S-3
96.12.31
GUIDELINES ON
PRESCRIBED REPORTS SIGNATORIES
(Appendix to Subsec. 4162S.1)
Category A-1 reports shall be signed by in-charge. Likewise, the signing authority in
the chief executive officer, or in his absence, this category shall be contained in a
by the executive vice-president, and by the resolution approved by the board of directors
comptroller, or in his absence, by the chief in the format prescribed in Annex S-3-b.
accountant, or by officers holding equivalent
positions. The designated signatories in this Categories A-3 and B reports shall be
category, including their specimen signed by officers or their alternates, who
signatures, shall be contained in a resolution shall be duly designated by the board of
approved by the board of directors in the directors. A copy of the board resolution, with
format prescribed in Annex S-3-a. format as prescribed in Annex S-3-c.
Category A-2 reports of head offices shall Copies of the board resolutions on the
be signed by the president, executive vice- report signatory designations shall be
presidents, vice-presidents or officers holding submitted to the appropriate supervising and
equivalent positions. Such reports of other examining department of the BSP within three
offices/units (such as branches) shall be (3) business days from the date of resolution.
signed by their respective managers/officers

Appendix S-3
Annex S-3-a
96.12.31

Whereas, it is required under Subsec. 1. Mr. President

Specimen Signature
4162S.1 that Category A-1 reports be signed or
by the Chief Executive Officer, or in his
absence, by the Executive Vice President, and Executive
2. Mr. Vice-Pres.
by the comptroller, or in his absence, by the Specimen Signature
Chief Accountant, or by officers holding
equivalent positions. and
Whereas, it is also required that 3. Mr. Comptroller

aforesaid officers of the institution be Specimen Signature
authorized under a resolution duly approved or
by the institution’s Board of Directors;
Whereas, we, the members of the Board Chief
4. Mr. Accountant
of Directors of (Name of Institution) , Specimen Signature
are conscious that, in designating the officials
who would sign said Category A-1 reports, are hereby authorized to sign Category A-1 reports
we are actually empowering and authorizing of ;
said officers to represent and act for or in (Name of Institution)
behalf of the Board of Directors in
particular and (Name of Institution) in Done in the City of _________, Philippines, this
general; _______ day of _____________, 19_____.
_________________________
confidence in the institution’s Chief Executive
Officer, Executive Vice-President,
Comptroller and Chief Accountant, as the __________________ __________________
case may be, and, therefore, assumes DIRECTOR DIRECTOR
responsibility for all the acts which may be __________________ __________________
performed by aforesaid officers under their DIRECTOR DIRECTOR
delegated authority; __________________ __________________
resolved that: ATTESTED BY:
___________________________
CORPORATE SECRETARY

Annex S-3-a
Annex S-3-b
96.12.31


4162S.1 that Category A-2 reports of head Officer Signature _ Title__ __No._
offices be signed by the President, Executive

Vice-Presidents, Vice-Presidents or officers
holding equivalent positions, and that such are hereby authorized to sign the
reports of other offices be signed by the Category A-2 reports indicated above of
respective managers/officers-in-charge; _____________________;
Whereas, it is also required that

aforesaid officers of the institution be
authorized under a resolution duly approved Done in the City of ________, Philippines,
by the institution’s Board of Directors; this _______ day of ___________, 19_____.
of Directors of (Name of Institution) , are
_________________________
conscious that, in designating the officials
we are actually empowering and authorizing
said officers to represent and act for or in
behalf of the Board of Directors in DIRECTOR DIRECTOR
particular and (Name of Institution) in
general;
Whereas, this Board has full faith and DIRECTOR DIRECTOR
confidence in the institution’s President (and/
or the Executive Vice-President, etc., as the
DIRECTOR DIRECTOR
case may be) and, therefore, assumes
performed by aforesaid officers under their ATTESTED BY:
Now, therefore, we, the members of the ___________________________
Board of Directors, resolve, as it is hereby CORPORATE SECRETARY
resolved that:

Annex S-3-b
Annex S-3-c
96.12.31


4162S.1 that Categories A-3 and B reports Authorized
be signed by officers or their alternates; Alternate_ Signature __Title_ __No._
aforesaid officers of the institution be 1. Authorized
(Alternate)
authorized under a resolution duly approved
by the institution’s Board of Directors; 2. Authorized
(Alternate)
of Directors of (Name of Institution) are etc.
conscious that, in designating the officials
who would sign said Categories A-3 and B are hereby authorized to sign Categories A-3
reports, we are actually empowering and and B reports (Name of Institution) .
authorizing said officers to represent and
act for or in behalf of the Board of Done in the City of ________, Philippines,
Directors in particular and (Name of this _____ day of ______________, 19____.
Institution) in general;
Whereas, this Board has full faith and _____________________________
confidence in the institution’s authorized CHAIRMAN OF THE BOARD
responsibility for all the acts which may be ________________ _________________
performed by aforesaid officers under their DIRECTOR DIRECTOR
delegated authority; ________________ _________________
________________ _________________
DIRECTOR DIRECTOR
resolved that:
ATTESTED BY:
___________________________
CORPORATE SECRETARY

Annex S-3-c
APP. S-4
96.12.31
FORMAT-DISCLOSURE STATEMENT OF
LOAN/CREDIT TRANSACTION
______________________________
(Business Name of Creditor)
DISCLOSURE STATEMENT OF LOAN/CREDIT TRANSACTION (SINGLE PAYMENT

OR INSTALLMENT PLAN)
(As required under R.A. 3765, Truth in Lending Act)
Name of Borrower
Address
1. Cash/Purchase Price ________________or Net Proceeds of Loan P

(Item Purchased)
2. LESS: Downpayment and/or Trade-in Value (Not applicable for loan

transaction)
3. Unpaid Balance of Cash/Purchase Price or Net Proceeds of Loan
4. Non-Finance Charges [Advanced by Seller/Creditor]:

a. Insurance Premium P
b. Taxes
c. Registration Fees
d. Documentary/Science Stamps
e. Notarial Fees
f. Others:
___________________
___________________
___________________
Total Non-Finance Charges
5. Amount to be Financed (Items 3 + 4) P

APP. S-4
96.12.31
6. Finance Charges*
a. Interest _______% p.a.
from ________ to ________ P
[ ] Simple [ ] Monthly
[ ] Compound [ ] Quarterly
[ ] Semi-Annual
[ ] Annual
b. Discounts
c. Service/Handling Charges
d. Collection Charges
e. Credit Investigation Fees
f. Appraisal Fees
g. Attorney’s/Legal Fees
h. Other charges incidental to the
extension of credit (specify):
_______________
_______________
_______________
Total Non-Finance Charges P
7. Percentage of Finance Charges to Total Amount Financed

(Computed in accordance with Subsec. 4307S.1) __________________%
8. Effective Interest Rate

%
(Method of computation attached)
9. Payment P
a. Single Payment due ____________________
(Date)
b. Total Installment Payments P
(Payable in __________ weeks/months @ P__________)
____________
*Time price differential should be disclosed as a finance charge. If an itemization cannot be made, a lump-sum figure may be
reported under Other charges incidental to the extension of credit in Item 6h.

APP S-4
96.12.31
10. Additional charges in case certain stipulations in the contract are not met by the
debtor:
Nature Rate Amount

____________________ ____________________ ____________________
____________________ ____________________ ____________________
____________________ ____________________ ____________________
____________________ ____________________ ____________________
CERTIFIED CORRECT:
_________________________
(Signature of Creditor/
Authorized Representative
Over Printed Name)
_________________________
Position
I ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT PRIOR TO THE

CONSUMMATION OF THE CREDIT TRANSACTION AND THAT I UNDERSTAND AND
FULLY AGREE TO THE TERMS AND CONDITIONS THEREOF.
__________________________
(Signature of Buyer/Borrower
Over Printed Name)
DATE ____________________
NOTICE TO BUYER/BORROWER: YOU ARE ENTITLED TO A COPY

OF THIS PAPER WHICH YOU SHALL SIGN.

APP. S-5
96.12.31
ABSTRACT OF “TRUTH IN LENDING ACT”

(Republic Act No. 3765)
Section 1. This Act shall be known as the are not incident to the extension of credit;
“Truth in Lending Act.” (5) the total amount to be financed;
(6) the finance charge expressed in terms
Sec. 2. Declaration of Policy. It is hereby of pesos and centavos; and
declared to be the policy of the State to (7) the percentage that the finance charge
protect its citizens from a lack of awareness bears to the total amount to be financed
of the true cost of credit to the user by assuring expressed as a simple annual rate on the
a full disclosure of such cost with a view of outstanding unpaid balance of the obligation.
preventing the uninformed use of credit to
the detriment of the national economy. xxx xxx xxx
xxx xxx xxx
Sec. 6. (a) Any creditor who in connection
Sec. 3. As used in this Act, the term - with any credit transaction fails to disclose
to any person any information in violation of
xxx xxx xxx this Act or any regulation issued thereunder
shall be liable to such person in the amount
(3) “Finance charge” includes interest, fees, of P100 or in an amount equal to twice the
service charges, discounts, and such other finance charge required by such creditor in
charges incident to the extension of credit as connection with such transaction, whichever
the Board may by regulation prescribe. is the greater, except that such liability shall
not exceed P2,000 on any credit transaction.
xxx xxx xxx
xxx xxx xxx
Sec. 4. Any creditor shall furnish to each
person to whom credit is extended, prior to (c) Any person who willfully violates any
the consummation of the transaction a clear provision of this Act or any regulation issued
statement in writing setting forth, to the extent thereunder shall be fined by not less than
applicable and in accordance with rules and P1,000 nor more than P5,000 or
regulations prescribed by the Board, the imprisonment for not less than 6 months nor
following information: more than one year or both.
xxx xxx xxx
(1) the cash price or delivered price of the
property or service to be acquired; (d) Any final judgment hereafter
(2) the amounts, if any, to be credited as rendered in any criminal proceeding under
down payment and/or trade-in; this Act to the effect that a defendant has
(3) the difference between the amounts willfully violated this Act shall be prima facie
set forth under clauses (1) and (2); evidence against such defendant in an action
(4) the charges, individually itemized, or proceeding brought by any other party
which are paid or to be paid by such person against such defendant under this Act as to
in connection with the transaction but which all matters respecting which said judgment

APP. S-5
96.12.31
would be an estoppel as between the parties

thereto.
Sec. 7. This Act shall become effective upon

approval.
Approved, June 22, 1963.

APP. S-6
02.12.31

(Appendix to Section 4691S)
Banks, quasi-banks, trust entities and all provisions regulating the power behind the
other institutions, and their subsidiaries and entity.
affiliates supervised or regulated by the BSP (2) Verification of the authority and
(covered institutions) shall strictly comply identification of the person purporting to act
with the provisions of Section 9 of R.A. No. on behalf of the client.
9160 and the following rules and regulations b. In case of doubt as to whether their
on anti-money laundering. purported clients or customers are acting for
themselves or for another, reasonable
1. Customer identification. Covered measures should be taken to obtain the true
institutions shall establish and record the true identity of the persons on whose behalf an
identity of its clients based on official account is opened or a transaction
documents. They shall maintain a system of conducted.
verifying the true identity of their clients and, c. The provisions of existing laws to the
in case of corporate clients, require a system contrary notwithstanding, anonymous
of verifying their legal existence and accounts, accounts under fictitious names,
organizational structure, as well as the and all other similar accounts shall be
authority and identification of all persons absolutely prohibited. In case where
purporting to act on their behalf. numbered accounts is allowed (i.e., peso and
When establishing business relations or foreign currency non-checking numbered
conducting transactions (particularly opening accounts), covered institutions should ensure
of deposit accounts, accepting deposit that the client is identified in an official or
substitutes, entering into trust and other other identifying documents.
fiduciary transactions, renting of safety The BSP may conduct annual testing
deposit boxes, performing remittances and solely limited to the determination of the
other large cash transactions) covered existence and the identity of the owners of
institutions should take reasonable measures such accounts.
to establish and record the true identity of Covered institutions shall phase out
their clients. Said client identification may within a period of one (1) year from April 2,
be based on official or other reliable 2001 or upon their maturity, whichever is
documents and records. earlier, anonymous accounts or accounts
a. In cases of corporate and other legal under fictitious names as well as numbered
entities, the following measures should be accounts being kept or managed by them,
taken, when necessary: which are not expressly allowed under
(1) Verification of the legal existence and existing law.
structure of the client from the appropriate d. The identity of existing clients or
agency or from the client itself or both, proof beneficial owners of deposits and other funds
of incorporation, including information held or being managed by the covered
concerning the customer’s name, legal form, institutions should be renewed/updated at
address, directors, principal officers and least every other year.

APP. S-6
03.12.31

of transactions. With respect to closed requirements of App. S-6 nos. 1, 2 and 4
transactions;
a. The development of internal policies, established;
procedures and controls, including the (5) Complex, unusual large transactions,
designation of compliance officers at and all unusual patterns of transactions,
management level, and adequate screening which have no apparent or visible lawful
procedures to ensure high standards when purpose;
hiring employees; (6) Funds being managed or held as
b. An ongoing employee training deposit substitutes if there is reasonable
program; and ground to believe that the same are proceeds
c. An audit function to test the system. of criminal and other illegal activities; and
1
Amended by AMLC Resolution No. 292 dated 11.20.03 (Annex S-6-a).

APP. S-6
02.12.31
(7) All other suspicious transactions/ the regular performance of his duties and in
activities which can be reported without good faith, whether or not such reporting
violating any law. results in any criminal prosecution under R.A.
The report on suspicious transactions 9160 or any other Philippine law.
shall provide the following minimum c. Prohibition from disclosure of the
information: covered transaction report. When reporting
(a) Name or names of the parties covered transactions to the AMLC, covered
involved. institutions and their officers, employees,
(b) A brief description of the transaction representatives, agents, advisors, consultants
or transactions. or associates are prohibited from
(c) Date or date the transaction(s) communicating, directly or indirectly, in any
occurred. manner or by any means, to any person,
(d) Amount(s) involved in every entity, the media, the fact that a covered
transaction. transaction report was made, the contents
(e) Such other relevant information thereof, or any other information in relation
which can be of help to the authorities should thereto. Neither may such reporting be
there be an investigation. published or aired in any manner or form by
b. Exemption from Bank Secrecy Law. the mass media, electronic mail, or other
When reporting covered transactions to the similar devices. In case of violation thereof,
AMLC, covered institutions and their officers, the concerned officer, employee,
employees, representatives, agents, advisors, representative, agent, advisor, consultant or
consultants or associates shall not be deemed associate of the covered institution, or media
to have violated R.A. No. 1405, as amended; shall be held criminally liable.
R.A. No. 6426, as amended; R.A. No. 8791
and other similar laws, but are prohibited 5. Certification of compliance with
from communicating, directly or indirectly, anti-money laundering regulations. Covered
in any manner or by any means, to any institution shall submit annually to the BSP
person the fact that a covered transaction thru the appropriate supervising and
report was made, the contents thereof, or any examining department a certification (Annex
other information in relation thereto. In case S-6-a) signed by the President or officer of
of violation thereof, the concerned officer, equivalent rank and by their Compliance
employee, representative, agent, advisor, Officer to the effect that they have monitored
consultant or associate of the covered compliance with existing anti-money
institution, shall be criminally liable. laundering regulations.
However, no administrative, criminal or civil The certification shall be submitted in
proceedings, shall lie against any person for accordance with Appendix S-2 and shall be
having made a covered transaction report in considered a Category A-2 report.

ANNEX S-6-a
02.12.31

REGULATIONS
CERTIFICATION
hereby certify:
1. That we have monitored (Name of NSSLA)’s compliance with R.A. No. 9160 (Anti-
302;
2. That the NSSLA is complying with the required customer identification, documenta-
tion of all new clients, and continued monitoring of customer’s activities;
3. That the NSSLA is also complying with the requirement to record all transactions and
to maintain such records including the record of customer identification for at least
five (5) years;
4. That the NSSLA does not maintain anonymous or fictitious accounts; and
5. That we conduct regular anti-money laundering training sessions for all NSSLA offic-
ers and selected staff members holding sensitive positions.
________________________ ___________________

Page No. _________;
Book No. _________;
Series of 2002

Annex S-6-a
ANNEX S-6-b
03.12.31

currency.
transactions.

Annex S-6-b
APP. S-7
03.12.31

RULE 1
Title
RULE 2
RULE 3
Definitions
follows:


APP. S-7
03.12.31



APP. S-7
03.12.31




issuer.


APP. S-7
03.12.31

teacher;
employees;

currency notes.




APP. S-7
03.12.31





OF THE FOREGOING.
instruments;
includes:
activity;

APP. S-7
03.12.31




APP. S-7
03.12.31


Philippines.


APP. S-7
03.12.31

worship.
1602;
(29) Jueteng;
(30) Masiao.
Decree No. 532;


other property;
third person;
art or business;

APP. S-7
03.12.31

game;

Act of 2000;

system, including
document;


APP. S-7
03.12.31
the Consumer Act;
the E-Commerce Act;
guarantee;
(85) Hijacking;
(87) Murder;

APP. S-7
03.12.31
market;
SEC;
contrivance;

APP. S-7
03.12.31
upon any person;
SEC;
SEC;
the SEC;

RULE 4

APP. S-7
03.12.31
RULE 5

RULE 6
RULES.

APP. S-7
03.12.31
unlawful activity.
RULE 7
as members.

APP. S-7
03.12.31


APP. S-7
03.12.31

RULE 8

APP. S-7
03.12.31
RULE 9

1) Name;
2) Present address;
5) Nationality;
7) Contact numbers;

APP. S-7
03.12.31

and corporations:

(2) By-laws;
stock;


APP. S-7
03.12.31
later.
Supreme Court.




APP. S-7
03.12.31



RULE 10


APP. S-7
03.12.31
related.

THEREOF.


APP. S-7
03.12.31

AND

ORDER(S).
FUNDS MAY BE FOUND.
RULE 11

APP. S-7
03.12.31



APP. S-7
03.12.31
RULES.

RULE 12

APP. S-7
03.12.31
RULE 13

APP. S-7
03.12.31
request.
office.

APP. S-7
03.12.31
RULE 14
Penal Provisions
(a) of the AMLA.
AMLA.
AMLA.

APP. S-7
03.12.31
Probation Law.
RULE 15

APP. S-7
03.12.31
RULE 16
Restitution
RULE 17
for approval.

APP. S-7
03.12.31
NO. 9194.
RULE 18

the minority.
RULE 19

APP. S-7
03.12.31
RULE 20
Separability Clause
thereby.
RULE 21
Repealing Clause
RULE 22
RULE 23

APP. S-8
03.12.31

REQUIREMENT FOR EXTERNAL AUDITORS OF NSSLAs


APP. S-8
03.12.31

APP. S-8
03.12.31

APP. S-8
03.12.31


therefor; NSSLA.
by the BSP. is:

APP. S-8
03.12.31
b. Power to govern the financial and entities, or NSSLAs, for regular audit or special
operating policies of the enterprise under a engagements.
4. Associate. Any director, officer, institutions. The report shall be submitted to
manager or any person occupying a similar the BSP and the audited institution
is responsible for reviewing the audit report. 1. That the bank, quasi-bank, trust
8. Auditor-in-charge. Refers to the team entity, or NSSLA shall be responsible for
leader of the audit engagement. keeping the auditor fully informed of existing
and subsequent changes to prudential,
E. INCLUSION IN BSP LIST regulatory and statutory requirements of the
BSP and that both parties shall comply with
In case of partnership, inclusion in the said requirements;

APP. S-8
03.12.31

04.12.31
A C
Agents I – 4 Capital-to-risk assets I - 2

and representatives I - 6g
Capitalization I - 2
Anti-money laundering regulations VI - 4 see capital I - 2
also App. S-6 revaluation surplus I - 2
AMLC Resolution No. 292 Annex S-6-b
certification of compliance with Annex S-6-a Checking account II - 1
revised implementation rules and regulations
R.A. No. 9160 as amended by R.A. No. Confidential information VI - 2
9194 App. S-7
sanctions and penalties VI – 4
D
Annual fees on Non-Stock Savings and Loan
Association VI - 2 Demand deposits II - 1
average assessable assets (AAAs) III - 3 checking account II - 1
total assessable assets III - 3
Applicability of other rules VI - 2 Deposit accounts II - 2

opening and operation of II - 2
deposits in checks and other cash items
B
II - 3
identification of member-depositors II - 2
Basic law governing non-stock savings and loan number of II - 2
associations III - 3 passbook and certificate of time deposits
II - 2
Batas Pambansa Blg. 344 VI - 3 signatured card II - 2
who may open II - 2
Borrowings II - 3
direct III - 7 Deposit and borrowing operations II - 1
indirect III - 7
Dividends I - 4
Branches and other offices I - 6g limitations on declaration of I - 4
application I - 7
conditions precluding acceptance/processing of Dormant savings deposits II - 1
application I - 7
establishment of branches/extension offices
I - 6g E
internal control system I - 7
permit to operate I - 7 Employees I - 4
bonding of I - 6g see also App. S-1
Business days and hours I - 7 compensation increases I - 6f
compensation of I - 6f
Business name I - 12 liability for loans contrary to law I - 6f

