Manual of Regulations for Banks and Other Financial Intermediaries — 1982 Book II

July 30, 1982 MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES The Monetary Board in its Resolution No. 1421 dated July 30, 1982, approved this codification of the rules and regulations governing banks and other financial intermediaries which shall be known and cited as: MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES These codified regulations shall take effect as final authority as of August 1, 1982 and supersede all regulatory issuances in force and effect as of July 31, 1982 on subject matters covered by the codified regulations. For the Monetary Board: (SGD.) JAIME C. LAYA Governor PREFACE This Manual of Regulations for Banks and Other Financial Intermediaries, approved by the Monetary Board as final authority under its Resolution No. 1421 dated July 30, 1982 shall constitute the Code of Central Bank Regulations. As such, it shall be the single source of all substantive regulations issued by the Monetary Board or the Governor of the Central Bank, and shall be cited as the authority for enjoining compliance with the rules and regulations embodied therein. For the present, only existing substantive rules issued by the Monetary Board or the Governor which are being implemented principally by the Supervision and Examination Sector (SES),are set out in four volumes with pertinent Parts and Sections in line with the arrangement and text of the Manual of Regulations on the Supervision of Financial Intermediaries which was issued as a systematic compilation of supervisory regulations in 1975. Regulations being implemented by the International Sector would subsequently form part of this Manual. The present volumes correspond to Book I Expanded Commercial Banks (EKBs) and Commercial Banks (KBs);Book II Thrift Banks (TBs);Book III Rural Banks (RBs);and Book IV Non-Bank Financial Intermediaries (NBFIs).The divisional features of the former Manual of Regulations which have been found valuable, such as the division of the Books into Parts indicative of the major operations of banks and NBFIs, and the further breaking up of Parts into major topics consisting of Sections and Subsections, were retained, and new and improved features were introduced to facilitate research. In addition to a comprehensive table of contents, an alphabetical subject/descriptive word index has been added at the end of each book. The financial reforms of 1980 which restructured the financial system are already reflected in this Manual. Furthermore, the substantive regulations in the Rules Governing Rural Banks (also in Manual form) are consolidated with the rules included in the original Book III of the Manual of Regulations which was published in 1975. The books were reorganized and revised as a project of the Commission on the Supervision of Financial Intermediaries (CSFI).The Office of Supervisory Policy and Regulations in coordination with the Office of the General Counsel and the Office of the Senior Deputy Governor undertook the further refinement of the Books towards conversion of the Manual into a single authority on the regulation or supervision of financial institutions. INSTRUCTIONS TO USERS This Manual shall constitute the single source of all substantive rules governing the financial system of the country effective as of August 1, 1982. Presently, it is composed of the regulations on the supervision of banks and non-bank financial intermediaries principally implemented by the Supervision and Examination Sector. It will subsequently include substantive regulations governing foreign exchange operations. The Manual, as the comprehensive authority on the specific subjects covered therein, shall be the basis for amending or repealing provisions incorporated in the Books. New rules shall immediately form part of the pertinent section or subsection of the Book affected 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 Book as amended or repealed by the Monetary Board/Governor. Financial institutions regulated and supervised by the Central Bank shall comply with the provisions of the Manual and any violation thereof shall be punishable under its general provision on sanctions. As a code of regulations, the Manual contains the basic features of division into Parts, further subdivided into major topic headings which introduce the corresponding sections and subsections making up the provisions governing a major operation of the particular financial institutions. Parts and major topic headings as well as coded section numbers and headings are made uniform for all Books, with slight modifications in Book IV. Coding of sections utilizes four digits: the first digit refers to Book number, the second to Part number, and the last two refer to section numbers. All provisions for EKBs and KBs (contained in Book I),therefore, begin with number 1; 2 for TBs; 3 for RBs; and 4 for NBFIs. Rules on Part One of Book I bear section numbers beginning with 11; those of Book II begin with 21, and so on for Books III and IV. For example, the code number 1161.6 would mean as follows: The coding of Book IV includes the letters "Q", "N" and "P" which are appended to the pertinent code numbers to indicate provisions for non-bank quasi-banks (NBQBs); non-bank financial intermediaries (NBFIs) and pawnshops, respectively. For example, the code numbers 4161Q, 4161N and 4161P would refer to provisions on reporting requirements of NBQBs, NBFIs and pawnshops, in that order. The paging is by Parts, with 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 6 pages will start with a first page indicated as "Part I-1" with "Part I-6" as its last page number. The pages for updates will follow the same pagination, with added letters to indicate inserted pages, in case of amendatory regulations with more provisions. Appendices for all Parts are found at the last portion of the Manual, before the subject index, and are numbered consecutively, by appendix number. Appendix 1 composed of 3 pages, for example, will begin with a page indicated as "App. 1-1" and end with "App. 1-3". To facilitate reference, running section headings consisting of the coded number(s) of section(s)/subsection(s) 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, which is initially June 30, 1982, is indicated immediately below the running section heads, as: 82.06.30. Issuances for the month ended July 31, 1982 are included as temporary inserts. 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. Amendments to the Manual will be issued as temporary inserts to facilitate dissemination. All amendments within a semester will be reprinted as regular inserts to replace affected pages or as additional pages in case of long amendatory provisions. July 30, 1982 UPDATING INSTRUCTIONS MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES The Manual of Regulations for Banks and Other Financial Intermediaries contains existing regulations as of December 30, 1984. For purposes of updating the Manual as of December 31, 1985, the affected pages shall be removed and the updated pages shall be inserted as follows: BOOK II THRIFT BANKS Manual Updated Pages PAGES TO BE REMOVED PAGES TO BE INSERTED Table of Contents xiii to xiv xiii to xiv xv to xviii xv to xviii.a xix to xx xix to xx xxv to xxvi xxv to xxvi Part I 5 to 6 5 to 6 11 to 12 11 to 12 17 to 18 17 to 18.a 45 to 46 45 to 46.a Part II 1 to 2 1 to 2 5 to 6 5 to 6 13 to 14 13 to 14 17 to 20.a 17 to 20 27 to 30 27 to 30 33 to 36 33 to 35 Part III 1 to 2 1 to 2 11 to 12 11 to 12.a 15 to 16 15 to 16 21 to 22.a 21 to 22.a 51 to 60 51 to 60.b 90.e to 90.f 90.e to 90.h 93 to 94.a 93 to 94.a Part IV 3 to 4 3 to 4 9 to 10 9 to 10 Part VI 1 to 4.b 1 to 4.a 9 to 10 9 to 10.a Appendices 38-1 to 38-2 38-1 to 38-2 48-1 to 48-35 Index I-5 to I-6 I-5 to I-6 I-9 to I-12 I-9 to I-12 BOOK II TABLE OF CONTENTS PART ONE ORGANIZATION, MANAGEMENT AND ADMINISTRATION A. SCOPE OF AUTHORITY SECTION 2101 Scope of thrift banking authority 2101.1 Grant of authority to perform other banking services 2101.2 Determination of competence, experience and adequacy of facilities SECTIONS 2102-2105 (Reserved) B. CAPITALIZATION SECTION 2106 Minimum capitalization 2106.1 Determination of minimum capital 2106.2 Capital build-up program for thrift banks not meeting minimum paid-in capital requirement 2106.3 Government counterpart capital SECTIONS 2107-2110 (Reserved) C. MERGER AND CONSOLIDATION OF BANKS SECTION 2111 Merger or consolidation to meet minimum capital 2111.1 Requirement of Central Bank approval 2111.2 Rules on exchange of shares SECTIONS 2112-2115 (Reserved) D. NET WORTH TO RISK ASSETS RATIO SECTION 2116 Basic ratio 2116.1 Suspended application of ratio in case of merger or consolidation 2116.2 Definitions/explanations of terms and phrases 2116.3 Required reports 2116.4 Sanctions SECTIONS 2117-2125 (Reserved) E. STOCK, STOCKHOLDERS AND DIVIDENDS SECTION 2126 Shares of stock of thrift banks 2126.1 Transfer of shares 2126.2 Convertibility of preferred stock to common stock 2126.3 Equity investments by foreigners in domestic banking institutions SECTIONS 2127-2130 (Reserved) SECTION 2131 Ceiling on stockholdings in a thrift bank 2131.1 Stockholdings in excess of ceiling 2131.2 Transfers and acquisitions of shares within a family group SECTIONS 2132-2135 (Reserved) SECTION 2136 Dividends 2136.1 Definition of terms 2136.2 Amount available as dividends 2136.3 Accrued interest 2136.4 Limitations on declaration of dividends by stock savings and loan associations 2136.5 Reporting and verification 2136.6 Recording of dividends SECTIONS 2137-2140 (Reserved) F. DIRECTORS, OFFICERS AND EMPLOYEES SECTION 2141 Definition and qualifications of directors 2141.1 Definition of directors 2141.2 Qualifications of directors SECTION 2142 Definition and qualifications of officers 2142.1 Definition of officers 2142.2 Qualifications of officers SECTION 2143. Disqualification of directors and officers 2143.1 Effect of non-possession of qualifications or possession of disqualifications SECTION 2144 Bio-data of directors and officers SECTION 2145 (Reserved) SECTION 2146 Interlocking directorships and/or officerships; declaration of policy 2146.1 Interlocking directorships 2146.2 Interlocking directorships and officerships 2146.3 Interlocking officerships 2146.4 Representatives of Government 2146.5 Categories of banks 2146.6 Definitions SECTION 2147 Profit sharing programs SECTION 2148 Bonds of officers and employees SECTIONS 2149-2150 (Reserved) G. BANKING OFFICES SECTION 2151 Establishment of banking offices 2151.1 Prior Monetary Board approval 2151.2 Citizenship requirements 2151.3 Capital requirements 2151.4 Other requirements/factors to be considered 2151.5 Conditions precluding acceptance of application 2151.6 Conditions precluding processing of application 2151.7 Priority in processing 2151.8 Date of opening 2151.9 Definition of branch offices and agencies 2151.10 Lease expenses prior to authorization of branch 2151.11 Reportorial requirement from certain extension offices SECTION 2152 Establishment of money shops 2152.1 Factors to be considered in the establishment of money shops 2152.2 Operational guidelines SECTION 2153 Establishment of savings agencies 2153.1 Factors to be considered in the establishment of savings agencies 2153.2 Operational guidelines 2153.3 Others SECTION 2154 Relocation of banking offices SECTION 2155 (Reserved) H. BANKING DAYS AND HOURS SECTION 2156 Banking days and hours 2156.1 Banking hours beyond the minimum 2156.2 Reports on and changes in banking days and hours 2156.3 Posting of schedules of banking days and hours 2156.4 Existing authorizations and notifications 2156.5 Emergencies SECTIONS 2157-2160 (Reserved) I. INTERNAL CONTROL SECTION 2161 Records and reports 2161.1 Categories and signatories of reports 2161.2 Sanctions in case of wilful delay in submission of reports/refusal to permit examination 2161.3 Submission of certain required information 2161.4 Submission of reports on crimes/losses 2161.5 Report on real estate transactions between a bank and its directors, officers, stockholders or any firm substantially owned by one or more of such directors, officers, stockholders 2161.6 Computation of "Due from CB" account for reporting purposes 2161.7 Reconciliation of head office and branch transactions 2161.8 List of stockholders and their stockholdings 2161.9 Reports on loans/credit accommodations aggregating P1/P20 million and above 2161.10 Central Bank offices where reports are submitted 2161.11 Manner of and deadlines for submission of reports 2161.12 Published statement of condition 2161.13 Report of stockholders'/board of directors' resolutions 2161.14 Consolidation of investors, financial statements with subsidiaries/affiliates SECTIONS 2162-2164 (Reserved) SECTION 2165 Audits 2165.1 Who may conduct 2165.2 Minimum coverage 2165.3 Minimum contents of reports 2165.4 Procedural guidelines 2165.5 Exemption SECTION 2166 Internal control system 2166.1 Proper accounting records 2166.2 Independent balancing 2166.3 Division of duties and responsibilities 2166.4 Joint custody 2166.5 Signing authorities 2166.6 Dual control 2166.7 Number control 2166.8 Rotation of duties 2166.9 Independence of the internal auditor 2166.10 Direct verification 2166.11 Other internal control standards 2166.12 Internal control procedures for dormant/inactive accounts SECTION 2167 Ban protection SECTIONS 2168-2170 (Reserved) J. MISCELLANEOUS PROVISIONS SECTION 2171 Place of board directors' meeting SECTION 2172 Voting requirements with respect to certain corporate transactions SECTION 2173 (Reserved) SECTION 2174 Business name of stock savings and loan associations SECTION 2175 Management contracts of banks SECTIONS 2176-2198 (Reserved) SECTION 2199 General provision on sanctions PART TWO DEPOSIT AND BORROWING OPERATIONS A. DEMAND DEPOSITS SECTION 2201 Authority to accept or create demand deposits 2201.1 Pre-requisite to accept or create demand deposits 2201.2 Permit to accept or create demand deposits 2201.3 Bonding of officers and employees SECTION 2202 Interest on demand deposits SECTION 2203 Reserve on demand deposits SECTION 2204 Temporary overdrawings (TODs) and drawings against uncollected deposits (DAUDs) 2204.1 Temporary overdrawings 2204.2 Drawings against uncollected deposits SECTION 2205 Checks without sufficient funds SECTION 2206 Current Account of bank officers and employees SECTION 2207-2212 (Reserved) B. SAVINGS DEPOSITS SECTION 2213 Interest on savings deposits SECTION 2214 Reserve on savings deposits SECTION 2215 Servicing deposits outside bank premises 2215.1 Solicitation of deposits under the TIPID Movement 2215.2 Solicitation of deposits under the Barangay Savings Movement SECTION 2216 Withdrawals/deposits SECTION 2217 Dormant savings account SECTION 2218 Special savings deposits of farmer-borrowers SECTION 2219 Rental deposits of farmer-borrowers SECTION 2220-2222 (Reserved) C. NOW ACCOUNTS SECTION 2223 Authority to accept NOW accounts 2223.1 Pre-requisites to accept NOW accounts 2223.2 Procedural requirements SECTION 2224 Interest on NOW accounts SECTION 2225 Reserve on NOW accounts SECTION 2226 Rules on servicing NOW accounts SECTION 2227 Minimum features SECTION 2228 Clearing of negotiable orders of withdrawals SECTION 2229-2230 (Reserved) D. TIME DEPOSITS SECTION 2231 Interest on time deposits SECTION 2232 Reserve on time deposits SECTION 2233 Minimum size and term of time deposits SECTION 2234 Special time deposits SECTION 2235 Negotiable Certificates of Time Deposit 2235.1 Minimum features 2235.2 Insurance coverage 2235.3 Pre-qualification and other requirements SECTION 2236 Reserved requirements SECTION 2237-2238 (Reserved) E. GOVERNMENT DEPOSITS SECTION 2239 Authority to service government deposits 2239.1 Banks which may accept government funds 2239.2 Definition of terms 2239.3 Liquidity floor 2239.4 Exempt transactions 2239.5 Application for authority 2239.6 Sanction SECTION 2240-2241 (Reserved) F. INTEREST ON DEPOSIT LIABILITIES SECTION 2242 Interest on demand deposits SECTION 2243 Interest on savings deposits on NOW accounts SECTION 2244 Interest on time deposits 2244.1 Time of payment 2244.2 Treatment of matured time deposits 2244.3 Pretermination SECTION 2245 (Deleted) SECTION 2246 (Reserved) SECTION 2247 Employees' provident fund contributions SECTION 2248 Disclosure of effective rates and interest SECTION 2249-2252 (Reserved) G. RESERVES AGAINST DEPOSIT LIABILITIES SECTION 2253 Accounts subjects to reserves; amounts required SECTION 2254 Form or composition of reserves 2254.1 Allowable drawings against reserves on deposit with the Central Bank 2254.2 Exclusion of uncleared checks and other cash items 2254.3 Interest income on reserve deposits with Central Bank 2254.4 Book entry method for reserve securities SECTION 2255 Computation of reserve position SECTION 2256 Reserved deficiencies 2256.1 Chronic reserve deficiency; penalties 2256.2 Unpaid fines SECTION 2257 Report on compliance SECTION 2258 (Reserved) SECTION 2259 Call by depositors for repayment of their deposits resulting in reduction of reserves below required minimum SECTION 2260 (Reserved) H. SUNDRY PROVISION ON DEPOSIT OPERATIONS SECTION 2261 Schemes to attract deposits 2261.1 Raffles and lotteries 2261.2 Gifts or "giveaways" 2261.3 Other promotional schemes 2261.4 Sanctions SECTION 2262 Miscellaneous rules on deposits 2262.1 Specimen signature 2262.2 Use of SEC-prescribed format for certification of certain deposits 2262.3 Insurance on deposits SECTION 2263 Booking of deposits and withdrawals 2263.1 Clearing cut-off time 2263.2 Definition 2263.3 Booking of cash deposits 2263.4 Booking of non-cash deposits 2263.5 Booking of deposits after regular banking hours 2263.6 Other records required 2263.7 Notice required 2263.8 Reports required SECTION 2264 Unclaimed balances SECTION 2265 Acceptance of checks payable to Commissioner/Collector of Customs SECTION 2266 Deposit pick-up services SECTION 2267-2268 (Reserved) I. BORROWINGS FROM THE CENTRAL BANK SECTION 2269 Rediscounting ceilings, eligibility of papers and maturities 2269.1 Rediscount ceilings 2269.2 Eligibility of papers 2269.3 Maturities SECTION 2270 Qualifications for availment of credit facilities 2270.1 Qualifications for availment of Central Bank credit facilities by thrift banks SECTION 2271 Loan values, rediscount and lending rates 2271.1 Loan values, rediscount and lending rates 2271.2 Scope/definitions of preferential areas of rediscounting 2271.3 Rediscount of eligible paper covering non-additional exports by thrift banks with CB Region Offices. SECTION 2272 (Reserved) SECTION 2273 Rediscounting of specific papers 2273.1 Papers pertaining to agrarian