01_BANKING REGULATIONS_PART1.pptx

Banking Regulations Introduction Banks in the Philippines are classified into 1. Universal banks 2. Commercial banks 3. Thrift banks 4. Rural banks 5. Cooperative banks 6. Islamic banks 7. Government-owned banks 8. Other banks as may be classified by the Bangko Sentral ng Pilipinas (BSP) Introductio...

Banking Regulations Introduction Banks in the Philippines are classified into 1. Universal banks 2. Commercial banks 3. Thrift banks 4. Rural banks 5. Cooperative banks 6. Islamic banks 7. Government-owned banks 8. Other banks as may be classified by the Bangko Sentral ng Pilipinas (BSP) Introduction  Universal and commercial banks are the dominant groups, representing approximately 70 per cent of the resources of the banking system.  Under the General Banking Law of 2000 (GBL), a universal bank is defined as a commercial bank with the additional authority to exercise the powers of an investment house and invest in nonallied enterprises. An ordinary commercial bank does not have that authority.   There are branches, subsidiaries and affiliates of foreign banks in the Philippines that are licensed either as universal or commercial banks. Others have offshore banking units with more limited functions. The BSP, which is the Philippine central bank, acting through its Monetary Board, is mandated by law to ensure that the control of 60 per cent of the resources or assets of the banking system is held by domestic banks that are at least majority-owned by Philippine nationals. Minimum Capitalization Requirement by Bank Type in the Philippines Classification of Banks in the Philippines PRIMARY STATUTES AND REGULATIONS THAT GOVERN THE BANKING INDUSTRY – organization, ownership, capitalization, and powers 1. UNIVERSAL BANKS - THE GENERAL BANKING LAW 2. COMMERCIAL BANKS – THE GENERAL BANKING LAW 3. THRIFT BANKS – THE THRIFT BANKS ACT 4. RURAL BANKS – THE RURAL BANKS ACT 5. COOPERATIVE BANKS – THE PHILIPPINE COOPERATIVE CODE 6. ISLAMIC BANKS – THE CHARTER OF AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILIPPINES 7. GOVERNMENT OWN BANKS General Banking Law can apply to the thrift banks and rural banks as long as there is no conflict with the provisions stated in the laws governing such banks. Classification of Banks in the Philippines PRIMARY STATUTES AND REGULATIONS THAT GOVERN THE BANKING INDUSTRY – organization, ownership, capitalization, and powers 8. OTHER BANKS – DIGITAL BANK a. Overseas Filipino (OF) by Land Bank b. Tonik Digital Bank c. Unobank d. Union Digital Bank Classification of Banks in the Philippines PH will only have 6 digital banks for now — Diokno Published October 4, 2021, 12:48 PM by Lee C. Chipongian  PH will only have 6 digital banks for now — Diokno  Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Monday, Oct. 4, that only six digital banks are authorized to operate after all following the cancellation of the seventh slot for neobanks due to non-complying applicants.  “We approved six digital banks and it will remain six because the seventh slot –which was supposed to be competed among the nine additional applicants — failed to submit the complete documentation for the request. So, we will keep it at six,” said Diokno in a forum organized by the Financial Executives Institute of the Philippines (FINEX).  With only six neobanks, the BSP chief said they will be able to closely monitor the development of the digital bank market and make sure that there is healthy competition among the digital banks and the existing traditional banks. Classification of Banks in the Philippines PH will only have 6 digital banks for now — Diokno Published October 4, 2021, 12:48 PM by Lee C. Chipongian  For now, there are only six digital banks approved to operate in the Philippines. These are Overseas Filipino Bank (OF Bank) of Land Bank of the Philippines (its license was approved on March 25, 2021); Tonik Bank of Singapore (June 3); UNObank of Singapore (June 3); UnionDigital of Union Bank of the Philippines (July 15): GOtyme of Robinsons Bank Corp. (Aug. 12); and Maya Bank, owned by PayMaya of PLDT Inc. (Sept. 16).  Of the six, only OF Bank and Tonik Bank are already operating as digital banks while the rest are expected to fully set up their operations within six months or less.  “We’ll give them three years to operate but some are really ready and they have huge networks (and some) will be online pretty soon, maybe in less than six months,” said Diokno in the FINEX forum. Classification of Banks in the Philippines PH will only have 6 digital banks for now — Diokno Published October 4, 2021, 12:48 PM by Lee C. Chipongian  “As you know, digital banking is different from the traditional banking, we only require them to have one headquarter, no branches, no light branches even, and so they will be operating at lower costs (and) adopting new technology,” he added.  The approved digital banks are given a year to complete preoperating requirements and commence banking operations. Existing banks converting to digital banks should complete the transition within three years from date of acquiring a Monetary Board approval.  