Index - Page 1
04.12.31
Examination by the BSP VI - 2 K

External auditor I - 10
Kinds of security III - 7
selection, appointment and reporting require-
ments for I - 11 see also App. S-8
L
F
Ledger discrepancies I - 3
surplus reserve for I - 3
Full-time manager for NSSLAs I - 6g
Loans III - 1
F unds investments III - 8 authority III - 1
basic requirements in granting III - 1
I loan limits III - 1
loan proceeds III - 2
Interest and other charges III - 2 loan repayment III - 2
accrual of interest earned on loans III - 3 maturity of III - 1
escalation clause III - 2
interest in the absenceof contract III - 2 Loans and investments III - 1
when allowable III - 2
Loans in general III - 1
Interest on deposits II - 2
on savings deposits II - 2 Loans/credit accommodations to trustees,
on time deposits II - 2 officers, stockholders and their related
interests III - 7
Interest on savings deposits II - 2 ceiling III - 7
direct borrowings III - 7
Interest on time deposits II - 2 general policy III - 7
time of payment II - 2 indirect borrowings III - 7
treatment of matured time deposits II - 2 records III - 8
reports III - 8
Internal control I - 10 sanctions III - 8
effectivity I - 11
external auditor I - 10 M
guidelines to govern the selection, appointment
and the reporting requirement for external Minimum deposit II - 1
auditors of NSSLAs App. S-8
sanction I - 11 Minimum term and size of time deposits II - 1
selection, appointment and reporting require- minimum size II - 1
ments for external auditors I - 11 see also term II - 1
App. S-8
Miscellaneous provision I - 12
G business name I - 12
prohibitions I - 12
General provision on sanctions I - 12, II - 3, publication requirements I - 12
III - 8, VI - 4

Index - Page 2
04.12.31
N extension/renewal of loans III - 3

write-off of loans as bad debts III - 3
Net worth-to-risk assets ratio I - 2
Payment of fines III - 3
Non-stock savings and loan associations I - 1
membership I - 1 Prohibitions I - 12
organizational requirements I -1
Publication requirements I - 12
Notice of dissolution VI - 2
R
NSSLA premises and other fixed assets VI - 3
Batas Pambansa Blg. 344 VI - 3 Records I - 7, III - 8
reclassification of real and other properties adoption of statements of financial accounting
owned or acquired as NSSLA premises standards I - 8
VI - 3 uniform system of accounts I - 8
O Reports I - 7, I - 8, III - 8 see also App. S-2

categories and signatories I - 8 see also
Office premises, furniture, fixtures and equip- App. S-3
ment I - 4 format of resolution for signatories of category
reserve for I - 4 A-1 Annex S-3-a
format of resolution for signatories of category
A-2 Annex S-3-b
Officers I - 4 format of resolution for signatories of catego-
bonding of I - 6g see also App. S-1 ries A-3 and B Annex S-3-c
compensation increases I - 6f guidelines on prescribed reports signatories and
compensation of I - 6f signatory authorization App. S-3
definition of I - 6b list of reports required from NSSLAs App. S-2
disqualification of I - 6c manner of filing I - 9
disqualification procedures I - 6e reporting guidelines on crimes/losses
effect of non-possession of qualifications or Annex S-2-a
possession of disqualifications I - 6e sanctions and procedures for filing and payment
liability for loans contrary to law I - 6f of fines I - 9
persons disqualified to become I - 6d
qualifications of I - 6b, I - 6c
watchlisting I - 6e Revocation/suspension of NSSLA license VI - 1
Other borrowings II - 3 S
Other operations III - 8, VI - 1 Safeguards in bonding of NSSLA accountable

funds investments III - 8 officers and employees App. S-1
payment of fines VI - 1
revocation/suspension of NSSLA license VI - 1 Saving deposits II - 1
definition II - 1
P dormant savings deposits II - 1
minimum deposit II - 1
Past due accounts III - 3 withdrawals II - 1
accounts considered past due III - 3

Index - Page 3
04.12.31
Secured loans III - 7 powers and authority of the board of I - 5

kinds of security III - 7 qualifications I - 4, I - 5
responsibilities and duties I - 4, I - 5
Sundry provisions II - 2, VI - 2 watchlisting I - 6e
annual fees on Non-Stock Savings and Loan
Association VI - 2 "Truth in Lending Act" III - 4
applicability of other rules VI - 2 abstract of "Truth in Lending Act" App. S-5
basic law governing non-stock savings and loan definition of terms III - 4
associations III - 3 amount to be financed III - 5
confidential information VI - 2 cash price or delivered price III - 5
examination by the BSP VI - 2 creditor III - 4
notice of dissolution VI - 2 down payment III - 5
NSSLA premises and other fixed assets VI - 3 finance charge III - 5
on deposit operations II - 2 non-finance charges III - 5
opening and operation of deposit accounts person III - 5
II - 2 simple annual rate III - 5
trade-in III - 5
T disclosure requirements III - 4
format-disclosure statement of loan/credit
Time deposits II - 1 transaction App. S-4
minimum term and size of II - 1 information to be disclosed III - 6 see also
withdrawals of II - 1 App. S-4
inspection of contracts covering credit transac-
Trustees I - 4 tions III - 6
compensation increases I - 6f penal provisions
compensation of I - 6f posters III - 6 see also App. S-5
definition I - 4, I - 5
disqualification of I - 6c W
disqualification procedures I - 6e
effect of non-possession of qualifications or
possession of disqualifications I - 6e Withdrawals of savings deposits II - 3
general responsibility of the board of I - 5
liability for loans contrary to law I - 6f Withdrawals of time deposits II - 1
persons disqualified to become I - 6c
Withdrawable share reserve I - 3

Index - Page 4
P REGULATIONS
(Regulations Governing Pawnshops)
TABLE OF CONTENTS
PART ONE - ORGANIZATION, MANAGEMENT

AND ADMINISTRATION
SECTION 4101P Scope of Authority of Pawnshops

4101P.1 Form of organization
4101P.2 Organizational requirements
4101P.3 Prior Bangko Sentral licensing to
perform quasi-banking functions
SECTION 4102P Definition of Terms
SECTIONS 4103P - 4105P (Reserved)
B. CAPITALIZATION
SECTION 4106P Capital of Pawnshops
C. - F. (RESERVED)
G. DIRECTORS, OFFICERS AND EMPLOYEES
SECTION 4141P Bonding of Officers and Employees
SECTION 4142P (Reserved)
ix
SECTION 4143P Disqualification of Directors and Officers
4143P.1 Persons disqualified to become directors
4143P.2 Persons disqualified to become officers
4143P.3 Disqualification procedures
4143P.4 Effect of possession of disqualifications
4143P.5 (Reserved)
4143P.6 Watchlisting
SECTION 4151P Establishment of Branches

4151P.1 Definition of term
4151P.2 Operations and functions
4151P.3 Basis for establishment
4151P.4 Capital requirement
4151P.5 Documentary requirements
4151P.6 Date of opening for business
I. BUSINESS DAYS AND HOURS
SECTION 4156P Business Days and Hours
J. RECORDS AND REPORTS
SECTION 4161P Records

4161P.1 Uniform System of Accounts
4161P.2 Adoption of statements of financial
accounting standards
SECTION 4162P Reports

4162P.1 Categories of and signatories to reports
4162P.2 Manner of filing
4162P.3 Sanctions
x
K. INTERNAL CONTROL
SECTION 4171P Safekeeping of Pawns and Records and Insurance

of Office Building
SECTION 4172P Separation of Pawnshop Business from Other Businesses
SECTION 4181P Business Name
SECTION 4182P Closing or Transfer of Business
SECTION 4199P General Provision on Sanctions
PART TWO - BORROWING OPERATIONS
A. - J. (RESERVED)
K. OTHER BORROWINGS
SECTION 4286P Borrowings Constituting Quasi-Banking Functions
PART THREE - LOANS AND INVESTMENTS
A. LOANS IN GENERAL
SECTION 4301P Loan Limits
xi
SECTION 4302P Interest and Other Charges
SECTION 4303P Past Due Accounts; Renewal/Redemption of Pawns
B. SECURED LOANS
SECTION 4321P Kinds of Security
SECTION 4322P Pawn Ticket

4322P.1 Contents of pawn ticket
4322P.2 Sanctions
SECTION 4323P Reminder to Pawner; Notice to the Public
SECTION 4324P Public Auction of Pawns
C. - J. (RESERVED)
SECTIONS 4336P- 4395P (Reserved)
K. MISCELLANEOUS
PART FOUR (RESERVED)
PART FIVE (RESERVED)
xii
A. (RESERVED)
SECTION 4651P Supervisory Powers of the Bangko Sentral
SECTION 4652P Basic Law Governing Pawnshops
SECTION 4657P Batas Pambansa Blg. 344 - An Act To Enhance The Mobility
Of Disabled Persons By Requiring Certain Buildings,
Institutions, Establishments and Public Utilities To Install
Facilities and Other Devices
SECTION 4691P Anti-Money Laundering Regulations

4691P.1 - 4691P.8 (Reserved)
4691P.9 Sanctions and penalties
SECTION 4699P Administrative Sanctions
xiii
03.12.31
LIST OF APPENDICES
No. SUBJECT MATTER
P-1 Chart of Accounts and Description of Loan Register of Pawnshops
P-2 List of Reports Required from Pawnshops

Annex P-2-a Reporting Guidelines on Crimes/Losses
P-3 Guidelines on Prescribed Reports Signatories and Signatory

Authorization
Annex P-3-a Format of Resolution for Signatories of Category A-1
Reports
Annex P-3-b Format of Resolution for Signatories of Category A-2
Reports
Annex P-3-c Format of Resolution for Signatories of Categories A-3
and B Reports
P-4 Standard Pawn Ticket

App. P-4-a Terms and Conditions of Standard Pawn Ticket
P-5 Anti-Money Laundering Regulations

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

Manual of Regulations for Non-Bank Financial Institutions P Regulations

Appendices - Page 1
§§ 4101P - 4101P.2
96.12.31
PART ONE
A. SCOPE OF AUTHORITY (70%) of the members entitled to vote shall

be citizens of the Philippines.
Section 4101P Scope of Authority of Pawnshops registered as a corporation
Pawnshops. A duly organized and licensed with foreign equity participation in excess of
pawnshop has, in general, the power to thirty percent (30%) of the voting stock, or
engage in the business of lending money on members entitled to vote, of the pawnshop
the security of personal property within the may retain the percentage of foreign equity
framework and limitations of P.D. No. 114 as of January 29, 1973, and said percentage
and the following regulations, subject to the shall not be increased, but may be reduced
regulatory and supervisory powers of the and once reduced, shall not be increased
Bangko Sentral ng Pilipinas (BSP). thereafter beyond thirty percent (30%) of the
voting stock, or number of members entitled
§ 4101P.1 Form of organization. A to vote, of such pawnshop.
pawnshop may be established as a single The percentage of foreign-owned voting
proprietorship, a partnership or corporation. stock in a pawnshop corporation shall be
Only Filipino citizens may establish determined by the citizenship of its individual
and own a pawnshop organized as a single stockholders. If the voting stock in a
proprietorship. A pawnshop established as pawnshop corporation is held by another
a single proprietorship by a non-Filipino corporation, the percentage of foreign
owner prior to January 29, 1973 may ownership in that pawnshop, shall be
continue as such during the lifetime of the computed on the basis of the foreign
registered owner. citizenship of the individuals owning voting
If a pawnshop is organized as a stocks in, or members entitled to vote of, the
partnership, at least seventy percent (70%) stockholder corporation.
of its capital shall be owned by Filipino
citizens. Pawnshops established as § 4101P.2 Organizational requirements
partnerships prior to January 29, 1973, with Any person or entity desiring to establish a
non-Filipino partners whose aggregate pawnshop shall register with the Bureau of
holdings amount to more than thirty percent Trade Regulation and Consumer Protection
(30%) of the capital may retain the percentage (BTRCP), in the case of a single proprietorship,
of their aggregate holdings as of January 29, or with the Securities and Exchange
1973, and said percentage shall not be Commission (SEC) , in the case of a
increased, but may be reduced, and once partnership/corporation.
reduced shall not be increased thereafter Pawnshops with foreign equity
beyond thirty percent (30%) of the capital participation shall also register with the
stock of such pawnshop. Board of Investments.
In the case of a pawnshop organized as After registering with the BTRCP or with
a corporation, at least seventy percent (70%) the SEC, the single proprietorship or the
of the voting stock therein shall be owned partnership/corporation, as the case may be,
by citizens of the Philippines, or if there be shall secure a business license from the city
no capital stock, at least seventy percent or municipality where the pawnshop is to be

Part I - Page 1
§§ 4101P.2 - 4101P.3
96.12.31
established and operated, in accordance with instruments of any kind, other than deposits,
the requirements of the pertinent ordinance such as:
in that city or municipality. (a) acceptances;
The following documents shall be filed (b) promissory notes;
with the BTRCP, the SEC and/or the BSP in (c) participations;
accordance with the forms prescribed by (d) certificates of assignment or similar
them: instruments with recourse;
a. Application under oath ( BTRCP) (e) trust certificates;
form; (f) repurchase agreements; and
b. Articles of Partnership/Incorporation (g) such other instruments as the
(for partnerships and/or corporations); Monetary Board may determine; and
c. List of partners/stockholders/ (4) Purpose:
directors/officers; (a) relending, or
d. Personal data sheet of owners/ (b) purchasing receivables or other
partners/incorporators/directors/officers; obligations.
e. Projected financial statements As used in the definition of quasi-
covering the first twelve (12) months of banking functions, the following terms and
operations; phrases shall be understood as follows:
f. Certificate of incorporation or Borrowing shall refer to all forms of
registration with SEC or BTRCP; obtaining or raising funds through any of the
g. City/municipal license; and methods and for any of the purposes
h. Such other documents as may be provided in (3) and (4) above, whether the
required by the BTRCP, the SEC, or the BSP. borrower’s liability thereby is treated as real
Before commencing actual business or contingent.
operations, the single proprietorship, For the borrower’s own account shall
partnership or corporation shall file with the refer to the assumption of liability in one’s
BSP an information sheet signed by the own capacity and not in representation, or
proprietor, managing partner or president as an agent or trustee, of another.
under oath. Purchasing of receivables or other
obligations shall refer to the acquisition of
§ 4101P.3 Prior Bangko Sentral claims collectible in money, including
licensing to perform quasi-banking interbank borrowings or borrowings between
functions. Pawnshops desiring to engage in financial institutions, or of securities, of any
quasi-banking functions shall first obtain a amount and maturity, from domestic or
Certificate of Authority from the BSP pursuant foreign sources.
to BSP regulations. Relending shall refer to the extension
a. Definition of quasi-banking of loans by an institution with antecedent
functions. Quasi-banking functions consist borrowing transactions. Relending shall be
of the following: presumed in the absence of express
(1) Borrowing funds for the borrower’s stipulation, when the institution is regularly
own account; engaged in lending.
(2) Twenty (20) or more lenders at any Regularly engaged in lending shall refer
one time; to the practice of extending loans, advances,
(3) Methods of borrowing: issuance, discounts or rediscounts as a matter of
endorsement, or acceptance of debt business, i.e., continuous or consistent
P Regulations Manual of Regulations for Non-Bank Financial Institutions

Part I - Page 2
§§ 4101P.3 - 4102P
96.12.31
lending as distinguished from isolated basis of the number of purchasers thereof and
lending transactions. shall not be treated as having been issued
b. Guidelines on lender count. The solely to the underwriter or trader: Provided,
following guidelines shall govern lender however, That in case of unsold debt
count on borrowings or funds mobilized by instruments in a firm commitment
pawnshops: underwriting, the underwriter shall be
(1) For purposes of ascertaining the counted as a lender.
number of lenders/placers to determine (5) Each buyer, assignee, and/or
whether or not a pawnshop is engaged in indorsee shall be counted in determining the
quasi-banking functions, the names of payees number of lenders/placers of funds mobilized
on the face of each debt instrument shall through sale, assignment, and/or
serve as the primary basis for counting the endorsement of securities or receivables on
lenders/placers except when proof to the a without recourse basis whenever the terms
contrary is adduced such as the official and/or attendant documentation, practice, or
receipts or documents other than the debt circumstances indicate that the sale,
instrument itself. In such case the actual/real assignment, and/or endorsement thereof
lenders/placers as appearing in such proof, legally obligates the pawnshop to repurchase
shall be the basis for counting the number of or reacquire the securities/receivables sold,
lenders/placers. assigned, endorsed or to pay the buyer,
In a debt instrument issued to two (2) assignee, or indorsee at some subsequent
or more named payees under an and/or and time.
or arrangement, the number of payees (6) Funds obtained by way of advances
appearing on the instrument shall be the basis from stockholders, directors or officers,
for counting the number of lenders/placers: regardless of nature, shall be considered
Provided, however, That a debt instrument borrowed funds or funds mobilized and such
issued in the name of a husband and wife stockholders, directors or officers shall be
followed by the word spouses, whether under counted in determining the number of
an and, and/or, or or arrangement or in the lenders/placers.
name of a designated payee under an in trust
for (ITF) arrangement shall be counted as one Sec. 4102P Definition of Terms
(1) borrowing/placement. a. Pawnshop shall refer to a person or
(2) Each debt instrument payable to entity engaged in the business of lending
bearer, shall be counted as one (1) lender/ money on personal property delivered as
placer, except when the pawnshop can prove security for loans. The term shall be
that there is only one owner for several debt synonymous, and may be used
instruments so payable. interchangeably, with pawnbroker or
(3) Two (2) or more debt instruments pawnbrokerage.
issued to the same payee, irrespective of the b. Pawner shall refer to the borrower
date and amount, shall be counted as one from a pawnshop.
(1) borrowing or placement. c. Pawnee shall refer to the pawnshop
(4) Debt instruments underwritten by or pawnbroker.
investment houses or traded by securities d. Pawn is the personal property
dealers/brokers whether on a firm, standby delivered by the pawner to the pawnee as
or best-efforts basis shall be counted on the security for a loan.

Part I - Page 3
§§ 4102P - 4143P.1
02.12.31
e. Pawn ticket is the pawnbroker’s an independent appraiser, at the option of

receipt for a pawn. the contributor, partner or proprietor.
f. Property shall include only such The value of properties forming part of
personal property as may actually be capital in accordance with the immediately
delivered to the control and possession of the preceding two paragraphs shall not exceed
pawnee. twenty-five percent (25%) of paid-in capital
g. Voting stock is that portion of the and surplus: Provided, however, That for
authorized capital which is subscribed and pawnshops existing as at 29 January 1973
entitled to vote. whose value of properties exceeds the
h. Vital records shall consist of the prescribed ratio, such percentage may be
Loans Extended/Paid Registers, General retained or reduced but shall not be increased
Ledger/Journal covering the current and at thereafter. Should the ratio, on the other
least the preceding two (2) years of hand, fall below the prescribed level, it may
operations, unused accountable forms and be increased but not beyond twenty-five
permanent pawnshop records, e.g., articles percent (25%).
of incorporation/co-partnership, stock certi-
ficates, etc. Secs. 4107P - 4110P (Reserved)
i. Bulky pawns shall refer to household
appliances, office machines and the like, C. - F. (RESERVED)
which occupy considerable amount of space,
i.e., measuring at least 1.5 x 1.5 x 0.5 feet. Secs. 4111P - 4140P (Reserved)
j. Premises shall refer to the area where
the pawnshop conducts its business and
maintains office. It includes office or storage G. DIRECTORS, OFFICERS AND
spaces maintained and/or used by the EMPLOYEES
pawnshop which are adjacent to the
pawnshop’s location. Sec. 4141P Bonding of Officers and
Employees. Accountable officers and
Secs. 4103P - 4105P (Reserved) employees, especially those who have access
to pawned articles, of pawnshops shall be
required to post bonds of reputable
B. CAPITALIZATION companies accredited by the Insurance
Commissioner.
Sec. 4106P Capital of Pawnshops
Pawnshops shall have a minimum paid-in Sec. 4142P (Reserved)
capital of P100,000.
Paid-in capital shall mean cash and Sec. 4143P Disqualification of Directors
other properties, including real estate and and Officers. The following regulations shall
improvements thereon: Provided, That such govern the disqualification of pawnshop
directors and officers.
properties are necessary for the conduct of
the pawnshop business.
§ 4143P.1 Persons disqualified to
Properties forming part of capital in
become directors. Without prejudice to
accordance with the preceding paragraph
specific provisions of law prescribing
may be valued at acquisition cost less
disqualifications for directors, the following
depreciation or at any other value not
are disqualified from becoming directors of
exceeding the appraised value as fixed by
pawnshops:

Part I - Page 4
§ 4143P.1
02.12.31
a. Permanently disqualified (a) Delinquency in the payment of

Directors/trustees/officers/employees obligations means that an obligation of a
permanently disqualified by the Monetary person with the institution where he/she is a
Board from holding a director/trustee director or officer, or at least two (2)
position: obligations with other financial institutions,
(1) Persons who have been convicted by under different credit lines or loan contracts,
final judgment of the court for offenses are past due pursuant to Secs. X306, 4308Q,
involving dishonesty or breach of trust such 4306S and 4303P;
as estafa, embezzlement, extortion, forgery, (b) Obligations shall include all
malversation, swindling and theft; borrowings from any financial institution
(2) Persons who have been convicted by obtained by:
final judgment of the court for violation of (i) A director, trustee or officer for his
banking laws; own account or as the representative or agent
(3) Persons who have been judicially of others or where he/she acts as a guarantor,
declared insolvent, spendthrift or endorser or surety for loans from such
incapacitated to contract; or financial institutions;
(4) Directors, trustees, officers or (ii) The spouse or child under the
employees of closed institutions under the parental authority of the director, trustee or
supervisory and regulatory powers of the BSP officer;
who were responsible for such institutions’ (iii) Any person whose borrowings or
closure as determined by the Monetary loan proceeds were credited to the account
Board. of, or used for the benefit of a director, trustee
b. Temporarily disqualified or officer;
Directors/trustees/officers/employees (iv) A partnership of which a director,
disqualified by the Monetary Board from trustee or officer, or his/her spouse is the
holding a director/trustee position for a managing partner or a general partner
specific/indefinite period of time. Included owning a controlling interest in the
are: partnership; and
(1) Persons who refuse to fully disclose (v) A corporation, association or firm
the extent of their business interest to the wholly-owned or majority of the capital of
appropriate supervising and examining which is owned by any or a group of persons
department when required pursuant to a mentioned in the foregoing Items “(i)”, “(ii)”
provision of law or of a circular, and “(iv)”;
memorandum or rule or regulation of the This disqualification shall be in effect as
BSP. This disqualification shall be in effect long as the delinquency persists.
as long as the refusal persists; (4) Persons convicted for offenses
(2) Directors who have been absent or involving dishonesty, breach of trust or
who have not participated for whatever violation of banking laws but whose
reasons in more than fifty percent (50%) of conviction has not yet become final and
all meetings, both regular and special, of the executory;
board of directors during their incumbency, (5) Directors, trustees and officers of
or any twelve (12)-month period during said closed institutions under the supervisory and
incumbency. This disqualification applies for regulatory powers of the BSP pending their
purposes of the succeeding election; clearance by the Monetary Board;
(3) Persons who are delinquent in the (6) Directors and trustees disqualified for
payment of their obligations as defined failure to observe/discharge their duties and
hereunder: responsibilities prescribed under existing