reform credit under Presidential Decree No. 717 2273.2 Masagana 99 and Masaganang Maisan papers 2273.3 Papers supported by pledges of blue chip/high grade shares of stock 2273.4 Papers pertaining to the Maisagana Program 2273.5 Promissory notes of overseas contract workers 2273,6 Papers from domestic sales of raw/frozen tuna 2273.7 Special credit programs for small corn farmers, corn plantations, corn traders and exporters in ten (10) provinces selected as initial Maisagana-Export zones SECTION 2274 Lender-of-last-resort facility of the Central Bank 2274,1 Purpose of facility 2274.2 Conditions to access 2274.3 Terms of the credit 2274.4 Quota 2274.5 Interest/penalty rates on lender-of-last-resort facility and overdrawing SECTION 2275 CB lending to long-term lending institutions SECTION 2276 Repurchase agreement with the Central Bank 2276.1 R/P window for inventory financing SECTION 2277 (Reserved) SECTION 2278 Recording and reporting requirements SECTION 2279 Facility to committed credit lines issuers SECTION 2280 (Reserved) J. DEPOSIT SUBSTITUTE OPERATIONS (QUASI-BANKING FUNCTION) SECTION 2281 Deposit substitute instruments 2281.1 Prohibition against use of acceptances, bills of exchange and trust certificates as D/S 2281.2 Negotiation of promissory notes 2281.3 Minimum features of D/S instruments 2281.4 Prescribed instruments 2281.5 Call slips/tickets for 24-hours loans 2281.6 Physical delivery of securities 2281.7 Other rules and regulations governing the issuance and treatment of D/S instruments 281.8 Sanctions SECTION 2282 Maturity; matured and unclaimed deposit substitutes SECTION 2283 Reserve requirements 2283.1 Composition of reserves 2283.2 Reserve deficiencies 2283.3 Chronic reserve deficiency, penalty 2283.4 Report of compliance 2283.5 Sanctions SECTION 2284 Minimum trading lot SECTION 2285 Yield/interest rates on deposit substitutes 2285.1 (Deleted) 2285.2 Time and payment of interest 2285.3 Interest/yield on preterminated deposit substitutes 2285.4 Sanctions SECTION 2286 (Reserved) SECTION 2287 Money market placements of rural banks 2287.1 Definition of terms 2287.2 Conditions required for placements not covered by prohibition 2287.3 Transition period 2287.4 Reporting requirements 2287.5 Sanctions SECTION 2288 Transactions with controlled corporations SECTION 2289 Sundry provisions on quasi-banking functions 2289.1 Elements of quasi-banking 2289.2 Definition of terms and phrases 2289.3 Transactions not considered quasi-banking 2289.4 Pre-conditions for the exercise of quasi-banking functions 2289.5 Certificate of authority from the Central Bank 2289.6 Issuance of Commercial Paper SECTION 2290. Without recourse transaction 2290.1 Prohibited practices K. OTHER BORROWINGS SECTION 2291 Borrowings from the Government SECTION 2292. Borrowings from trust departments or managed funds of banks or investment houses SECTION 2293 Deleted by Cir. 1059 2293.1 Deleted by Cir. 1059 2293.2 Deleted by Cir. 1059 2293.3 Deleted by Cir. 1059 SECTION 2294 (Reserved) SECTION 2295 Mortgage/chattel mortgage certificates SECTION 2296-2298 (Reserved) SECTION 2299 General provision on sanctions PART THREE LOANS, INVESTMENTS AND SPECIAL FINANCING PROGRAMS A. LOANS IN GENERAL SECTION 2301 Loan limit to a single borrower 2301.1 Exclusions from loan limit 2301.2 Definition of terms 2301.3 Determination of total loans to a single borrower 2301.4 Contingent liabilities included in loan limit SECTION 2302 Loan proceeds 2302.1 Derivative/compensating deposits 2302.2 Prohibited use of loan proceeds SECTION 2303 Interest and other charges 2303.1 Interest rate in the absence of stipulation 2303.2 Escalation clause; when allowable 2303.3 (Deleted) 2303.4 Floating rates of interest 2303.5 Accrual of interest earned on loans 2303.6 Service fees and other charges on loans to land reform beneficiaries SECTION 2304 Past due accounts 2304.1 Accounts considered past due 2304.2 Demand loans 2304.3 Accrual of interest income 2304.4 Renewals or extensions 2304.5 Reporting requirements 2304.6 Restructuring or refinancing of loans 2304.7 Writing-off loans as bad debts SECTION 2305 "Truth in Lending Act" disclosure requirement 2305.1 Requirement of disclosure 2305.2 Definition of terms 2305.3 Scope of requirements 2305.4 Inspection of contracts covering credit transactions 2305.5 Information sheets and reports to be submitted to the Central Bank 2305.6 Posters 2305.7 Offices authorized to enforce rules and regulations 2305.8 Penal provisions B. SECURED LOANS SECTION 2306-2310 (Reserved) SECTION 2311 Loans secured by bonds, mortgages on real estate and insured improvements thereon and other forms of security 2311.1 Insurance on real estate improvements 2311.2 Real estate mortgage loans by savings and mortgage banks and private development banks 2311.3 Loan or discount secured by bank's own shares SECTION 2312 Increased loan values of collaterals in certain cases SECTION 2313 Loans secured by time deposits SECTION 2314-2318 (Reserved) C. UNSECURED LOANS SECTION 2319 Loans against personal security 2319.1 General guidelines 2319.2 Proof of financial capacity of borrower 2319.3 Amounts and terms of credit accommodations; renewals 2319.4 Signatories 2319.5 Collateral requirements 2319.6 Sanctions SECTION 2320-2325 (Reserved) SECTION 2328 Transactions not covered 2328.1 Applicability to credit card operations SECTION 2329 Direct or indirect borrowings SECTION 2330 Individual ceiling SECTION 2331 Aggregate ceiling; ceiling on unsecured loans SECTION 2332 Exclusions from aggregate ceiling SECTION 2333 Procedural requirements SECTION 2334 Reportorial requirements SECTION 2335 Availment of credit facility with the Central Bank SECTION 2336 Sanctions SECTION 2337 Financial assistance to officers and employees 2337.1 Mechanics of financial assistance 2337.2 Limitations on financial assistance 2337.3 Other requirements 2337.4 Sanctions SECTIONS 2338-2340 (Reserved) E. SPECIFIC TYPES/CLASSES OF LOANS SECTION 2341 Agrarian reform and agricultural credit 2341.1 Definition of terms 2341.2 Who may borrow; purposes 2341.3 Required allocation for agrarian reform and agricultural credit in general 2341.4 Computation of loanable funds 2341.5 Allowable alternative investment 2341.6 Syndicated type of agrarian reform credit/agricultural credit 2341.7 Security for loans 2341.8 Interest and other charges 2341.9 Submission of reports SECTION 2342 Loans to rural banks SECTION 2343 Interbank loan transactions SECTION 2344 (Reserved) SECTION 2345 Supervised credit 2345.1 The supervised credit system 2345.2 Crop insurance SECTION 2346 Peso borrowings by foreign firms 2346.1 General principles and policies 2346.2 Requirements/conditions for availment of peso borrowings by foreign firms 2346.3 Exemptions 2346.4 Definition of terms 21346.5 Procedural requirements SECTION 2347 Domestic standby Letters of Credit SECTION 2348 Committed Credit Line SECTION 2349 Money shop loans SECTION 2350 (Reserved) F. SPECIAL FINANCING PROGRAMS SECTION 2351 Industrial Guarantee and Loan Fund (IGLF) Program 2351.1 Accreditation system 2351.2 IGLF loans to small industries 2351.3 IGLF loans to medium-scale industries SECTION 2352 Livestock financing and loans for agricultural inputs 2352.1 Livestock financing 2352.2 Loans for agricultural inputs SECTION 2353 Masagana 99 and Masaganang Maisan 2353.1 Coordinating Masagana program agencies 2353.2 Lending policies and procedures 2353.3 Incentive allowance to government agricultural credit production technician by the lending institutions 2353.4 Use of purchase orders or chits for the inputs portion of the loan to be extended to farmer-borrowers SECTION 2354 Palay Marketing Credit Program 2354.1 Terms of reference 2354.2 Statement of policies 2354.3 Terms and conditions 2354.4 Other conditions 2354.5 Responsibilities of participating agencies 2354.6 Operating procedures SECTION 2355 Central Bank DALL Fund (Bakahang Barangay) 2355.1 Objectives of the project SECTION 2354 Palay Marketing Program 2354.1 Terms of reference 2354.2 Statement of policies 2354.3 Terms and conditions 2354.4 Other conditions 2354.5 Responsibilities of participating agencies 2354.6 Operating procedures SECTION 2355 Central Bank DALL Fund (Bakahang Barangay) 2355.1 Objectives of the project 2355.2 Targets and target areas 2355.3 Implementing strategy 2355.4 The Bakahang Barangay management committee 2355.5 Details of implementation 2355.6 Training of production technicians, PPOs, rural banks/SLA managers and CB-ACS, including farmer cooperators 2355.7 Organizational set-up 2355.8 Lending policies and procedures 2355.9 Operational expenses SECTION 2356 Food Quedan Financing Program 2356.1 Objectives of the program 2356.2 Legal bases 2356.3 Terminology 2356.4 Statement of policies 2356.5 Responsibilities of participating agencies 2356.6 Food commodities in storage at the bonded warehouse of the Food Terminal, Inc. 2356.7 Guidelines on the use of food trust receipts under the Food Quedan Financing Program SECTION 2357 Cooperative Finance System 2357.1 Definition of terms 2357.2 General credit policies 2357.3 Types of financing 2357.4 Authorized lenders 2357.5 Eligible borrowers 2357.6 Credit requirements 2357.7 Amount of loan 2357.8 Loan periods; extension periods 2357.9 Collateral security; loan value 2357.10 Interest rates 2357.11 Loan repayment schedule 2357.12 Lending procedures 2357.13 Use of borrowed funds; diversion 2357.14 Application of payments; remittance to CB-CFG 2357.15 Default; foreclosure SECTION 2358 Cottage Industry Guarantee and Loan Fund SECTION 2359 Fourth CB:IBRD Rural Credit Project 359.1 Definition of terms 2359.2 Participating institutions; eligibility 2359.3 Other eligibility requirements 2359.4 Subloans extended by participating financial institutions; purposes 2359.5 Eligibility of borrowers 2359.6 Subloan limits 2359.7 Creditworthiness 2359.8 Maturity of subloans 2359.9 Loan repayment 2359.10 Grace period 2359.11 Interest rates 2359.12 Collateral 2359.13 Subloan applications and processing 2359.14 Release of subloan proceeds 2359.15 Penalty for non-payment 2359.16 Extension periods 2359.17 Subloans in litigation 2359.18 Procurement 2359.19 CB loans to participating financing institutions 2359.20 Auditing and reportorial requirements 2359.21 Guidelines on restructuring SECTION 2360 Cotton Supervised Credit financing Program SECTION 2361 Medium-term financing under the Special Cotton Financing Program 2361.1 Objective 2361.2 Strategy of Implementation 2361.3 Loan availments SECTION 2362 Lending policies and implementing guidelines for the Bakahang Barangay (cow-calf) program 2362.1 Objectives 2362.2 Target clientele and program areas 2362.3 Production and technical aspects 2362.4 Sources of breeder stocks 2362.5 Government and industry support 2362.6 Space, feed and water requirements 2362.7 Some reproductive phenomena or practices 2362.8 Credit and financing for Bakahang Barangay (cow-calf) production 2362.9 Marketing services for calves, feeders, breeders and culls 2362.10 Responsibilities of program participants 2362.11 Strategy of program implementation 2362.12 Project models SECTION 2363 Second Rural Development Settlement Project SECTION 2364 Pukyutang Barangay Program SECTION 2365 Implementing guidelines governing the Participation of Banks Under The Expanded Yellow Corn Production Assistance Program (EYCPAP) SECTION 2366 Implementing guidelines governing the Participation of Banks Under the Intensified Rice Production Program in the provinces of Pangasinan, La Union, Ilocos Norte, Cagayan, Isabela, Nueva Viscaya, Nueva Ecija, Pampanga, Bulacan, Mindoro Oriental and Occidental, Camarines Sur, Iloilo, Leyte, Zamboanga Sur, Bukidnon, South and North Cotabato, Davao Norte and Sultan Kudarat. SECTION 2367 Implementing Guidelines Governing Covering the Participation of Banks in Financing Post-Harvest Facilities for the Agricultural Productivity Programs of the Government SECTIONS 2368-2375 (Reserved) G. EQUITY INVESTMENTS SECTION 2376 Scope of authority SECTION 2377 Financial allied undertakings SECTION 2378 Limits on investments in the equities of financial allied undertakings 2378.1 Investments in financial intermediaries performing quasi-banking functions SECTION 2379 Non-financial allied undertakings 2379.1 Limits on equity investments in non-financial allied undertakings SECTION 2380 (Reserved) SECTION 2381 Other limitations and restrictions. SECTION 2382 (Reserved) SECTION 2383 General provisions SECTION 2384 Investments in equities of venture capital corporations to assist small and medium scale enterprises 2384.1 Conditions for investment in venture capital corporations 2384.2 Equity investments of venture capital corporations 2384.3 Business name of venture capital corporations 2384.4 Reportorial requirements; examination by Central Bank 2384.5 Interlocking directorships and/or officerships SECTIONS 2385-2387 (Reserved) H. OTHER OPERATIONS SECTION 2388 Purchase of receivables and other obligations 2388.1 Yield on purchases of receivables 2388.2 Purchase of receivables on a "without recourse" basis 2388.3 Purchase of Commercial Papers SECTION 2389 Open market operations 2389.1 Government securities dealers 2389.2 Regular repurchase agreements 2389.3 Reverse repurchase agreements 2389.4 Overnight repurchase facility SECTION 2390 Investment in bonds and other debt instruments SECTION 2391-2392 (Reserved) I. MISCELLANEOUS PROVISIONS SECTION 2393 Investment deposit ratio 2393.1 Statement of policy 2393.2 Method of compliance 2393.3 Government securities as eligible investments 2393.4 Clarifications 2393.5 Sanctions for non-compliance 2393.6 Regional groupings 2393.7 Reporting requirements 2393.8 Grace period SECTION 2394 Assets acquired in settlement of loans SECTION 2395 (Reserved) SECTION 2396 Parcellary plans on crop loans SECTIONS 2397-2398 (Reserved) SECTION 2399 General provision on sanctions PART FOUR TRUST AND OTHER FIDUCIARY FUNCTIONS A. TRUST OPERATIONS SECTION 2401 Authority to perform trust functions SECTION 2402 Scope of trust regulations 2402.1 Definitions SECTION 2403 Pre-requisites for engaging in trust business SECTION 2404 Security for the faithful performance of trust duties SECTION 2405 Non-trust agreements SECTION 2406 Mergers and consolidations of financial institutions SECTION 2407 Responsibilities of administration 2407.1 Role of the board of directors * 2602.8 Penalty for wilful delay on the reporting of collections/remittances 2602.9 Promulgation of guidelines/rules and regulations 2602.10 Interest on monthly collections of over P40 million SECTION 2603 Clearing operations 2603.1 Clearing regulations in general 2603.2 Inter-regional clearing operations in Visayas and Mindanao SECTION 2604 Miscellaneous operations 2604.1 Private development banks as collection agencies of the DBP 2604.2 Consignee of PNB money orders 2604.3 Operation of cash dispensers 2604.4 Operation of armored cars 2604.5 Foreign exchange dealers SECTION 2605 (Reserved) SECTION 2606 Bank premises and other fixed assets 2606.1 Expansion of bank premises 2606.2 Appreciation or increase in book value 2606.3 Ceiling on total investment 2606.4 Sub-lease of bank premises SECTION 2607 Advertisements SECTION 2608 Assessment fees SECTION 2609 Reproduction and use of facsimiles of government securities, currency notes and coins 2609.1 Facsimiles of government securities 2609.2 Facsimiles of Philippine legal tender and commemorative coins 2609.3 Facsimiles of Central Bank notes SECTION 2610 Collection of fines from banks SECTION 2611 Guidelines governing the exchange of credit information 2611.1 Participating institutions 2611.2 Procedures 2611.3 Available information 2611.4 Sources of information 2611.5 Costs SECTION 2612 Clean note policy SECTIONS 2613-2698 (Reserved) SECTION 2699 General provision on sanctions 2415.2 Reports to Central Bank 2415.3 Audits 2415.4 Borrowings from trust department or managed funds of banks and investment houses SECTIONS 2416-2420 (Reserved) B. FUND MANAGEMENT SECTION 2421 Scope of regulations 2421.1 Definition SECTION 2422 Responsibilities of administration SECTION 2423 Minimum features of management contract SECTION 2424 Authorized investments; prohibition 2424.1 Prohibitions SECTION 2425 Separation of accounts; reports SECTION 2426 Fees and commissions for fund portfolio management services SECTION 2427 Security for faithful performance of fund management duties SECTIONS 2428-2470 (Reserved) C. OTHER FIDUCIARY FUNCTIONS SECTIONS 2471-2498 (Reserved) SECTION 2499 General provision on sanctions PART FIVE (RESERVED FOR FOREIGN EXCHANGE OPERATIONS) PART SIX MISCELLANEOUS A. OTHER OPERATIONS SECTION 2601 Sale of government securities 2601.1 Central Bank Certificate of Indebtedness 2601.2 DBP Bonds 2601.3 Premyo Savings Bonds 2601.4 National Housing Authority (NHA) Bonds SECTION 2602 Collection of Taxes 2602.1 Coverage 2602.2 Collection and reporting of internal revenue taxes 2602.3 Collection and reporting of customs duties 2602.4 Collection and reporting of import processing fees 2602.5 Collection and reporting of export/premium duties 2602.6 Debit/credit advices 2602.7 Reconciliation of revenue collections * Copied verbatim directly obtained from the Central Bank of the Philippines (CBP) APPENDICES NO . SUBJECT MATTER 1 Formal affidavit on transfer of stock 2 Safeguards in connection with bonding of accountable officers and employees of SSLAs 3 Reports required of thrift banks 4 (Reserved) 5 Format of resolution for signatories of Category A-1 reports of thrift banks 6 Format of resolution for signatories of Category A-2 reports of thrift banks 7 Format of resolution for signatories of Category B reports of thrift banks 8 Certain information required from Banks and NBFIs 9 Documents/information on organizational structure and operational policies 10 Format certification of compliance with rules and regulations on bank protection 11-13 (Reserved) 14 Tipid Movement Manual 15 Excerpts from P.D. No. 465 on the classification of provinces and cities 16 Pro-forma order of withdrawal for NOW accounts 17 SEC Prescribed format for certification of certain deposits 18 Maximum maturity of loans from the Central Bank to institutional borrowers 19 Rediscounting guidelines on rediscounting of M-99 and Masaganang Maisan papers under Supervised Credit Program 20 Samples of standardized instruments evidencing deposit substitute liabilities 21 New Rules on Registration of Short-term Commercial Papers 22 SEC Rules on Registration of Long-term Commercial Papers and Bonds 23 (Reserved) 24 Format of disclosure statement on loans/credit transactions under the "Truth in Lending Act" 25 Format of Abstract of the provisions of the "Truth in Lending Act" 26 Central Bank