General Banking Law of 2000 PDF | Banks in the Philippines

THE GENERAL BANKING LAW OF credit services to cooperative 2000 organizations and their members Islamic banks - known as the "Charter of Al Amanah Isl...

THE GENERAL BANKING LAW OF credit services to cooperative 2000 organizations and their members Islamic banks - known as the "Charter of Al Amanah Islamic Investment Bank of Banks – entities engaged in the lending the Philippines” also known as Sharia- of funds obtained in the form of deposits compliant banks, are financial institutions Quasi-banks – entities engaged in the that operate according to Islamic borrowing of funds through the issuance, principles, prohibiting interest (riba) and endorsement, or assignment with focusing on profit-sharing and fair acceptance of deposit substitutes for dealings. purposes of relending or purchasing of Other classifications of banks as receivables and other obligations determined by the Monetary Board of the Banking is fiduciary in nature that Bangko Sentral ng Pilipinas requires high standards of integrity and performance. Demand Deposit – cannot be accepted or created by banks other than universal Authority to Incorporate and Operate and commercial banks. Except upon prior approval of, subject to such 1. Certificate of Authority issued by conditions and rules as may be the Monetary Board prescribed by the Monetary Board 2. Articles of Incorporation should be accompanied by Certificate of Authority to be registered by SEC. Authority of BSP 3. Any entity performing baking or quasi-banking function can’t 1. The issuance of rules of conduct operate without a certificate of or the establishment of standards authority from BSP. of operation for uniform application to all institutions or functions covered Classification of Banks 2. The conduct of examination to determine compliance with laws Universal banks - Banks that have and regulations if the authority to exercise, in addition to the circumstances so warrant as powers and functions of commercial determined by the Monetary banks, powers of an investment house Board; and the power to invest in non-allied 3. Overseeing to ascertain that laws enterprises and regulations are complied with; Commercial banks - Banks that are 4. Regular investigation which shall given all such power necessary to not be oftener than once a year engage in commercial banking in from the last date of examination addition to general corporate powers to determine whether an institution is conducting its Thrift banks - Composed of savings and business on a safe or sound basis; mortgage banks, stock savings and loan 5. Inquiring into the solvency and associations, and private development liquidity of the institution; and banks 6. Enforcing prompt corrective Rural banks - Banks that are created to action. make needed credit available and readily The BSP shall also have supervision accessible in the rural areas over the operations of and exercise Cooperative banks - Banks that regulatory powers over quasi-banks, primarily provide financial, banking, and trust entities, and other financial institutions. 1 The operations and activities of banks Functions of Banks shall be subject to supervision of the Basic Functions Bangko Sentral ng Pilipinas (BSP) 1. Deposit function 2. Loan function Risk-based Capital Other Functions Monetary Board – may prescribe 1. Receive in custody minimum ratio to be determined based 2. Act as a financial agent and buy on the net worth and risk assets of a bank and sell and its subsidiaries. 3. Make collections and payments The ratio may be altered or suspended 4. Acts as managing agent, adviser, when necessary for a MAXIMUM period etc. Under prior approval of of one (1) year. Monetary Board 5. Rent out safety deposit boxes If not complied with, Monetary Board may: Prohibited Acts - Limit or prohibit the distribution of 1. Engaging in insurance business net profits by such bank and may as the insurer require that part or all of the net 2. Outsourcing of functions profits be used to increase the capital accounts of the bank until the minimum requirement has Deposit been met - unpaid balance of money or its - Restrict or prohibit the acquisition equivalent received by a bank in of major assets and the making of the usual course of business new investments by the bank, with - consists of money placed into the exception of purchases of banking institutions for readily marketable evidences of safekeeping indebtedness of the Republic of the Philippines and of the BSP and any other evidences of Kinds of Deposits indebtedness or obligations the Savings Deposit – most common type servicing and repayment of which of deposit and is usually evidenced are fully guaranteed by the through passbook Republic of the Philippines, until the minimum required capital ratio Foreign Currency Deposit – Any has been restored. person, natural or juridical, may, in accordance with the provisions of the Bank = Under Merger/Consol/Rehab: Foreign Currency Deposit Act, deposit The Monetary Board may temporarily with such Philippine banks foreign relieve the surviving, consolidated or currencies which are acceptable as part constituent bank/corporation from full of the international reserve. compliance with the required capital Demand Deposit – All those liabilities of ratio. banks which are denominated in February 16, 2001 – approval of the Philippine currency and are subject to adoption of the risk-based capital payment in legal tender upon demand by adequacy ratio along with the criteria of presentation of checks the Bank for International Settlements  General Rule: Universal and (BIS) Commercial Banks – may  Required minimum ratio = 10% accept/create demand deposits  International recommended without prior authority from the minimum ratio = 8% BSP 2   Exception: Other banks may other credit accommodation is accept or create demand deposits granted upon prior approval of, and subject to such conditions and rules as may be prescribed by the Single Borrower’s Limit (SBL) Monetary Board Basis for determining compliance with Negotiable Order of Withdrawal SBL: Total credit commitment of the bank Accounts (NOW) – These are interest- to the borrower bearing deposit accounts that combine Maximum Limit: the payable on demand feature of checks and investment feature of savings SHOULD NOT EXCEED 25% of the net accounts worth of such bank.  Universal/Commercial banks – Additional Limit: may offer NOW accounts without May be increased by ADDITIONAL 10% prior authority by the Monetary of the net worth of such bank Board.  