Part I - Page 4a
§§ 4143P.1 - 4143P.5
02.12.31
regulations. This disqualification applies Accountant of a branch or office of a

until the lapse of the specific period of pawnshop [an NBFI] is disqualified from
disqualification or upon approval by the holding or being appointed to any of said
Monetary Board on recommendation by the positions in the same branch or office.
department of such directors’ election/ § 4143P.3 Disqualification procedures
reelection; a. Upon establishment of any of the
(7) Persons dismissed/terminated from grounds for disqualification mentioned in
employment for cause. This disqualification Subsecs. 4143P.1 and 4143P.2, the office of
shall be in effect until they have cleared the disqualified director or officer shall
themselves of involvement in the alleged immediately become vacant, except in the
irregularity; case of delinquency in the payment of
(8) Those under preventive suspension; obligations wherein the director or officer
and concerned shall be given a grace period of
(9) Persons with derogatory records with thirty (30) days after such ground for
the National Bureau of Investigation (NBI), disqualification has been established.
court, police, Interpol and monetary b. All cases of disqualification shall be
authority (central bank) of other countries (for immediately reported to the board of
foreign directors and officers) involving directors of the institution concerned. If the
violation of any law, rule or regulation of the ground for disqualification is delinquency in
Government or any of its instrumentalities the payment of obligations, the report shall
adversely affecting the integrity and/or ability be made at the expiry of the thirty (30)-day
to discharge the duties of a director/trustee/ grace period mentioned in Item “a” above.
officer. This disqualification applies until The board shall act on the report not later
they have cleared themselves of involvement than the following board meeting. Within
in the alleged irregularity. seventy-two (72) hours thereafter, the
corporate secretary shall report to the
§ 4143P.2 Persons disqualified to Governor of the BSP through the appropriate
become officers supervising and examining department the
a. The disqualifications for directors name of the director or officer involved, the
mentioned in Subsec. 4143P.1 shall likewise ground for his disqualification and the action
apply to officers, except those stated in Items taken by the board.
“b(2)”. c. When the ground for disqualification
b. Except as may be authorized by the ceases to exist, the director or officer
Monetary Board or the Governor, the spouse concerned shall be eligible to become
or a relative within the second degree of director, trustee or officer of any institution
consanguinity or affinity of any person under the supervisory and regulatory powers
holding the position of Chairman, President, of the BSP only upon prior approval by the
Executive Vice President or any position of Monetary Board.
equivalent rank, General Manager, Treasurer,
Chief Cashier or Chief Accountant is § 4143P.4 Effect of possession of
disqualified from holding or being elected disqualifications. Directors/officers elected
or appointed to any of said positions in the or appointed possessing any of the
same pawnshop [NBFI]; and the spouse or disqualifications as enumerated herein, shall
relative within the second degree of vacate their respective positions immediately.
consanguinity or affinity of any person
holding the position of Manager, Cashier, or § 4143P.5 (Reserved)

Part I - Page 4b
§§ 4143P.6 - 4150P
02.12.31
§ 4143P.6 Watchlisting. To provide d. Confidentiality. Watchlisting shall be

the BSP with a central information file to be for internal use only and may not be
used as reference in passing upon and accessed or queried upon by outside parties
reviewing the qualifications of persons including such institutions under the
elected or appointed as trustee or officer of supervisory and regulatory powers of the BSP,
an institution under the supervisory and except with the authority of the person
regulatory powers of the BSP, the SES shall concerned and with the approval of the
maintain a watchlist of disqualified directors/ Deputy Governor, SES, the Governor, or the
trustees/officers under the following Monetary Board.
procedures: e. Delisting. All delistings shall be
a. Watchlist categories. Watchlisting approved by the Monetary Board upon
shall be categorized as follows: recommendation of the appropriate
(1) Disqualification File “A” (Permanent) supervising and examining department
– Directors/trustees/officers/employees except in cases of persons known to be dead
permanently disqualified by the Monetary where delisting shall be automatic upon
Board from holding a director/trustee/officer proof of death and need not be elevated to
position. the Monetary Board. Delisting may be
(2) Disqualification File “B” (Temporary) approved by the Monetary Board in the
– Directors/trustees /officers/employees following cases:
temporarily disqualified by the Monetary (1) Watchlist - Disqualification File “B”
Board from holding a director/trustee/officer (Temporary) -
position. (a) After the lapse of the specific period
b. Inclusion of directors/trustees/ of disqualification;
officers/employees in the watchlist. Upon (b) When the conviction by the court for
recommendation by the appropriate crimes involving dishonesty, breach of trust
supervising and examining department, the and/or violation of banking laws becomes
inclusion of directors/trustees/officers/ final and executory, in which case the
employees in watchlist disqualification files director/trustee/officer/employee is relisted to
“A” and “B” on the basis of decisions, actions Watchlist – Disqualification File “A”
or reports of the courts, institutions under the (Permanent); or
supervisory and regulatory powers of the BSP, (c) Upon favorable decision or clearance
BSP, NBI or any other administrative agencies by the appropriate body, i.e., court, NBI,
shall first be approved by the Monetary institutions under the supervisory and
Board. regulatory powers of the BSP, or such other
c. Notification of directors/trustees/ agency/body where the concerned individual
officers/employees. Upon approval by the had derogatory record.
Monetary Board, the concerned director/ Directors/trustees/officers/employees
trustee/officer/employee shall be informed delisted from the Watchlist – Disqualification
through registered mail, with registry return File “B” other than those upgraded to
receipt card, at his last known address of his Watchlist – Disqualification File “A” shall
inclusion in the masterlist of watchlisted be eligible for re-employment with any
persons disqualified to be a director/trustee/ institution under the supervisory and
officer in any institution under the regulatory powers of the BSP.
supervisory and regulatory powers of the
BSP. Secs. 4144P - 4150P (Reserved)

Part I - Page 4c
§ 4151P
02.12.31
H. BRANCHES AND OTHER OFFICES for and obtaining from the BSP, through the
Sec. 4151P Establishment of Branches department, authority to operate such branch
No pawnshop shall open, maintain or which shall be processed in accordance with
operate a branch office without first applying the following guidelines.

Part I - Page 4d
§§ 4151P.1 - 4160P
96.12.31
§ 4151P.1 Definition of term. As used b. Bio-data of the proposed manager

in these rules the term branch office shall and accountable employees;
include any place of business outside the c. Information on branch location,
main office of a pawnshop, where pawnshop facilities (such as vault), bonding and
operations or transactions or any phase insurance;
thereof are conducted by said pawnshop d. Certified true copy of the board
under the control and supervision of a head resolution authorizing the establishment of
or main office. the branch (in case of corporation); and
e. Business and/or economic
§ 4151P.2 Operations and functions justification (including data) for the
The operations/transactions of a branch establishment of the branch, etc.
office shall likewise be governed by the
provisions of P.D. No. 114 governing § 4151P.6 Date of opening for
operations/transactions of a head office, as business. A branch office shall open for
well as by other pertinent laws, BSP rules and business within six (6) months from receipt
regulations. of its authority to operate said branch,
The primary purpose of branching shall otherwise, the authority is automatically
be to provide an additional source of credit revoked.
to small borrowers left unserved by the
banking and other financial institutions. Secs. 4152P - 4155P (Reserved)
§ 4151P.3 Basis for establishment

Branch offices shall be allowed on the basis I. BUSINESS DAYS AND HOURS
of the head office’s ability to conduct
operations, as well as correspondent Sec. 4156P Business Days and Hours
arrangements. The BSP department Pawnshops shall transact business at a
concerned shall not process an application minimum of five (5) days a week, for a
for branching of a pawnshop which has an minimum of six (6) hours a day, both to be
approved but unopened branch. selected by them. They may, at their
discretion, remain open beyond the above
§ 4151P.4 Capital requirement. Upon requirement for as long as they deem it
compliance with the minimum paid-in necessary. The business hours and business
capital of P100,000, permission to open a days shall be posted conspicuously at all
maximum of one (1) branch may be granted, times at the door of the pawnshop.
subject to the provisions of the rules on Exemption from the above requirement
branching. shall be granted to pawnshops in troubled
Additional paid-in capital of P100,000 areas after due evaluation of their requests.
shall be required for each additional branch.
Special public holidays proclaimed for local
§ 4151P.5 Documentary requirements government shall be regular working days.
The following documents shall be filed with
the appropriate supervising and examining Secs. 4157P - 4160P (Reserved)
department of the BSP in connection with an
application to operate a branch
a. Bank certification on paid-in capital J. RECORDS AND REPORTS
deposit;

Part I - Page 5
§§ 4161P - 4162P.2
96.12.31
Sec. 4161P Records. The accounting period or limit prescribed by BSP regulations shall
of all pawnshops shall be on the calendar be adopted by pawnshops.
year basis. For purposes hereof, the SFAS shall refer
The accounting records of pawnshops to the issuances of the Accounting Standards
shall consist of records of original entry and Council (ASC) and approved by the
books of final entry. Professional Regulation Commission (PRC).
The records of original entry shall
consist of pawn tickets, official receipts, Sec. 4162P Reports. Pawnshops shall submit
vouchers and other supporting documents. to the appropriate supervising and examining
The books of final entry shall consist of the department of the BSP the reports listed in
general ledger, subsidiary ledgers and Appendix P-2 in the forms as may be
registers of loans extended and loans paid. prescribed by the Deputy Governor,
Pawnshops may use any form of Supervision and Examination Sector, BSP.
register: Provided, That (a) it contains spaces Any change in, or amendment to, the
and columns adequate to substantially reflect articles of incorporation/co-partnership, by-
the data required by the BSP, (b) said register laws or material documents required to be
is with a permanent binding, and (c) no submitted to the BSP shall be reported by
register with loose leaves or detachable pages submitting copies of the amended articles of
shall be allowed. The Chart of Accounts and incorporation, by-laws or material document
Description of Loan Registers of Pawnshops to the appropriate supervising and examining
provided in Appendix P-1 shall be followed. department of the BSP within fifteen (15) days
No pawnbroker or other persons shall following such change.
alter or erase any entry made in the registers
of a pawnshop. § 4162P.1 Categories of and
No pawnshop shall destroy or dispose signatories to reports. Reports required to
of any record, ledger, book, or document for be submitted to the BSP are classified
at least three (3) years from the date thereof. into Categories A-1, A-2, A-3 and B reports
as indicated in the list of reports required
§ 4161P.1 Uniform System of to be submitted to the BSP in Appendix
Accounts. Pawnshops shall strictly adopt/ P-2.
implement the Uniform System of Accounts Appendix P-3 prescribes the signatories
prescribed for pawnshops in the recording for each report category and the requirements
of daily transactions including reportorial on signatory authorization. Reports
requirements. submitted in computer media shall be subject
to the same requirements.
§ 4161P.2 Adoption of Statements A report submitted to the BSP under the
of Financial Accounting Standards signature of an officer who is not authorized
Pawnshops shall adopt the Statements of in accordance with the requirements in this
Financial Accounting Standards (SFAS) in Subsection shall be considered as not having
their financial statements and reports to the submitted.
BSP. However, in cases where there are
differences between BSP regulations and § 4162P.2 Manner of filing. The
SFAS, as when more than one (1) option are submission of the reports shall be effected
allowed or certain maximum or minimum by filing them personally with the appropriate
limits are prescribed by the SFAS, the option supervising and examining department of the

Part I - Page 6
§§ 4162P.2 - 4162P.3
03.12.31
BSP or with the BSP Regional Offices/Units, b. Fine for submission of faulty report.
or by sending them by registered mail or Any pawnshop which submits a faulty report
special delivery through private couriers, shall pay to the BSP a fine of P30 per business
unless otherwise specified in the circular or day which shall accrue beginning on the
memorandum of the BSP. sixth business day from the day the written
notice of faulty report is received by the
§ 4162P.3 Sanctions pawnshop concerned until a correct report
a. Definition of terms. For purposes is submitted.
of these rules, the following definitions shall c. Fines for willful delay in submission
apply: of reports. Pawnshops incurring willful delay
(1) Report shall refer to any report or in the submission of required reports shall
statement required of a pawnshop to be pay a fine in accordance with the following
submitted to the BSP periodically or within schedule:
a specified period.
(2) Faulty report shall refer to an I. For Categories A-1, A-2 and A-3 reports
inaccurate/improperly accomplished report.
(3) Willful delay or default in the Per business day of P 90
submission of reports shall refer to the failure default until the
of a pawnshop to submit a report on time. report is filed
Failure to submit a report on time due to
fortuitous events, such as fire and other II. For Category B reports
natural calamities and public disorders,
including strike or lockout affecting a Per business day of P 30
pawnshop as defined in the Labor Code or a default until the
national emergency affecting operations of report is filed
pawnshops, shall not be considered as willful
delay. Delay or default shall start to run on
(4) False Statement shall refer to any the day following the last day required for
untruthful data or information or falsehoods the submission of reports. However, should
made in a report to the BSP or its authorized the last day of filing fall on a non-working
agents, with intent to deceive or mislead. day in the locality where the reporting
Any false statement which tends to favor the pawnshop is situated, delay or default shall
pawnshop submitting the report shall be start to run on the day following the next
prima facie evidence of intent to deceive or working day. The due date/deadline for
mislead. submission of reports to BSP as prescribed
(5) Repeated violation shall mean the under Sec. 4162P governing the frequency
commission of the same offense for at least and deadlines indicated in Appendix P-2
two (2) times. shall be automatically moved to the next
(6) Persistent violation shall mean the banking day whenever a half-day suspension
commission of the same offense for at least of business operations in government offices
three (3) times. is declared due to an emergency such as
(7) Offense shall refer to submission of typhoon, floods, etc.
faulty report, willful delay in submission of For the purpose of establishing delay
reports, or making of false statements in or default, the date of acknowledgment by
reports.

Part I - Page 7
§ 4162P.3
03.12.31
the appropriate supervising and examining shall operate on the sixth working day
department of the BSP or the BSP Regional counted from receipt of notice of submission
Offices/Units appearing on the copies of such of a false statement from the BSP or its
reports filed or submitted or the date of authorized agents until a correct statement
mailing postmarked on the envelope or the is submitted.
date of registry or special delivery receipt, e. Manner of collection and payment
as the case may be, shall be considered as of fines. A pawnshop shall be billed by the
the date of filing. appropriate supervising and examining
Delayed schedules or attachments and department of the BSP. The pawnshop shall
amendments shall be considered late thereupon remit the amount of the fine to
reporting subject to the above penalties. the BSP thru the appropriate supervising and
d. Fines for making false statements. Any examining department. Failure of a
pawnshop which makes a false statement in pawnshop to effect the settlement of the full
any of its reports to the BSP or its authorized amount of the fine within a period of fifteen
agents shall pay to the BSP a fine in (15) days from receipt of the bill shall subject
accordance with the following schedule: it to other administrative sanctions and/or to
the penal provisions of P.D. No. 114.
(1) On the first and P300 and P60 f. Appeal to the Monetary Board. A
second offense, for every day
a fine payable of delay in pawnshop may appeal to the Monetary
on the business payment until Board a ruling of the appropriate supervising
day following the fine is and examining department of the BSP
the receipt of fully paid imposing any penalty prescribed herein.
BSP advice
g. Payment of the penalties by
(2) On repeated P600 and installments.
violations P120 for every (1) The head of the appropriate
day of delay supervising and examining department may
in payment approve requests for payment of penalties
until the fine
is fully paid by installments: Provided,
(3) On persistent Suspension,

violations after due
hearing, of the
pawnshop's
directors/
officers/
proprietor/
managing
partner
Any false statement made in a previous

report which was not immediately known but
was discovered only in later reports shall
constitute only one (1) violation. The penalty

Part I - Page 8
§§ 4322P.1 - 4324P
96.12.31
ticket, prescribed for pawnshops pursuant to dispose of the pawn only after it has
the requirements of P.D. No. 114, and the published a notice of public auction of
terms and conditions on the reverse side unredeemed articles held as security for loans
thereof, are prescribed in Appendices P-4 and in at least two (2) newspapers circulated in
P-4-a. Suplusage data shall be avoided. the city or municipality where the pawnshop
Additional terms and conditions which has its place of business, six (6) days prior to
pawnshops may wish to incorporate shall be the date set for the public auction.
subject to prior approval by the appropriate The notice shall be in English and in
supervising and examining department of the Pilipino or in the local dialect and shall
BSP. contain the following:
Pawn tickets shall not be smaller than a. Name and address of the owner of
8" x 5". the pawnshop; and
Pawn tickets shall at least be in b. Date and hour of the auction sale.
duplicate. The first copy shall contain the In remote areas where newspapers are
word "Original" and the second copy shall neither published nor circulated, the
be marked "Duplicate". publication shall be complied with by posting
Pawn tickets shall be serially numbered. notices at the city hall or municipal building
Pawnshops may choose the color and of the city or municipality and in two (2) other
quality of the paper used as pawn ticket. conspicuous public places where the
pawnshop has its place of business.
§ 4322P.2 Sanctions. Any pawnshop
which violates or fails to comply with the Sec. 4324P Public Auction of Pawns. No
requirements of Subsec. 4322P.1 shall pay a pawnshop shall sell or otherwise dispose of
fine of P500 and shall be liable for such other any article or thing received as security for a
administrative sanctions as the BSP may loan except by public auction at any of the
impose. The owner, partner, manager, or following places:
officer-in-charge of the pawnshop responsible a. Pawnshop's place of business; or
for the violation or non-compliance shall be b. Any public place within the territorial
jointly liable with the pawnshop. limits of the municipality or city where the
pawnshop conducts its business.
Sec. 4323P Reminder to Pawner; Notice to The auction shall be conducted under
the Public. On or before the expiration of the control and direction of a duly licensed
the ninety (90)-day grace period allowed in auctioneer. In cities and municipalities
Sec. 4303P, the pawnshop shall duly notify where there is no duly licensed auctioneer,
the pawner in writing that the pawn shall be the public auction may be conducted by a
sold or otherwise disposed of in the event notary public of the city or province
that the pawner fails to redeem the pawn w h e r e the pawnshop has its place of
within the ninety (90)-day grace period, business.
specifying in the same notification the date, The Auction Sheet/Book containing
hour and place where the sale shall take entries of auctioned pawned articles duly
place. If upon the expiration of the ninety signed by the auctioneer or notary public
(90)-day grace period, the pawner fails to under oath shall be maintained by the
redeem his pawn, the pawnshop may sell or pawnshop.

Part III - Page 2
§§ 4325P - 4399P
96.12.31
Sècs. 4325P - 4335P (Reserved) Secs. 4396P - 4398P (Reserved)
C. - J. (RESERVED) Sec. 4399P General Provisions on Sanctions

Any violation of the provisions of this Part
Secs. 4336P - 4395P (Reserved) shall be subject to Section 18 of P.D. No.
114.
K. MISCELLANEOUS

Part III - Page 3
§§ 4322P.1 - 4324P
96.12.31
ticket, prescribed for pawnshops pursuant to dispose of the pawn only after it has
the requirements of P.D. No. 114, and the published a notice of public auction of
terms and conditions on the reverse side unredeemed articles held as security for loans
thereof, are prescribed in Appendices P-4 and in at least two (2) newspapers circulated in
P-4-a. Suplusage data shall be avoided. the city or municipality where the pawnshop
Additional terms and conditions which has its place of business, six (6) days prior to
pawnshops may wish to incorporate shall be the date set for the public auction.
subject to prior approval by the appropriate The notice shall be in English and in
supervising and examining department of the Pilipino or in the local dialect and shall
BSP. contain the following:
Pawn tickets shall not be smaller than a. Name and address of the owner of
8" x 5". the pawnshop; and
Pawn tickets shall at least be in b. Date and hour of the auction sale.
duplicate. The first copy shall contain the In remote areas where newspapers are
word "Original" and the second copy shall neither published nor circulated, the
be marked "Duplicate". publication shall be complied with by posting
Pawn tickets shall be serially numbered. notices at the city hall or municipal building
Pawnshops may choose the color and of the city or municipality and in two (2) other
quality of the paper used as pawn ticket. conspicuous public places where the
pawnshop has its place of business.
§ 4322P.2 Sanctions. Any pawnshop
which violates or fails to comply with the Sec. 4324P Public Auction of Pawns. No
requirements of Subsec. 4322P.1 shall pay a pawnshop shall sell or otherwise dispose of
fine of P500 and shall be liable for such other any article or thing received as security for a
administrative sanctions as the BSP may loan except by public auction at any of the
impose. The owner, partner, manager, or following places:
officer-in-charge of the pawnshop responsible a. Pawnshop's place of business; or
for the violation or non-compliance shall be b. Any public place within the territorial
jointly liable with the pawnshop. limits of the municipality or city where the
pawnshop conducts its business.
Sec. 4323P Reminder to Pawner; Notice to The auction shall be conducted under
the Public. On or before the expiration of the control and direction of a duly licensed
the ninety (90)-day grace period allowed in auctioneer. In cities and municipalities
Sec. 4303P, the pawnshop shall duly notify where there is no duly licensed auctioneer,
the pawner in writing that the pawn shall be the public auction may be conducted by a
sold or otherwise disposed of in the event notary public of the city or province
that the pawner fails to redeem the pawn w h e r e the pawnshop has its place of
within the ninety (90)-day grace period, business.
specifying in the same notification the date, The Auction Sheet/Book containing
hour and place where the sale shall take entries of auctioned pawned articles duly
place. If upon the expiration of the ninety signed by the auctioneer or notary public
(90)-day grace period, the pawner fails to under oath shall be maintained by the
redeem his pawn, the pawnshop may sell or pawnshop.

