Podcast
Questions and Answers
Which of the following individuals qualifies as a first-degree relative?
Which of the following individuals qualifies as a first-degree relative?
What type of interest is considered a related interest in the context of DOSRI?
What type of interest is considered a related interest in the context of DOSRI?
A corporation where any DOS holds at least what percentage of subscribed capital is classified under related entities?
A corporation where any DOS holds at least what percentage of subscribed capital is classified under related entities?
Which scenario does NOT classify as a DOSRI related interest?
Which scenario does NOT classify as a DOSRI related interest?
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Which option defines the term DOSRI?
Which option defines the term DOSRI?
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What is the total appraised value of the collateral for the proposed loan?
What is the total appraised value of the collateral for the proposed loan?
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What amount is classified as a fully secured housing loan?
What amount is classified as a fully secured housing loan?
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Which of the following represents the total BFSB exposure?
Which of the following represents the total BFSB exposure?
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What is the approval medium for the proposed credit classification?
What is the approval medium for the proposed credit classification?
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What is the maximum amount for unsecured loans according to the classification of credit?
What is the maximum amount for unsecured loans according to the classification of credit?
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What is the total amount of existing loans in the classified credit section?
What is the total amount of existing loans in the classified credit section?
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Which type of loan is classified as fully secured in the provided content?
Which type of loan is classified as fully secured in the provided content?
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How much of the total BFSB exposure is categorized as unsecured?
How much of the total BFSB exposure is categorized as unsecured?
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What classification level is indicated for retail approval in business loans?
What classification level is indicated for retail approval in business loans?
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What is the total appraised value of the property used as collateral for the loan?
What is the total appraised value of the property used as collateral for the loan?
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How much total exposure does the BFSB have based on the provided loans?
How much total exposure does the BFSB have based on the provided loans?
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What type of loan has the largest amount in the classification table?
What type of loan has the largest amount in the classification table?
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Which existing loan is classified as fully secured?
Which existing loan is classified as fully secured?
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What is the classification level for the approval of business loans?
What is the classification level for the approval of business loans?
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What type of additional documentation is required for individual applicants in Enhanced Due Diligence?
What type of additional documentation is required for individual applicants in Enhanced Due Diligence?
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Which of the following is NOT required for corporate borrowers during Enhanced Due Diligence?
Which of the following is NOT required for corporate borrowers during Enhanced Due Diligence?
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In Enhanced Due Diligence, what is the purpose of gathering information on the Ultimate Beneficial Owner (UBO)?
In Enhanced Due Diligence, what is the purpose of gathering information on the Ultimate Beneficial Owner (UBO)?
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What type of information must be provided regarding the source of funds for individual applicants?
What type of information must be provided regarding the source of funds for individual applicants?
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What is a common reason for corporate borrowers to provide a list of banks where they maintain accounts?
What is a common reason for corporate borrowers to provide a list of banks where they maintain accounts?
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Which of the following documents is NOT considered supporting information for individual applicants' business relationships?
Which of the following documents is NOT considered supporting information for individual applicants' business relationships?
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Which of the following details about corporate officers is required during Enhanced Due Diligence?
Which of the following details about corporate officers is required during Enhanced Due Diligence?
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What is the significance of identifying the intended nature of the business relationship?
What is the significance of identifying the intended nature of the business relationship?
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What is the loan amount applied for in this case?
What is the loan amount applied for in this case?
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What is the loan-to-value ratio (LVR) for the loan application?
What is the loan-to-value ratio (LVR) for the loan application?
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What is the proposed purpose of the loan?
What is the proposed purpose of the loan?
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How many years is the applied term for the loan?
How many years is the applied term for the loan?
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Who are the sureties provided for the corporate borrower?
Who are the sureties provided for the corporate borrower?
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What is the average daily balance (ADB) of the President?
What is the average daily balance (ADB) of the President?
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What is the gross monthly income (GMI) of the President?
What is the gross monthly income (GMI) of the President?
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If the Treasurer is not the spouse of the President, will the Treasurer still be required as surety?
If the Treasurer is not the spouse of the President, will the Treasurer still be required as surety?