credit priority classification system 27 Prescribed format of transfer tickets for Interbank loans 28 (Reserved) 29 Suggested debt-to-equity ratio for borrowing foreign firms 30 Suggested annual build-up program for borrowing foreign firms 31 List of potential small industries for IGLF financing 32 Rules and regulations issued by Quedan Guarantee Fund Board governing the guarantee coverage of grains Quedan pursuant to Letter of Instructions No. 704 33 Revised implementing guidelines of the Cotton Supervised Credit Financing Program for Crop Year 1982-83 34 Rules and regulations on the guarantee coverage of the AGF of loans under supervised credit for cotton production 35 Sources of seedstocks/grasses 36 Financial analysis of four (4) project models under program 37 Regional groupings of provinces for purposes of the required investment deposit ratio of TB branches in a region 38 List of Clearing Centers 39 Clearing operations between regional clearing centers and the Manila clearing center (Tarlac, Tarlac Used as Sample) 40 List of agreement between PNB and SLAs as consignee of PNB bank money orders 41 Procedural guidelines for the reproduction of facsimiles of government securities 42 Clean note policy 43 Guidelines and procedures to govern verification of currency notes deposited by banks to their demand deposit account with the Central Bank 44 Guidelines and procedures to govern shipment of unfit/mutilated currency notes to the Central Bank, Cash Department, Regional Offices and Cash Units 45 Illustrative case on the steps taken in the restructuring of CB:IBRD Loan under the 3rd and 4th Rural Credit Projects 46 Guidelines on food quedan Financing Program for Food Terminal, Inc. (FTI) Deposits 47 Guidelines on the use of food trust receipts under the food quedan Financing Program PART ONE Organization, Management and Administration A. SCOPE OF AUTHORITY SECTION 2101. Scope of Thrift Banking Authority . Savings and mortgage banks, stock savings and loan associations, and private development banks, hereinafter referred to as thrift banks, may perform any or all of the following services: a. to grant loans, whether secured or unsecured; b. to invest in readily marketable bonds and other debt securities, commercial papers and accounts receivables, drafts, bills of exchange, acceptances or notes arising out of commercial transactions; c. to issue domestic letters of credit; and d. to undertake such other investments which the Monetary Board may determine as necessary in the furtherance of national economic objectives. With prior approval of the Monetary Board, thrift banks may undertake trust and quasi-banking functions and accept checking accounts, "NOW" accounts, government deposits and foreign currency deposits under Circular No. 343. SUBSECTION 2101.1 Grant of authority to perform other banking services . With prior approval of the Monetary Board, a thrift bank may convert into a commercial bank and then subsequently may be granted expanded commercial banking authority; or remain as a thrift bank, and to the extent allowed by law, perform all the services of a commercial bank and then those of a bank with expanded commercial banking authority, in which case it may retain its corporate name: Provided ,That its articles of incorporation are amended to encompass its new powers. SUBSECTION 2101.2 Determination of competence, experience and adequacy of facilities . Among the factors that will be considered to determine competence, experience and adequacy of facilities of a bank applying for authority to proved commercial banking services, are: (1) liquidity, solvency and profitability prior to application; (2) past performance of management in the operation of the bank; (3) general compliance with banking laws, Central Bank rules and regulations, and policies and instructions of the Monetary Board; (4) managerial reorganizations or potential capacity to provide international banking expertise; and (5) adequate staffing, equipment and other facilities to meet its expanded functions, including international correspondent bank relationship. SECTIONS 2102-2105. ( Reserved ) B. CAPITALIZATION SECTION 2106. Minimum Capitalization . A thrift bank shall have a minimum paid-in capital which shall be in accordance with the following: a. For existing thrift banks with head offices located Within Metropolitan Manila P10 million Outside Metropolitan Manila 5 million b. For new thrift banks located: Within Metropolitan Manila P20 million Outside Metropolitan Manila 10 million Existing thrift banks which presently do not meet the minimum paid-in capital shall submit not later than December 31, 1980, their individual programs under which they would achieve their respective paid-in capital mentioned above within a three-year period (in six equal semestral installments),or not later than December 31, 1983. It shall be the responsibility of the thrift bank's board of directors and senior management to ensure full compliance with the bank's capital build-up program. Non-compliance with the approved program may mean withholding from the bank of availment of some privilege such as branching, rediscounting and the like. SUBSECTION 2106.1 Determination of minimum capital . Each thrift bank shall have a minimum paid-in capital in the amounts stated in Section 2106 hereof. In addition, the total of paid-in capital (including government counterpart capital, if any, and paid-in surplus),earned surplus and undivided profits, net of (a) such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank and (b) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, stockholders, and their related interests (DOSRI),shall not be less than the amounts stated in said Sec. 2106. Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets shall be excluded. SUBSECTION 2106.2 Capital build-up program for thrift banks not meeting minimum paid-in capital requirement a. Existing thrift banks which presently do not meet the minimum paid-in capital requirement of P10 million for those within Metro Manila and P5 million for those outside Metro Manila shall submit not later than December 31, 1980 their individual programs under which they would achieve their respective paid-in capital within a 3-year period or not later than December 31, 1983. b. The semestral capital build-up shall be the capital gap divided into equal amounts by the number of semesters of each bank's respective program. Capital gap shall mean the difference between the required minimum paid-in capital referred to above and the bank's paid-in capital, plus paid-in surplus, if any, as of December 31, 1979. The capital gap in a merger or consolidation where the combined paid-in capital of the merging or consolidating banks is less than P10 million or P5 million, as the case may be, as of December 31, 1979, shall be the difference between the required minimum paid-in capital and the paid-in capital, plus paid-in surplus, if any, of the surviving or resulting bank after the merger or consolidation shall have been effected. c. The periodic capital build-up required for each semester may be met through (a) conversion of surplus (net of reserves),surplus reserves (except reserve for the retirement of preferred shares) and undivided profits outstanding as of December 31, 1979 into paid-in capital; and (b) the infusion of fresh capital which may include new capital contribution from local private sources, or a combination of local private capital and new paid-in surplus and/or conversion into paid-in capital of net earnings accumulated after December 31, 1979, Provided, That such infusion of fresh capital shall be subject to the limits prescribed in Sec. 2131.c on stockholdings in thrift banks of a commercial bank, a bank authorized to provide commercial banking services or to operate under an expanded commercial banking authority, or a bank holding company. d. The proportion of permissible converted capital to the periodic capital build-up for each semester shall not exceed the proportion which the amount of surplus, surplus reserves and undivided profits as of December 31, 1979 bears to the capital gap existing as of December 31, 1979, to be computed in accordance with the following formula: Permissible Surplus, surplus reserves/ Amount of converted = undivided profits x semestral capital capital Capital gap build-up e. If the prescribed minimum paid-in capitalization will necessitate an increase in the authorized capital stock, the thrift bank shall cause the corresponding amendments to its articles of incorporation, and submit the same to the Central Bank together with its capital build-up program. f. It shall be the responsibility of the thrift bank's board of directors and senior management to ensure full compliance with the bank's capital build-up program. Failure to submit its capital build-up program * shall disqualify a thrift bank from either or a combination of the following: (1) Establishment of branches, extension offices, savings agencies and/or money shops; and (2) Declaration of cash dividends. With the approval of the Monetary Board, such thrift bank which fails to submit a capital build-up program within the prescribed deadline or, having submitted one, fails to comply therewith may also be disqualified from: (1) availment of the Central Bank's preferential rediscounting facilities; and/or (2) participation in special financing programs. Any or all of the foregoing disqualifications may be lifted by the Governor or the Senior Deputy Governor upon certification by the appropriate supervising and examining department that such thrift bank has submitted the required capital build-up program and complied with the scheduled capital build-up program. SUBSECTION 2106.3 Government counterpart capital . Beginning April 1, 1980, the Development Bank of the Philippines (DBP) may no longer provide counterpart capital to private development banks: Provided ,That applications for such counterpart capital under Republic Acts No. 85 and 4093, both as amended, which were approved but not yet paid by DBP as of said date shall not be covered by the provisions of this Subsection. SECTIONS 2107-2110. ( Reserved ) C. MERGER AND CONSOLIDATION OF BANKS SECTION 2111. Merger or consolidation to meet minimum capital . As a means of meeting the minimum capital required for a bank with expanded commercial banking authority or a commercial bank, the merger or consolidation of a commercial bank with a thrift bank or a rural bank is hereby encouraged. A thrift bank may merge or consolidate with one or more thrift banks or rural banks for purposes of increasing its resources, capital base as well as effectiveness in the operations of the resulting bank. The merger/consolidation of a thrift bank with a commercial bank or with an investment house towards operation under an expanded commercial banking authority may also be allowed. SUBSECTION 2111.1 Requirement of Central Bank approval . Bank mergers and consolidations including the terms and conditions thereof shall comply with the provisions of applicable law and are subject to approval by the Central Bank. Merging/consolidating banks should consult with the Central Bank before any merger/consolidation agreement is finalized. SUBSECTION 2111.2 Rules on exchange of shares . As a general rule, the ratio of exchange of shares between or among the participating banks and qualified non-bank financial intermediaries in a bank merger or consolidation shall be based on mutual agreement of the parties concerned. However, any appraisal surplus arising from the revaluation of the fixed assets as may be agreed upon by the parties, shall be limited in case of merger or consolidation between banks, to bank premises and improvements, and bank equipment which are necessary for its immediate accommodation in the transaction of the bank's business. Such revaluation should be based on fair valuation of the property which shall be subject to review and approval by the Central Bank. SECTIONS 2112-2115. ( Reserved ) D. NET WORTH TO RISK ASSETS RATIO SECTION 2116. Basic Ratio . The net worth (or combined capital accounts) of a bank shall not be less than an amount equal to ten per cent (10%) of its risk assets as herein defined: Provided, however ,That the Monetary Board may authorize a bank to maintain a net worth to risk assets ratio lower than ten percent (10%) subject to the conditions in the next succeeding paragraph. The Monetary Board may subsequently raise the ratio but such upward adjustment shall be made effective only after a reasonable period of time. If a bank has a capital as defined in Subsec. 2106.1, of at least P500 million, it may be authorized to maintain a net worth to risk assets ratio of eight per cent (8%).A bank may further be authorized to maintain a lower net worth to risk assets ratio of six per cent (6%) if its net worth averages at least P700 million and it complies with such other conditions or requirements as the Monetary Board may prescribe. The average figures for net worth mentioned above shall be based on the end-of-month balances for 12 successive months immediately preceding the grant of authority to maintain a lower ratio. Thereafter, if the average figure falls below the required amounts/ratios for at least two (2) consecutive months, the Monetary Board may require the bank concerned to maintain the corresponding higher net worth to risk assets ratio prescribed in these regulations: Provided ,That the upward adjustment in the ratio shall take effect not earlier than ninety (90) calendar days from the date of the Monetary Board decision. SUBSECTION 2116.1 Suspended application of ratio in case of merger or consolidation . If in the process of a bank merger or consolidation, the resulting bank is unable to comply fully with the net worth to risk assets ratio prescribed under the regulations, the Monetary Board may, at its discretion, temporarily relieve the bank from full compliance with such ratio under such conditions as the Monetary Board may prescribe. SUBSECTION 2116. 2 Definitions/explanations of terms and phrases a. Risk Assets ."Risk Assets" is defined as total assets minus the following assets: (1) Cash on hand; (2) Amount due from the Central Bank; (3) Evidences of indebtedness of the Republic of the Philippines and of the Central Bank, and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines; As approved by the Monetary Board, such evidences of indebtedness or obligations subject of repurchase or resale agreements may be deducted by both the selling/borrowing and buying/lending banks; (4) Loans to the extent covered by hold-out on, or assignment of, deposits maintained in the lending bank and held in the Philippines; and (5) Loans or acceptances under letters of credit to the extent covered by margin deposits. (6) Bank premises, depreciated; (7) Furniture, fixtures and equipment, depreciated; (8) Balances maintained with the Philippine National Bank or any of its branches for clearing checks drawn on banks located in places not serviced by the Central Bank Clearing Offices; (9) Portions of special time deposit loans covered by Industrial Guarantee and Loan Fund (IGLF) guarantee; (10) Real estate mortgage loans insured by the Home Financing Commission (HFC) to the extent of the amount of the insurance or the outstanding loan, whichever is lower; (11) Loans to the extent secured by Central Bank Certificates of Indebtedness and other assets listed in (3) above; (12) Loans to the extent covered by hold-out on, assignment of, deposit substitutes maintained in the lending bank and held in the Philippines; (13) Loans to the extent guaranteed by the Philippine Export and Foreign Loan Guarantee Corporation which are not past due. (14) Deferred income tax. ( Effective April 20, 1985 ) b. Total Assets For this purpose, the term "total assets" shall exclude-the following: (1) All Trust Department accounts; (2) Unutilized portions of letters of credit; and (3) All contingent accounts. c. Net worth ( or Combined Capital Accounts ) shall mean the total of the unimpaired paid-in capital, earned surplus, and undivided profits, net of deferred income tax, and such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank; and excluding any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets, except in such cases as may be authorized by the Monetary Board. ( Effective April 23, 1985 ) For purposes of computing the prescribed ratio of net worth to risk assets, equity investments of a bank in another bank or enterprise, whether foreign or domestic, shall be deducted from its net worth if the other bank or enterprise has a reciprocal equity investment in the investing bank, in which case the investment of the bank or the reciprocal investment of the other bank or enterprise, whichever is lower, shall be deducted from the net worth of the bank. d. Cash on Hand .This refers to total cash held by the bank consisting of both notes and coins in Philippine currency and in such foreign currencies acceptable as part of the international reserves. c. Amount Due From the Central Bank This refers to all deposits of the reporting banks with the Central Bank of the Philippines. f. Loans to the Extent Covered by Holdout on or Assignment of Deposits or Deposit Substitutes Maintained in the Lending Bank and Held in the Philippines (1) A loan shall be considered as secured by a hold-out on or assignment of deposits or deposit substitutes only if such deposit or deposit substitute account is covered by a hold-out agreement or deed of assignment signed by the depositor or investor/placer in favor of the bank and maintained in the lending bank and held in the Philippines. (2) The amount deductible from total assets shall be the outstanding balance of the loan to the extent covered by the corresponding hold-out on or assignment of deposits or deposit substitutes signed by the depositor or investor/placer in favor of the bank. (3) Loans transferred to/carried by the bank's trust department (secured by deposit hold-out/assignment) are not deductible items. g. Loans or Acceptances under Letters of Credit to the Extent Covered by Margin Deposits (1) Unnegotiated letters of credit or the unutilized portion thereof, or other items booked under contingent accounts are not deductible items. Only the amount of loans or acceptances (real account) negotiated under letters of credit to the extent covered by the corresponding margin deposits shall be considered as a deductible item. (2) Margin deposits against loan or acceptance accounts which are fully liquidated shall not be deductible items. h. Bank Premises , Depreciated .This refers to the cost of the bank premises, including land owned by the