Part III - Page 2
§§ 4325P - 4399P
96.12.31
Sècs. 4325P - 4335P (Reserved) Secs. 4396P - 4398P (Reserved)
C. - J. (RESERVED) Sec. 4399P General Provisions on Sanctions

Any violation of the provisions of this Part
Secs. 4336P - 4395P (Reserved) shall be subject to Section 18 of P.D. No.
114.
K. MISCELLANEOUS

Part III - Page 3
§§ 4401P - 4499P
96.12.31
PART FOUR
Sections. 4401P - 4499P (Reserved)

Part IV - Page 1
§§ 4501P - 4599P
96.12.31
PART FIVE
Sections. 4501P - 4599P (Reserved)

Part V - Page 1
§§ 4601P - 4691P
03.12.31
PART SIX
MISCELLANEOUS
A. (RESERVED) Secs. 4653P - 4656P (Reserved)
Secs. 4601P - 4650P (Reserved) Sec. 4657P Batas Pambansa Blg. 344 – An
Act To Enhance The Mobility Of Disabled
Persons By Requiring Certain Buildings,
B. SUNDRY PROVISIONS Institutions, Establishments And Public
Utilities To Install Facilities And Other
Section 4651P Supervisory Powers of the Devices. In order to promote the realization
Bangko Sentral. The head of the appropriate of the rights of disabled persons to participate
supervising and examining department of the fully in the social life and the development
BSP and his duly designated representatives of the societies in which they live and the
are authorized to conduct an examination, enjoyment of the opportunities available to
inspection, or investigation of books, other citizens, no license or permit for the
records, business affairs, administration, and construction, repair or renovation of public
financial condition of any pawnshop, and private buildings for public use,
whenever said official deems it necessary for educational institutions, airports, sports and
the effective implementation of P.D. No. recreation centers and complexes, shopping
114, and other pertinent rules and centers or establishments, public parking
regulations. Said official and his duly places, workplaces, public utilities, shall be
designated representatives may administer granted or issued unless the owner or
oaths to any director, officer, or employee operator thereof shall install and incorporate
of the pawnshop. in such building, establishment or public
If, upon such examination, inspection, utility, such architectural facilities or
or investigation, the official or his deputies structural features as shall reasonably
shall establish that the pawnshop is violating enhance the mobility of disabled persons
or is not complying with the requirements such as sidewalks, ramps, railings and the
of P.D. No. 114 and of the provisions of other like. If feasible, all such existing buildings,
pertinent rules and regulations, said official institutions, establishments, or public utilities
shall immediately inform the Monetary may be renovated or altered to enable the
Board of his findings and recommendations, disabled persons to have access to them.
and the Monetary Board shall take
appropriate actions to stop such violation or Secs. 4658P - 4690P (Reserved)
non-compliance, and punish the persons
responsible. Sec. 4691P Anti-Money Laundering
Regulations. Banks, offshore banking
Sec. 4652P Basic Law Governing Pawn- units(OBUs), quasi-banks (QBs), trust entities,
shops. P.D. No. 114, known as the non-stock savings and loan associations
Pawnshop Regulation Act, regulates the (NSSLAs), pawnshops, and all other
establishment and operation of pawnshops. institutions, including their subsidiaries and

Part VI - Page 1
§§ 4691P - 4699P
03.12.31
affiliates supervised and/or regulated by the and officers for any violation of the provisions
BSP, otherwise known as “covered of the rules on pawnshops, P.D. No. 114,
institutions” shall comply with the provisions pertinent laws or any order or instruction of
of R.A. No. 9160, as amended, otherwise the Monetary Board or its authorized official;
known as the “Anti-Money Laundering Act or any commission of irregularities in the
of 2001” and its Implementing Rules and conduct of its business, the following
Regulations (IRRs) in Appendix P-6 and those administrative sanctions:
in Appendix P-5. a. For a violation consummated at a
single instance and not punishable on a per-
§§ 4691P.1 - 4691P.8 (Reserved) day basis, a fine of not more than P500; or
for a violation which is continuing and
§ 4691P.9 Sanctions and penalties punishable on a per-day basis, a fine of not
a. Whenever a covered institution more than P600 for every day of violation or
violates the provisions of Section 9 of R.A. non-compliance; and/or
No. 9160 of this Section, the officer(s) or b. Suspension or, after due hearing,
other persons responsible for such violation removal of partners/directors or officers.
shall be punished by a fine of not less than For purposes of this Section, the phrase
P50,000 nor more than P200,000 or by any commission of irregularities in the
imprisonment of not less than two (2) years conduct of its business shall include any act
nor more than ten (10) years, or both, at the or omission described hereunder.
discretion of the court pursuant to Section 1. Failure to produce pawn upon
36 of R.A. No. 7653, otherwise known as redemption or in any other case where the
“The New Central Bank Act”. pawnshop has the obligation to produce the
b. Without prejudice to the criminal pawn.
sanctions prescribed above against the 2. Allowing the redemption of pawn
culpable persons, the Monetary Board may, without the surrender of the corresponding
at its discretion, impose upon any covered original pawn ticket/substitute pawn ticket/
institution, its directors and/or officers for any affidavit of loss.
violation of Section 9 of R.A. No. 9160, the 3. Falsifying pawn tickets.
administrative sanctions provided under 4. Actual collection of interest in
Section 37 of R.A. No. 7653. advance and or service charges without
reflecting the same on the pawn ticket.
Secs. 4692P - 4698P (Reserved) 5. Tampering or substitution of pawn.
6. Failure to issue official receipts for
Sec. 4699P Administrative Sanctions. The amounts collected.
Monetary Board shall impose upon 7. Any other act or omission analogous
pawnshops, their owners, partners, directors to the above-enumerated acts and omissions.

Part VI - Page 2
APP. P-1
96.12.31
CHART OF ACCOUNTS AND DESCRIPTION

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

Appendix P-1 - Page 1
APP. P-1
96.12.31
B. Registers. The following registers (j) Description of the pawner,

shall be maintained to trace loan transactions. including:
(1) Loans Extended Register - Every (i) Nationality;

pawnbroker shall keep a "Loans Extended (ii) Sex; and
Register" in which shall be entered in ink, at (iii) General appearance; and
the time of each loan or pledge transaction,
an accurate account and description in (k) Signature or thumbmark of the
English, with corresponding translation in pawner and the name of the pawner written
the local dialect, the following minimum by and signature of the witness to the
data: thumbmarking.
(a) Date of transaction; (2) Loans Paid Register - A "Loans Paid

(b) Number of pawn ticket; Register" shall be maintained in which shall
(c) Amount of money loaned or be entered in ink, the principal and interest
principal; payments of loans. It shall contain the
(d) Rate of interest to be paid, in following minimum data:
percent;
(e) Service charge collected; (a) Date of payment;
(f) Description of pawn; (b) Number of pawn ticket;
(g) Appraised value of pawn; (c) Name of pawner;
(h) Name of pawner; (d) Principal amount; and
(i) Address of pawner; (e) Amount of interest paid.

LIST OF REPORTS REQUIRED FROM PAWNSHOPS
(Appendix to Sec. 4161P.1)

Report Submission
B BSP 7-26-01.C Information Sheet Upon - Original - SED III

registration
B BSP 7-26-01.1C Personal Data Sheet of Owner/Partner/ -do- - -do-

Incorporator/Director/Officer
A-2 BSP 7-26-02.C Consolidated Balance Sheet Annually January 31 -do-
A-2 BSP 7-26-02.1C Breakdown of Pledged Loans According to -do- -do- -do-
Size
A-3 BSP 7-26-03.C Statement of Income & Expenses -do- -do- -do-
B Unnumbered (no Annual Report of Management to Annually 31 March following -do-

prescribed form) Stockholders Covering Results of Operations end of each year
for the Previous Year
B
Audited Financial Statement for the Previous -do- -do- -do-
Year Ended Prepared by the External Auditor
Loss/Destruction of Pawned Articles/ As incident See Annex P-2-a -do-

B
Pawnshop Property Caused by Crimes or occurs For guidelines on
Fortuitous Events reporting crimes and
losses
A-2 Unnumbered Report on Suspicious Transactions As 5th business day from To be submitted to the
transaction date of transaction/ Anti-Money Laundering
occurs knowledge Council
P Regulations
04.12.31
APP. P-2
P Regulations
04.12.31
APP. P-2
Report Frequency of Deadline for Submission
B Unnumbered Plan of action to comply with Anti-Money - 30th business day Original - SED III
Laundering requirements from July 31, 2000 or
from opening of the
institution
A-2 Unnumbered Certification of compliance with existing anti- Annually 20th business day SED III
money laundering regulations after end of reference
year

Annex P-2-a
96.12.31

(Annex to Appendix P-2)
1. Pawnshops shall report on the pawned article is involved, the amount

following matters through the appropriate involved per incident is P20,000 or more.
supervising and examining department:
a. Crimes whether consummated, 2. The following guidelines shall be
frustrated or attempted against pawned observed in the preparation and submission
articles/property/facilities (such as robbery, of the report.
theft, swindling or estafa, forgery and other a. The report shall be prepared in two
deceits) and other crimes involving loss/ (2) copies and shall be submitted within five
destruction of pawn/property of the (5) business days from knowledge of the
pawnshop: Provided, That if no pawned crime or incident, the original to the
article is involved, the amount involved in appropriate supervising department and the
each crime is P20,000 or more. duplicate to the BSP Security Coordinator,
Crimes involving the pawnshop thru the Director, Security Investigation and
personnel, regardless of whether or not such Transport Department.
crimes involve the loss/destruction of pawned b. Where a thorough investigation and
articles/property of the pawnshop, even if the evaluation of facts is necessary to complete
amount involved is less than those above the report, an initial report submitted within
specified, shall likewise be reported to the the five (5) business day deadline may be
BSP. accepted: Provided, That a complete report
b. Incidents involving material loss, is submitted not later than fifteen (15)
destruction or damage to the institution's business days from termination of
pawned articles/property/facilities, other than investigation.
arising from a crime: Provided, That if no

Annex P-2-a
APP. P-3
96.12.31
GUIDELINES ON
PRESCRIBED REPORTS SIGNATORIES
(Appendix to Subsec. 4162P.1 )
Category A-1 reports shall be signed by shall be duly designated in a resolution

the chief executive officer, or in his absence, approved by the board of directors in the
by the executive vice-president, and by the format as prescribed in Annex P-3-c.
comptroller, or in his absence, by the chief
accountant, or by officers holding equivalent Copies of the board resolutions on the
positions. The designated signatories in this report signatory designations shall be
category, including their specimen submitted to the appropriate supervising and
signatures, shall be contained in a resolution examining department of the BSP within three
approved by the board of directors in the (3) days from the date of resolution.
format prescribed in Annex P-3-a.
In the case of pawnshops organized as
Category A-2 reports of head offices single proprietorship or partnership, the
shall be signed by the president, executive reports shall be signed by the proprietor or
vice-presidents, vice-presidents or officers managing partner, as the case may be, in
holding equivalent positions. Such reports of place of chief executive officer or president.
other offices/units (such as branches) shall be Other signatories shall be authorized by the
signed by their respective managers/officers proprietor/managing partner in a letter of
in-charge. Likewise, the signing authority in authority to be submitted to the appropriate
this category shall be contained in a supervising and examining department of the
resolution approved by the board of directors BSP indicating the names, positions and
in the format prescribed in Annex P-3-b. specimen signatures of the designated
signatories as well as the reports they are to
Categories A-3 and B reports shall be sign.
signed by officers or their alternates, who

Appendix P-3
Annex P-3-a
96.12.31

Whereas, it is required under Subsec. 1..Mr._________________,President______________________

4162P.1 that Category A-1 reports be signed Specimen Signature
by the chief executive officer, or in his or
absence, by the executive vice-president, and Executive
by the comptroller, or in his absence, by the 2.Mr.___________,Vice-Pres.____________________
chief accountant, or by officers holding Specimen Signature
equivalent positions.
and
aforesaid officers of the institution be 3. Mr.___________,Comptroller__________________
authorized under a resolution duly approved Specimen Signature
by the institution's Board of Directors;
Whereas, we, the members of the Board of or
Directors of (Name of Institution) , are Chief
conscious that, in designating the officials 4. Mr.__________,Accountant____________________
who would sign said Category A-1 reports, Specimen Signature
said officers to represent and act for or in are hereby authorized to sign Category A-1
behalf of the Board of Directors in reports of ;
particular and (Name of Institution) in (Name of Institution)
general;
Whereas, this Board has full faith and Done in the City of , Philippines,
confidence in the institution's Chief Executive this day of , 19 .
Officer, Executive Vice-President,
Comptroller and Chief Accountant, as the
case may be, and, therefore, assumes CHAIRMAN OF THE BOARD
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY

Annex P-3-a
Annex P-3-b
96.12.31


4162P.1 that Category A-2 reports of head Officer Signature _Title__ __No._
offices be signed by the president, executive
vice-presidents, vice-presidents or officers
holding equivalent positions, and that such are hereby authorized to sign the Category
reports of other offices be signed by the A-2 reports indicated above of
respective managers/officers-in-charge; (Name of Institution) ;
aforesaid officers of the institution be
authorized under a resolution duly approved Done in the City of , Philippines,
by the institution’s Board of Directors; this day of , 19 .
of Directors of (Name of Institution) , are
conscious that, in designating the officials CHAIRMAN OF THE BOARD
said officers to represent and act for or in
behalf of the Board of Directors in particular DIRECTOR DIRECTOR
and (Name of Institution) ;
Whereas, this Board has full faith and DIRECTOR DIRECTOR
confidence in the institution’s President (and/
or the Executive Vice-President, etc., as the DIRECTOR DIRECTOR
case may be) and, therefore, assumes
ATTESTED BY:
Board of Directors, resolve, as it is hereby ___________________________
resolved that: CORPORATE SECRETARY

Annex P-3-b
Annex P-3-c
96.12.31


4162P.1 that Categories A-3 and B reports Authorized
be signed by officers or their alternates; Alternate Signature Title No.
aforesaid officers of the institution be 1. Authorized
authorized under a resolution duly approved (Alternate)
by the institution's Board of Directors;
Whereas, we, the members of the 2. Authorized
(Alternate)
Board of Directors of (Name of Institution) ,
are conscious that, in designating the officials etc.
who would sign said Categories A-3 and B
reports, we are actually empowering and are hereby authorized to sign the Categories
authorizing said officers to represent and act A-3 and B reports of (Name of Institution) .
for or in behalf of the Board of Directors in
particular and (Name of Institution) in Done in the City of , Philippines,
general; this day of , 19 .
confidence in the institution's authorized
responsibility for all the acts which may be CHAIRMAN OF THE BOARD
performed by afore-said officers under their
Now, therefore, we, the members of DIRECTOR DIRECTOR
the Board of Directors, resolve, as it is hereby
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY

Annex P-3-c
APP. 4
96.12.31
Serial No.
STANDARD PAWN TICKET

(Appendix to Subsec. 4322P.1)
(Name of Pawnshop)
(Address of Pawnshop)
Date Loan Granted: , 19 Maturity Date , 19

Expiry Date of Redemption Period:
, 19
Mr./Mrs./Miss a resident of
for a loan of PESOS (P ) with an interest
of percent ( %) P.M./P.A., has pledged to this Pawnee in security
for the loan article(s) described below appraised at PESOS
(P ) subject to the terms and
conditions stated on the reverse side hereof.
(Description of the pawn)

Principal P
Interest P
Service Charge P
Net Proceeds P
(Signature or Thumbmark) (Signature or Thumbmark)

Pawner Pawnshop's Authorized Representative
PAWNER IS ADVISED TO READ AND UNDERSTAND THE TERMS AND

CONDITIONS ON REVERSE SIDE HEREOF

Appendix 4 - Page 1
APP. P-4-a
96.12.31
TERMS AND CONDITIONS OF STANDARD PAWN TICKET
1. The pawner hereby accepts the the ninety (90)-day grace period, that the
pawnshop's appraisal as proper. pawn shall be sold or disposed of in the event
the pawner fails to redeem the pawn within
2. The interest rate stipulated herein is the ninety (90)-day grace period.
in accordance with the existing policy of the
Monetary Board. 7. The parties hereby agree that this
ticket shall be surrendered at maturity date
The pawnshop hereby agrees not to upon payment of the loan. In case of loss or
collect in advance interest for a period of destruction of this ticket, the pawner hereby
more than one (1) year. undertakes to personally present an affidavit
to the pawnshop before the redemption
3. The service charge is equivalent to period expires. It is hereby agreed upon that
one percent (1%) of the principal loan, but the pawnshop has a period of two (2) days
not exceeding five pesos (P5.00). No other within which to verify from its records before
charges shall be collected. (1) indicating on the affidavit that it shall take
the place of the original pawn ticket for
4. This loan is renewable for such purposes of redemption; or (2) issuing a
amount and period as may be agreed upon substitute ticket, the original pawn ticket
between the pawnshop and the pawner, thereby being deemed cancelled.
subject to the requirements of P.D. No. 114
for a new loan. 8. The pawner hereby agrees not to
assign, sell or in any other way alienate the
5. Upon maturity of this loan, as pawn securing this loan as evidenced by the
indicated on the face of this ticket, the pawner pawn ticket without prior written consent of
still has ninety (90) days from maturity date the pawnshop and subject to the terms and
within which to redeem the pawn by paying conditions of this contract.
the principal loan plus the interest that shall
have accrued thereon. The amount of interest 9. In case of pre-payment of this loan
due and payable after the maturity date of by pawner, the interest collected in advance
the loan and during the redemption period shall accrue in full to the pawnshop.
shall be computed upon redemption at the
same rate of interest provided in No. 2 based 10. The pawner shall not be entitled to
on the sum of the principal loan and interest the excess of the public auction sale price
earned as of the date of maturity. over the amount of principal interest and
service fee; neither shall the pawnshop be
6. The pawnshop shall send a written entitled to recover the defeciency from the
reminder to pawner, before the expiration of pawner.

Appendix P-4-a
APP. P-5
02.12.31

(Appendix to Section 4691P)

APP. P-5
03.12.31

of transactions. With respect to closed requirements of App. P-5 nos. 1, 2 and 4
transactions;
1
Amended by AMLC Resolution No. 292 dated 11.20.03 (Annex P-5-b).

APP. P-5
02.12.31
violating any law. results in any criminal prosecution under
The report on suspicious transactions R.A. 9160 or any other Philippine law.
(b) A brief description of the transaction representatives, agents, advisors, consultants or
or transactions. associates are prohibited from
which can be of help to the authorities thereto. Neither may such reporting be
should there be an investigation. published or aired in any manner or form
b. Exemption from Bank Secrecy Law. by the mass media, electronic mail, or other
and other similar laws, but are prohibited from 5. Certification of compliance with anti-
communicating, directly or indirectly, in any money laundering regulations. Covered
manner or by any means, to any person the institution shall submit annually to the BSP
fact that a covered transaction report was thru the appropriate supervising and
made, the contents thereof, or any other examining department a certification (Annex
information in relation thereto. In case of P-5-a) signed by the President or officer of
violation thereof, the concerned officer, equivalent rank and by their Compliance
proceedings, shall lie against any person for accordance with Appendix P-2 and shall be

ANNEX P-5-a
02.12.31

REGULATIONS
CERTIFICATION
hereby certify:
1. That we have monitored (Name of Pawnshop)’s compliance with R.A. No. 9160 (Anti-
302;
2. That the Pawnshop is complying with the required customer identification, docu-
mentation of all new clients, and continued monitoring of customer’s activities;
3. That the Pawnshop is also complying with the requirement to record all transactions
and to maintain such records including the record of customer identification for at
least five (5) years;
4. That the Pawnshop does not maintain anonymous or fictitious accounts; and
5. That we conduct regular anti-money laundering training sessions for all Pawnshop
officers and selected staff members holding sensitive positions.
________________________ ___________________

Page No. _________;
Book No. _________;
Series of 2002

Annex P-5-a
ANNEX P-5-b
03.12.31

currency.
transactions.

Annex P-5-b
APP. P-6
03.12.31

(Appendix to Sec. 4691P)
RULE 1
Title
RULE 2
RULE 3
Definitions
follows:


APP. P-6
03.12.31



APP. P-6
03.12.31




issuer.


APP. P-6
03.12.31

teacher;
employees;

currency notes.




APP. P-6
03.12.31





OF THE FOREGOING.
instruments;
includes:
activity;

APP. P-6
03.12.31




APP. P-6
03.12.31


Philippines.


APP. P-6
03.12.31

worship.
1602;
(29) Jueteng;
(30) Masiao.
Decree No. 532;


other property;
third person;
art or business;

APP. P-6
03.12.31

game;

Act of 2000;

system, including
document;


APP. P-6
03.12.31
the Consumer Act;
the E-Commerce Act;
guarantee;
(85) Hijacking;
(87) Murder;

APP. P-6
03.12.31
market;
SEC;
contrivance;

APP. P-6
03.12.31
upon any person;
SEC;
SEC;
the SEC;

RULE 4

APP. P-6
03.12.31
RULE 5

RULE 6
RULES.

APP. P-6
03.12.31
unlawful activity.
RULE 7
as members.

APP. P-6
03.12.31


APP. P-6
03.12.31

RULE 8

APP. P-6
03.12.31
RULE 9

1) Name;
2) Present address;
5) Nationality;
7) Contact numbers;

APP. P-6
03.12.31

and corporations:

(2) By-laws;
stock;


APP. P-6
03.12.31
later.
Supreme Court.




APP. P-6
03.12.31



RULE 10


APP. P-6
03.12.31
related.

THEREOF.