The BSP is limiting the number of digital banks to allow them the space to closely monitor the performance and impact of digital banks to the banking system and their contribution to the financial inclusion agenda. Diokno has said that BSP needs to ensure that there is healthy competition among banks to encourage the development of innovative and competitive financial products and services. Classification of Banks in the Philippines PH will only have 6 digital banks for now — Diokno Published October 4, 2021, 12:48 PM by Lee C. Chipongian  Digital banks, which are required at least P1 billion capitalization, have minimal or zero-reliance on physical touchpoints but will have to set up one office as central hub in the Philippines to receive and resolve customer complaints.  The BSP issued Circular No. 1105 last Dec. 2020 on the establishment of digital banks. It is the BSP’s seventh bank category.  Diokno said last week that BSP could reopen the window for digital bank license applications anytime or even within a year if they have assessed that the digital bank market needs to expand.  The Regulatory Regime Applicable To Banks The GBL governs universal and commercial banking. Special laws or charters regulate the operations of the other banks, but the GBL still applies to them insofar as it is not in conflict with those laws or charters. In fact, the Philippine Cooperative Code of 2008 recognizes the primacy of the GBL in the regulation of cooperative banks.  The rules implementing the various banking laws are embodied in the Manual of Regulations for Banks issued by the BSP. From time to time, additional circulars and other issuances are promulgated by the BSP to regulate new matters, if not to amend, repeal or otherwise modify existing rules.  The New Central Bank Act, which is the BSP charter, is applicable as it contains provisions on banking regulation in line with the mandate of the BSP as the primary overseer of banks in the Philippines. Relevant too is the Charter of the Philippine Deposit Insurance Corporation (PDIC), the insurer of bank deposits. Prudential Regulation Relationship with the Prudential Regulator  An effective prudential regulator is central to a safe and sound banking system.  In the Philippines, that role is fulfilled entirely by the BSP.  Section 4 of the GBL expressly states that the 'operations and activities of banks shall be subject to supervision of the Bangko Sentral'.  Supervision, as defined in Section 4, not only contemplates the promulgation by the BSP of rules of conduct and standards of operations for banks (now set out in the Manual of Regulations for Banks, as supplemented or modified by the BSP from time to time), but also visitorial powers; that is, the conducting of examinations and investigations of the activities of banks with a view to determining their compliance with those rules and standards, and enforcing prompt and corrective action in cases of breaches of the same.  Ultimately, the aim is to ensure the continued solvency and Prudential Regulation  As a rule, the BSP conducts regular investigations of banks not more than once a year. However, the Monetary Board, by an affirmative vote of five members, may order a special examination of a bank. In this regard, the BSP is required to immediately address findings of irregularities or deficiencies. When examining a bank, the BSP also has the authority to examine an enterprise that is wholly or majorityowned by the bank.  Under the PDIC Charter, the PDIC can also examine banks once a year with the prior approval of the BSP. To avoid the overlapping of efforts, the PDIC has to maximise the efficient use of relevant reports, information and findings of the Bangko Sentral which it shall make available to the [PDIC].  Under the amendments to the PDIC Charter made by Republic Act No. 10846, if the PDIC has submitted to the Monetary Board a report of examination asking that corrective action be taken against a bank determined by the PDIC to be conducting unsafe and unsound banking practices, and no corrective action is taken by the Monetary Board within 45 days of submission of the report, the PDIC can, motu proprio, institute the necessary corrective action and thereafter inform the Monetary Board of the action taken. Prudential Regulation Management of banks  The management of a locally incorporated bank (such as a subsidiary of a foreign bank) is vested in a board of directors with 5 to 15 members, at least two of whom must be independent directors. Foreign nationals may become directors to the extent of the foreign equity in the bank concerned.  The Monetary Board has prescribed the criteria for individuals to be elected as bank directors, in line with the fit and proper rule, to maintain the quality of bank management, and better protect depositors and the public in general. Here, the Monetary Board considers the integrity, experience, education, training and competence of the individual concerned. The election of bank directors must be confirmed by the Monetary Board.  