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Study Notes
Module 7: Special Topics in Credit
- Module presented on December 4, 2024
- Presented by Kevin C. Jimeno, Admin and Controls Head, Retail Credit, BPI
Topics
- Lending Coverage for Retail Lending Products
- AML Profiling
- UBOs for Corporate Borrowers
- Related Party Transactions
- When and How to Present to Retail Sub-Crecom
- Special Cases
Lending Coverage for Retail Products
- No geographical limit, as long as the borrower maintains an active BPI deposit account
- All approved loan accounts require a BPI deposit account enrolled in Automatic Debit Arrangement (ADA) for loan repayment
- Waiver of ADA requires Division Head and Retail Loans Group Head approval if the borrower's residence is within:
- A 50-km radius from Head Office
- A 20-km radius from the Retail Loans Center
- Specific towns/cities approved by Management
AML Profiling
- Blacklisted Applicants: Reject application and report to Compliance Office
- High Risk Applicants: Conduct enhanced due diligence and elevate for approval
- Normal Risk Applicants: No action required
AML Risk Rating and Profiling
- All individual borrowers, sureties, co-mortgagors
- Corporate borrowers, including:
- Beneficial owner
- Chairman of the Board of Directors/Trustees
- Authorized signatories
- President and Treasurer, or their equivalent
AML Risk Rating - Blacklisted Applicants - Customer Denial
- Name appears in OFAC List, UN Sanctions Lists, BPI HB List, SEC Advisories, HBL in RM2
- Nationality or Citizenship (individual/beneficial owner)/Country of Registration or Location of Headquarters (entity) is one of the following:
- Syria
- Iran
- North Korea
- Crimea (Region of Ukraine)
AML Risk Rating - Blacklisted Applicants
- Examples of blacklisted industries:
- Gambling/online gaming businesses (OGBs)
- Casinos (land or ship-based)
- Offshore gaming operators
- POGO (e.g., e-casino, sports betting, etc.)
- OGB service providers (BPO, Customer Service, Software, Studio/Streaming providers, etc.)
- Online Sabong including those acting as Agents
- Virtual Asset Service Providers (VASPs) - includes virtual/digital currencies (e.g., Bitcoin)
- Arms and ammunitions
- Shell bank or company
- Gambling/online gaming businesses (OGBs)
- Individual applicant is a foreign tourist with no justifiable reason and/or legal purpose for applying for a loan. Reject and report to Compliance Office
AML Risk Rating - Blacklisted Applicants
- UN Sanctions List: List of individuals and entities subject to measures imposed by the UN Security Council
- OFAC Sanctions List: List of individuals and companies owned or controlled by targeted countries, terrorists, and narcotics traffickers
- BPI High Risk - Black List: Existing customers involved in fraud, money laundering or terrorist financing; non-customers with negative news of involvement in ML/TF, etc.
- Existing customers with suspected involvement in money laundering or terrorist financing
- SEC Advisories: Entities soliciting public investment without an SEC license
AML Risk Rating - High Risk Applicants
- Name appears in any of the following:
- NDB tagging as High Risk, HTXN (High Risk Transaction), or HREP (High Risk Reputation) or similar connotations
- Internal PEP List – whether by name or by position
- Question: Which government positions are considered PEPs (excluding President and VP)?
- To determine who should be considered, review the official list of PEPs.
- Action: Conduct enhanced due diligence and obtain deviation approval
AML Risk Rating - High Risk Applicants
- Name appears in any of the following:
- NDB tagging as High risk, HTXN (High risk transaction) or HREP (high risk reputation), or similar connotations
- Internal PEP list
- Incumbent elected government officials (Cabinet Secretaries, Presidents, Vice Presidents, Senators, Congressmen/Assemblymen, Governors, etc.)
- Appointed officials in the executive branch
- Heads of military services and police (Chief of Staff, Armed Forces of the Philippines, Chief of Army, Chief of Navy, Chief of Air Force, Chief of Marines, Chief of Police)
- Immediate family members and close relationships
- Action: Conduct enhanced due diligence and obtain deviation approval
AML Risk Rating - High Risk Applicants - Specific Industries
- Any of the applicants engaging in high risk industries
- Money Service Businesses (MSBs)
- Remittance Agents
- Remittance Platform Providers
- E-money issuers
- Money Changers
- Foreign Exchange Dealers
- Third Party Payment Processors
- Companies handling transactions for merchants (PayPal, DragonPay, AliPay, etc.)