APP. P-6
03.12.31

AND

ORDER(S).
FUNDS MAY BE FOUND.
RULE 11

APP. P-6
03.12.31



APP. P-6
03.12.31
RULES.

RULE 12

APP. P-6
03.12.31
RULE 13

APP. P-6
03.12.31
request.
office.

APP. P-6
03.12.31
RULE 14
Penal Provisions
(a) of the AMLA.
AMLA.
AMLA.

APP. P-6
03.12.31
Probation Law.
RULE 15

APP. P-6
03.12.31
RULE 16
Restitution
RULE 17
for approval.

APP. P-6
03.12.31
NO. 9194.
RULE 18

the minority.
RULE 19

APP. P-6
03.12.31
RULE 20
Separability Clause
thereby.
RULE 21
Repealing Clause
RULE 22
RULE 23

04.12.31
A E
Anti-money laundering regulations VI - 1,
App. P-5 Employees I - 4
AMLC Resolution No. 292 Annex P-5-b bonding of I - 4
certification of compliance with Annex P-5-a watchlisting I - 4c
revised implementing rules and regulations
App. P-6
sanctions and penalties VI - 2
G
B General provision on sanctions I - 9, II - 1, III - 3
Batas Pambansa Blg. 344 VI - 1 I
Borrowing operations II - 1 Internal control I - 9

safekeeping of pawns and records and insur-
Branches and other offices I - 4d ance of office building I - 9
basis for establishment I - 5 separation of pawnshop business from other
capital requirement I - 5 businesses I - 9
date of opening for business I - 5
definition of term I - 5 L
branch office I - 5
documentary requirements I - 5
establishment of branches I - 4d Loans and investments III – 1
operations and functions I - 5
Loans in general III - 1
Bulky pawns I - 4 interest and other charges III - 1
definition I - 4 loan limits III - 1
past due accounts III - 1
Business days and hours I - 5 renewal/redemption of pawns III - 1
Business name I-9 M
C Miscellaneous VI - 1
Capitalization I - 4 O
capital of pawnshops I - 4
Officers I - 4
Closing or transfer of business I - 9 bonding of I - 4
disqualification of I - 4
D disqualification procedures I - 4b
effect of possession of disqualifications I - 4b
Directors I - 4 persons disqualified to become I - 4b
disqualification of I - 4 watchlisting I - 4c
disqualification procedures I - 4b
effect of possession of disqualifications I - 4b Other borrowings II – 1
persons disqualified to become I - 4 borrowings constituting quasi-banking
watchlisting I - 4c functions II - 1

Index - Page 1
04.12.31
P terms and phrases I - 2

borrowing I - 2
Past due accounts III - 1 for the borrower's own account I - 2
purchasing of receivables or other obliga-
Pawn I -3 tions I - 2
definition I - 3 relending I - 2
regularly engaged in lending I - 2
Pawn ticket I - 4, III - 1
contents of III - 1 see also App. P-4 R
definition I - 4
sanctions III - 2 Records I – 5, I - 6 see also App. P-1
standard pawn ticket App. P-4 adoption of statements of financial accounting
terms and conditions of standard pawn ticket standards I – 6
App. P-4-a chart of accounts and description of loan
register of pawnshop App. P-1
Pawnee I - 3 list of reports required from pawnshops
definition I - 3 App. P-2
reporting guidelines on crimes/losses
Pawner I - 3 Annex P-2-a
definition I - 3 uniform system of accounts I - 6 see also
reminder to III – 2 App. P-2
Pawns III - 2
public auction of III - 2 Reports I - 5, I - 6
renewal/redemption of III - 1 categories of and signatories to I - 6, see also
Appendices P-2 & P-3
Pawnshops I - 1 format of resolution for signatories of category
basic law governing VI - 1 A-1 Annex P-3-a
capital of I - 4 format of resolution for signatories of category
definition I - 3 A-2 Annex P-3-b
form of organization I - 1 format of resolution for signatories of category
scope of authority of I - 1 A-3 and B Annex P-3-c
guidelines on prescribed reports signatories and
Premises I - 4 signatory authorization App. P-3
definition I - 4 manner of filing I - 6
sanctions I - 7
Property I - 4 definition of terms I - 7
definition I - 4 false statement I - 7
faulty report I - 7
offense I - 7
Q persistent violation I - 7
repeated violation I - 7
Quasi-banking functions I - 2 report I - 7
borrowings constituting II - 1 willful delay or default in the submission
definition I - 2 of reports I - 7
prior Bangko Sentral licensing to perform quasi-
banking functions I - 2

Index - Page 2
04.12.31
S Sundry provisions VI - 1
Secured loans III - 1 Supervisory powers of the BSP VI - 1

kinds of security III - 1
pawn ticket III - 1 V
reminder to pawner III - 2
notice to the public III - 2 Vital records I - 4
public auction of pawns III - 2
Voting stock I - 4
definition I - 4

Index - Page 3
N REGULATIONS
(Regulations Governing Other Non-Bank Financial Institutions)
TABLE OF CONTENTS
SECTION 4101N Applicable Regulations on Trust and Other Fiduciary

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

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

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

4109N.1 - 4109N.15 (Reserved)
4109N.16 Qualification and accreditation of non-bank
financial institutions acting as trustee on any
mortgage or bond issuance by any municipality,
government-owned or controlled corporation, or
any body politic
SECTION 4143N Disqualification of Directors and Officers

4143N.1 Persons disqualified to become directors
4143N.2 Persons disqualified to become officers
4143N.3 Disqualification procedures
4143N.4 Effect of possession of disqualifications
4143N.5 (Reserved)
4143N.6 Watchlisting
SECTION 4144N Securities Custodianship and Securities Registry Operations

4144N.1 Statement of policy
4144N.2 Applicability of this regulation
4144N.3 Prior Bangko Sentral approval
4144N.4 Application for authority
ix
4144N.5 Pre-qualification requirements for a securities
custodian/registry
4144N.6 Functions and responsibilities of a securities
custodian
4144N.7 Functions and responsibilities of a securities
registry
4144N.8 Protection of securities of the customer
4144N.9 Independence of the registry and custodian
4144N.10 Registry of scripless securities of the Bureau of
the Treasury
4144N.11 Confidentiality
4144N.12 Compliance with anti-money laundering laws/
regulations
4144N.13 Basic security deposit
4144N.14 Reportorial requirements
4144N.15 - 4144N.28 (Reserved)
4144N.29 Sanctions
SECTION 4157N Batas Pambansa Blg. 344 - An Act To Enchance The Mobility
Of Disabled Persons By Requiring Certain Buildings, Institu-
tions, Establishments And Public Utilities To Install Facilities
And Other Devices
SECTION 4162N Reports

4162N.1 Categories and signatories of reports
4162N.2 Manner of filing
4162N.3 Sanctions in case of willful delay in the
submission of reports
SECTION 4180N Selection, Appointment and Reporting Requirements for

SECTION 4181N Publication Requirements
x
SECTION 4301N Credit Card Operations; General Policy
4301N.1 Definition of terms
4301N.2 Risk management system
4301N.3 Minimum requirements
4301N.4 Information to be disclosed
4301N.5 Accrual of interest earned
4301N.6 Finance charges
4301N.7 Deferral charges
4301N.8 Late payment/penalty fees
4301N.9 Confidentiality of information
4301N.10 Suspension, termination of effectivity and
reactivation
4301N.11 Inspection of records covering credit card
transactions
4301N.12 Offsets
4301N.13 Handling of complaints
4301N.14 Unfair collection practices
4301N.15 Sanctions
SECTION 4302N Classification of Credit Card
SECTION 4700N General Provision on Sanctions
xi
04.12.31
LIST OF APPENDICES
No. SUBJECT MATTER
N-1 List of Reports Required from Non-Bank Financial Institutions
N-2 Guidelines on Prescribed Reports Signatories and Signatory

Authorization
Annex N-2-a Format of Resolution for Signatories of Category A-2
Reports
Annex N-2-b Format of Resolution for Signatories of Category B
Reports
N-3 Anti-Money Laundering Regulations

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

N-5 Guidelines to Govern the Selection, Appointment and the Reporting

Requirement for External Auditors of NBFIs
N-6 Qualification Requirements for a Bank/NBFI Applying for

Accreditation to Act as Trustee on any Mortgage or Bond Issued by
any Municipality, Government-Owned or Controlled Corporation, or
any Body Politic
Manual of Regulations for Non-Bank Financial Institutions N Regulations

Appendices - Page 1
§§ 4101N - 4103N.1
02.12.31
BSP Manual of Regulations for Non-Bank Financial Institutions
N Regulations
(Regulations Governing Other Non-Bank Financial Institutions)
Section 4101N Applicable Regulations on c. Methods of borrowing: issuance,

Trust and Other Fiduciary Activities. Trust endorsement, or acceptance of debt
operations and investment management instruments of any kind, other than deposits,
activities of non-bank financial institutions such as:
not performing quasi-banking functions shall (1) acceptances;
be subject to the applicable regulations on (2) promissory notes;
such activities of non-bank financial (3) participations;
institutions performing quasi-banking (4) certificates of assignment or similar
functions in Part IV of the Q Regulations of instruments with recourse;
this Manual, to the regulations in the other (5) trust certificates;
parts of the Q Regulations addressed also to (6) repurchase agreements; and
trust entities and to the regulations (7) such other instruments as the
implementing the Truth in Lending Act in Monetary Board may determine; and
Sec. 4309Q. d. Purpose:
(1) relending, or
Sec. 4102N Minimum Capital for (2) purchasing receivables or other
Investment Houses. Investment houses not obligations.
performing quasi-banking functions shall also As used in the definition of quasi-banking
be subject to the minimum capital functions, the following terms and phrases
requirement in Sec. 4107Q of this Manual. shall be understood as follows:
Borrowing shall refer to all forms of
Sec. 4103N Prior Bangko Sentral Authority obtaining or raising funds through any of the
on Quasi-Banking Functions. Borrowing by methods and for any of the purposes provided
non-bank financial institutions (NBFIs) from in c and d, above whether the borrower’s
twenty (20) or more lenders for the purpose liability thereby is treated as real or
of relending or purchase of receivables or contingent.
other obligations, which constitutes quasi- For the borrower’s own account shall
banking functions, shall be subject to prior refer to the assumption of liability in one’s
Bangko Sentral ng Pilipinas (BSP) authority own capacity and not in representation, or
on performance of quasi-banking functions as an agent or trustee, of another.
under BSP regulations. Purchasing of receivables or other
obligations shall refer to the acquisition of
§ 4103N.1 Quasi-banking functions claims collectible in money, including
Quasi-banking functions shall consist of the interbank borrowings or borrowings between
following: financial institutions, or of securities, of any
a. Borrowing funds for the borrower’s amount and maturity, from domestic or
own account; foreign sources.
b. Twenty (20) or more lenders at any Relending shall refer to the extension
one (1) time; of loans by an institution with antecedent

Page 1
§§ 4103N.1 - 4103N.2
02.12.31
borrowing transactions. Relending shall be date and amount shall be counted as one (1)
presumed in the absence of express borrowing or placement.
stipulation, when the institution is regularly 4. Debt instruments underwritten by
engaged in lending. investment houses or traded by securities
Regularly engaged in lending shall refer dealers/brokers whether on a firm, standby
to the practice of extending loans, advances, or best efforts basis shall be counted on the
discounts or rediscounts as a matter of basis of the number or purchasers thereof and
business, i.e., continuous or consistent shall not be treated as having been issued
lending as distinguished from isolated solely to the underwriter or trader: Provided,
lending transactions. however, That in case of unsold debt
The following guidelines shall govern instruments in a firm commitment
lender count on borrowings or funds underwriting, the underwriter shall be
mobilized by NBFIs not performing quasi- counted as a lender.
banking functions: 5. Each buyer, assignee, and/or
1. For purposes of ascertaining the indorsee shall be counted in determining the
number of lenders/placers to determine number of lenders/placers of funds mobilized
whether or not an NBFI is engaged in quasi- through sale, assignment, and/or indorsement
banking functions, the names of payees on of securities or receivables on a without
the face of each debt instrument shall serve recourse basis whenever the terms and/or
as the primary basis for counting the lenders/ attendant documentation, practice, or
placers except when proof to the contrary is circumstances indicate that the sale,
adduced such as the official receipts or assignment, and/or indorsement thereof
documents other than the debt instrument legally obligates the NBFI not performing
itself. In such case the actual/real lenders/ quasi-banking functions to repurchase or
placers as appearing in such proof, shall be reacquire the securities/receivables sold,
the basis for counting the number of lenders/ assigned, indorsed or to pay the buyer,
placers. assignee, or indorsee at some subsequent
In a debt instrument issued to two (2) time.
or more named payees under an and/or and 6. Funds obtained by way of advances
or arrangement, the number of payees from stockholders, directors, or officers,
appearing on the instrument shall be the basis regardless of nature, shall be considered
for counting the number of lenders/placers: borrowed funds or funds mobilized and such
Provided, however, That a debt instrument stockholders, directors or officers shall be
issued in the name of a husband and wife counted in determining the number of
followed by the word spouses, whether lenders/placers.
under an and, and/or or or arrangement or
in the name of a designated payee under an § 4103N.2 Transactions not considered
in trust for (ITF) arrangement shall be counted quasi-banking. The following shall not
as one borrowing/placement. constitute quasi-banking:
2. Each debt instrument payable to a. Borrowing by commercial, industrial
bearer shall be counted as one (1) lender/ and other non-financial companies, through
placer, except when the NBFI can prove that the means listed in Subsec. 4103N.1 for the
there is only one (1) owner for several debt limited purpose of financing their own needs
instruments so payable. or the needs of their agents or dealers; and
3. Two (2) or more debt instruments b. The mere buying and selling without
issued to the same payee, irrespective of the recourse of instruments mentioned in Subsec.
N Regulations Manual of Regulations for Non-Bank Financial Institutions

Page 2
§§ 4103N.2 - 4103N.3
04.12.31
4103N.1: Provided, That: § 4103N.3 Delivery of securities 1

(1) The institution selling without Securities sold on a without recourse basis
recourse shall indicate or stamp in allowed under Subsec. 4101Q.3(b) shall be
conspicuous print on the instrument/s, as well delivered physically to the purchaser, or to
as on the confirmation of sale, the phrase his designated custodian duly accredited by
without recourse or sans recourse and the the BSP, if certificated, or by means of book-
following statement: entry transfer to the appropriate securities
(Name of non-bank) assumes account of the purchaser or his designated
no liability for the payment, BSP accredited custodian in a registry for said
directly or indirectly, of securities, if immobilized or dematerialized,
this instrument. while the confirmation of sale or document
(2) In the absence of the phrase without of conveyance by the seller shall be
recourse or sans recourse and the above- physically delivered to the purchaser. The
required accompanying statement, the custodian shall hold the securities in the
instrument so issued, endorsed or accepted name of the buyer. Provided, That an NBFI
shall automatically be considered as falling authorized by the BSP to perform custodianship
within the purview of the rules on quasi- function may not be allowed to be custodian
banking. of securities issued or sold on a without
Provided, further, That any of the recourse basis by said NBFI, its subsidiaries
following practices or practices similar and/ or affiliates, or of securities in bearer form.
or tantamount thereto in connection with a The delivery shall be effected upon
without recourse transaction renders such payment and shall be evidenced by a
transaction as with recourse and within the securities delivery receipt duly signed by the
purview of the rules on quasi-banking. authorized officer of the custodian and
i. Issuance of postdated checks by a delivered to the purchaser.
financial intermediary, whether for its own b. Sanctions. Violation of any provision
account or as an agent of the debt instrument of this Subsection shall be subject to the
issuer, in payment of the debt instrument following sanctions/penalties:
sold, assigned or transferred without (1) Monetary penalties
recourse; First offense – Fine of P10,000 a day for
ii. Issuance by a financial intermediary each violation reckoned from the date the
of any form of guaranty on sale transactions violation was committed up to the date it was
or on negotiations or assignment of debt corrected.
instruments without recourse; or Subsequent offenses – Fine of P20,000
iii. Payment with the funds of the a day for each violation reckoned from the
financial intermediary which assigned, sold date the violation was committed up to the
or transferred the debt instrument without date it was corrected.
recourse, unless the financial intermediary (2) Other sanctions
can show that the issuer has with the said First offense – Reprimand for the
financial intermediary funds corresponding directors/officers responsible for the
to the amount of the obligation. violation.
Any investment house violating the Subsequent offense –
provisions of this Subsection shall be subject (a) Suspension for ninety (90) days
to the sanctions provided in Sections 12 and without pay of directors/officers responsible
16 of P.D. No. 129, as amended. for the violation;
-----------------------------------------------------------------------------
1

Page 3
§§ 4103N.3 - 4103N.4
04.12.31
(b) Suspension or revocation of the (3) any BSP regulated institution shall not
accreditation to perform custodianship enter into securities transactions with a client
function; who has outstanding securities not delivered
(c) Suspension or revocation of the to a BSP accredited third party custodian; and
authority to engage in quasi-banking (4) it shall be the responsibility of any
function; and/or BSP regulated institution to satisfy itself that
(d) Suspension or revocation of the the person purchasing securities from it has
authority to engage in trust and other no outstanding securities holdings which
fiduciary business. were not delivered to a BSP accredited third
party custodian.
§ 4103N.4 Securities custodianship b. Sanctions. Without prejudice to the
operations penal and administrative sanctions provided
a. Securities sold on a without recourse for under Sections 36 and 37, respectively,
basis shall be delivered to the purchaser, or of the R.A. No. 7653, violation of any
to his designated custodian duly accredited provision of this Subsection shall be subject
by the BSP: Provided, That the other entity to the following sanctions/penalties:
authorized by the BSP to perform (1) First Offense –
custodianship function may not be allowed (a) Fine of up to P10,000 a day for the
to be custodian of securities issued or sold institution for each violation reckoned from
on a without recourse basis by said entity, its the date the violation was committed up to
subsidiaries or affiliates, or of securities in the date it was corrected; and
bearer form. Existing securities being held (b) Reprimand for the directors/officers
under custodianship by other entities under responsible for the violation.
BSP supervision, which are not in accordance (2) Second Offense -
with said regulation, must therefore, be (a) Fine of up to P20,000 a day for the
delivered to a BSP accredited third party institution for each violation reckoned from
custodian. However, other financial the date the violation was committed up to
institutions under BSP supervision may the date it was corrected; and
maintain custody of existing securities of their (b) Suspension for ninety (90) days
clients who are unable or unwilling to take without pay of directors/officers responsible
delivery pursuant to the provisions of this for the violation.
Subsection but who declined to deliver their (3) Subsequent Offenses –
existing securities to a BSP accredited third (a) Fine of up to P30,000 a day for the
party custodian subject to the following institution for each violation from the date
conditions: the violation was committed up to the date it
(1) the custody arrangements with clients was corrected;
have been in existence prior to 05 November (b) Suspension or revocation of the
2004 (effectivity date of Circular 457 dated authority to act as securities custodian and/
14 October 2004); or registry; and
(2) the dealing NBFI under BSP (c) Suspension for one hundred twenty
supervision had been informed in writing by (120) days without pay of the directors/
the client that he is not willing to have his officers responsible for the violation.
existing securities delivered to a third party
custodian;

Page 4
§§ 4104N - 4109N.16
04.12.31
Sec. 4104N Anti-Money Laundering municipality, government-owned or

Regulations. Banks, offshore banking controlled corporation, or any body politic
units(OBUs), quasi-banks (QBs), trust entities, a. Applicability. NBFIs duly accredited
non-stock savings and loan associations by the BSP may act as trustee on any
(NSSLAs), pawnshops, and all other mortgage or bond issued by any municipality,
institutions, including their subsidiaries and government-owned or controlled corporation,
affiliates supervised and/or regulated by the or any body politic.
BSP, otherwise known as “covered b. Application for accreditation. An
institutions” shall comply with the provisions NBFI desiring to act as trustee on any
of R.A. No. 9160, otherwise known as the mortgage or bond issued by any municipality,
“Anti-Money Laundering Act of 2001” and government-owned or controlled corporation,
its Implementing Rules and Regulations (IRRs) or any body politic shall file an application
in Appendix N-4 and those in Appendix N-3. for accreditation with the appropriate
supervising and examining department of
§§ 4104N.1 - 4104N.8 (Reserved) SES. The application shall be signed by the
president or officer of equivalent rank of the
§ 4104N.9 Sanctions and penalties NBFI and shall be accompanied by the
a. Whenever a covered institution following documents:
violates the provisions of Section 9 of R.A. (1) certified true copy of the resolution
No. 9160 of this Section, the officer(s) or other of the institution’s board of directors
persons responsible for such violation shall authorizing the application;
be punished by a fine of not less than P50,000 (2) a certification signed by the president
nor more than P200,000 or by imprisonment or officer of equivalent rank that the
of not less than two (2) years nor more than institution has complied with all the
ten (10) years, or both, at the discretion of qualification requirements for accreditation.
the court pursuant to Section 36 of R.A. No. c. Qualification requirements. An NBFI
7653, otherwise known as “The New Central applying for accreditation to act as trustee
Bank Act”. on any mortgage or bond issued by any
b. Without prejudice to the criminal municipality, government-owned or
sanctions prescribed above against the controlled corporation, or any body politic
culpable persons, the Monetary Board may, must comply with the requirements in
at its discretion, impose upon any covered Appendix N-6.
institution, its directors and/or officers for any d. Independence of the trustee. An
violation of Section 9 of R.A. No. 9160, the NBFI is prohibited from acting as trustee of a
administrative sanctions provided under mortgage or bond issuance if any elective or
Section 37 of R.A. No. 7653. appointive official of the LGU, government-
owned or controlled corporation, or body
Secs. 4105N - 4109N (Reserved) politic which issued said mortgage or bond
and/or his related interests own such number
§§ 4109N.1 - 4109N.15 (Reserved) of shares of the NBFI that will allow him or
his related interests to elect at least one (1)
§ 4109N.16 Qualification and member of the board of directors of such
accreditation of non-bank financial NBFI or is directly or indirectly the registered
institutions acting as trustee on any or beneficial owner of more than ten percent
mortgage or bond issuance by any (10%) of any class of its equity security.