Board meetings may be conducted via teleconferencing or videoconferencing. Accordingly, directors of a bank need not all be physically present in one room to hold a valid meeting. A bank director must, however, participate in at least 50 per cent of all board meetings every year and physically attend at least 25 per cent of all such meetings. Prudential Regulation  As in other domestic corporations, all corporate powers of a locally incorporated bank are exercised by its board of directors. After the election of the directors, the shareholders can participate in the management of the bank only in certain fundamental matters, such as the amendment of the articles of incorporation or by-laws of the bank, its dissolution, or its merger or consolidation with another bank.  The BSP published the Handbook on Corporate Governance 'to improve corporate governance in the Philippine banking system'. The BSP also issued the rules of procedure on administrative cases involving directors and officers of banks. It is also aligning its rules with international best practices that foster good corporate governance in the banking sector, such as the Principles for Enhancing Corporate Governance promulgated by the Basel Committee on Banking Supervision.  In this regard, the BSP has required each bank to appoint a fulltime chief compliance officer to manage a compliance system designed to identify and mitigate business risks that may erode Prudential Regulation  To protect the funds of the depositors and creditors of banks, the Monetary Board may regulate the payment of compensation, allowances, fees, bonuses, stock options, profit-sharing and fringe benefits to bank directors and officers, in exceptional cases and when circumstances warrant, such as when a bank is under comptrollership or conservatorship, when it is found to be conducting business in an unsafe and unsound manner, or when it is in an unsatisfactory financial condition.  Towards this end, the Monetary Board requires that the total amount of unbooked valuation reserves and deferred charges be deducted from the net income of the bank in the event of profit sharing.  Further, when the total compensation package (including salaries, allowances, fees and bonuses) of directors and officers is significantly excessive when compared with peer group averages, the Monetary Board may order a reduction of the package to a more reasonable level. It must also be noted that the compensation of directors in general is regulated by Section 29 of the Revised Prudential Regulation  Philippine branches of foreign banks are bound by the pertinent provisions of the GBL and the Manual of Regulations for Banks, except those providing for (1) the creation, formation, organization or dissolution of corporations, and (2) the fixing of the relations, liabilities, responsibilities or duties of shareholders, directors or officers of corporations.  These excluded matters will be governed by the applicable law in the jurisdiction of the foreign bank. Apart from the aforementioned in items (1) and (2), branches of foreign banks are required to conduct their operations subject to the same standards required of domestic banks.  A branch does not have a board of directors. It is usually managed by an individual appointed by the head office, and his or her authority is normally set out in a power of attorney from the head office. Prudential Regulation Regulatory Capital and Liquidity  Section 34 of the GBL enjoins the BSP to conform the 'minimum ratio which the net worth of a bank must bear to its total risk assets' to 'internationally accepted standards, including those of the Bank of International Settlements relating to risk-based capital requirements’.  In the case of non-compliance by a bank with the prescribed minimum ratio, the Monetary Board may, until that ratio is met or restored by the bank: a. limit or prohibit the distribution of net profits by the bank, and require that those profits be used, in full or in part, to increase the capital accounts of the bank; b. restrict or prohibit the acquisition of major assets by the bank; and c. restrict or prohibit the making of new investments by the bank, with the exception of purchases of readily marketable evidence of indebtedness of the government and the BSP, and other evidence of indebtedness or obligations, the servicing and the Prudential Regulation  Universal and commercial banks are subject to the capital adequacy standards under Basel III. The Basel Committee on Banking Supervision had outlined a staggered implementation of Basel III up to the end of 2018 to allow internationally active banks time to raise capital organically.  However, the BSP decided to adopt Basel III-based capital standards in full on 1 January 2014 on a non-staggered basis. This is in recognition of the strong capital position of the Philippine banking industry.28  Under the rules, the risk capital ratio, expressed as a percentage of qualifying capital to risk-weighted assets, is 10 per cent for solo bases (head office plus branches) and consolidated bases (parent bank plus subsidiary financial allied undertakings, but excluding insurance companies). Prudential Regulation  The Common Equity Tier 1 (CET1) ratio is 6 per cent, while the Tier 1 capital ratio is 7.5 per cent.  Moreover, there is a capital conservation buffer of 2.5 per cent, composed of CET1 capital.  