- Non-Government Organizations (NGOs)
- Charities
- Foundations
- Recruitment/Manning Agencies
- Local recruitment agencies sending seafarers abroad
- Financial Technology (Fintech) Companies
- Money Service Businesses (MSBs)
AML Risk Rating - High Risk Applicants - Additional Entities
- High Risk Individuals/Entities
- Beneficial Owners
- Members of the Board of Directors/Trustees
- President and Treasurer (and equivalent) of any entity classified as high-risk or blacklisted
- Individuals/entities whose primary source of income is donations
- Individuals with remittances from non-familial remitters as the declared source of funds
- Walk-in foreign exchange customers
- Embassies and Consular offices
- Ambassadors
- Consular officers
- Military attaches
- Foreign nationals with diplomatic rank/status
- Nationality/Citizenship or Headquarters location
- Afghanistan
- Botswana
- Cuba
- Donetsk (Region of Ukraine)
- Ghana
- Iraq
- Jamaica
- Libya
- Luhansk (Region of Ukraine)
- Palestine
- Russia
- etc.
Enhanced Due Diligence (EDD) Information
- A) Individual Applicants: Full name, birth date, address, contact, nationality, employer, nature of work, sources of income, gender, Supporting info, reason/purpose of loan application, list of banks & companies, other information
- B) Corporate Borrowers: Registered business name, address, contact info, business nature, beneficial owner (if applicable), president, treasurer, authorizers, specimen signatures/biometrics, etc.
UBOs for Corporate Borrowers
- Money launderers and terrorists use anonymity to avoid detection
- They hide assets obtained through illegal activities
- Identifying UBOs is essential for preventing financial crimes
Ultimate Beneficial Owner (UBO)
- Identifying UBOs helps prevent crimes
- Determine who has ultimate controlling ownership interests, effective control over an entity or the position of President and Treasurer
- Steps to Identify the UBO:
- Check if the company is listed in PSE
- Determine the ownership type if the company is not listed in PSE (direct, indirect)
- When in doubt about the ownership and control; determine who exercises actual control
- Determine who holds the position of President and Treasurer
Ultimate Beneficial Owner (UBO) - KYC and AML Risk Rating
- Obtain minimum information (name, address, nationality, citizenship) - Conduct sanctions screening and customer risk profile (if high risk, conduct Enhanced Due Diligence; if blacklisted, reject application)
- Indicate results of sanctions screening and AML risk rating in the notepad
AML Risk Rating - Roles Requiring EDD
- Beneficial Owner: High Risk - Elevate for EDD
- Chair of the Board of Directors / Trustees: Blacklisted - Reject and report to AML Unit
- President, Treasurer, or equivalent: High Risk - Elevate for EDD
-
Authorized signatories: High risk (if only active and/or >20% of the corporation) - Elevate for EDD
- Other authorized signatories that do not meet the criteria are not evaluated
Related Party Transactions (RPTs)
- A related party is a party that the bank has direct or indirect control over, or which has direct or indirect control over the bank
- These transactions, provided they are approved (and conducted on an arm's length basis) by the appropriate authority, are not prohibited
- Vetting to ensure arm's length basis
- Approval by the appropriate authority
- Monitoring to adhere to limits
- Reporting to Board, Stockholders and Regulator
Related Party Transactions (RPTs)
- Dealings with related parties, including trust department transactions
- Cover on- and off-balance sheet transactions, regardless of whether a price is charged or not.
Related Parties: Buckets
- DOSRI (Director, Officer, Shareholder, Relative Interest)
- Subsidiaries and Affiliates
- Other Related Parties (ORP)
DOSRI (Director, Officer, Shareholder, Relative Interest)
- Directors, officers of the bank (any rank) up to President
- Stockholders who own at least 1% of the subscribed capital
- Individually or collectively, a person within the 1st degree relating to the owner or partner
- A company that owns over 50% of the total subscribed capital
- Related interests
- Spouse or relative within the 1st degree of consanguinity or affinity or relative by legal adoption of a DOSRI
- Partnership where the DOSRI is a general partner or a company in which the DOSRI and relatives hold more than 50% of the total capital.