Page 5
§ 4109N.16
04.12.31
e. Investment and management of the amended, duly executed by the issuer of the
funds. A domestic NBFI designated as trustee mortgage or bond in favor of the BSP.
of a mortgage or bond issuance may hold g. Reportorial requirements. An NBFI
and manage, in accordance with the authorized by the BSP to act as trustee of the
provisions of the trust indenture or proceeds of mortgage or bond issuance of a
agreement, the proceeds of the mortgage or municipality, government-owned or
bond issuance and such assets and funds of controlled corporation, or body politic shall
the issuing municipality, corporation, or body comply with reportorial requirements that
politic as may be required to be delivered to may be prescribed by the BSP.
the Trustee under the Trust indenture/ h. Applicability of the rules and
agreement, subject to the following regulations on trust, other fiduciary business
conditions/restrictions: and investment management activities. The
(1) Pending the utilization of such funds provisions of the Rules and Regulations on
pursuant to the provisions of the trust Trust, Other Fiduciary Business and
indenture/agreement, the same shall only be Investment Management Activities not
(i) deposited in any bank authorized to inconsistent with the provisions of this
accept deposits from the Government or Subsection shall form part of these rules.
government entities: Provided, That the i. Sanctions. Without prejudice to the
depository bank is not a subsidiary or affiliate penal and administrative sanctions provided
of the trustee NBFI, or (ii) invested in peso- for under Sections 36 and 37, respectively,
denominated treasury bills acquired/ of the R.A. No. 7653, violation of any
purchased from any securities dealer/entity, provision of this Subsection shall be subject
other than the trustee or any of its unit/ to the following sanctions/penalties
department, its subsidiary or affiliate. depending on the gravity of the offense:
(2) Investments of funds constituting or (1) First offense –
forming part of the sinking fund created as (a) Fine of up to P10,000 a day for the
the primary source for the payment of the institution for each violation reckoned from
principal and interests due the mortgage or the date the violation was committed up to
bonds shall also be limited to deposits in any the date it was corrected; and
bank authorized to accept deposits from the (b) Reprimand for the directors/officers
Government or government entities and responsible for the violation.
investments in government securities that are (2) Second offense –
consistent with such purpose which must be (a) Fine of up to P20,000 a day for the
acquired/purchased from any securities institution for each violation reckoned from
dealer/entity, other than the trustee or any of the date the violation was committed up to
its unit/department, its subsidiary or affiliate. the date it was corrected;
f. Waiver of confidentiality. An NBFI (b) Suspension for ninety (90) days
designated as trustee of any mortgage or bond without pay for directors/officers
issued by any municipality, government- responsible for the violation; and
owned or controlled corporation, or any (c) Revocation of the authority to act
body politic shall submit to the appropriate as trustees on any mortgage or bond
supervising and examining department of SES issuance by any municipality, government-
a waiver of the confidentiality of information owned or controlled corporations, or body
under Sections 2 and 3 of R.A. No. 1405, as politic.

Page 6
§§ 4109N.16 - 4143N.1
04.12.31
(3) Subsequent offense – who were responsible for such institutions’

(a) Fine of up to P30,000 a day for the closure as determined by the Monetary
institution for each violation reckoned from Board.
the date the violation was committed up to b. Temporarily disqualified
the date it was corrected; Directors/trustees/officers/employees
(b) Suspension or revocation of the trust disqualified by the Monetary Board from
license; holding a director/trustee position for a
(c) Suspension for one hundred twenty specific/indefinite period of time. Included
(120) days without pay of the directors/ are:
officers responsible for the violation. (1) Persons who refuse to fully disclose
the extent of their business interest to the
Secs. 4110N - 4142N (Reserved) appropriate supervising and examining
department when required pursuant to a
Sec. 4143N Disqualification of Directors provision of law or of a circular,
and Officers. The following regulations shall memorandum or rule or regulation of the
govern the disqualification of directors and BSP. This disqualification shall be in effect
officers of institutions under the supervisory as long as the refusal persists;
and regulatory powers of the BSP other than (2) Directors who have been absent or
banks, quasi-banks, NSSLAs and pawnshops. who have not participated for whatever
reasons in more than fifty percent (50%) of
§ 4143N.1 Persons disqualified to all meetings, both regular and special, of the
become directors. Without prejudice to board of directors during their incumbency,
specific provisions of law prescribing or any twelve (12)-month period during said
disqualifications for directors, the following incumbency. This disqualification applies for
are disqualified from becoming directors: purposes of the succeeding election;
a. Permanently disqualified (3) Persons who are delinquent in the
Directors/trustees/officers/employees payment of their obligations as defined
permanently disqualified by the Monetary hereunder:
Board from holding a director/trustee (a) Delinquency in the payment of
position: obligations means that an obligation of a
(1) Persons who have been convicted by person with the institution where he/she is a
final judgment of the court for offenses director or officer, or at least two (2)
involving dishonesty or breach of trust such obligations with other financial institutions,
as estafa, embezzlement, extortion, forgery, under different credit lines or loan contracts,
malversation, swindling and theft; are past due pursuant to Secs. X306, 4308Q,
(2) Persons who have been convicted by 4306S and 4303P;
final judgment of the court for violation of (b) Obligations shall include all
banking laws; borrowings from any financial institution
(3) Persons who have been judicially obtained by:
declared insolvent, spendthrift or (i) A director, trustee or officer for his
incapacitated to contract; or own account or as the representative or agent
(4) Directors, trustees, officers or of others or where he/she acts as a guarantor,
employees of closed institutions under the endorser or surety for loans from such
supervisory and regulatory powers of the BSP financial institutions;

Page 7
§§ 4143N.1 - 4143N.3
04.12.31
(ii) The spouse or child under the (8) Those under preventive suspension;
parental authority of the director, trustee or and
officer; (9) Persons with derogatory records with
(iii) Any person whose borrowings or the National Bureau of Investigation (NBI),
loan proceeds were credited to the account court, police, Interpol and monetary authority
of, or used for the benefit of a director, trustee (central bank) of other countries (for foreign
or officer; directors and officers) involving violation of
(iv) A partnership of which a director, any law, rule or regulation of the Government
trustee or officer, or his/her spouse is the or any of its instrumentalities adversely
managing partner or a general partner owning affecting the integrity and/or ability to
a controlling interest in the partnership; and discharge the duties of a director/trustee/
(v) A corporation, association or firm officer. This disqualification applies until they
wholly-owned or majority of the capital of have cleared themselves of involvement in
which is owned by any or a group of persons the alleged irregularity.
mentioned in the foregoing Items “(i)”, “(ii)”
and “(iv)”; § 4143N.2 Persons disqualified to
This disqualification shall be in effect as become officers
long as the delinquency persists. a. The disqualifications for directors
(4) Persons convicted for offenses mentioned in Subsec. 4143N.1 shall likewise
involving dishonesty, breach of trust or apply to officers, except those stated in Items
violation of banking laws but whose “b(2)”.
conviction has not yet become final and b. Except as may be authorized by the
executory; Monetary Board or the Governor, the spouse
(5) Directors, trustees and officers of or a relative within the second degree of
closed institutions under the supervisory and consanguinity or affinity of any person
regulatory powers of the BSP pending their holding the position of Chairman, President,
clearance by the Monetary Board; Executive Vice President or any position of
(6) Directors and trustees disqualified for equivalent rank, General Manager, Treasurer,
failure to observe/discharge their duties and Chief Cashier or Chief Accountant is
responsibilities prescribed under existing disqualified from holding or being elected
regulations. This disqualification applies until or appointed to any of said positions in the
the lapse of the specific period of same NBFI; and the spouse or relative within
disqualification or upon approval by the the second degree of consanguinity or affinity
Monetary Board on recommendation by the of any person holding the position of
appropriate supervising and examining Manager, Cashier, or Accountant of a branch
department of such directors’ election/ or office of an NBFI is disqualified from
reelection; holding or being appointed to any of said
(7) Persons dismissed/terminated from positions in the same branch or office.
employment for cause. This disqualification
shall be in effect until they have cleared § 4143N.3 Disqualification procedures
themselves of involvement in the alleged a. Upon establishment of any of the
irregularity; grounds for disqualification mentioned in

Page 8
§§ 4143N.3 - 4143N.6
04.12.31
Subsecs. 4143N.1 and 4143N.2, the office the qualifications of persons elected or
of the disqualified director or officer shall appointed as trustee or officer of an institution
immediately become vacant, except in the under the supervisory and regulatory powers
case of delinquency in the payment of of the BSP, the SES shall maintain a watchlist
obligations wherein the director or officer of disqualified directors/trustees/officers
concerned shall be given a grace period of under the following procedures:
thirty (30) days after such ground for a. Watchlist categories. Watchlisting
disqualification has been established. shall be categorized as follows:
b. All cases of disqualification shall be (1) Disqualification File “A” (Permanent)
immediately reported to the board of –Directors/trustees/officers/employees
directors of the institution concerned. If the permanently disqualified by the Monetary
ground for disqualification is delinquency in Board from holding a director/trustee/officer
the payment of obligations, the report shall position.
be made at the expiry of the thirty (30)-day (2) Disqualification File “B” (Temporary)
grace period mentioned in Item “a” above. – Directors/trustees /officers/employees
The board shall act on the report not later temporarily disqualified by the Monetary
than the following board meeting. Within Board from holding a director/trustee/officer
seventy-two (72) hours thereafter, the position.
corporate secretary shall report to the b. Inclusion of directors/trustees/
Governor of the BSP through the appropriate officers/employees in the watchlist. Upon
supervising and examining department the recommendation by the appropriate
name of the director or officer involved, the supervising and examining department, the
ground for his disqualification and the action inclusion of directors/trustees/officers/
taken by the board. employees in watchlist disqualification files
c. When the ground for disqualification “A” and “B” on the basis of decisions, actions
ceases to exist, the director or officer or reports of the courts, institutions under the
concerned shall be eligible to become supervisory and regulatory powers of the BSP,
director, trustee or officer of any institution BSP, NBI or any other administrative agencies
under the supervisory and regulatory powers shall first be approved by the Monetary
of the BSP only upon prior approval by the Board.
Monetary Board. c. Notification of directors/trustees/
officers/employees. Upon approval by the
§ 4143N.4 Effect of possession of Monetary Board, the concerned director/
disqualifications. Directors/officers elected trustee/officer/employee shall be informed
or appointed possessing any of the through registered mail, with registry return
disqualifications as enumerated herein, shall receipt card, at his last known address of his
vacate their respective positions immediately. inclusion in the masterlist of watchlisted
persons disqualified to be a director/trustee/
§ 4143N.5 (Reserved) officer in any institution under the supervisory
and regulatory powers of the BSP.
§ 4143N.6 Watchlisting. To provide the d. Confidentiality. Watchlisting shall
BSP with a central information file to be used be for internal use only and may not be
as reference in passing upon and reviewing accessed or queried upon by outside parties

Page 9
§§ 4143N.6 - 4144N.4
04.12.31
including such institutions under the following rules and regulations shall govern
supervisory and regulatory powers of the BSP, securities custodianship and securities
except with the authority of the person registry operations of non-bank financial
concerned and with the approval of the institutions (NBFIs) under BSP supervision.
Deputy Governor, SES, the Governor, or the
Monetary Board. § 4144N.1 Statement of policy. It is the
e. Delisting. All delistings shall be policy of the BSP to promote the protection
approved by the Monetary Board upon of investors in order to gain their confidence
recommendation of the appropriate and encourage their participation in the
supervising and examining department development of the domestic capital market.
except in cases of persons known to be dead Therefore, the following rules and regulations
where delisting shall be automatic upon are promulgated to enhance transparency of
proof of death and need not be elevated to securities transactions with the end in view
the Monetary Board. Delisting may be of protecting investors.
approved by the Monetary Board in the
following cases: § 4144N.2 Applicability of this
(1) Watchlist - Disqualification File “B” regulation. This regulation shall govern
(Temporary) - securities custodianship and securities
(a) After the lapse of the specific period registry operations of banks and NBFIs under
of disqualification; BSP supervision. It shall cover all their
(b) When the conviction by the court for transactions in securities as defined in Section
crimes involving dishonesty, breach of trust 3 of the Securities Regulation Code (SRC),
and/or violation of banking laws becomes whether exempt or required to be registered
final and executory, in which case the with the Securities and Exchange
director/trustee/officer/employee is relisted to Commission (SEC), that are sold, borrowed,
Watchlist – Disqualification File “A” purchased, traded, held under custody or
(Permanent); or otherwise transacted in the Philippines where
(c) Upon favorable decision or clearance at least one (1) of the parties is a bank or an
by the appropriate body, i.e., court, NBI, NBFI under BSP supervision. However, this
institutions under the supervisory and regulation shall not cover the operations of
regulatory powers of the BSP, or such other stock and transfer agents duly registered with
agency/body where the concerned individual the SEC pursuant to the provisions of SRC
had derogatory record. Rule 36-4.1 and whose only function is to
Directors/trustees/officers/employees maintain the stock and transfer book for
delisted from the Watchlist – Disqualification shares of stock.
File “B” other than those upgraded to
Watchlist – Disqualification File “A” shall § 4144N.3 Prior Bangko Sentral
be eligible for re-employment with any approval. NBFIs under BSP supervision may
institution under the supervisory and act as securities custodian and/or registry only
regulatory powers of the BSP. upon prior Monetary Board approval.
Sec. 4144N Securities Custodianship and § 4144N.4 Application for authority. A

Securities Registry Operations. The BSP-supervised entity desiring to act as

Page 10
§§ 4144N.4 - 4144N.5
04.12.31
securities custodian and/or registry shall file expertise to ensure the protection, safety and
an application with the appropriate integrity of client assets, such as:
supervising and examining department of the (1) It can maintain an electronic registry
BSP. The application shall be signed by the dedicated to recording of accountabilities to
highest ranking officer of the NBFI and shall its clients; and
be accompanied by a certified true copy of (2) It has an updated and comprehensive
the resolution of the NBFI’s board of directors computer security system covering system,
authorizing the NBFI to engage in securities network and telecommunication facilities
custodianship and/or registry. that will:
(a) limit access only to authorized users;
§ 4144N.5 Pre-qualification (b) preserve data integrity; and
requirements for a securities custodian/ (c) provide for audit trail of transactions.
registry f. It has complied, during the period
a. It must be an NBFI under BSP immediately preceding the date of
supervision; application, with the following:
b. It must have complied with the (1) ceilings on credit accommodation to
minimum capital accounts required under DOSRI; and
existing regulations not lower than an (2) single borrower’s limit.
adjusted capital of P 300 million or such g. It has no reserve deficiencies during
amounts as may be required by the Monetary the eight (8) weeks immediately preceding
Board in the future; the date of application;
c. It must have a CAMELS composite h. 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;
d. It must have in place a i. It has not been found engaging in
comprehensive risk management system unsafe and unsound practices during the last
approved by its board of directors appropriate six (6) months preceding the date of
to its operations characterized by a clear application;
delineation of responsibility for risk j. It has generally complied with laws,
management, adequate risk measurement rules and regulations, orders or instructions
systems, appropriately structured risk limits, of the Monetary Board and/or BSP
effective internal control and complete, Management;
timely and efficient risk reporting systems. k. It has submitted additional
In this connection, a manual of operations documents/information which may be
(which includes custody and/or registry requested by the appropriate supervision and
operations) and other related documents examination department, such as, but not
embodying the risk management system must limited to:
be submitted to the appropriate supervising (a) Standard custody/registry agreement
and examining department at the time of and other standard documents;
application for authority and within thirty (30) (b) Organizational structure of the
days from updates; custody/registry business;
e. It must have adequate technological (c) Transaction flow; and
capabilities and the necessary technical (d) For those already in the custody or

Page 11
§§ 4144N.5 - 4144N.8
04.12.31
registry business, a historical background for received with respect to the securities under
the past three years; custody;
l. It shall be conducted in a separate j. Securities borrowing and lending
unit headed by a qualified person with at least operations as agent.
two (2) years experience in custody/registry
operations; and § 4144N.7 Functions and responsibilities
m. It can interface with the clearing and of a securities registry
settlement system of any recognized a. Maintains an electronic registry book;
exchange in the country capable of achieving b. Delivers confirmation of transactions
a real time gross settlement of trades. and other documents within agreed trading
periods;
§ 4144N.6 Functions and responsibilities c. Issues registry confirmations for
of a securities custodian. A Securities transfers of ownership as it occurs;
Custodian shall have the following basic d. Prepares regular statement of
functions and responsibilities: securities balances at such frequency as may
a. Safekeeps the securities of the client; be required by the owner on record but not
b. Holds title to the securities in a less frequent than every quarter; and
nominee capacity; e. Follows appropriate legal
c. Executes purchase, sale and other documentation to govern its relationship with
instructions; the Issuer.
d. Performs at least a monthly
reconciliation to ensure that all positions are § 4144N.8 Protection of securities of the
properly recorded and accounted for; customer. A custodian must incorporate the
e. Confirms tax withheld; following procedures in the discharge of its
f. Represents clients in corporate functions in order to protect the securities of
actions in accordance with the direction the customer:
provided by the securities owner; a. Accounting and recording for
g. Conducts mark-to-market valuation securities. Custodians must employ
and statement rendition; accounting and safekeeping procedures that
h. Does earmarking of encumbrances or fully protect customer securities. It is
liens such as, but not limited to, Deeds of essential that custodians segregate customer
Assignment and court orders; and securities from one another and from its
In addition to the above basic functions, proprietary holdings to protect the same from
it may perform the following value-added the claims of its general creditors.
service to clients: All securities held under custodianship
i. Acts as a collecting and paying agent: shall be recorded in the books of the
Provided, That the management of funds that custodian at the face value of said securities
may be collected shall be clearly defined in in a separate subsidiary ledger account
the custody contract or in a separate “Securities Held Under Custodianship” if
document or agreement attached thereto: booked in the Bank Proper or the subsidiary
Provided, further, That the custodian shall ledger account “Safekeeping and
immediately make known to the securities Custodianship – Securities Held Under
owner all payments made and collections Custodianship”, if booked in the Trust

Page 12
§§ 4144N.8 - 4144N.10
04.12.31
Department: Provided, That securities held registry must be a third party with no
under custodianship where the custodian subsidiary/affiliate relationship with the issuer
also performs securities borrowing and of securities while a BSP-accredited custodian
lending as agent shall be booked in the Trust must be a third party with no subsidiary/
Department. affiliate relationship with the issuer or seller
b. Documentation. The appropriate of securities. An NBFI accredited by BSP as
documentation for custodianship shall be securities custodian may, however, continue
made and it shall clearly define, among holding securities it sold under the following
others, the authority, role, responsibilities, cases:
fees and provision for succession in the event a. where the purchaser is a related entity
the custodian can no longer discharge its acting in its own behalf and not as agent or
functions. It shall be accepted in writing by representative of another;
the counterparties. b. where the purchaser is a non-resident
The governing custodianship agreement with existing global custody agreement
shall be pre-numbered and this number shall governed by foreign laws and conventions
be referred to in all amendments and wherein the NBFI is designated as custodian
supplements thereto. or sub-custodian; and
c. Confirmation of custody. The c. upon approval by the BSP, where the
custodian shall issue a custody confirmation purchaser is an insurance company whose
to the purchaser or borrower of securities to custody arrangement is either governed by a
evidence receipt or transfer of securities as global custody agreement where the NBFI is
they occur. It shall contain, as a minimum, designated as custodian or sub-custodian or
the following information on the securities by a direct custody agreement with features
under custody: at par with the standards set under this
(1) Owner of securities; Subsection drawn or prepared by the parent
(2) Issuer; company owning more than fifty percent
(3) Securities type; (50%) of the capital stock of the purchaser
(4) Identification or serial numbers; and executed by the purchaser itself and its
(5) Quantity; custodian.
(6) Face value; and Purchases by non-residents and
(7) Other information, which may be insurance companies that are exempted from
requested by the parties. the independence requirement of this
(d) Periodic reporting. The custodian Subsection shall, however, be subject to all
shall prepare at least quarterly (or as frequent other provisions of this Subsection.
as the owner of securities will require)
securities statements delivered to the § 4144N.10 Registry of scripless
registered owner’s address on record. Said securities of the Bureau of the Treasury. The
statement shall present detailed information Registry of Scripless Securities (RoSS),
such as, but not limited to, inventory of operated by the Bureau of the Treasury,
securities, outstanding balances, and market which is acting as a registry for government
values. securities is deemed to be automatically
accredited for purposes of this Section and is
§ 4144N.9 Independence of the registry likewise exempted from the independence
and custodian. A BSP-accredited securities requirement under Subsec. 4144N.9.