Thrift banks, rural banks, and cooperative banks – may accept Inclusions in the computation of SBL NOW accounts upon prior approval of the Monetary Board The direct liability of the maker or acceptor of paper discounted with or sold Time Deposit – an account with fixed to such bank; and term-payment of which cannot be legally required within such a specified number The liability of a general indorser, drawer, of days or guarantor who obtains a loan or other credit accommodation from or discounts paper with or sells papers to such bank; Loan Function Individual = owns or controls a Rules/Restrictions MAJORITY INTEREST in a corporation, partnership, association or any other 1. A bank shall grant loans and other entity, the liabilities of said entities to credit accommodations only in such bank; amounts and for the periods of time essential for the effective Corporation = all liabilities to such bank completion of the operations to be of all subsidiaries in which such financed. corporation owns or controls a majority 2. Such grant of loans and other interest; and credit accommodations shall be Partnership, association, or other consistent with safe and sound entity = the liabilities of the members banking practices. thereof to such bank. 3. Before granting a loan or other credit accommodation, a bank must ascertain that the debtor is *Even if a parent corporation, capable of fulfilling his partnership, association, entity, or an commitments to the bank (Section individual who owns or controls a 40). majority interest in such entities has no Amortization on Loans and Other liability to the bank, the Monetary Board Credit Transactions (09 handout pg 5) may prescribe the combination of the liabilities of subsidiary corporations or - Initial amortization date should members NOT BE LATER than 5 YEARS from the date on which the loan or 3 Exclusions in the computation of SBL - a copy of such entry shall be transmitted forthwith to the Loans and other credit accommodations appropriate supervising and - secured by BSP or PH Gov’t; examining department of the BSP. - fully guaranteed by the PH Gov’t as to the payment of principal and interest;  Arm’s Length Rule - covered by assignment of Dealings of a bank with any of its deposits maintained in the lending directors, officers or stockholders and bank and held in the Philippines; their related interests shall be upon - under letters of credit to the extent terms not less favorable to the bank covered by margin deposits; and than those offered to others. - which the Monetary Board may from time to time, specify as non- risk items.  Aggregate Ceiling DOSRI shall not exceed 15% of the total loan portfolio of the bank Restrictions on Directors, Officers, or Stockholders, and Their Related 100% of net worth whichever is Interests (DOSRI) Accounts lower Related Interests Provided, that in no case shall the total  within 4th degree of unsecured loans, other credit consanguinity/affinity/common- accommodations and guarantees to said law/ related interests DOSRI exceed 30% of the aggregate  STOCKHOLDINGS must be fully ceiling or the outstanding loans, other disclosed in ALL credit accommodations and guarantees, TRANSACTIONS by such an whichever is lower. individual with the bank  09 Handout pg 7  Individual Ceiling The total outstanding loans, other credit Requirements for validity of loan accommodations and guarantees to granted by the DOSRI each of the bank’s DOSRI shall be limited to an amount equivalent to their respective unencumbered deposits and  Procedural Requirement book value of their paid-in capital No director or officer of any bank shall, contribution in the bank: directly or indirectly borrow from such Provided, however, that unsecured bank for himself or as a representative; loans, other credit accommodations, and NOR guarantees to each of the bank’s DOSRI shall not exceed 30% of their respective shall he become a guarantor, indorser, or total loans, other credit accommodations surety for loans from such bank to others, and guarantees or in any manner be an obligor or incur any contractual liability to the bank Note: This limit shall not apply to loans, credit accommodations, and guarantees extended by a cooperative bank to its  Reportorial Requirement cooperative shareholders. - The required approval shall be entered upon the records of the bank 4 OTHER PROVISIONS the funds or properties in the custody of the bank Collaterals  Accept gifts, fees or commissions 1. Loans and Other Credit or any other form of remuneration Accommodations Against Real in connection with the approval of Estate a loan or other credit a. shall not exceed 75% of accommodation the appraised value of the  Overvalue or aid in overvaluing respective real estate any security security,  Outsource inherent banking b. plus 60% of the appraised functions. value of the insured improvements No borrower of a bank shall: 2. Loans and Other Credit Accommodations on Security of  Fraudulently overvalue property Chattels and Intangible Properties offered as security for a loan a. shall not exceed 75% of  Furnish false or make the appraised value of the misrepresentation or suppression security of material facts  Attempt to defraud the said bank  Offer any director, officer, Ownership of Real Property employee or agent of a bank any gift, fee, commission, 1. Ceiling on Investments in Certain Assets Any bank may acquire real estate as Diligence Required: shall be necessary for its own use in the  Extraordinary diligence conduct of its business: o Demand deposit, savings Provided, however, that the total deposit, and time deposit investment in such real estate, and  Ordinary diligence or diligence improvements, such as bank equipment of a good gather of a family shall NOT EXCEED 50% of combined o Services and contracts capital accounts. Limitation of Foreign Ownership of Minimum Deposit Reserve Ratio of a Domestic Bank Bank to BSP  Foreign individuals and Non-bank  at least 20% of its total liabilities to corporations: BSP (before March 2, 2018) o may own or control up to  BSP reduced it to 19% in MarcH 40% of the voting stock of 2018 a domestic bank o shall apply to Filipinos and domestic non-bank PROHIBITED TRANSACTIONS corporations  The percentage of foreign-owned No director, officer, employee, or agent of voting stocks in a bank shall be any bank shall: determined by the citizenship of  Make false entries in any bank the individual stockholders in report or statement or participate that bank. The citizenship of the in any fraudulent transaction corporation, which is a  Disclose to any unauthorized stockholder in a bank shall follow person any information relative to the citizenship of the 5  controlling stockholders of the corporation, irrespective of the place of incorporation Other Bank Laws The organization, ownership and capital requirements, powers, supervision and general conduct of the business of thrift banks, rural banks, and cooperative banks shall be governed by the provisions of the  Thrift Banks Act  The Rural Banks Act  The Cooperative Code 6