bank, less the accumulated depreciation thereon. Properties used as bank premises purchased by the bank in foreclosure or execution sale shall not be considered owned by the bank until title is consolidated in the bank. i. Furniture, Fixtures, and Equipment, Depreciated .This refers to the cost of furniture and fixtures, including equipment, owned by the bank, and used for its banking operations, less the accumulated depreciation thereon. j. Deferred income tax .This refers to the accumulated balance of income tax expense deferred in view of certain expenses or provision for losses not currently deductible for income tax purposes. ( Effective April 23, 1985 ) SUBSECTION 2116.3 Required reports . All banks concerned shall compute every business day their capital required and capital accounts and shall submit a report thereon on a weekly basis to the appropriate supervising and examining department of the Central Bank in such reporting form and on that day of the week as may be prescribed in pertinent issuances of the Central Bank. Banks shall maintain suitable records to facilitate verification of the required capital accounts. SUBSECTION 2116.4 Sanctions . The Monetary Board may, whenever warranted, impose the additional sanctions on any erring bank provided for under Sec. 30 of Republic Act No. 337, as amended, and Sec. 34-A of R.A. No. 265, as amended. The Monetary Board may also impose sanctions on any bank if the required periodic reports to the Central Bank on this matter contain recurring material error or inaccuracies. SECTIONS 2117-2125. ( Reserved ) E. STOCK, STOCKHOLDERS AND DIVIDENDS SECTION 2126. Shares of Stock of Thrift Banks . Private development banks may also issue ordinary preferred shares of stock to private persons, other than the preferred stock representing government counterpart capital contribution: Provided, That said preferred stock sold to private persons shall be governed by the pertinent Central Bank regulations for preferred stock issued to private investors. Preferred shares of stock of private development banks held by DBP and sold thereafter to private persons may, at the option of the purchasers, be retained with the same rights as when such shares of stock were held by DBP, or converted at not less than par to common shares or to ordinary preferred shares of the class issued to private shareholders. SUBSECTION 2126.1 Transfer of shares a. Transfers requiring prior Monetary Board approval (1) Prior approval of the Monetary Board shall be required on the following: (a) Any sale or transfer of ownership or control of more than twenty per cent (20%) of the voting stock of a bank to any person whether natural or juridical; and (b) Any sale or transfer or a series of sales or transfers which will effect a change in the majority ownership or control of the voting stock of the bank from one group of persons to another group: Provided ,That in no case shall such sale or transfer be approved unless the bank concerned shall immediately comply with the prescribed minimum capital requirement for new banks notwithstanding any approved capital build-up program. ( Effective May 16, 1974 ). (2) For purpose of Item "1",the sale or transfer of voting stocks shall refer to sales or transfers of voting stocks which are allowed under existing laws or Central Bank rules and regulations and which have not been registered/recorded in the transfer book/stock ledger or other records of banks. (3) All sales or transfers of voting stocks of banks entered into or effected prior to April 2, 10982 and subsequently thereafter which Shave not been registered/recorded in the stock and transfer book of the bank concerned shall, before being accepted for registration/recording therein, be referred to the Monetary Board of the Central Bank through the appropriate supervising and examining department, for purposes of determining compliance with the requirements of Item "1",as well as the provisions of existing laws and rules and regulations on ownership of voting stocks in banks. b. Registration of transfers and other arrangements involving voting stocks in banks The following regulations govern the registration of transfers and other arrangements involving voting stocks in banks, in furtherance of the purposes of Secs. 12, 12-A, 12-B and 12-D of Republic Act No. 337, as amended, otherwise known as the General Banking Act, and Sec. 2131. (1) Unlawful and void transactions involving stocks in banks .The following transactions, to the extent of the excess over any of the ceilings referred to in this subsection, are hereby declared unlawful and void ab initio : (a) The sale or transfer of voting stock of banks to any individual or entity, if such sale or transfer, in itself, or in relation with another previous sale or transfer shall result in the ownership by foreign persons or corporations in excess of thirty percent (30%) or, when allowed by the Monetary Board and approved by the President of the Philippines, forty per cent (40%) of the voting stock in the bank, in violation of Secs. 12 and 12-A of Republic Act No. 337, as amended. (b) The sale or transfer of voting stock of banks to any corporation, including its wholly-or majority-owned subsidiaries, if such sale or transfer, in itself, or in relation with another previous sale or transfer shall result in the ownership by such corporation and its wholly- or majority-owned subsidiary in excess of thirty percent (30%) of the voting stock of the bank and the other limitations prescribed in Sec. 12-B of Republic Act No. 337, as amended. (c) The sale or transfer of voting stocks of banks to (a) any natural person; (b) persons related to each other within the third degree of consanguinity or affinity herein termed a family group; and (c) any corporation or corporations which are wholly-owned or a majority of the voting stock of which is owned by a natural person such as in (a) above, or by a family group such as in (b) above, including their wholly-or majority-owned subsidiaries, if such sale or transfer or encumbrance, in itself, or in relation with another previous sale or transfer, shall result in the ownership by such person or family group and such corporations m excess of twenty per cent (20%) of the voting stock of the bank, in violation of Secs. 12-B and 12-D of Republic Act No. 337, as amended, and Sec. 2131. (d) Any arrangement, such as a voting trust agreement or proxy, which vests on any person or corporation the right to vote or control voting stocks in banks, if such agreement in itself, or in relation with another previous similar agreement or previous sale or transfer shall result in the acquisition of control, in excess of the limitations prescribed in Secs. 12, 12-A, 12-B and 12-D of Republic Act No. 337, as amended, and Sec. 2131. (2) Stockholders to be informed of the ineligibility to acquire or control additional voting stocks .The corporate secretary shall promptly inform stockholders who have reached any of the ceilings imposed by law of their ineligibility to own or control more than the applicable ceiling. (3) Requirement for newly-established banks .Entities which may hereinafter apply for a license to engage in banking business shall, before being allowed to operate, submit: (a) An alphabetical list of stockholders with the number and percentage of voting stocks owned by them. (b) A separate list containing the names of persons own voting stocks in banks and who are related to each other within the third degree off consanguinity or affinity, with proper indication of the combined percentage of voting stocks held by them in the particular bank, as well as corporations which are wholly-owned or a majority of the stock of which is owned by any of such persons, including their wholly- or majority-owned subsidiaries. (4) Procedure in the transfer or registration of transactions of voting stocks in banks .In all transactions which may lawfully come to the corporate secretary involving transfer of voting shares of stock or registration of voting trust agreements, or any form of arrangement vesting the right to vote the voting shares of stock of the bank, the corporate secretary shall: (a) ascertain the identity and citizenship of the transferee, voting trustee, proxy or person vested with the right to vote, and his relation to existing stockholders, and for this purpose, he should require the transferee, voting trustee, proxy or the person vested with the right to vote to submit proof of citizenship, which may consist, in case of a corporation, of a certified true copy of the articles of incorporation, accompanied by the affidavit of the corporate secretary of the corporation, certifying to the correctness and accuracy of the list of stockholders and the percentage of shares owned by them; (b) require the transferee, voting trustee, proxy or person vested with the right to vote, at the time of the receipt of the request for transfer or registration, or at any time thereafter, to disclose all information with respect to persons related to the transferee, voting trustee, proxy or person vested with the right to vote, within the third degree of consanguinity or affinity, as well as corporations, partnerships or associations where the transferee, voting trustee, proxy or person vested with the right to vote has equity interest, and the extent thereof; (c) require the transferee to execute an affidavit (sample form shown in App. 1) stating, among others, that the transferee is a bona fide owner of shares of stock and that he acknowledges full awareness of the requirements of the law and the prohibitions against exceeding ownership of voting stocks beyond the limitations prescribed by Secs. 12, 12-A, 12-B, and 12-D of Republic Act No. 337, as amended, and Sec. 2131. In the event the request for transfer or the arrangement sought to be registered will patently cause the voting stocks of a person or persons related to each other within the third degree of consanguinity or affinity or corporations, to exceed the limits prescribed by law, the corporate secretary shall deny the transfer or registration and forthwith inform the parties to the transaction in writing. Simultaneous with the notice to the parties, the corporate secretary shall submit a written report to the Governor of the Central Bank of the attempted illegal transfer or arrangement, together with the names, addresses of parties and other pertinent data with respect to the particular stock transaction. In the event the corporate secretary has reason to doubt the legality of the transfer or of the arrangement sought to be registered, he may commence an action before the Securities and Exchange Commission, pursuant to its original and exclusive jurisdiction to hear and decide cases involving controversies arising out of intra-corporate relations. (5) Duties of securities brokers and dealers in case transaction is coursed through them .If the transfer of voting shares in banks is effected through the intercession of securities brokers and dealers, only securities brokers and dealers duly registered with the Securities and Exchange Commission can request the corporate secretary for the transfer of shares in banks. Securities brokers and dealers shall inform prospective sellers and buyers of voting stocks in banks that no person or persons related to each other within the third degree of consanguinity or affinity, or corporations can own more than the ceilings prescribed by law and that in case of a sale or transfer, shall require the transferee to furnish information and execute an affidavit, as provided in Item d(3) hereof. SUBSECTION 2126.2 Convertibility of preferred stock to common stock Out of the preferred shares of stock which savings banks may henceforth be authorized to issue, at least fifty per cent (50%) of each such issue of preferred stock shall be convertible into common stock at the option of the holders thereof after five years from date of issue: Provided, however ,That: a. The bank concerned may, if it so desires, allow the conversion of such preferred stock into common stock even before the lapse of five years from date of issue. b. At the time of the sale of the preferred stock, both classes thereof (one with convertibility feature and the other without convertibility feature) shall be offered to the purchasers, with the purchasers having the option to acquire either or both classes of preferred stock. c. Preferred shares of stock with a cumulative feature issued by savings banks shall automatically be convertible into common shares of stock at the option of the holders thereof whenever the rights as may be acquired by the holders by virtue of such cumulative feature are not satisfied by the bank within a period of three years from date of issue. SUBSECTION 2126.3 Equity investments by foreigners in domestic banking institutions .The following guidelines shall be observed in allowing equity investments by foreigners in domestic banks: a. The prior authority of the Monetary Board shall be obtained by foreign banking institutions, including their wholly- or majority-owned subsidiaries and their holding companies having majority holdings in such foreign banking institutions, whenever acquiring shares of domestic banking institutions including foreign-owned shares outstanding and foreign-held as of April 27, 1973 and which continued to be held by the foreign stockholder up to the date of the acquisition by the foreign banking institution. b. If the foreign investor in the equity of a domestic banking institution is (i) an individual, (in) a non-financial entity, or (iii) a non-bank financial entity which is not owned or controlled by a banking institution, its subsidiary or holding company, and the investor is acquiring shares which were not foreign-held as of April 27, 1973 nor continued to be held by the foreign stockholder up to the date of acquisition by the foreign investor, the investment may be made only with the prior authority of the Monetary Board. c. The prior authority of the Monetary Board is not required if the foreign investor is (i) an individual, (ii) a non-financial entity, or (in) a non-bank financial entity which is not owned or controlled by a banking institution, its subsidiary or holding company, and the investor is acquiring foreign-owned shares in existing domestic banks: Provided ,That said shares were outstanding and foreign-held as of April 27, 1973 and which continued to be foreign-held up to the date of the acquisition by the foreign investor. d. Only foreign-owned shares directly funded by inward remittance of foreign exchange sold to the local banking system are qualified for registration with the Central Bank (thru the Management of External Debt and Investment Accounts Department) for capital repatriation and remittance of profits/dividends privileges, in accordance with existing Central Bank regulations. SUBSECTION 2126.4 (As amended by CBP Circular 1173 dated April 11, 1988) SECTIONS 2127-2130. ( Reserved ) SECTION 2131. Ceilings on Stockholdings in a Thrift Bank . a. Except as provided for in Subsec. 2131.1 the stockholdings in any bank of the following shall not exceed twenty per cent (20%) of the voting stock of the bank: (1) Any natural person; or (2) Persons related to each other within the third degree of consanguinity or affinity, herein termed a family group; or (3) Any corporation or corporations which are wholly-owned or a majority of the voting stock of which are owned by a natural person such as in (1) above, or by a family group such as in (2) above, including their wholly-or majority-owned subsidiaries: Provided ,That, where (3) together with (1) or (2) own or desire to own equity in any bank, their combined voting stockholding shall be the basis for the computation of the twenty per cent ceiling. b. Determination of relationship within the third degree of consanguinity or affinity, and a "family group" subject to the twenty per cent ceiling Relationship of persons to each other with the third degree of consanguinity or affinity shall be determined in accordance with the provisions of Articles 963 to 966 of the Civil Code of the Philippines. For purposes of this subsection, persons owning voting stocks in a bank who are related to each other within the third degree of consanguinity or affinity shall comprise a family group whose combined holding is subject to the twenty per cent ceiling. Persons who are related to each other but not within the third degree, such as first cousins, do not form a family group. In determining whether the prospective transferee or purchaser is part of a family group subject to the twenty per cent ceiling, the degree of relationship shall be counted from the transferee or purchaser. It is possible for a person to belong to several family groups, and in such a case, it is enough that the percentage limit of twenty per cent for one family group is exceeded for the acquisition/transfer of shares to be considered a violation, even if the transaction may not violate the limit for all the other possible family groups. c. Upon prior approval of the Monetary Board, a commercial bank, a bank authorized to provide commercial banking services or to operate under an expanded commercial banking authority, or a holding corporation, referred to in Sec. 12-C of Republic Act No. 337, as amended, may acquire up to 100% of the equity of a thrift bank: Provided , That the holdings of an individual, family, corporation or business group in such investing bank or holding corporation shall be subject to the limits prescribed in Secs. 12, 12-A, 12-B and 12-D of Republic Act No. 337, as amended. (As amended by CBP Circular 1171 dated March 29, 1988) SUBSECTION 2131.1 Stockholdings in excess of ceiling . Any or all, as the case may be, of the stockholders mentioned in Sec. 2131 owning more than twenty per cent of the voting stock of any bank on the date of the effectivity of Presidential Decree No. 71 amending R.A. No. 337, as amended, may maintain but may not increase such holdings in percentage terms; and once reduced, the same may not thereafter be increased beyond twenty per cent of the bank's voting stock. Stockholders falling under categories (1) or (2) of Sec. 2131 who are presently allowed to own up to thirty-five per cent of the voting stock in a newly organized thrift bank shall also be covered by this rule. SUBSECTION 2131.2 Transfers and acquisitions of shares within a family group . Transfers of ownership of shares of stock within a family group, which do not thereby increase but merely maintain the aggregate percentage holdings of the group beyond twenty per cent of the bank's voting stock shall be allowed: Provided ,That no