In addition, the BSP subjects domestically systematically important banks to a higher loss absorbency by requiring them to have a higher share of their balance sheets funded by instruments that increase their resilience as a going concern. Prudential Regulation  To restrict the build-up of leverage, banks must meet a leverage ratio of not less than 5 per cent on both a solo and consolidated basis.  Finally, there is a required liquidity coverage ratio, which is the ratio of high-quality liquid assets to total net cash outflows. As a minimum, the stock of liquid assets should enable the bank to withstand significant liquidity shocks that last 30 calendar days, which would give time for corrective actions to be taken by the bank management or the BSP, or by both.  Thrift banks, rural banks and cooperative banks, which are not subsidiaries of universal and commercial banks, are covered by a separate risk-based capital adequacy system labelled by the BSP as the Basel 1.5 framework – a simplified version of Basel II that takes into account the simple operations of those banks. Prudential Regulation Recovery and resolution  Under Section 29 of the New Central Bank Act, the Monetary Board may appoint a conservator for a bank that is in a 'state of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors'. The conservator will: a. have such powers as the Monetary Board deems necessary to take charge of the assets and liabilities of the bank; b. manage the bank or reorganize its management; c. collect all monies and debts due to the bank; and d. exercise all powers necessary to restore its viability. Prudential Regulation  The conservator must be competent and knowledgeable in bank operations and management. There is a one-year limit to conservatorship.  The Monetary Board will terminate the conservatorship when the bank can continue to operate on its own. Termination is also an option if the Monetary Board determines that the continuance in business of the bank would involve probable loss to the depositors and other creditors of the bank, in which case Section 30 of the New Central Bank Act would apply.  Under Section 30, the Monetary Board may summarily forbid a bank from doing business and designate the PDIC as a receiver of the bank if that bank 'has insufficient realisable assets, as determined by the Bangko Sentral, to meet its liabilities'. The appointment of a receiver is also warranted without prior hearing in the event that the Monetary Board finds that a bank is unable to pay its liabilities as they become due in the ordinary course of business; cannot continue in business without involving probable losses to its depositors or creditors; or has wilfully violated a final Prudential Regulation  The receiver must determine, as soon as possible but not later than 90 days after the takeover, whether the bank may be rehabilitated or otherwise placed in a condition that would permit it to resume business with safety to its depositors and other creditors, and the general public.  Any such determination for the resumption of business is subject to prior Monetary Board approval. Prudential Regulation  In the event that the receiver determines that the bank cannot be rehabilitated or permitted to resume business, the Monetary Board will notify the board of directors of the bank accordingly, and instruct the receiver to liquidate the bank.  The receiver will then file an ex parte petition in court for assistance in the liquidation of the bank pursuant to a liquidation plan adopted by the PDIC for general application to all closed banks and convert the assets of the bank to money, disposing of the same to creditors and other parties, for the purpose of paying the debts of the bank in accordance with the rules on concurrence and preference of credits under the Civil Code of the Philippines, and institute actions to collect and recover accounts and assets of, or defend any action against, the bank. Prudential Regulation  The actions of the Monetary Board taken under Section 30 of the New Central Bank Act are final and executory, and may not be restrained or set aside by a court, except for on petition for certiorari on the ground that the action in question was in excess of jurisdiction or done with such grave abuse of discretion as to amount to lack or excess of jurisdiction.  Under the amended PDIC Charter, a bank ordered to be closed by the Monetary Board will no longer be rehabilitated. The PDIC, as the designated receiver, will proceed with the takeover and liquidation of the closed bank, without the consent of the stockholders, board of directors, depositors and the other creditors of the closed bank. Conduct of Business  Section 2 of the GBL requires banks to exercise 'high standards of integrity and performance'.  A breach of this fiduciary duty could make the erring bank liable for damages to its customers, and result in the conduct of banking business in an unsafe and unsound manner that may lead to a bank run and eventual insolvency.  To minimise this systemic risk, prudential measures have been put in place in the GBL and the Manual of Regulations for Banks.  