Page 13
§§ 4144N.10 - 4144N.29
04.12.31
However, securities registered under the of Circular 457), may be held by a lending
RoSS shall only be considered delivered if NBFI up to the original maturity of the loan
said securities were transferred by means of or full payment thereof, whichever comes
book entry to the appropriate securities earlier.
account of the purchaser or his designated
custodian. Book entry transfer to a sub- § 4144N.13 Basic security deposit
account for clients under the primary account Securities held under custodianship whether
of the seller shall not constitute delivery for booked in the Trust Department or carried
purposes of this Section. in the regular books of the NBFI shall be
subject to a security deposit for faithful
§ 4144N.11 Confidentiality. A BSP- performance of duties at the rate of 1/25 of
accredited securities custodian/ registry shall one percent (1%) of the total face value or
not disclose to any unauthorized person any P500,000 whichever is higher.
information relative to the securities under However, securities held under
its custodianship/registry.The management custodianship where the custodian also
shall likewise ensure the confidentiality of performs securities borrowing and lending
client accounts of the custody or registry unit as agent shall be subject to a higher basic
from other units within the same security deposit of one percent (1%) of the
organization. total face value. For this purpose, the
following subsidiary ledger account shall be
§ 4144N.12 Compliance with anti- created in the Trust Department Books:
money laundering laws/regulations. For “Safekeeping and Custodianship -
purposes of compliance with the Securities Held Under Custodianship with
requirements of R.A. No. 9160, otherwise Securities Borrowing and Lending As Agent”
known as the “Anti-Money Laundering Act Compliance shall be in the form of
of 2001,” as amended, particularly the government securities deposited with the BSP
provisions regarding customer identification, eligible pursuant to existing regulations
record keeping and reporting of suspicious governing security for the faithful
transactions, a BSP-accredited custodian may performance of trust and other fiduciary
rely on referral by the seller/issuer of business.
securities: Provided, That it maintains a
record of such referral together with the § 4144N.14 Reportorial requirements
minimum identification, information/ An accredited securities custodian shall
documents required under the law and its comply with reportorial requirements that
implementing rules and regulations. may be prescribed by the BSP, which shall
A BSP accredited custodian must include as a minimum, the face and market
maintain accounts only in the true and full value of securities held under custodianship.
name of the owners of the security.
However, said securities owners may be §§ 4144N.15 - 4144N.28 (Reserved)
identified by number or code in reports and
correspondences to keep his identity § 4144N.29 Sanctions
confidential. Without prejudice to the penal and
Securities subject of pledge and/or deed administrative sanctions provided for under
of assignment as of 14 October 2004 (date Section 36 and 37, respectively, of the R.A.

Page 14
§§ 4144N.29 - 4162N.1
04.12.31
No. 7653, violation of any provision of this educational institutions, airports, sports and
Section shall be subject to the following recreation centers and complexes, shopping
sanctions/penalties: centers or establishments, public parking
a. First offense – places, workplaces, public utilities, shall be
(1) Fine of up to P10,000 a day for the granted or issued unless the owner or
institution for each violation reckoned from operator thereof shall install and incorporate
the date the violation was committed up to in such building, establishment or public
the date it was corrected; and utility, such architectural facilities or
(2) Reprimand for the directors/officers structural features as shall reasonably
responsible for the violation. enhance the mobility of disabled persons
b. Second offense - such as sidewalks, ramps, railings and the
(1) Fine of up to P20,000 a day for the like. If feasible, all such existing buildings,
institution for each violation reckoned from institutions, establishments, or public utilities
the date the violation was committed up to may be renovated or altered to enable the
the date it was corrected; and disabled persons to have access to them.
(2) Suspension for ninety (90) days
without pay of directors/officers responsible Secs. 4158N - 4161N (Reserved)
for the violation.
c. Subsequent offenses– Sec. 4162N Reports. NBFIs without quasi-
(1) Fine of up to P30,000 a day for the banking functions but are subsidiaries/
institution for each violation from the date affiliates of banks and quasi-banks and
the violation was committed up to the date it investment houses without quasi-banking
was corrected; functions but with trust operations shall
(2) Suspension or revocation of the submit to the appropriate supervising and
authority to act as securities custodian and/ examining department of the BSP the reports
or registry; and listed in Appendix N-1 in the forms as may
(3) Suspension for one hundred twenty be prescribed by the Deputy Governor,
(120) days without pay of the directors/ Supervision and Examination Sector, BSP.
officers responsible for the violation. Any change in, or amendment to, the
articles of incorporation, by-laws or material
Secs. 4145N – 4156N (Reserved) documents required to be submitted to the
BSP shall be reported by submitting copies
Sec. 4157N Batas Pambansa Blg. 344 – An of the amended articles of incorporation, by-
Act To Enhance The Mobility Of Disabled laws, or material documents to the
Persons By Requiring Certain Buildings, appropriate supervising and examining
Institutions, Establishments And Public department of the BSP within fifteen (15) days
Utilities To Install Facilities And Other following such change.
Devices. In order to promote the realization
of the rights of disabled persons to participate § 4162N.1 Categories and signatories
fully in the social life and the development of reports. Reports required to be submitted
of the societies in which they live and the to the BSP are classified into Categories A-2
enjoyment of the opportunities available to and B reports as indicated in the list of reports
other citizens, no license or permit for the required to be submitted to the BSP in
construction, repair or renovation of public Appendix N-1.
and private buildings for public use,

Page 15
§§ 4162N.1 - 4179N
04.12.31
Appendix N-2 prescribes the signatories I. For Categories A-2 reports

for each report category and the requirements
on signatory authorization. Reports submitted Per business day of default
by NBFIs in computer media shall be subject until the report is filed P300
to the same requirements.
A report submitted to the BSP under the II. For Category B reports
signature of an officer who is not authorized
in accordance with the requirements in this Per business day of default
Subsection shall be considered as not having until the report is filed P 60
been submitted.
Delay or default shall start to run on the
§ 4162N.2 Manner of filing. The day following the last day required for the
submission of the reports shall be effected submission of reports. However, should the
by filing them personally with the appropriate last day of filing fall on a non-working day in
supervising and examining department of the the locality where the reporting financial
BSP or with the BSP Regional Offices/Units, institution is situated, delay or default shall
or by sending them by registered mail or start to run on the day following the next
special delivery through private couriers working day. The due date/deadline for
unless otherwise specified in the circular or submission of reports to BSP as prescribed
memorandum of the BSP. under Sec. 4162N governing the frequency
and deadlines indicated in Appendix N-1
§ 4162N.3 Sanctions in case of willful shall be automatically moved to the next
delay in the submission of reports business day whenever a half-day suspension
a. Definition of terms. For purposes of business operations in government offices
of this Subsection, the following definitions is declared due to an emergency such as
shall apply: typhoon, floods, etc.
(1) Report shall refer to any report or For purposes of establishing delay or
statement required of an NBFI to be default, the date of acknowledgment by the
submitted to the BSP periodically or within appropriate supervising and examining
a specified period. department of the BSP or the BSP Regional
(2) Willful delay in the submission of Offices/Units appearing on the copies of such
reports shall refer to the failure of an NBFI to reports filed or submitted, or the date of
submit a report on time. Failure to submit a mailing postmarked on the envelope/the date
report on time due to fortuitous events, such of registry/special delivery receipt, as the case
as fire and other natural calamities and public may be, shall be considered as the date of
disorders, including strike or lockout affecting filing by the NBFI.
an NBFI as defined in the Labor Code or c. Manner of payment or collection of
national emergency affecting operations of fines – NBFIs shall, within fifteen (15)
NBFIs, shall not be considered as willful calendar days from receipt of the statement
delay. of account from the appropriate department
b. Fines for willful delay in submission of the BSP, pay the fines imposed thereon
of reports. NBFIs incurring willful delay in for willful delay on the submission of reports.
the submission of required reports shall pay
a fine in accordance with the following Secs. 4163N - 4179N (Reserved)
schedule:

Page 16
§ 4180N
04.12.31
Sec. 4180N Selection, Appointment and to the three-year renewal period, if based on
Reporting Requirements for External assessment, the external auditors’ report did
Auditors; Sanction; Effectivity. Under not comply with BSP requirements.
Section 58, R.A. No. 8791, the Monetary External auditors who meet the
Board may require a subsidiaries and affiliates requirements specified in this Section shall
of banks and quasi-banks to engage the be included in the list of BSP selected external
services of an independent auditor to be auditors. In case of partnership, inclusion in
chosen by the subsidiaries and affiliates of the list of BSP selected external auditors shall
banks and quasi-banks concerned from a list apply to the audit firm only and not to the
of certified public accountants acceptable to individual signing partners or auditors under
the Monetary Board. its employment.
It is the policy of the BSP to promote The BSP will circularize to all banks,
high ethical and professional standards in quasi banks, trust entities and NSSLAs the list
public accounting practice and to encourage of selected external auditors once a year. The
coordination and sharing of information BSP, however, shall not be liable for any
between external auditors and regulatory damage or loss that may arise from its
authorities of banks, quasi-banks, NSSLAs, selection of the external auditors to be
and/or trust entities to ensure effective audit engaged by banks, quasi-banks, trust entities
and supervision of these institutions and to or NSSLAs for regular audit or special
avoid unnecessary duplication of efforts. In engagements.
furtherance of this policy and to ensure that a. Rules and regulations. The rules and
reliance by regulatory authorities and the regulations to govern the selection and
public on the opinion of external auditors is delisting by the BSP of external auditors of
well placed, the BSP hereby prescribes the trust entities and banks’/quasi-banks’/trust
rules and regulations that shall govern the entities’ subsidiaries and affiliates engaged
selection, appointment, reporting in allied activities and other financial
requirements and delisting for external institutions are shown in Appendix N-5.
auditors of banks, quasi-banks, NSSLAs, and/ b. Sanctions. The applicable sanctions/
or trust entities, their subsidiaries and affiliates penalties prescribed under Sections 36 and
engaged in allied activities and other financial 37 of R. A. No. 7653 to the extent applicable
institutions which under special laws are shall be imposed on the trust entity, its audit
subject to BSP supervision. committee and the directors approving the
The selection of external auditors shall hiring of external auditors who are not in the
be valid for a period of three years. BSP BSP list of selected auditors for banks, quasi-
selected external auditors shall apply for the banks, NSSLAs, and/or trust entities, or for
renewal of their selection every three years. hiring, and/or retaining the services of the
The provisions of Items “A” and “B” of external auditor in violation of any of the
Appendix N-5 shall likewise apply for each provisions of this Section and for non-
application for renewal. compliance with the Monetary Board
The Supervision and Examination Sector directive under Item “I” in Appendix N-5.
(SES) shall make an annual assessment of the Erring external auditors may also be reported
performance of external auditors and will by the BSP to the PRC for appropriate
recommend deletion from the list even prior disciplinary action.

Page 17
§§ 4181N - 4301N.1
04.12.31
Sec. 4181N Publication Requirements. The amount that the credit cardholder needs to
quarterly consolidated statements of pay on or before the payment due date for a
condition of a trust entity and its subsidiaries particular billing period/cycle as defined
and affiliates shall be published side by side under the terms and conditions or reminders
with the statement of condition of its head stated in the statement of account/billing
office and its branches/other offices as of such statement which may include: (1) total
dates as the BSP may require within twenty outstanding balance multiplied by the
(20) working days from receipt of call letter, required payment percentage or a fixed
in any newspaper of general circulation in amount whichever is higher; (2) any amount
the country in the prescribed format. which is part of any fixed monthly installment
that is charged to the card; (3) any amount in
Secs. 4182N - 4200N (Reserved) excess of the credit line; and (4) all past due
amounts, if any.
Secs. 4201N - 4300N (Reserved) d. Default or delinquency. Shall mean
non-payment of, or payment of any amount
Sec. 4301N Credit Card Operations; less than, the “Minimum Amount Due” or
General Policy. The BSP shall foster the “Minimum Payment Required” within two
development of consumer credit through (2) cycle dates, in which case, the “Total
innovative products such as credit cards Amount Due” for the particular billing period
under conditions of fair and sound consumer as reflected in the monthly statement of
credit practices. The BSP likewise encourages account may be considered in default or
competition and transparency to ensure more delinquent.
efficient delivery of services and fair dealings e. Acceleration Clause. Shall mean any
with customers. provision in the contract between the bank
Towards this end, the following rules and and the cardholder that gives the bank the
regulations shall govern the credit card right to demand the obligation in full in case
operations of subsidiary/affiliate credit card of default or non-payment of any amount
companies of banks/quasi-banks, aligned due or for whatever valid reason.
with global best practices. f. Subsidiary refers to a corporation or
firm more than fifty percent (50%) of the
§ 4301N.1 Definition of terms outstanding voting stock of which is directly
a. Credit card. Means any card, plate, or indirectly owned, controlled or held with
coupon book or other credit device existing the power to vote by a bank or other financial
for the purpose of obtaining money, prop- institution.
erty, labor or services on credit. g. Affiliate refers to an entity linked
b. Credit card receivables. Represents directly or indirectly to a bank or other
the total outstanding balance of credit financial institution through any one (1) or a
cardholders arising from purchases of goods combination of any of the following:
and services, cash advances, annual mem- (1) Ownership, control or power to vote,
bership/renewal fees as well as interest, pen- whether by permanent or temporary proxy
alties, insurance fees, processing/service fees or voting trust, or other similar contracts, by
and other charges. a bank or other financial institution of at least
c. Minimum amount due or minimum ten percent (10%) or more of the outstanding
payment required. Means the minimum voting stock of the entity, or vice-versa;

Page 18
§§ 4301N.1 - 4301N.3
04.12.31
(2) Interlocking directorship or l. Suspension, cancellation and

officership, except in cases involving withdrawal or termination of card;
independent directors as defined under m. Renewal of cards, upgrade or
existing regulations; downgrade of credit limit;
(3) Common stockholders owning at n. Lost or stolen cards and their
least ten percent (10%) of the outstanding replacement;
voting stock of each financial institution and o. Accounts of DOSRI and employees;
the entity; or p. Disposition of errors and/or questions
(4) Management contract or any about the billing statement/statement of
arrangement granting power to the bank or account and other customers’ complaints;
other financial institution to direct or cause and
the direction of management and policies of q. Dealings with marketing agents/
the entity, or vice-versa. collection agents.
§ 4301N.2 Risk management system. To § 4301N.3 Minimum requirements

safeguard their interests, subsidiary/affiliate Before issuing credit cards, subsidiary/affiliate
credit card companies of banks/quasi-banks credit card companies of banks/quasi-banks
are required to establish an appropriate must exercise proper diligence by
system for managing risk exposures from ascertaining that applicants possess good
credit card operations which shall be credit standing and are financially capable
documented in a complete and concise of fulfilling their credit commitments. The net
manner. The risk management system shall take home pay of applicants who are
cover the organizational set-up, records and employed, the net monthly receipts of those
reports, accounting, policies and procedures engaged in trade or business, or the net worth
and internal control. or cash flow inferred from deposits of those
Written policies, procedures and internal who are neither employed nor engaged in
control guidelines shall be established on the trade or business or the credit behavior
following aspects of credit card operations: exhibited by the applicant from his other
a. Requirements for application; existing credit cards, or other lifestyle
b. Solicitation and application processing; indicators such as but not limited to club
c. Determination and approval of credit memberships, ownership and location of
limits; residence and motor vehicle ownership shall
d. Pre-approved cards; be determined and used as basis for setting
e. Issuance, distribution and activation of credit limits. The gross monthly income may
cards; also be used provided reasonable deductions
f. Supplementary or extension cards; are estimated for income taxes, premium
g. Cash advances; contributions, loan amortizations and other
h. Billing and payments; deductions.
i. Deferred payment program or special All credit card applications, especially
installment plans; those solicited by third party representatives/
j. Collection of past due accounts; agents, shall undergo a strict credit risk
k. Handling of accounts for write-off; assessment process and the information
stated thereon validated and verified by
persons other than those handling marketing.

Page 19
§§ 4301N.4 - 4301N.7
04.12.31
§ 4301N.4 Information to be disclosed applicable, and the corresponding simple

Subsidiary/affiliate credit card companies of annual rate; and
banks/quasi-banks shall disclose to each j. other fees, such as membership/
person to whom the credit card privilege is renewal fees, processing fees, collection fees,
extended in the agreement, contract or any credit investigation fees and attorney’s fees.
equivalent document governing the issuance k. for transactions made in foreign
or use of the credit card or any amendment currencies and/or outside the Philippines, for
thereto or in such other statement furnished dual currency accounts (peso and dollar
the cardholder from time to time, prior to the billings), as well as payments made by credit
imposition of the charges and to the extent cardholders in any currency other than the
applicable, the following information: billing currency: the application of payments;
a. non-finance charges, individually the manner of conversion from the transaction
itemized, which are paid or to be paid by currency and payment currency to Philippine
the cardholder in connection with the pesos or billing currency; definition or
transaction but which are not incident to the general description of verifiable blended
extension of credit; exchange/conversion rates (e.g., MASTERCARD
b. the percentage that the interest bears and/or VISA International rates on the day the
to the total amount to be financed expressed item was processed/posted to the billing
as a simple monthly or annual rate, as the statement, plus mark-up, if any) including
case may be, on the outstanding balance of conversion commission; and/or other
the obligation; currency conversion charges and costs
c. the effective interest rate per annum; arising from the purchase by the card
d. for installment loans, the number of company of foreign currency to settle the
installments, amount and due dates or customer’s transactions shall also be disclosed.
periods of payment schedules to repay the
indebtedness; § 4301N.5 Accrual of interest earned
e. the default, late payment/penalty fees Interest accrued and/or booked shall be
or similar delinquency-related charges reversed and no accrual of interest shall be
payable in the event of late payments; allowed ninety (90) days after the credit card
f. the conditions under which interest receivable has become past due as defined
may be imposed, including the time period, in Subsec. 4308Q.1.
within which any credit extended may be
repaid without interest; § 4301N.6 Finance charges. The
g. the method of determining the amount of finance charges in connection
balance upon which interest and/or with any credit card transaction shall refer to
delinquency charges may be imposed; interest charged to the cardholder.
h. the method of determining the
amount of interest and/or delinquency § 4301N.7 Deferral charges. The bank
charges, including any minimum or fixed and the cardholder may, prior to the
amount imposed as interest and/or consummation of the transaction, agree in
delinquency charge; writing to a deferral of all or part of one or
i. where one (1) or more periodic rates more unpaid installments and the bank may
may be used to compute interest, each such collect a deferral charge which shall not
rate, the range of balances to which it is exceed the rate previously disclosed pursuant
to the provisions on disclosure.

Page 20
§§ 4301N.8 - 4301N.12
04.12.31
§ 4301N.8 Late payment/penalty fees company in the administration of its credit

No late payment or penalty fee shall be card business; and
collected from cardholders unless the f. disclosure to third parties such as
collection thereof is fully disclosed in the insurance companies, solely for the purpose
contract between the issuer and the of insuring the bank from cardholder default
cardholder: Provided, That late payment or or other credit loss, and the cardholder from
penalty fees shall be based on the unpaid fraud or unauthorized charges.
minimum amount due or a prescribed
minimum fixed amount: Provided, further, § 4301N.10 Suspension, termination of
That said late payment or penalty fees may effectivity and reactivation. Subsidiary/
be based on the total outstanding balance of affiliate credit card companies of banks/quasi-
the credit card obligation, including amounts banks shall formulate criteria or parameters
payable under installment terms or deferred for suspension, revocation and reactivation
payment schemes, if the contract between of the right to use the card and shall include
the issuer and the cardholder contains an in their contract with cardholders a provision
“acceleration clause” and the total authorizing the issuer to suspend or terminate
outstanding balance of the credit card is its effectivity, if circumstances warrant.
classified and reported as past due.
§ 4301N.11 Inspection of records
§ 4301N.9 Confidentiality of covering credit card transactions. Subsidiary/
information. Subsidiary/affiliate credit card affiliate credit card companies of banks/quasi-
companies of banks/quasi-banks shall keep banks shall make available for inspection or
strictly confidential the data on the examination by the appropriate supervising
cardholder or consumer, except under the and examining department of the BSP
following circumstances: complete and accurate files on card
applicant/cardholder to support the
a. disclosure of information is with the consideration for approval of the application
consent of the cardholder or consumer; and determination of the credit limit which
b. release, submission or exchange of shall be in accordance with the verified debt
customer information with other financial repayment ability and/or net worth of the card
institutions, credit information bureaus, credit applicant/cardholder.
card issuers, their subsidiaries and affiliates;
c. upon orders of court of competent § 4301N.12 Offsets. For purposes of
jurisdiction or any government office or transparency and adequate disclosure, the
agency authorized by law, or under such credit card issuer shall inform/notify the credit
conditions as may be prescribed by the cardholder in the agreement, contract or any
Monetary Board; equivalent document governing the issuance
d. disclosure to collection agencies, or use of the credit card that, pursuant to the
counsels and other agents of the bank or card provisions of Articles 1278 to 1290 of the
company to enforce its rights against the New Civil Code of the Philippines, as
cardholder; amended the use of his credit card will
e. disclosure to third party service subject his deposit/s with the bank to offset
providers solely for the purpose of assisting against any amount/s due and payable on his
or rendering services to the bank or card credit card which have not been paid in

Page 21
§§ 4301N.12 - 4301N.15
04.12.31
accordance with the terms of the agreement/ Without limiting the general application of
contract. the foregoing, the following conduct is a
violation of this Subsection:
§ 4301N.13 Handling of complaints a. the use or threat of violence or other
Subsidiary/affiliate credit card companies of criminal means to harm the physical person,
banks/quasi-banks shall give cardholders at reputation, or property of any person;
least twenty (20) calendar days from b. the use of obscenities, insults, or
statement date to examine charges posted in profane language which amount to a criminal
his/her statement of account and inform the act or offense under applicable laws;
credit card company in writing of any billing c. disclosure of the names of credit
error or discrepancy. Within ten (10) calendar cardholders who allegedly refuse to pay
days from receipt of such written notice, the debts, except as allowed under Subsec.
credit card company shall send a written 4301N.9;
acknowledgement to the cardholder unless d. threat to take any action that cannot
the action required is taken within such ten legally be taken;
(10)-day period. e. communicating or threat to
Not later than two (2) billing cycles or communicate to any person credit
two (2) months which in no case shall exceed information which is known to be false,
ninety (90) days after receipt of the notice including failure to communicate that a debt
and prior to taking any action to collect the is being disputed;
contested amount, or any part thereof, banks/ f. any false representation or deceptive
subsidiary credit card companies shall make means to collect or attempt to collect any
appropriate corrections in their records and/ debt or to obtain information concerning a
or send a written explanation or clarification cardholder; and
to the cardholder after conducting an g. making contact at unreasonable/
investigation. Nothing in this Subsection shall inconvenient times or hours which shall be
be construed to prohibit any action by the defined as contact before 6:00 A.M. or after
bank/subsidiary credit card company to 10:00 P.M., unless the account is past due
collect any amount which has not been for more than sixty (60) days or the cardholder
indicated by the cardholder to contain a has given express permission or said times
billing error or apply against the credit limit are the only reasonable or convenient
of the cardholder the amount indicated to opportunities for contact.
be in error.
§ 4301N.15 Sanctions. Violations of the
§ 4301N.14 Unfair collection practices provisions of this Section shall be subject to
Subsidiary/affiliate credit card companies of any or all of the following sanctions
banks/quasi-banks, collection agencies, depending upon their severity:
counsels and other agents may resort to all a. Disqualification of the bank
reasonable and legally permissible means to concerned from the credit facilities of the BSP
collect amounts due them under the credit except as may be allowed under Section 84
card agreement: Provided, That in the of R.A. No. 7653;
exercise of their rights and performance of b. Prohibition of the bank concerned
duties, they must observe good faith and from the extension of additional credit
reasonable conduct and refrain from accommodation against personal security;
engaging in unscrupulous or untoward acts. and

Page 22
§§ 4301N.15 - 4700N
04.12.31
c. Penalties and sanctions provided The foregoing is the minimum

under Sections 36 and 37 of R.A. No. 7653. classification requirement. Management may
therefore formulate additional specific
Sec. 4302N Classification of Credit Card guidelines.
Receivables. Credit card receivables shall
be classified in accordance with age as Secs. 4303N - 4400N (Reserved)
follows:
Secs. 4401N - 4500N (Reserved)
No. of days past due Classification
Secs. 4501N - 4600N (Reserved)
91 - 120 Substandard
121 - 180 Doubtful Secs. 4601N - 4699N (Reserved)
181 or more Loss
Sec. 4700N General Provision on Sanctions
Any violation of the preceding provisions
shall be subject to Section 36 of R.A. No.
7653.