stockholder-member of a family group may acquire additional shares from any other member of that group, if such acquisition would increase his holdings of voting stock beyond the twenty per cent ceiling on individual holdings. SECTIONS 2132-2135. ( Reserved ) SECTION 2136. Dividends . If losses have at any time been sustained by any banking institution equal to or exceeding the undivided profits on hand, no dividend shall be declared; and no dividend shall ever be declared by any such bank while it continues in banking operations to an amount greater than its net profits then on hand deducting therefrom its losses and bad debts. All debts due to any such bank on which interest is past due and unpaid for a period of six months, unless the same are well-secured and in process of collection, shall be considered bad debts within the meaning of this section. SUBSECTION 2136.1 Definition of terms . For purposes of this section, the following definitions shall apply: a. Bad debts shall include any debt on which interest is past due for a period of six (6) months, unless it is well-secured and in process of collection. A loan payable in installments with an automatic acceleration clause shall be considered a bad debt, within the contemplation of the Section, where installments or amortizations have become past due for a period of six (6) months, unless the loan is well-secured and in process of collection. For a loan payable in installments without an acceleration clause, only the installments or amortizations that have become past due for a period of six (6) months and which are not well-secured and in the process of collection shall be considered bad debts within the contemplation of this section. b. Well-secured a debt shall be considered "well-secured' (or fully secured) if it is covered by collateral in the form of a duly constituted mortgage, pledge, or lien on real or personal properties including securities, having a loan value sufficient to discharge the debt in full, including accrued interest and other pertinent fees and expenses. c. In process of collection . a debt due to a bank shall be considered in process of collection when it is the subject of continuing extrajudicial or judicial proceedings aimed towards full settlement or liquidation, or otherwise to place it in current status. The extrajudicial proceedings, such as the writing of collection or demand letters, must have been initiated by the bank and/or its lawyers before the interest or installments or amortizations on the debt have become past due and unpaid for a period of six (6) months. The debt shall continue to be considered in process of collection for a period of six (6) months counted from date of the first collection or demand letter and if, within this period, the debtor fails to make a payment of at least twenty per cent (20%) of the outstanding balance of the principal on his account, plus all interests which may have accrued thereon, the same shall automatically be classified as bad debt unless judicial proceedings are instituted. The debt shall continue to be considered in process of collection during the pendency of the judicial proceedings. When judgment against the debtor has been obtained, the bank must be active in enforcing the judgment for the debt to continue to be considered in process of collection. SUBSECTION 2136.2 Amount available as dividends The net amount available for cash dividend declaration shall be the total of unrestricted or free earned surplus and undivided profits less: a. Bad debts against which valuation reserves are not required to be set up; b. Unbooked valuation reserves, and other unbooked capital adjustments required by the Central Bank, whether or not allowed to be set up on a staggered basis; c. Accrued interest receivable credited to income but not yet collected, net of reserve for uncollected interest on loans; and d. Deferred income tax as defined under item 'j' of Subsection 2116.2. ( Effective April 23, 1985 ) SUBSECTION 2136.2.a(2).e (Additional provision as provided by No. 1a of CBP Circular 1170 dated January 13, 1988) SUBSECTION 2136.3 Accrued interest . Accrued interest earned but not yet collected or received on loans or any installments thereon shall not be considered profits and/or earnings for purposes of cash dividend declaration. SUBSECTION 2136.4 Limitations on declaration of dividends by stock savings and loan associations a. The board of directors of stock savings and loan associations shall see to it that everytime a discrepancy between the general ledger accounts and their respective subsidiary ledger occurs, it shall immediately set up from the net profits of the association, if any, a Surplus Reserve in an amount equivalent to the amount of the discrepancy, and this reserve shall not be reverted for distribution as dividends or for any other purpose unless and until the discrepancy ceases to exist. b. Compliance with the approved capital build-up program shall be a pre-requisite before any stock savings and loan association can declare any cash dividends. SUBSECTION 2136.5 Reporting and verification a. Declaration of cash dividends shall be reported by the bank concerned to the appropriate supervising and examining department of the Central Bank within ten (10) banking days from date of approval of the declaration by the bank's board of directors. b. Pending verification of above-mentioned report by the appropriate supervising and examining department of the Central Bank, the bank concerned shall not make any announcement or communication on the declaration of cash dividends nor shall any payment be made thereon. Banks whose shares are listed with any domestic stock exchange may declare cash dividends and give immediate notice of such declaration to the SEC and the stock exchanges, in compliance with pertinent rules of SEC: Provided ,That no record date is fixed for such cash dividend pending verification of the report on such declaration by the appropriate supervising and examining department of the Central Bank. c. In any case, the declaration may be announced and the dividends paid if, after thirty (30) banking days from the date the report required herein shall have been received by the Central Bank, no advice against such declaration has been received by the bank concerned. SUBSECTION 2136.6 Recording of dividends . The liability for cash dividends declared shall be taken up in the bank's book on the date of approval of the board of directors. SUBSECTION 2136.7 Issuance of fractional shares of stock in declaration of stock dividends . Stock savings and loan associations shall observe the following guidelines in cases where the declaration of stock dividend results in the issuance of fractional shares: a. Whenever possible the amount corresponding to the fraction should be given in the form of cash dividend. b. If Item "a" is not possible, the certificate of stock issued should be in whole numbers, and the fractional share shall be issued in the form of scrip certificates. In no case shall the certificate of stock be issued including such fractional share. The scrip certificate is temporary in nature and should be redeemed in cash when the bank is in a position to do so. Or stockholders holding such scrip certificates may negotiate with other stockholders for the purchase or sale of such shares to convert them into full shares, subject to the limitations on stockholdings as provided by law. SUBSECTION 2136.8 (Additional provision as provided by CBP Circular 1182 dated August 30, 1988) SECTIONS 2137-2140. ( Reserved ) F. DIRECTORS, OFFICERS AND EMPLOYEES SECTION 2141. Definition and Qualifications of Directors . The following shall be the definition and qualifications of directors for purposes of this Section: SECTION 2142. Definition and Qualifications of Officers . The following shall be the definition and qualifications of officers for purposes of this Section: SUBSECTION 2142.1 Definition of officers . Officers shall include the President, Executive Vice President, Senior Vice-President, Vice President, General Manager, Secretary, Trust Officer and others mentioned as officers of the bank, or those whose duties as such are defined in the by-laws, or are generally known to be the officers of the bank (or any of its branches and offices other than the head office) either through announcement, representation, publication or any kind of communication made by the bank. SUBSECTION 2142.2 Qualifications of officers . An officer shall have the following minimum qualifications: a. He shall be at least twenty one (21) years of age; and b. He shall be at least a college graduate, or have at least five (5) years experience in banking or trust operations or related activities or in a field related to his position and responsibilities, or have undergone training in banking or trust operations acceptable to the appropriate supervising and examining department of the Central Bank: Provided, however ,That trust officers shall have at least two (2) years of actual experience or training in trust operations or fund management or other related fields. The foregoing qualifications for officers shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. SECTION 2143. Disqualifications of Directors and Officers . a. Without prejudice to specific provisions of law prescribing disqualifications for directors, the following are disqualified from becoming directors: (1) Persons who have been convicted judicially or administratively of an offense involving moral turpitude, or judicially declared insolvent, spendthrift, or incapacitated to contract; (2) Directors, officers and employees who have been removed by the Monetary Board pursuant to the provisions of Section 34-A of Republic Act No. 265, as amended, and other provisions thereof; (3) Persons who shall refuse to disclose the extent of their business interests to the appropriate supervising and examining department of the Central Bank, when required for the proper implementation of a provision of law or of a circular, memorandum or rule or regulation of the Central Bank. This disqualification shall be in effect as long as the refusal persists; (4) Directors, excluding non-resident directors representing foreign equity interests, who have been absent for whatever reasons for more than fifty per cent (50%) of all meetings, both regular and special, of the board of directors for a two-year period reckoned from the date of the election of the director concerned. This disqualification applies for purposes of the succeeding election; (5) Those who are delinquent in the payment of their obligations as defined herein. This disqualification shall operate as long as the delinquency persists; "Delinquency in the payment of obligations" means that an obligation of a person with a bank where he is a director or officer or where he may be elected or appointed to said positions or at least two obligations with other banks and non-bank financial intermediaries performing quasi-banking functions, under different credit lines or loan contracts, are past due for at least three (3) months. "Obligations" shall include all borrowings from a bank or from a non-bank financial intermediary performing quasi-banking functions obtained by: (a) A director or officer for his own account or as the representative or agent of others or where he acts as a guarantor, indorser or surety, for loans from such financial institutions; (b) The spouse or child under parental authority of the director or officer; (c) Any person whose borrowings or loan proceeds were credited to the account of, or used for the benefit of a director or officer; (d) A partnership of which a director or officer, or his spouse is the managing partner, or a general partner owning a controlling interest in the partnership; and (e) A corporation, association or firm wholly-owned or majority of the capital of which is owned by any or a group of persons mentioned in (a),(b) and (d). (6) Persons found by the Monetary Board to have willfully failed or refused to comply with any banking law, order, instruction or regulation issued by the Monetary Board or by the Governor, or to have committed irregularities or to have conducted business in an unlawful, unsafe or unsound manner as determined by the Monetary Board in any institution supervised by the Central Bank; and (7) Persons who have been dismissed for cause from any institution under the regulation or supervision of the Central Bank. b. The disqualifications for directors above-mentioned shall likewise apply to officers, except that stated in Item (4). c. Except as may be authorized by the Monetary Board or the Governor, the spouse or a relative within the second degree of consanguinity or affinity of any person holding the position of Chairman, President, Executive Vice-President or any position of equivalent rank, General Manager, Treasurer, Chief Cashier, or Chief Accountant is disqualified from holding or being elected or appointed to any of said positions in the same bank; and the spouse or a relative within the second degree of consanguinity or affinity of any person holding the position of Manager, Cashier, or Accountant of a branch or extension office of a bank is disqualified from holding or being appointed to any of said positions in the same branch or extension office: d. Except in the case of technical personnel whose employment may be specifically authorized by the Minister of Justice, foreigners cannot be officers or employees of thrift banks. Institutions concerned shall file with the Minister of Justice the necessary request for authority to employ any foreign technical personnel, in accordance with the procedure prescribed in Office Circular of the Ministry of Justice dated May 28, 1976. The foregoing disqualifications shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. SUBSECTION 2143.1 Effect of non-possession of qualifications or possession of disqualifications Unless otherwise provided, directors and officers elected or appointed without possessing the qualifications above-mentioned or possessed of any of the disqualifications as enumerated herein, shall vacate their respective positions immediately. SECTION 2144. Bio-data of Directors/Officers . All banks shall submit to the appropriate supervising and examining department a bio-data of all of their incumbent directors and officers including a list of relatives of legal age within the second degree of consanguinity or affinity, in accordance with the following: a. The format for reporting biographical data of directors and officers of banks shall be in accordance with the prescribed form (CBP 7-16-18).The biographical data shall be updated annually within 25 banking days after end of the calendar year. In the case of changes in educational attainment and experience in banking, only additional qualifications that will enhance the director's or officer's competence or will qualify him to his present position shall be reported. cdlex In case of transfers to other banks, the director need only to update the pertinent Section in the pages of the report. Submission shall be within seven (7) banking days from election or appointment. b. All banks, including building and loan associations, shall submit to the appropriate supervising and examining department within twenty-five (25) banking days following the date of the annual election of the board of directors as provided in the bank's by-laws a list of the members of the board of directors and officers. The list shall be submitted whether or not the annual election results in a change in the composition of the board of directors. c. In the case of directors and officers elected or appointed after December 31, 1978 and whose bio-data have not been submitted pursuant hereto, the deadline for submission shall be within seven (7) banking days from election or appointment. d. A report on changes in the composition of the board of directors or officers shall be submitted within seven (7) banking days after such change. e. For purposes of showing compliance with the minimum qualification requirements in case of promotions, only the updated data need be reflected in the section and page affected. The page shall be submitted within seven (7) banking days after promotion. f. The bio-data shall be submitted only once. Thereafter, in the annual updating, only the pertinent sections and pages in the report form shall be submitted within twenty-five (25) banking days after the end of every calendar year. SECTION 2145. ( Reserved ) SECTION 2146. Interlocking Directorships and/or Officerships ; Declaration of Policy . In order to safeguard against exercise by the same person or group of persons of undue influence over the policy-making and/or management functions of similar financial institutions that could have an adverse effect on competition or which could result in conflict of interest situations to the detriment of others, the following regulations shall govern interlocking directorships and/or officerships within the financial system. SUBSECTION 2146.1 Interlocking directorships . While concurrent directorships may be the least prejudicial of the various relationships cited in this Section to the interests of the institutions involved, certain measures are still necessary to ensure against the disadvantages that could result from indiscriminate concurrent directorships. a. Except as may be authorized by the Monetary Board or as otherwise provided hereunder, there shall be no concurrent directorships between banks or between a bank and a non-bank financial intermediary. b. Without the need for prior approval of the Monetary Board, concurrent directorships between the following entities shall be allowed in the following cases: (1) banks not belonging to the same category: Provided ,That not more than one of the banks shall have quasi-banking functions; (2) a non-bank financial intermediary, other than an investment house not performing quasi-banking functions, and a bank; (3) a bank not performing quasi-banking functions and a non-bank financial intermediary, other than an investment house, performing quasi-banking functions; and (4) a bank with expanded commercial banking authority or a commercial bank, and one or more financial institutions other than investment houses in each of which majority interest is held by the bank. SUBSECTION 2146.2 Interlocking directorships and officerships . In order to prevent any conflict of interest resulting from the exercise of directorship coupled with the reinforcing influence of an officer's decision-making and implementing powers, the following rules shall be observed: a. Except as may be authorized by the Monetary Board