Apart from the capital adequacy discussed earlier, these measures include the reserve requirement, single borrower's limit (SBL), the directors, officers, stockholders and related interests (DOSRI) limit, loan-loss provisioning and equity investment limit. Conduct of Business  The BSP is also reinforcing prudential measures to minimise systemic risk, as exemplified by its adoption of a stress test for the real estate exposures of local banks.  Further, Part Ten of the Manual of Regulations for Banks sets forth the minimum standards of consumer protection in the areas of disclosure and transparency, confidentiality of client information, fair treatment, effective recourse and financial education.  BSP-supervised financial institutions must adhere to the highest service standards in their dealings with their customers.  They are required to have a consumer protection risk management system whereby they are able to identify, measure, monitor and control consumer protection risks inherent in their operations.  The BSP considers consumer protection as a core function complementary to its prudential regulation and supervision, and to its agenda for financial stability, inclusion and education. Conduct of Business Reserves  Banks are required to maintain reserves against their deposit and deposit-substitute liabilities.  The reserve requirements are not static, as they may be varied from time to time by the Monetary Board.  The BSP imposed a unified reserve (initially at 18 per cent) for the deposit and deposit-substitute liabilities of universal and commercial banks.  These reserves, aside from being an instrument of monetary policy of the BSP, have a prudential purpose, since they serve as a ready source of funds that will respond to an unusually large number of withdrawals of deposits taking the shape of a bank run.  Under manageable circumstances, the reserves and other funds at the bank's disposal should stem the run. Conduct of Business Single Borrowers Limit (SBL)  The SBL serves to allocate bank resources to different sectors of the economy.  It prevents banks from making excessive loans and other credit accommodations to a single borrower or corporate group.  Thus, banks are prohibited from placing all their eggs in the basket of a single client, thereby safeguarding them from too large a risk exposure to a single client.  Currently, the SBL is 25 per cent of the net worth of a bank.  There could be an incremental SBL of 10 per cent of the net worth of the bank, provided that the additional liabilities of the borrower are adequately secured by documents of title to goods that are readily marketable, non-perishable and fully insured. Conduct of Business Directors, Officers, Stockholders and Related Interests (DOSRI) Limit  The general policy behind the DOSRI limit is to level the lending field between insiders (namely, directors, officers, stockholders and their related interests) and outsiders.  The rules require that loans and other credit accommodations to DOSRI are to be in the regular course of business and upon terms no less favourable to the bank than those offered to those outside the DOSRI circle.  The aim is to prevent banks from becoming a captive source of finance of the DOSRI.  The existing DOSRI rules have three ceilings: an individual ceiling, an aggregate ceiling and a ceiling on unsecured loans.  The individual ceiling relates to the total allowable outstanding direct credit accommodation to a DOSRI, which is an amount equivalent to the individual's unencumbered deposits in the lending bank plus the book value of the paid-capital contribution therein. It is also required that the unsecured credit accommodations must not exceed 30 per cent of the total DOSRI Conduct of Business Directors, Officers, Stockholders and Related Interests (DOSRI) Limit  On the other hand, the aggregate ceiling refers to the total credit accommodations to DOSRI: this is 15 per cent of the total loan portfolio of the bank or 100 per cent of its net worth, whichever is lower.  Before a bank can extend a DOSRI loan, a specific resolution must be passed by the board of directors, without the participation of the interested director.  The resolution must be entered into the records of the bank, and a copy of the entry must be transmitted to the BSP within 20 banking days of board approval. Conduct of Business Loan-loss Provisioning  Appendix 15 to the Manual of Regulations for Banks contains the basic minimum guidelines for setting up allowances for credit losses (ACL) in respect of banks 'with operations that may not economically justify a more sophisticated loan loss estimation methodology or where practices fell short of expected standards'.  Loans and other credit accommodations with unpaid principal or interest are to be classified (as pass, especially mentioned, substandard, doubtful or loss, as the case may be) and provided with ACL based on the number of days of missed payments. Conduct of Business Equity investment limit  There are limits as to how much universal and commercial banks can invest in equities of enterprises. Under Section 24 of the GBL, the total investment by a universal bank in equities of allied and non-allied enterprises must not exceed 50 per cent of its net worth, while its equity investment in any one enterprise is not to exceed 25 per cent of its net worth.41  On the other hand, the total investment by a commercial bank in equities of allied enterprises must not exceed 35 per cent of its net worth, while the individual limit is 25 per cent of its net worth.  