- Corporation, association or firm which owns/controls over 20% of the subscribed capital; related to the lending bank's stockholder or controls the majority interest of the bank, defined by owning shares, giving the ability of at least one board seat, or beneficial owner of the security being greater than 10%
- Specific examples of DOSRI are: Spouse or relative within the 1st degree of consanguinity or affinity, or relative by legal adoption of a DOS.
Subsidiaries and Affiliates
- A corporation (owning over 50% of the voting stock) is directly or indirectly owned, controlled or held with the power to vote
- BPI's ownership/power to vote in the borrowing entity is at least 20%
- Interlocking officership/directorship: an officer/director in the borrowing entity owns at least 20% of the borrowing entity
- Common stockholder ownership: owning at least 10% of BPI and at least 20% of the borrowing entity
- Management contract/voting trusts: BPI has at least 20% voting trust in the borrowing entity
Other Related Parties
-
Second-degree relatives of BPI's SVPs and above
-
First-to-second-degree relatives of BPI Groups' SVPs and above
-
BPI's ownership or power to vote is between 10% and 20%
-
Interlocking officership/directorship – with ownership of more than 2% up to less than 20%
-
Common stockholder ownership with at least 10% of BPI and 10% to less than 20% of the borrowing entity
-
BPI's voting trust with at least 10% to less than 20%
-
Entities where at least 50% of revenue is from BPI/subsidiaries/affiliates
-
1st degree relatives: Parents, children, parents-in-law, son/daughter-in-law
-
2nd degree relatives: Grandparents, grandparents-in-law, grandchildren, grandchildren-in-law, siblings, siblings-in-law
-
Details of how to identify 1st & 2nd degree relatives using specific examples.
Retail Subcrecom Presentation
- Aggregate exposure (including proposed facility) is beyond the approval authority of Minor Subcrecom
- Product/security types for presentation to Retail Subcrecom
- Secured limit (HL & PEL)
- Unsecured (HL & PEL)
- Clean limit (retail loan products)
- Auto Loans (Fleet, Auto Loan Line, Trucks/Buses)
- Floorstock financing
Rule on Aggregation
- Proposed and existing credit facilities/loan exposures with other BPI units and subsidiaries with the same borrower, are aggregated to reflect the total credit exposure of the BPI group
- Directly related accounts are aggregated in accordance with the BPI group accounts policy
- Details of what/how to aggregate (owning >50% of another entity, spouses who are general partners in an entity, significant influence)
- All proposals involving accounts from the Institutional Banking Relationship Management Group (IBG-RMG) must be endorsed by the assigned RMG officer before routing for approval
- In determining the approval level, the proposed and existing exposures of the principal and co-borrower/s to be aggregated and included
- Auto loans (fleet, auto line, trucks/bus, motorcycles)
- Housing (property equity, contract-to-sell)
Single DLO Authority Limit
- DLO approvals of loans are rendered through LOS system
- For Auto Loans, the DLO is meant to be a checker, not to calculate and evaluate the application
- Deviations may include age requirements, business/employment tenure or professional experience.
Retail Minor Sub Crecom and Subcrecom Limits
- Product & Security types limits Secured Limit for HL & PEL, UnSecured Limit for HL & PEL, and Clean Limit Auto Loans, Fleet Line, Auto Lines, Truck/Buses and Floorstock Financing
Example Loan Scenarios
- Demonstrates the various classifications and approval levels of different loan types
- Provides a clear breakdown of existing loan exposures and how these should be addressed.
- Shows how the required information is used in evaluating applications, including classifications of loan exposures (auto, housing, business loans)
Sales Responsibilities
- Questions about employee relatives must be included on on-boarding questionnaires.
- Check citizenship and rank of relative
- Indicate “Subject to RPT Vetting prior to implementation” if a borrower is an RP
- Credit applications with borrowers being related to BPI employees are evaluated in the same way as non-related parties
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Description
Test your knowledge on various aspects of credit classifications and related interests, including the definitions and thresholds that categorize loans. This quiz covers topics relevant to first-degree relatives, DOSRI classifications, and appraised values for collateral. Challenge yourself to see how well you understand these financial concepts.