or as otherwise provided hereunder, there shall be no concurrent directorships and officerships between banks or between a bank and a non-bank financial intermediary, whether or not performing quasi-banking functions. b. Without the need for prior approval of the Monetary Board, concurrent directorships and officerships in a bank with expanded commercial banking authority or a commercial bank and one or more financial institutions other than an investment house, in each of which majority interest is held by the bank shall be allowed. SUBSECTION 2146.3 Interlocking officerships . Concurrent officerships in different financial intermediaries present a most serious conflict of interest problem. Considering the full-time nature of officer positions, the difficulties of serving two offices at the same time, and the need for effective and efficient management, the following rules shall be observed: a. There shall be no concurrent officerships between banks or between a bank and a non-bank financial intermediary, whether or not performing quasi-banking functions, except as otherwise provided hereunder. b. With prior approval of the Monetary Board, concurrent officerships may be allowed in the following cases: (1) between an expanded commercial bank or a commercial bank and one or more financial institutions majority of the equity of which is owned by the expanded commercial bank or commercial bank; or (2) between two or more banks and non-bank financial intermediaries other than investment houses, whether or not performing quasi-banking functions, majority of the equities of which is owned by the expanded commercial bank or commercial bank; and (As amended by Section 1 of CBP Circular 1115 dated September 16, 1986) (3) between banks or between a bank and a non-bank financial intermediary other than an investment house: Provided ,That at least twenty per cent (20%) of the equity of each of the banks and non-bank financial intermediaries is owned by a holding company or a bank, and the interlocking arrangement is necessary for the holding company or the bank to provide technical expertise or managerial assistance to its affiliates; subject to the following guidelines: (a) that the positions do not involve any functional conflict of interests; (b) that the position of chief executive officer may be held by a person in only one financial intermediary; (c) that the officer involved, or his spouse or any of his relatives within the first degree of consanguinity or affinity or by legal adoption, or a corporation, association or firm wholly or majority-owned or controlled by such officer or his relatives enumerated above, does not own in his/its own capacity more than twenty per cent (20%) of the subscribed capital of the entities in which the bank has equity investments; and (d) that where any of the positions involved are held on a full-time basis, adequate justification shall be submitted to the Monetary Board. (As amended by Section 2 of CBP Circular 1115 dated September 16, 1986) SUBSECTION 2146.4 Representatives of Government The foregoing prohibitions shall not apply to persons appointed to such positions as representatives of the Government or government-owned or controlled entities. SUBSECTION 2146.5 Categories of banks . The categories of banks are the following: a. Banks with expanded commercial banking authority and commercial banks which shall belong to the same category; b. Thrift banks, composed of savings and mortgage banks, stock savings and loan associations and private development banks; and c. Rural Banks. SUBSECTION 2146.6 Definitions . For purposes of this Section, the following definitions shall apply: a. "Directors" shall refer to the bank directors duly holding their positions as such in accordance with the corporate by-laws and pertinent provisions of law. b "Officers" shall include the President, Vice-President, and others mentioned as officers of the bank, or those whose duties as such are defined in the by-laws, or are generally known to be the officers of the bank (or any of its branches and offices other than the head office) either through announcement, representation, publication or any kind of communication made by the bank: Provided ,That the person holding the position of Chairman or Vice-Chairman of the Board or another position in the Board shall not be considered as an officer unless the duties of his position in the Board include functions of management such as those ordinarily performed by regular officers: Provided, further ,That members of a group or committee, including sub-groups or sub-committees, whose duties include functions of management such as those ordinarily performed by regular officers, shall likewise be considered as officers for the purpose of this Section: and Provided, finally ,That for purposes of the rules on interlocking directorships, a husband and his wife shall be considered as one person. SECTION 2147. Profit Sharing Program . Profit sharing programs adopted in favor of directors, officers and employees shall be reflected in the by-laws of the bank or the NBQB concerned: Provided, That these guidelines shall apply during the interim period that the bank or NBQB has not effected these changes in its by-laws: a. The base in any profit sharing program shall be the net income for the year of the bank/NBQB as shown in its Consolidated Statement of Income and Expenses for the Year, net of the following: (1) All cumulative dividends accruing to preferred stock to the extent not covered by earned surplus; (2) Accrued interest receivable credited to income but not yet collected, net of reserves already set up for uncollected interest on loans; (3) Unbooked valuation reserves on loans or an amount required to update valuation reserves in accordance with the schedule approved by the Monetary Board, as well as all amortizations due on deferred charges; (4) Provision for current year's income taxes; and (5) Income tax deferred for the year . Provided, however ,That in case of reversal of deferred income taxes which were deducted from net income in computing for profit sharing of previous years, the deferred income tax reversed to expense shall be added back to net income to arrive at the base for profit sharing for the year during which the reversal is made. ( Effective April 23, 1985 ) SUBSECTION 2147 a.6 (Additional provision as provided by No. 1b of CBP Circular 1170 dated January 13, 1988) b. The bank/NBQB may provide in its by-laws for other priorities in the computation of net profits for purposes of profit sharing: Provided ,That in no case shall profit sharing take precedence over any of the items in the preceding paragraph.. c. prior approval of the Monetary Board shall be necessary before a bank/NBQB which has received financial assistance from the Central Bank may implement its profit sharing program in favor of its directors, officers and employees. Financial assistance shall refer to emergency loans and advances and to availments under the lender of last resort facility in the form of loans, advances, rediscounts and such other forms of credit accommodations which are intended to provide banks and NBQBs with liquidity in times of need. SECTION 2148. Bonds of Officers and Employees . All officers and employees of savings and loan associations who have access to money, or negotiable securities of the association, or who issue shares of stock of the association in the regular discharge of their duties shall, before entering upon their duties, furnish to the employing association a good and sufficient bond indemnifying the association against loss of money or securities by reason of their dishonesty and against loss arising from their dishonest issue of stock or shares. The bond of the Cashier, Assistant Cashier, Treasurer, Tellers and all other employees of the association, including agents, salesmen and solicitors, having money accountability, shall be equivalent to, or not less than, their average cash daily accountability. The Corporate Secretary of a stock association shall furnish a bond in an amount to be determined by the board of directors which in no case shall be less than P1,000. The bonds must be issued by a reputable bonding company approved by the Central Bank. The average cash daily accountability of an officer or employee of an association shall be computed by adding the amount of actual cash which he handles each day for a year, the total of which shall be divided by the number of days of the year said officer or employee receives or handles such cash. Checks or other cash items shall not be included in the computation of the average daily cash accountability: Provided ,That the necessary minimum safeguards embodied in Appendix 2 are adopted by stock savings and loan associations to justify the reduction of the bond coverage of accountable officers/employees to the extent of the amount of cash actually handled without including checks and other cash items. No stock savings and loan association shall act or sign as co-maker of bonds of their accountable officers/employees. SECTIONS 2149-2150. ( Reserved ) SECTION 2151. Establishment of Banking Offices . Thrift banks may, upon prior approval by the Monetary Board, establish banking offices which include branches, sub-branches, agencies and extension offices on a nationwide basis. SUBSECTION 2151.1 Prior Monetary Board approval No bank operating in the Philippines shall establish, open or operate branches and other banking offices, or transact business outside the premises of its duly authorized principal office, without the prior approval of the Monetary Board. SUBSECTION 2151.2 Citizenship requirements . A thrift bank applying for authority to establish additional banking offices must comply with the following requirements: a. At least seventy per cent (70%) of the voting stock shall be owned by Filipinos except when such required minimum percentage age is reduced to sixty per cent (60%) pursuant to low; and b. At least two thirds (2/3) of the members of the board of directors shall be Filipinos. SUBSECTION 2151.3 Capital requirements A thrift bank apply for authority to establish banking offices shall comply with the required minimum paid-in capital as follows: (1) For existing banks establishing branches to be located: Within Metropolitan Manila P10 million Outside Metropolitan Manila 5 million (2) For new thrift banks establishing branches to be located within Metropolitan Manila P20 million. Any thrift bank applying for authority to establish a branch or banking unit in any of the classified service areas as provided in Subsec. 2151.5 shall immediately comply with the prescribed minimum paid-in capital unimpaired by (a) unbooked valuation reserves and other capital adjustments as may be required by the Central Bank and (b) total outstanding unsecured credit accommodations to directors, officers, stockholders, and their related interests (DOSRI). An applicant bank may be required to put up additional capital in an amount to be determined by the appropriate supervising and examining department based on criteria which consider expected growth of risk assets and capital accounts. ( Effective June 3, 1983 ) SUBSECTION 2151.4 Other requirements/factors to be considered . Other requirements/factors to be considered are the following: a. The applicant's general compliance with laws, rules, regulations and policies of the Central Bank such as: (1) Capital adequacy and solvency; (2) Profitability and capacity to absorb losses; (3) Reserve and liquidity position; and (4) Qualifications of the proposed officers of the banking office. b. The service area of the proposed banking office is not over-banked and shows economic growth or reasonable prospects thereof. A service area is defined as an area of interrelated and interacting local economic activities. The service area is overbanked if (1) the rates of return are so depressed by an excess of banks in the area that adequate banking performance for the customers' overall benefit is threatened in the long run; and (2) the level of deposits of banks in the area or their growth indicates no reasonable prospects that the situation in (1) above will be reversed in the short run. c. A certification under oath by the bank's chief executive officer or officer of similar authority to the effect that applicant bank has no float items in its Due From/To Head Office/Branches/Offices accounts as well as its Due From Central Bank account which are outstanding for more than sixty (60) calendar days exceeding one per cent (1%) of its total resources as of the end-of-month nearest to application date shall be submitted. d. Proposed banking offices shall not be allowed in premises purchased, acquired or leased to the disadvantage of another bank under circumstances attended by bad faith. e. No proposed banking office shall be established in a place adjoining the premises of an existing rural bank/branch: Provided , however ,That a rural bank/branch is not precluded from establishing a banking office adjoining the premises of any existing banking office, or of an approved but not yet opened banking office. f. The applicant bank shall submit a written declaration under oath of (1) the manner of occupancy/acquisition of the premises and the consideration for the lease, purchase or acquisition of such premises and (2) the name of the previous owner, lessor and lessee, indicating the banking institutions, if any, which had previously occupied such premises. g. Applications for authority to establish additional banking offices shall be accompanied as a minimum by the following information/documents: (1) Certified true copy of the resolution of the bank's board of directors authorizing the application for the establishment of the additional banking office. (2) Sketch of the area to be served showing the following information: (a) Proposed site of the banking office to be established; (b) Names and location of existing banking offices in the area, if any, and approximate distance from the proposed banking office; (3) Banking facilities and services to be offered. (4) Business or economic justification stating facts and figures (such as population and growth of population, number and names of the principal industrial, commercial and other establishments within the effective area of operations, deposit and loaning potentials, traffic flow and other information) tending to show that the establishment of the proposed banking office is justified on the basis of local public need therefor. (5) Projected statement of condition at the end of the first and second semesters of operation of the proposed banking office. (6) Statement of estimated earnings and expenses for the first 12 months of operation. (7) Organizational set-up of the proposed banking office showing the proposed positions and annual pay for each; and the names, qualifications and experience of the proposed manager and other officers. (8) Bank premises and initial outlay. SUBSECTION 2151.5 Conditions precedent to approval . a. Thrift banks applying for authority to establish, or to transfer from one service area to another, any branch or other banking unit, or to purchase any existing branch or other banking unit from another bank, shall purchase from the Central Bank with respect to each branch or other banking unit to be established, transferred or purchased in any of the following service areas, the five-year Special Series Treasury Notes, or the five-year Central Bank Certificates of Indebtedness, in the minimum amounts indicated: (1) Service Area I (Heavily) P20 million overbranched areas) (2) Service Area II (Over- P15 million branched areas) (3) Service Area III (Ideally P10 million branched areas) (4) Service Area IV (Under- P5 million branched areas) (5) Service Area V (Encouraged) -0- For this purpose, the Central Bank shall classify the Philippines into Service Areas I to V based on the density of banking units as of end of calendar year, and the trend of deposits within the area during the last three (3) consecutive calendar years, preceding the date of application. b. The government securities acquired for branching purposes shall not be eligible for legal reserve purposes nor considered as compliance with agricultural and agrarian reform requirements. These shall be held by the bank concerned until maturity and shall not be returned to the Central Bank before maturity whether directly or indirectly by way of a repurchase or resale agreement through any of the accredited government securities dealers ( Effective June 3, 1983 ) c. Interim policy guidelines/clarification as regards the establishment/transfer or relocation by banks of branches/other banking units; (1) The establishment of new branches/other banking units in places classified under the following service area categories shall be suspended: (a) Service Area Category I (Heavily overbranched areas) (b) Service Area Category II (Overbranched areas) (c) Service Area Category III (Ideally branched areas) Where there are existing branches/banking units of a closed bank located therein, the same shall be available for purchase by applicant banks. (2) The establishment of new branches/other banking units in places classified under Service Area Categories IV (Underbranched) and V (Encouraged) shall be allowed subject to existing guidelines, except that where there are existing branches/banking units of a closed bank located therein, no new branch/banking unit shall be established in said areas. Instead, the existing branches/banking units of the closed bank shall be available for purchase by applicant banks. (3) Transfers/reallocations of branches/other banking units presently located in places classified under any of the service area categories shall be allowed only within the physical boundaries of the area which is classified under a particular category (I, II, III, IV or V) where the branch/other banking unit sought to be transferred/relocated is presently situated. ( Effective November 23, 1984 ) SUBSECTION 2151.6 Conditions precluding processing of application . The existence of any of the following conditions shall preclude/suspend processing of the application: a. The applicant's operation during the year immediately preceding the filing of the application was unprofitable; b. The applicant has not complied with the ceilings on credit accommodations to directors, officers, and/or stockholders; c. The net worth of the applicant is found to be deficient for five (5) or more times within a thirty (30) days period during the last six (6) months immediately preceding the date the application was received, in which case its privilege to establish banking offices