It must be stressed that only universal banks can invest in non-allied enterprises. In all cases, the approval of the Monetary Board is required. Conduct of Business  A breach of any of the foregoing prudential measures would constitute a violation of the GBL or the Manual of Regulations for Banks. Under Section 36 of the New Central Bank Act, any person responsible for a breach or violation may be criminally prosecuted, and if convicted may be punished with a fine ranging from 50,000 to 2 million Philippine pesos, with imprisonment for a period ranging between two and 10 years, or with a combination of a fine and imprisonment, at the discretion of the court.  Further, whenever a bank persists in carrying on its business in an unlawful or unsafe manner, the Monetary Board may take action under Section 30 of the New Central Bank Act for its receivership and liquidation, without prejudice to the penalties provided above and the administrative sanctions provided in Section 37 of the New Central Bank Act, namely: a. fines in amounts determined by the Monetary Board, but in no case to exceed 1 million pesos for each transactional violation or 100,000 pesos per calendar day for violations of a continuing nature; Conduct of Business b. suspension of rediscounting privileges or access to BSP credit facilities; c. suspension of lending or foreign exchange operations or authority to accept new deposits or make new investments; d. suspension of interbank clearing privileges; and e. suspension or revocation of quasi-banking or other special licenses. Conduct of Business  The bank is subject to certain confidentiality obligations. Any information relating to the funds or properties of clients of a bank are to be kept confidential by that bank and its directors, officers, employees and agents.  Under Subsection 55.1(b) of the GBL, this information cannot be disclosed to any unauthorised person without a court order. However, under Section 11 of the Anti-Money Laundering Act of 2001, no court order is required if: a. the funds or property involved consist of investments (other than those in bonds issued by the government or its political subdivisions and instrumentalities, as those are governed by the Secrecy of Bank Deposits Law mentioned below); and b. the said investments are related to: o kidnapping for ransom; o unlawful activities under Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15 and 16 of the Comprehensive Dangerous Drugs Act of 2002; o hijacking and other violations under Republic Act No. 6235; and o destructive arson and murder, including that perpetrated by Conduct of Business  The term 'unauthorised person' in Subsection 55.1(b) of the GBL does not include BSP officials involved in the periodic or special examination of a bank, or other persons authorised by the bank to undertake certain activities on its behalf (e.g., a service provider under an outsourcing arrangement allowed under Subsection 55.1(e) of the GBL).  It must also be noted that the persons entitled to protection under Subsection 55.1(b) are 'private individuals, corporations, or any other entity'. Thus, the protection would not extend to non-private persons, such as public officials.  With regard to bank deposits in pesos (as well as investments in bonds issued by the government or its political subdivisions and instrumentalities), the Secrecy of Bank Deposits Law applies.  Under this Law, those deposits and investments may not be examined, enquired about or looked into by any person, government official, bureau or office, except: a. upon written permission of the depositor or investor; b. in cases of impeachment; c. upon an order of a competent court regarding bribery; d. for dereliction of duty by public officials; or e. where the money deposited or invested is the subject of the Conduct of Business  The following cases are additional exceptions to the Secrecy of Bank Deposits Law: a. prosecution for unexplained wealth under Republic Act No. 3019, as amended (otherwise known as the Anti-Graft and Corrupt Practices Act); b. upon order of a competent court in cases of violation of the AntiMoney Laundering Act of 2001 when it has been established that there is probable cause that the deposits or investments involved are in any way related to an unlawful activity or a money laundering offence under the said Act, except that no court order is required in cases of: o kidnapping for ransom; o unlawful activities under Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15 and 16 of the Comprehensive Dangerous Drugs Act of 2002; o hijacking and other violations under Republic Act No. 6235; and Conduct of Business  the BSP's enquiry into or examination of deposits or investments with any bank when the enquiry or examination is made during the course of the BSP's periodic or special examination of a bank;  an enquiry by the Commissioner of Internal Revenue into the deposits of a decedent for the purpose of determining the gross estate of the