Page 23
LIST OF REPORTS REQUIRED FROM NON-BANK FINANCIAL INSTITUTIONS
(Appendix to Sec. 4162N)

Report Submission
B BSP 7-26-01 Information Sheet Annually January 31 Original - Appropriate

BSP SED
Corporate stockholders
should also submit Infor-
mation Sheet
B BSP-7-26-01.1 Biographical Data of Directors/Officers Annually January 31 or 15th Original - Appropriate

calendar day follow- BSP SED
ing the creation or
filling up of a vacancy In case of changes in
in the Board of Direc- educational attainment
tors and the manage- and experience in finan-
rial staff cial management and
related fields, only addi-
tional qualifications that
will enhance the
director's or officer's
competence or will
qualify him to his
present position shall be
reported.
B Unnumbered Change of List of Directors/Officers As change Immediately after Original - Appropriate

occurs change BSP SED
Duplicate - SRSO
Appendix N-1 - Page 1
A-2 BSP-7-26-02 Statement of Condition Monthly 15th business day Original - Appropriate
after end of reference BSP SED
month Duplicate - SRSO or
N Regulations
cc:mail/electronic trans-
04.12.31
mission
APP. N-1
Separate report for Head
Office and each Branch;
and a Consolidated Re-
port for Head Office and
Branches
04.12.31
APP. N-1
N-Regulations
Report Frequency of Deadline of Submission
A-2 BSP-7-26-02 Schedule of Loans/Receivables, Monthly 15th business day Original - Appropriate
Schedule 1 Trading Account Securities (TAS)-Loans and after end of BSP SED
(IHs only) Underwritten Debt Securities reference month Duplicate - SRSO or
cc:mail/electronic trans-
mission

and a Consolidated
Report for Head Office
and Branches
Manual of Regulations for Non-Banks Financial Institutions
A-2 BSP 7-26-02 Schedule of Loans/Receivables and Trading - do - - do - - do -
Schedule 1 Account Securities-Loans
A-2 BSP-7-26-02 Schedule of Trading Account Securities - - do - - do - - do -

Schedule 2 Investments, Available for Sale Securities and
(FCs only) Investment in Bonds and Other Debt
Instruments (IBODI)
A-2 BSP-7-26-02 Interest Rate and Maturities Matching - do - - do - - do -

Schedule 3
A-2 BSP-7-26-02 Remaining Maturities of Selected Accounts - do - - do - - do -

Schedule 4
A-2 BSP-7-26-02 Schedule of Bills Payables and Bonds - do - - do - -do -

Schedule 5
A-2 BSP-7-26-02 Data on Firm's Businesses - do - - do - - do -

Schedule 6
(FCs only)
A-2 BSP-7-26-03 Statement of Income and Expenses - do - - do - - do -
A-2 BSP-7-26-23 Trust/Fund Management Operations - do - - do - - do -

(Entities w/Trust/
Fund Manage-
ment Only)

Report Submission
A-2 BSP-7-26-24 Credit and Equity Exposures to Individuals/ Quarterly 15th business day Electronic submission/
(Revised August Companies/Groups Aggregating P1 Million and from end of reference diskette - SRSO
2003 per CL dated above quarter
8.6.03)
Notarized Control Prooflist Fax to SRSO
A-2 Unnumbered (no Report on required and available reserves on Weekly 3rd business day Original - Appropriate
prescribed form) (En- Peso-denominated Common Trust Funds following reference BSP SED
tities with Trust/Fund (CTFs), such other managed peso funds and week Duplicate - SRSO or
Management only) TOFA-Others cc:mail/electronic trans-
mission

and a Consolidated
Report for Head Office
and Branches
B Unnumbered Board Resolution on NBFIs signatories of As 3rd day from date of

reports submitted to Bangko Sentral authorized resolution
transaction from date of transac- Anti-Money Laundering
occurs tion/knowledge Council

B Unnumbered Plan of action to comply with Anti-Money - 30th business day To be submitted to the
Laundering requirements from July 31, 2000 or appropriate BSP supervis-
from opening of the ing and examining de-
institution partment (SED)
N Regulations
A-2 Unnumbered Certification of compliance with existing anti- Annually 20th business day -do-
04.12.31
APP. N-1
money laundering regulations after end of reference
year
04.12.31
APP. N-1
N-Regulations
Report Frequency of Deadline of Submission
Unnumbered (no Audit Engagement Contract As contract 15th calendar day Appropriate BSP SED
prescribed form) is signed from date of signing
of contract
Waiver of the Confidentiality of Information As

under Sections 2 and 3 of R.A. No. 1405, as transaction
amended occurs
Manual of Regulations for Non-Banks Financial Institutions

APP. N-2
02.12.31
GUIDELINES ON PRESCRIBED REPORTS SIGNATORIES

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

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

ANNEX N-2-a
02.12.31

(Annex to Appendix N-2)
Whereas, it is required under Subsec. 4162N.1 that Category A-2 reports of head offices
be signed by the president, executive vice-presidents, vice-presidents or officers holding
equivalent positions, and that such reports of other offices be signed by the respective managers/
officers-in-charge;
Whereas, it is also required that aforesaid officers of the institution be authorized under
a resolution duly approved by the institution’s Board of Directors;
Whereas, we, the members of the Board of Directors of (Name of Institution) , are
conscious that, in designating the officials who would sign said Category A-2 reports, we are
actually empowering and authorizing said officers to represent and act for or in behalf of the
Board of Directors in particular and (Name of Institution) in general;
Whereas, this Board has full faith and confidence in the institution’s President (and/or
the Executive Vice-President, etc., as the case may be) and, therefore, assumes responsibility
for all the acts which may be performed by aforesaid officers under their delegated authority;
Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby
resolved that:
Name of Specimen Position Report
Officer Signature Title No.
___________________ ____________________ ____________________ ____________
___________________ ____________________ ____________________ ____________
___________________ ____________________ ____________________ ____________
are hereby authorized to sign the Category A-2 reports of ________________________________.

Done in the City of ___________, Philippines, this _____ day of __________, 200_ .
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY

Annex N-2-a - Page 1
ANNEX N-2-b
02.12.31

OF CATEGORY B REPORTS
Whereas, it is required under Subsec. 4162N.1 that Category B reports be signed by

officers or their alternates;
Whereas, it is also required that aforesaid officers of the institution be authorized under
a resolution duly approved by the institution’s Board of Directors;
Whereas, we the members of the Board of Directors of (Name of Institution)_ are
conscious that, in designating the officials who would sign said Category B reports, we are
actually empowering and authorizing said officers to represent and act for or in behalf of the
Board of Directors in particular and (Name of Institution) in general;
Whereas, this Board has full faith and confidence in the institution’s authorized signatories
and, therefore, assumes responsibility for all the acts which may be performed by aforesaid
officers under their delegated authority;
Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby
resolved that:
Name of Authorized Specimen Position Report
Signatory/Alternate Signature Title No.
1. Authorized ________________ ___________________ ______________ ______

(Alternate) ________________ ___________________ ______________ ______
2. Authorized ________________ ___________________ ______________ ______

Alternate) ________________ ___________________ ______________ ______
etc.
are hereby authorized to sign the Category B reports of _______________________________.

Done in the City of __________, Philippines, this ____ day of ____________, 200_ .
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY

Annex N-2-b - Page 1
APP. N-3
02.12.31

(Appendix to Section 4104N)

APP. N-3
03.12.31

of transactions. With respect to closed requirements of App. N-3 nos. 1, 2 and 4
transactions;
1
Amended by AMLC Resolution No. 292 dated 11.20.03 (Annex N-3-b).

APP. N-3
02.12.31
violating any law. results in any criminal prosecution under R.A.
The report on suspicious transactions 9160 or any other Philippine law.
(b) A brief description of the transaction representatives, agents, advisors, consultants
or transactions. or associates are prohibited from
which can be of help to the authorities should thereto. Neither may such reporting be
there be an investigation. published or aired in any manner or form by
b. Exemption from Bank Secrecy Law. the mass media, electronic mail, or other
and other similar laws, but are prohibited 5. Certification of compliance with
from communicating, directly or indirectly, anti-money laundering regulations. Covered
in any manner or by any means, to any institution shall submit annually to the BSP
person the fact that a covered transaction thru the appropriate supervising and
report was made, the contents thereof, or any examining department a certification (Annex
other information in relation thereto. In case N-3-a) signed by the President or officer of
of violation thereof, the concerned officer, equivalent rank and by their Compliance
proceedings, shall lie against any person for accordance with Appendix N-1 and shall be

ANNEX N-3-a
02.12.31

REGULATIONS
CERTIFICATION
hereby certify:
1. That we have monitored (Name of NBFI)’s compliance with R.A. No. 9160 (Anti-
302;
2. That the NBFI is complying with the required customer identification, documentation
of all new clients, and continued monitoring of customer’s activities;
3. That the NBFI is also complying with the requirement to record all transactions and to
maintain such records including the record of customer identification for at least five
(5) years;
4. That the NBFI does not maintain anonymous or fictitious accounts; and
5. That we conduct regular anti-money laundering training sessions for all NBFI officers
and selected staff members holding sensitive positions.
________________________ ___________________

Page No. _________;
Book No. _________;
Series of 2002

Annex N-3-a
ANNEX N-3-b
03.12.31

1. All covered institutions are required to file Suspicious Transaction Reports (STRs)
on transactions involving all kinds of monetary instruments or property.
currency.
transactions.
rule, the insurance company shall file the CTR only once every year until the policy matures
or rescinded, whichever comes first.

Annex N-3-b
APP. N-4
03.12.31

RULE 1
Title
RULE 2
RULE 3
Definitions
follows:


APP. N-4
03.12.31



APP. N-4
03.12.31




issuer.


APP. N-4
03.12.31

teacher;
employees;

currency notes.




APP. N-4
03.12.31





OF THE FOREGOING.
instruments;
includes:
activity;

APP. N-4
03.12.31




APP. N-4
03.12.31


Philippines.


APP. N-4
03.12.31

worship.
1602;
(29) Jueteng;
(30) Masiao.
Decree No. 532;


other property;
third person;
art or business;

APP. N-4
03.12.31

game;

Act of 2000;

system, including
document;


APP. N-4
03.12.31
the Consumer Act;
the E-Commerce Act;
guarantee;
(85) Hijacking;
(87) Murder;

APP. N-4
03.12.31
market;
SEC;
contrivance;

APP. N-4
03.12.31
upon any person;
SEC;
SEC;
the SEC;

RULE 4

APP. N-4
03.12.31
RULE 5

RULE 6
RULES.

APP. N-4
03.12.31
unlawful activity.
RULE 7
as members.

APP. N-4
03.12.31


APP. N-4
03.12.31

RULE 8

APP. N-4
03.12.31
RULE 9

1) Name;
2) Present address;
5) Nationality;
7) Contact numbers;

APP. N-4
03.12.31

and corporations:

(2) By-laws;
stock;


APP. N-4
03.12.31
later.
Supreme Court.




APP. N-4
03.12.31



RULE 10


APP. N-4
03.12.31
related.

THEREOF.


APP. N-4
03.12.31

AND

ORDER(S).
FUNDS MAY BE FOUND.
RULE 11

APP. N-4
03.12.31



APP. N-4
03.12.31
RULES.

RULE 12

APP. N-4
03.12.31
RULE 13

APP. N-4
03.12.31
request.
office.

APP. N-4
03.12.31
RULE 14
Penal Provisions
(a) of the AMLA.
AMLA.
AMLA.

APP. N-4
03.12.31
Probation Law.
RULE 15

APP. N-4
03.12.31
RULE 16
Restitution
RULE 17
for approval.

APP. N-4
03.12.31
NO. 9194.
RULE 18

the minority.
RULE 19

APP. N-4
03.12.31
RULE 20
Separability Clause
thereby.
RULE 21
Repealing Clause
RULE 22
RULE 23

APP. N-5
03.12.31

REQUIREMENT FOR EXTERNAL AUDITORS OF NBFIs


APP. N-5
03.12.31

APP. N-5
03.12.31

APP. N-5
03.12.31


therefor; NSSLA.
by the BSP. is:

APP. N-5
03.12.31
b. Power to govern the financial and entities, or NSSLAs, for regular audit or
operating policies of the enterprise under a special engagements.
4. Associate. Any director, officer, institutions. The report shall be submitted
manager or any person occupying a similar to the BSP and the audited institution
is responsible for reviewing the audit report. 1. That the bank, quasi-bank, trust entity,
8. Auditor-in-charge. Refers to the team or NSSLA shall be responsible for keeping
leader of the audit engagement. the auditor fully informed of existing and
subsequent changes to prudential, regulatory
E. INCLUSION IN BSP LIST and statutory requirements of the BSP and
that both parties shall comply with said
In case of partnership, inclusion in the requirements;

APP. N-5
03.12.31

APP. N-6
04.12.31
QUALIFICATION REQUIREMENTS
FOR A BANK/NBFI APPLYING FOR ACCREDITATION TO ACT AS
TRUSTEE ON ANY MORTGAGE OR BOND ISSUED BY ANY
MUNICIPALITY, GOVERNMENT-OWNED OR CONTROLLED
CORPORATION, OR ANY BODY POLITIC
(Appendix to Subsec. 4109N.16)
A bank/NBFI applying for accreditation e. The articles of incorporation or

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

APP. N-6
04.12.31
(2) attendance by every member of the l. It has established a risk management

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

04.12.31
A D
Anti-money laundering regulations N - 5 see Directors N - 7
also App. N-3 disqualification of N - 7
AMLC Resolution No. 292 Annex N-3-b disqualification procedures N – 8
certification of compliance with Annex N-3-a effect of possession of disqualifications N - 9
revised implementing rules and regulations persons disqualified to become N - 7
App. N-4 watchlisting N – 9
sanctions and penalties N - 5
I
B
Investment houses N - 1
Batas Pambansa Blg. 344 N - 15 minimum capital for N - 1
C O
Credit card operations N - 18 Officers N – 7
accrual of interest earned N - 20 disqualification of N – 7
confidentiality of information N - 21 disqualification procedures N – 8
deferral charges N - 20 effect of possession of disqualifications N - 9
definition of terms N - 18 persons disqualified to become N - 8
acceleration clause N - 18 watchlisting N - 9
affiliate N - 18
credit card N - 18 P
credit card receivables N - 18
default or delinquency N - 18 Publication requirements N - 18
minimum amount due or minimum payment
required N - 18 Q
subsidiary N - 18
finance charges N - 20
Qualification and accreditation of non-bank
general policy N - 18
financial institutions acting as trustee on any
handling of complaints N - 22
mortgage or bond issuance by any municipal-
information to be disclosed N - 20
ity, government-owned or controlled corpora-
inspection of records covering credit card
tion, or any body politic N - 5 see also
transactions N - 21
App. N-6
late payment/penalty fees N - 21
Qualification requirements for a Bank/NBFI
minimum requirements N - 19
applying for accreditation to act as trustee on
offsets N - 21
any mortgage or bond issued by any munici-
risk management system N - 19
pality, government-owned or controlled
sanctions N - 22
corporation, or any body politic App. N-6
suspension, termination of effectivity and
reactivation N - 21
Quasi-banking functions N - 1
unfair collection practices N - 22
prior BSP authority on N - 1
terms and phrases N - 1
Credit card receivables N - 23
borrowing N - 1
classification of N - 23
for the borrowers' own account N - 1

Index - Page 1
04.12.31
purchasing of receivables or other obliga- application for authority N - 10

tions N - 1 basic security deposit N - 14
relending N - 1 compliance with anti-money laundering laws/
regularly engaged in lending N - 2 regulations N - 14
transactions not considered quasi-banking N - 2 confidentiality N - 14
functions and responsibilities of a securities
R custodian N – 12
functions and responsibilities of a securities
Reports N - 15 registry N – 12
categories and signatories of N- 15 see also independence of the registry and custodian
App. N - 1 N - 13
format of resolution for signatories of category pre-qualification requirements for N - 11
A-2 Annex N-2-a prior BSP approval N - 10
format of resolution for signatories of protection of securities of the customer N - 12
category B Annex N-2-b reportorial requirements N - 14
guidelines on prescribed reports signatories and registry of scripless securities of the Bureau of
signatory authorization N-2 the Treasury N - 13
list of reports required from non-bank financial sanctions N - 14
institutions App. N-1 statement of policy N - 10
manner of filing N - 16
sanctions in case of willful delay in the
submission of N - 16 Selection, appointment and reporting require-
ments for external auditors N - 17 see also
S App. N-5
effectivity N - 17
Securities N - 3 guidelines to govern App. N-5
custodianship operations N - 4 sanctions N - 17
delivery of N - 3
T
Securities custodianship and securities registry
operations N - 10 Trust and other fiduciary activities N - 1
applicability N - 10 applicable regulations on N - 1

Index - Page 2

Manual of Regulations For Non-Bank Financial Institutions

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Manual of Regulations For Non-Bank Financial Institutions

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MANUAL OF REGULATIONS

FOR NON-BANK FINANCIAL

BANGKO SENTRAL NG PILIPINAS

The Bangko Sentral ng Pilipinas

Main caption on “Records”

Regulation addressed to quasi-banks

Part One on “Organization, Management and Administration"

Regulations addressed to NBFIs

PART ONE - ORGANIZATION, MANAGEMENT AND

SECTION 4101Q Quasi-Banking Functions

SECTION 4102Q Preconditions for the Exercise of Quasi-Banking Functions

SECTION 4103Q Certificate of Authority from the Bangko Sentral

SECTION 4104Q Bangko Sentral Certificate of Authority

SECTION 4105Q Licensing of an Investment House

SECTION 4106Q Minimum Capitalization

SECTION 4107Q Minimum Capital of Investment House

SECTION 4108Q Sanctions

SECTIONS 4109Q - 4110Q (Reserved)

SECTION 4111Q Merger/Consolidation Involving Quasi-Banks

SECTION 4112Q Merger/Consolidation Incentives

D. RISK-BASED CAPITAL ADEQUACY RATIO

SECTION 4116Q Minimum Ratio

SECTION 4117Q Treatment of Equity Investment with Reciprocal

SECTION 4118Q Sanctions on Net Worth Deficiency

SECTIONS 4119Q - 4120Q (Reserved)

SECTIONS 4121Q - 4125Q (Reserved)

F. STOCK, STOCKHOLDERS AND DIVIDENDS

SECTION 4126Q Dividends

SECTIONS 4127Q - 4140Q (Reserved)

G. DIRECTORS, OFFICERS AND EMPLOYEES

SECTION 4141Q Definition; Qualifications; Powers; Responsibilities and

SECTION 4142Q Definition and Qualifications of Officers

SECTION 4143Q Disqualification of Directors and Officers

SECTION 4144Q Interlocking Directorships and/or Officerships

SECTION 4145Q Profit Sharing of Directors, Officers and Employees

SECTION 4146Q Monetary Board Confirmation of Directors and Senior

SECTION 4147Q Compensation and Other Benefits of Directors and Officers

SECTION 4148Q (Reserved)

SECTION 4149Q Conducting Business in an Unsafe/Unsound Manner

H. BRANCHES AND OTHER OFFICES

SECTION 4151Q Establishment

SECTIONS 4152Q - 4155Q (Reserved)

SECTIONS 4156Q - 4160Q (Reserved)

J. RECORDS AND REPORTS

SECTION 4161Q Records

SECTION 4162Q Reports

SECTIONS 4163Q - 4170Q (Reserved)

SECTION 4171Q Internal Control Systems

SECTION 4172Q Financial Audit

SECTIONS 4173Q - 4179Q (Reserved)

SECTION 4181Q Publication Requirements

SECTION 4182Q Management Contracts

SECTIONS 4183Q - 4190Q (Reserved)

SECTION 4191Q Compliance System; Compliance Officer

SECTIONS 4192Q - 4198Q (Reserved)

SECTION 4199Q General Provision on Sanctions

PART TWO - DEPOSIT AND BORROWING OPERATIONS

SECTIONS 4201Q - 4210Q (Reserved)

E. DEPOSIT SUBSTITUTE OPERATIONS

SECTION 4211Q Deposit Substitute Instruments

SECTION 4212Q Recording; Payment; Maturity; Renewal

SECTION 4213Q Minimum Trading Lot

SECTION 4214Q Interbank Borrowings