shall be suspended for the next sixty (60) calendar days without prejudice to the resubmission of its application after said period; d. The net worth of the applicant is found to be deficient continuously for a period of thirty (30) days or more during the last twelve (12) months immediately preceding the date the application was received, in which case its privilege to establish banking offices shall be suspended for the next twelve (12) months without prejudice to the resubmission of its application after said period; e. The applicant has incurred net deficiencies in reserves against deposit/deposit substitutes for four (4) consecutive weeks, in which case its application shall be processed only after it shall have had no net reserve deficiencies for eight (8) weeks: Provided ,That in case the applicant had incurred net deficiencies in reserves for eight (8) consecutive weeks during the last twelve (12) months immediately preceding the date the application was received, its privilege to establish banking offices shall be suspended for the next twelve (12) months without prejudice to the resubmission of its application after said period; f. The applicant has transferred the location of banking offices without Central Bank authority, in which case the receipt/processing of applications shall be suspended for a period of at least six (6) months from date of knowledge of the Central bank; g. The bank has not complied with the investment-deposit ratio for four (4) consecutive quarters immediately preceding the date the application was received; and h. The bank has failed to comply with the requirement to set aside twenty-five per cent (25%) of its loanable funds of which ten per cent (10%) shall be set aside for agrarian reform credit and fifteen per cent (15%) for agricultural credit in general. SUBSECTION 2151.7 Priority in processing a. Only applications complete with the minimum documents required by the appropriate supervising and examining department shall be accepted for any area on a first-come-first-served basis, regardless of whether or not there are approved but unopened banking offices in the area. ( Effective June 3, 1983 ) b. The mere filing or pendency of an application for the establishment of a banking office in a particular area shall not give an applicant priority over other applicants with respect to such area. Preference shall be given to the application which satisfies all Central Bank requirements. If two or more applications satisfy all Central Bank requirements, the application which was field first shall be given preferential consideration. SUBSECTION 2151.8 Date of opening . Approved banking offices shall be opened within six (6) months from the date of approval thereof: Provided ,That the applicant bank may be given a final extension of another three (3) months subject to presentation of justification and valid reason for the bank's failure to open within the six (6) month period and proof that said banking office can be opened within the succeeding three (3) month period. SUBSECTION 2151.9 Definition of "branch offices and agencies ." The term "branch offices and agencies" shall include extension offices and any other office outside the main office of a savings and loan association, where operations or transactions, or any phase thereof, are conducted by said associations. SUBSECTION 2151.10 Lease expenses prior to authorization of branch . Contracts of lease of premises for a proposed branch which are entered into prior to approval of the application for the establishment of such branch shall be at the risk of the banks concerned, considering that there is no assurance that the covering application to establish a branch will be approved. The bank's having incurred expenses in connection with their proposed establishment of branches, such as for acquisition/improvement or rental of premises, purchase/installation of equipment and furniture, employment/training of personnel, and acquisition of materials and supplies, is not a basis for, and does not entitle them to, the approval of applications to establish branches. SUBSECTION 2151.11 Reportorial requirement from certain extension offices .Extension offices of banks which maintain separate books of accounts shall be subject to all reporting requirements of a regular branch. Extension offices of banks whose record of transactions/accounts are consolidated daily with its mother unit shall submit only "Selected Financial Accounts" form. SUBSECTION 2151.12 Guidelines to be followed in the implementation of the requirement to purchase government securities for branching purposes: a. Assumption of branches in merger/consolidation (1) In a merger or consolidation of banks of whatever category, the equivalent amount of government securities shall be purchased by the resulting bank for each branch assumed and in effect upgraded to a higher type of bank by virtue of such merger or consolidation, in the amount required with respect to the service area category where the particular branch is located. (2) In a merger or consolidation of a bank and a non-bank financial intermediary (NBFI) the equivalent amount of government securities shall be purchased by the resulting bank for each branch of the NBFI which shall be converted to a new bank branch in the amount required with respect to the service area category where the particular branch is located. b. Branches of subsidiary/affiliate of investing bank When a bank buys into the equity of another bank (of a higher category) with branches to such an extent as would create a subsidiary/affiliate relationship, the investing bank shall be subject to the government securities requirement with respect to the branches of the subsidiary/affiliate bank. This rule shall not be applied if the purchasing bank and the investee bank belong to the same category, e.g.,a rural bank buying into the equity of another rural bank. c. Conversion of rural bank into thrift bank. A rural bank that is converted into a thrift bank or that services deposits and other transactions of another type of bank as may be determined by the Central Bank shall be subject to the applicable government securities requirement. The branches, if any, of such converted rural bank shall likewise be subject to the government securities requirement. ( Effective Oct . 18, 1983 ) SECTION 2152. Money Shop . Existing money shops shall be classified as extension offices subject, among others, to the reporting requirement prescribed under Subsec. 2151.11. ( Effective July 25, 1983 ) SECTION 2153. Savings Agencies . Existing savings agencies shall be classified as extension offices subject among others, to the reporting requirement prescribed under Subsec. 2151.11. ( Effective July 15, 1983 ) SECTION 2154. Relocation of Banking Offices . Applications for authority to transfer/relocate banking offices (except head offices) shall be accompanied by the following information/papers/documents: a. Certified true copy of the resolution of the bank's board of directors authorizing the transfer/relocation; b. Sketch of the area of operations showing the present location and the new location and the approximate distance between the two as well as from other banking offices; c. Reasons/justifications for the transfer and relocation; and d. Estimated expenses to be incurred for the transfer which should include outlays for the new bank premises. No application shall be accepted/processed unless all minimum requirements accompany the corresponding applications. SECTION 2155. ( Reserved ) H. BANKING DAYS AND HOURS SECTION 2156. Banking Days and Hours . Effective June 1, 1984, all banks, their branches, agencies and extension offices (including money shops and savings agencies) doing business in the Philippines with the exception of banks located in the Manila International Airport and the Malabon, Navotas fishports, shall observe a five-day banking week for the conduct of their business, the banking days during which each banking unit may be opened to be selected by the bank concerned; Provided ,however, That the Monetary Board, may authorize exemptions therefrom, if warranted, by areas. Special holidays proclaimed for local governments shall be considered as regular banking days. Thus, banks should open on such days if the same fall on regular banking days selected and need not give the notice prescribed under subsections 1156.4 (Book I),2156.2 (Book II) and 3156.4 (Book III). In the case of special holidays for special purposes under Section 4 of LOI No. 1087 such as elections and related events, which, by the terms of their proclamation, are specifically declared as non-working days, banks, may at their discretion open on such days if the same fall on regular banking days selected, provided they shall comply with the reporting requirement prescribed under subsections 1156.4 (Book I),2156.2 (Book II) and 3156.4 (Book III).( Effective May 15, 1984 ) All banks, including their branches, agencies and extension offices doing business in the Philippines shall transact business for not less than six (6) hours a day, to be selected by the bank concerned, between 8:00 o'clock in the morning and 8:00 o'clock in the evening: Provided ,That in the exercise of the option printed in this Section, banks may transact business for less than six (6) hours. ( Effective July 25, 1983 ) SUBSECTION 2156.1 Banking hours beyond the minimum . For purposes of servicing deposits and withdrawals, banks may, at their discretion and after prior written notice to the appropriate supervising and examining department of the Central Bank, remain open beyond the minimum six (6) hours and for as long as they had it necessary, even before 8:00 o'clock in the morning, or after 8:00 o'clock in the evening. Banks may, after prior written notice, so remain open beyond the minimum six (6) hours for banking services other than the servicing of deposits and withdrawals but in no case shall such banking hours start earlier than 8:00 o'clock in the morning or extend beyond 8:00 o'clock in the evening. SUBSECTION 2156.2 Reports on and changes in banking days and hours . The banking days and hours selected for each of the offices of banks shall be reported in writing to the appropriate supervising and examining department of the Central Bank. Banks may change the banking days and hours previously reported to the Central Bank by giving prior written notice to the appropriate supervising and examining department of the Central Bank: Provided ,That except in emergencies, changes of banking days or hours shall not be made oftener than once every thirty (30) days. The prior written notice to the Central Bank of changes in banking days and hours as required in this Subsection shall be given through the fastest means of communication, at least seven (7) banking days before the extended effectivity of the change in banking hours or days. In case a bank, due to an emergency has to open outside, or close during, the banking hours or days reported to the Central Bank, a written report submitted within twenty four (24) hours from opening or closing, as the case may be, will suffice. The report shall state the specific nature of the emergency and the period the bank opened or closed or shall open or close by reason of the emergency. SUBSECTION 2156.3 Posting of schedules of banking days and hours . The schedule of banking days and hours reported to the Central Bank shall be posted conspicuously at all times in the bank's premises. SUBSECTION 2156.4 Existing authorization and notifications . Except as otherwise provided hereinabove, existing authorizations and notifications regarding banking days inconsistent with the five-day banking week are hereby revoked. ( Effective May 15, 1984 ) SUBSECTION 2156.5 Emergencies . Banks shall not close for business during the banking days and hours as reported to the Central Bank, nor shall they open for business outside said days and hours without giving the prior written notice prescribed in Subsec. 2156.2 except when such closing or opening is due to an emergency as herein defined. For purposes of this Section, "emergency" shall mean (a) a condition of an area or locality proclaimed by the President of the Philippines as in a state of emergency, or (b) an event or occasion or a combination of circumstances equivalent to a public calamity resulting from fire, flood, or like disaster, or through some unusual occurrence or pressing necessity, not reasonably subject to anticipation calling for immediate action or remedy. SECTIONS 2157-2160. ( Reserved ) I. INTERNAL CONTROL SECTION 2161. Records and Reports a. All banking institutions shall have a true and accurate account, record or statement of their daily transactions, particularly those referring to their deposit liabilities. The commission of any false entry or the omission to make an entry on any such transactions shall be a ground for the Monetary Board to order the removal from office of any officer, director, agent or employee responsible therefor, without prejudice to their criminal liability under Secs. 33 and 34 of Republic Act No. 265, as amended, and/or the applicable provisions of the Revised Penal Code. b. All banks are enjoined to use and follow strictly the forms prescribed by the Deputy Governor, Supervision and Examination Sector, and as may be revised from time to time, for their statements and/or periodic reports (Appendix 3) required for submission to the appropriate supervising and examining department. c. All banks shall strictly adopt/implement the Uniform Systems of Accounts prescribed in the corresponding Central Bank Manual, including reportorial and publication requirements. The following penalties/sanctions, whenever applicable, shall be imposed upon any thrift bank for failure or refusal to adopt the prescribed Uniform System or any of the applicable accounts contained therein or for using/adopting any general ledger account not specified in the said Uniform System without prior written approval of the Governor of the Central Bank: (a) Penalties prescribed under Sec. 2199; (b) Suspension or revocation of the authority to engage in quasi-banking functions; and (c) Such other penalties/sanctions authorized by law. d. All banks and non-bank financial intermediaries are hereby required to adopt the Statements of Financial Accounting Standards (SFAS) in their financial statements and reports to the Central Bank of the Philippines which are purported to be prepared in accordance with generally accepted accounting principles. The SFAS which have been approved by the Professional Regulation Commission (PRC) as of July 1983 are as follows: 1. SFAS No. 1, Basic Concepts and Accounting Principles Underlying Financial Statements of Business Enterprises; 2. SFAS No. 2, Summary of Generally Accepted Accounting Principles on Cash; 3. SFAS No. 3, Summary of Generally Accepted Accounting Principles on Receivables; 4. SFAS No. 4, Summary of Generally Accepted Accounting Principles on Inventories; and 5. SFAS No. 5, Summary of Generally Accepted Accounting Principles on Liabilities ( Effective Sept . 19, 1983 ) SUBSECTION 2161.1 Categories and signatories of reports . For purposes of designating the signatories thereto, certain weekly, monthly, quarterly, semi-annual and annual statements/reports required to be submitted to the Central Bank are hereby grouped into Category A-1, Category A-2, and Category B as follows: a. Categories of reports (1) Category A-1 reports are the quarterly published statements of condition of thrift banks (CBP 7-16-03SB, CBP 7-16-03PDB, and CBP 7-19-03-B). (2) Category A-2 reports are the consolidated monthly statements of condition; quarterly statements of condition of thrift banks (CBP 7-16-02SB, CBP 7-16-02PDB CBP 7-19-04.B.4, CBP 7-16-05, and CBP 7-16-05B). (3) Category B reports are those required to be submitted to the Central Bank and which are not included in Categories A-1 and A.2. b. Authorized signatories (1) Category A-1 reports shall be signed by the institution's president or the senior executive vie-president and by the chief finance officer (i.e.,controller or chief accountant),who shall be authorized under a resolution approved by the board of directors (sample format of resolution is shown in Appendix 5). (2) Category A-2 reports of head offices of financial intermediaries shall be signed by the institution's president or the senior executive vice-president. Reports of offices/units (such as branch, sub-branch, agency, etc.) in this category shall be signed by its respective manager/officer-in-charge. Likewise, the signing authority in this category shall be contained in a resolution approved by the board of directors (sample format of resolution is shown in Appendix 6). (3) Category B reports shall be signed by officers or their alternates, who shall be duly designated by the board of directors. A copy of the board resolution (sample format is shown in Appendix 7) covering the initial designation and subsequent change(s) in signatories as well as specimen signatures of the signatories and alternates, shall be submitted to the appropriate supervising and examining department of the Central Bank of the Philippines within three (3) days from date of resolution. SUBSECTION 2161.1b.