decedent; and  disclosure of certain information about bank deposits, which have been dormant for at least 10 years, to the Treasurer of the Philippines in a sworn statement, a copy of which is posted in the bank premises  On the other hand, deposits in foreign currency deposit units of banks may be examined in any of the following instances: a. upon the written permission of the depositor; b. upon an order of a competent court in cases of violation of the Anti-Money Laundering Act of 2001, when it has been established that there is probable cause that the deposits involved are in any way related to an unlawful activity or a money laundering offence under the said Act, except that no Conduct of Business  kidnapping for ransom;  unlawful activities under Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15 and 16 of the Comprehensive Dangerous Drugs Act of 2002;  hijacking and other violations under Republic Act No. 6235; and  destructive arson and murder, including that perpetrated by terrorists against non-combatants and similar targets; c. an enquiry by the Commissioner of Internal Revenue into the deposits of a decedent for the purpose of determining the gross estate of the decedent;51 and d. the BSP's enquiry into or examination of deposits with any bank when the enquiry or examination is made during the course of the BSP's periodic or special examination of the bank. Conduct of Business  Notwithstanding the provisions of the Secrecy of Bank Deposits Law, the Foreign Currency Deposit Act and Subsection 55.1(b) of the GBL, the BSP and the PDIC may enquire into or examine deposit accounts and all information related thereto in cases where there is a finding of unsafe or unsound banking practices.  Further, under the Terrorism Financing Prevention and Suppression Act 2012, the Anti-Money Laundering Council is authorised, in connection with an investigation of financing of terrorism, to enquire into or examine deposits and investments with any bank and any of its subsidiaries or affiliates without a court order. Funding  Funding for banks comes from equity contributions from its shareholders, and from loans and credit accommodations from the BSP and other lenders.  The BSP has prescribed certain minimum levels of capitalization for banks. For instance, a universal bank (with more than 100 branches) must have a minimum paid-in capital of 20 billion pesos at the time of its establishment, while a commercial bank (with the same number of branches) must have 15 billion pesos. Furthermore, the risk-based capital adequacy ratio of universal and commercial banks has continued to be above the BSP's minimum ratio of 10 per cent and the Basel Accord's standard ratio of 8 per cent, despite global financial uncertainties.  The BSP, for its part, provides rediscounting and other credit facilities to banks, including loans for liquidity purposes and emergency loans during periods of financial panic that directly threaten monetary and banking stability. Control of Banks and Transfers of Banking Business Control regime  Under Section 122 of the Manual of Regulations for Banks, the shareholdings of an individual or a corporation in any bank are subject to the following limits: a. foreign individuals and non-bank corporations may collectively own or control up to 40 per cent of the voting stock of a domestic bank; b. qualified foreign banks may own or control up to 100 per cent of the voting stock of a domestic bank; c. a Filipino individual and a domestic non-bank corporation may each own up to 40 per cent of the voting stock of a domestic bank, but there is no ceiling on the aggregate ownership by such individuals and corporations in a domestic bank; and d. an individual and corporations wholly or majority-owned by him or her can own or control only up to a combined 40 per cent of the voting stock of a domestic bank. Control of Banks and Transfers of Banking Business Transfers of banking business  The prior approval of the Monetary Board is required for transactions involving voting shares of a bank if they will result in ownership or control of more than 20 per cent of voting shares of stock of a bank by any person (whether natural or juridical), or will enable that person to elect or be elected as a director of the bank; or effect a change in the majority ownership or control of the voting shares of stock of the bank from one group of persons to another. Foreign individuals and non-bank corporations may collectively own or control up to 40 per cent of the voting stock of a domestic bank;  The transaction will not be approved by the Monetary Board unless the bank concerned immediately complies with the prescribed minimum capital requirement for new banks. Control of Banks and Transfers of Banking Business Transfers of banking business  Under the Philippine Competition Act, a bank merger or consolidation whose value exceeds 1 billion pesos is to be notified to the Philippine Competition Commission. However, a favorable or no-objection ruling by the Commission will not dispense with the Monetary Board and PDIC approvals for a merger or consolidation. Further, without PDIC consent, no insured bank can assume another bank's liability to pay deposits.