(4) (Additional provision as provided by No. 3 of CBP Circular 1216 dated December 20, 1989) c. Sanctions If a report is submitted to the Central Bank under the signature of an officer who is not listed or included in any of the resolution(s) mentioned above, the supervising and examining department shall refuse to acknowledge the report as valid or consider the report as not having been submitted at all. If such a report is not re-submitted by the institution under the signature of a duly authorized signing officer, administrative sanctions/penalties shall be imposed on the erring institution for late reporting or failure to submit the required reports, as the case may be. SUBSECTION 2161.2 Sanctions in case of wilful delay in the submission of reports/refusal to permit examination . For wilful delay in the submission of reports/refusal to permit examination, specific sanctions shall be imposed in accordance with the following rules: a. Definition of terms .For purposes of this Subsection, the following definitions shall apply: (1) "Report" shall refer to all written reports/statements (such as report on required and available reserves against deposit liabilities, annual statement of condition) required of a banking institution to be submitted to the Central Bank periodically or within a specified period. (2) "Wilful delay in submission of reports" shall refer to the failure of any banking institution to submit on time the report defined in number (1) above. Failure to submit a report on time due to fortuitous events, such as fire and other natural calamities, and public disorders shall not be considered as wilful delay. (3) "Examination" shall include, but need not be limited to, the verification, review, audit, investigation and inspection of the books and records, business affairs, administration and financial condition of any banking institution including the reproduction of banking records as well as the taking possession of the books and records and keeping them under Central Bank custody after giving proper receipts therefor. It shall also include the interview of the directors and personnel of any banking institution. (4) "Refusal to permit examination" shall mean any act or omission which impedes, delays or obstructs the duly authorized Central Bank officer/examiner/employee from conducting an examination, including the act of refusing to accept or honor a letter of authority to examine presented by any officer/examiner/employee of the Central Bank. b. Fines for wilful delay in the submission of reports (1) Amount of fine. Any banking institution which shall willfully delay the submission of reports as defined above within the periods prescribed for each particular report, shall pay a fine in accordance with the following schedule: P50 per banking day of default for the first five banking days of default; P75 per banking day of default for the next five successive banking days of default; P100 per banking day of default for the succeeding days of default. In the implementation of the foregoing rules, delay or default shall start to run on the day following the last day required for submission of the reports. However, should the last day of filing fall on a non-working day in the locality where the reporting bank is situated, delay or default shall start to run on the day following the next working day. (2) Manner of payment or collection of fines The regulations embodied in Subsec. 2610 shall be observed in the collection of fines from banks. (As amended by CBP Circular 1206 date July 17, 1989) c. Fine for refusal to permit examination (1) Amount of fine. Any banking institution which shall willfully refuse to permit examination as defined above, shall pay a fine of P500 daily from the day of refusal and for as long as such refusal lasts. (2) Basis for, and effectivity of, the imposition of fine: (a) The Central Bank officer/examiner/employee shall report the refusal of the banking institution to permit examination to the head of the appropriate department of the Central Bank, who shall forthwith make a written demand upon the banking institution concerned for such examination. If the banking institution continues to refuse said examination without any satisfactory explanation therefor, the Central Bank officer/examiner/employee concerned shall submit a report to that effect to the appropriate department head. (b) The fine shall be imposed starting on the day following the receipt by the appropriate department of the written report submitted by the Central Bank officer/examiner/employee concerned regarding the continued refusal of the banking institution to permit the desired examination. (c) Manner of payment or collection of fine. The same procedures as in Item b (2) of this Subsection shall be observed. (d) Other penalties. The foregoing penalties shall not preclude the application of, or shall be without prejudice to, the other administrative sanctions as well as to the filing of criminal cases as provided for in other provisions of law, and as may be warranted by the nature of the offense. (e) Appeal to the Monetary Board. Any aggrieved banking institution may appeal to the Monetary Board from a ruling of the appropriate department of the Central Bank imposing a fine. SUBSECTION 2161.3 Submission of certain required information . All thrift banks (savings and mortgage banks, stock savings and loan associations and private development banks) shall submit to the appropriate supervising and examining department of the Central Bank the information required in Appendix 8. Any changes in any of the required information submitted, after the initial submission, shall be reported to the appropriate supervising and examining department immediately. All thrift banks shall likewise submit to the same department within thirty (30) days any or all of the documents/information on organizational structure and operational policies enumerated in Appendix 9. SUBSECTION 2161.4 Reports on crimes/losses . All banks shall report on the following matters to the Central Bank through the appropriate supervising and examining department: a. Crimes whether consummated, frustration or attempted against property/facilities (such as robbery, theft, swindling or estafa, forgery, and other deceits) and other crimes involving loss/destruction of their property when the amount involved in each crime is 1) Savings banks P4,000 or more 2) Private development banks P2,000 or more 3) Stock savings and loan associations P2,000 or more. Crimes involving bank personnel, even if the amount involved is less than those above specified, shall likewise be reported to the Central Bank whenever the bank initiates judicial or extrajudicial action, or imposes sanctions against such bank personnel. (As amended by CBP Circular 1268 dated December 28, 1990) b. Incidents involving material loss, destruction or damage to the institution's property/facilities, other than that arising from a crime, when the amount involved per incident is 1) Savings banks P20,000 or more 2) Private development banks P10,000 or more 3) Stock savings and loan associations 10,000 or more. c. The following guidelines shall be observed in the preparation and submission of the report; 1) The report shall be prepared in two copies and shall be submitted within forty-eight (48) hours from knowledge of the crime or incident with the details contained in CBP 7-16-20, the original to the appropriate supervising department and the duplicate copy to the Central Bank Security Coordinator, thru the Director of Security and Transport; Provided ,That in the cases mentioned in the second paragraph of Item "a" the report shall be submitted as specified above, within forty-eight (48) hours from initiation of judicial or extrajudicial action or from the imposition of sanctions against such bank personnel; 2) Where a thorough investigation and evaluation of facts is necessary to complete the report, an initial report submitted within the 48-hour deadline may be accepted: Provided ,That a complete report is submitted by the date of postmark, if the report was sent by mail or by the date received, if hand carried to the appropriate supervising and examining department, Manila, or, in applicable cases, to the unit of the supervising and examining department in any of the Regional Offices of the Central Bank. (As amended by No. 1 of CBP Circular 1216 dated December 20, 1989) SUBSECTION 2161.5 Report on real estate transactions between a bank and its directors, officers, stockholders or any firm substantially owned by one or more of such directors, officers, stockholders The board of directors of the bank shall through the Department of Commercial and Savings Banks: a. Report to the Monetary Board any real estate transaction (such as, but not limited to, rentals or leases, purchase and sales, or foreclosed assets) by and between the bank and its director/s, officer/s, stockholder/s, owning at least two per cent (2%) of the bank's subscribed capital stock or any firm substantially owned (in the aggregate of at least twenty per cent (20%) of the paid-in capital of such firm) by one or more of such directors/officers/stockholders; and b. Certify to the Monetary Board that such transaction has been thoroughly reviewed and verified as having been entered into in the best interest of the bank. SUBSECTION 2161.6 Computation of "Due from CB" account for reporting purposes . The balance of the "Due from Central Bank of the Philippines" account when used in the computation of (1) available reserves against (a) deposit substitutes/Interbank loans and (b) deposit liabilities; and (2) penalty on reserve deficiencies shall be based on the books of the Accounting Department of the Central Bank, net of returned checks delivered to/received from the Central Bank clearing. To implement this policy, the following guidelines for reporting shall be observed: 1) Banks which have adopted the Consolidated Daily Report of Condition (CDRC) shall continue to report their book balances of "Due from Central Bank of the Philippines" account in this report. The Central Bank shall observe the aforementioned policy in computing available reserves from the CDRC. 2) Banks which have not yet adopted the CDRC shall use the Central Bank book's balance of their "Due from Central Bank of the Philippines" account in the Consolidated Report of Required and Available Reserves Against Deposit Liabilities (CBP 7-16-01) 3) Accounting Department of the Central Bank shall furnish banks with the periodic balances of their demand deposit accounts in accordance with the schedule and frequency to be mutually agreed upon with the banks concerned. SUBSECTION 2161.7 Reconciliation of head office and branch transactions . All savings and mortgage banks, private development banks and stock savings and loan associations shall prepare monthly reconciliation statements covering transactions between the head office and all its branches within fifteen (15) days after the end of each month. All items which are unresponded or outstanding in the reconciliation statement for more than six (6) months as of reconciliation statement date shall be reported, with explanations/reasons for their being outstanding to the appropriate supervising and examining department within the next fifteen (15) days after the aforementioned deadline. The reconciliation statement shall be made available to any duly authorized bank examiner for inspection/examination without need of advance notice. A copy of the year-end reconciliation statement covering transactions between a bank's head office and all its branches shall be furnished the appropriate supervising and examining department not later than the end of January of the following year. cdlex SUBSECTION 2161.8 List of stockholders and their stockholdings . The following guidelines are adopted so as to facilitate the preparation and submission of report form CBP 7-16-11; LexLib a. Banks shall submit in duplicate to the Department of Commercial and Savings Banks annually a complete list of stockholders and their stockholdings and all other relevant information called for in the report form CBP 7-16-11 within twelve (12) banking days from the beginning of each calendar year. b. Any change (either by replacement, addition or cancellation) in the above original list shall be reported quarterly to the Department of Commercial and Savings Banks not later than seven (7) banking days after the end of each quarter, specifying therein the name(s) and/or stockholdings involved which is/are to be cancelled or replaced, and the new name(s) and/or stockholdings which shall be included for that quarter. In case no change(s) occurred during a particular quarter, the report shall provide a notation, viz: "No change(s) since last report submitted for the quarter ended __________,19 _____". SUBSECTION 2161.9 Reports on loans/credit accommodations aggregating P20 million and above Item No. 2 of Letter of Instructions No. 1107 dated February 16, 1981 provides that: "A credit information exchange system shall be initiated by the Central Bank of the Philippines, which shall provide data on bank borrowings, commercial paper issuances and other forms of borrowings to banks and other financial institutions. The data shall be obtained from financial institutions and shall be released on an exchange arrangement, after the appropriate summarization and classification of data." In this connection, banks shall submit a quarterly report of their exposure in the form of Loans, Commercial Papers/Receivables and Bonds Purchased/Sold (Excluding Government Securities Purchased Outright),Lease Contracts Receivable, Equity Investment, Stand-by Letters of Credit/Guarantee, Regular and Deferred Letters of Credit/Authority to Purchase (Domestic and Import),and Commercial Papers/Receivables Sold on a Without Recourse Basis to individuals, companies or groups of companies aggregating P20 million and above. The Trust Department and/or Investment Management Division shall submit similar reports. The frequency of reporting and the benchmarks on amount to be reported are as follows: P20 million and above exposure every first and second month of the quarter; and P1 million and above exposure every end of the quarter. Reports as of the end of every quarter, i.e.,exposure aggregating P1 million and above, shall be submitted to the Department of Loans and Credit (DLC) on or before the 15th banking/business day following the reference quarter. However, reports as of the end of every first and second month of the quarter, i.e. exposures aggregating P20 million and above, shall continue to be submitted to the DLC on or before the 10th banking day/business day following the reference month. The total assets and net worth required to be reported in Annex A of the above-mentioned reports need not be reported again if the audited financial statements of the individual or company concerned are the same as the last report. Institutions that do not have exposures to individuals, companies or groups of companies aggregating P20 million and above may simply submit a letter stating that they do not have such large exposures as of the end of the quarter concerned. The reports submitted by the banks and NBFIs concerned shall be summarized and an information exchange arrangement shall be developed in cooperation and coordination with the industry associations, i.e.,Bankers Association of the Philippines, Chamber of Thrift Banks, Investment Houses Association of the Philippines and Philippine Association of Finance Companies. Any financial institution, whether or not engaged in quasi-banking functions, which shall willfully delay the submission of the report on its exposures to individuals, companies or groups of individuals/companies shall pay a fine in accordance with the following schedule: Commercial, Specialized Thrift Banks Government Banks and and NBFIs NBQBs without Quasi-Banking Functions 1. Per banking/business day of default for the first 5 banking/ business days of default P100 P50 2. Per banking/business day of default for the next 5 banking/ business days of default 150 75 3 Per banking/business day of default for the succeeding days of default 200 100 The manner of payment or collection of the fines shall be as follows: a) Where the financial institution maintains a deposit account with the Central Bank, its deposit account shall be debited immediately by the Accounting Department of the Central Bank upon receipt of notice from the Department of Loans and Credit. A copy of said notice shall be attached to the debit advice furnished the bank concerned. b) Where the financial institutions do not have deposit accounts with the Central Bank or where the deposit account balances with the Central Bank are insufficient to cover the amount of fines involved, said institutions shall be billed immediately by the Central Bank Accounting Department upon receipt of notice from the Department of Loans and Credit. Failure to effect the settlement of the full amount of the fines within a period of thirty (30) days from receipt of the bill shall make them subject to the penal provisions of Republic Act No. 265, as amended. SUBSECTION 2161.10 Central Bank Offices Where Reports Are Submitted a. Department of Commercial and Savings Banks (DCSB) . The submission of Department of Commercial and Savings Banks' periodic/call reports shall be as follows: 1. All banking offices (except those located in areas serviced by regional offices) shall submit required reports (original and duplicate) direct to the Department of Commercial and Savings Banks, Manila, either by messenger, or by mail addressed to: DEPARTMENT OF COMMERCIAL AND SAVINGS BANKS Central Bank of the Philippines P.O. Box 616, Manila 2. All banking offices located in areas serviced by regional offices shall submit both the original and duplicate of required reports direct to the respective CB Regional Offices located in said areas. 3. Where a particular report form calls for distribution of copies to other Departments of the Central Bank, the bank concerned shall furnish said copies of the report direct to the respective Departments of the Central Bank. b. Department of Rural Banks and Savings and Loan Associations (DRBSLA) The submission of the reports shall be effected by filing them personally with the Department of Rural Banks and Savings and Loan Associations or with the Central Bank Regional Offices, or by sending them by registered mail or special delivery, unless otherwise specified by the Monetary Board or the Central Bank. Some banks/associations submit their reports to the Department through service companies like the LBC Air Cargo, JRS and Cimexco Messengerial Services. To enable the Department to determine the date of filing of such reports, all savings and loan associations availing of the facilities of the above service firms and the like, are hereby required to include in their reports, proofs of deposit/mailing showing the date of submission to, and acknowledgment of, the service companies. SUBSECTION 2161.11 Manner of and deadlines for submission of reports 1. Regular Reports on the Various DCSB Forms . Original report is to be submitted to the respective regional offices; duplicate to the Department of Commercial and Savings Banks. LibLex 2. " Call " Reports. The manner of submission shall be as specified in the letter calling for the report. 3. Replies to Letters Emanating from the DCSB (Manila) . These shall be addressed and sent direct to the Department of Commercial and Savings Banks, Central Bank. The deadlines for submission of reports, both periodic and non-periodic, which are being submitted/to be submitted by banks to the Department of Commercial and Savings Banks of the Central Bank, are hereby amended such that the period within which to submit said reports shall be reckoned on the basis of banking days instead of calendar days. For this purpose, banking days shall be understood to mean Monday thru Friday and/or banking days of the Central Bank. SUBSECTION 2161.12 Published statement of condition . All stock savings and loan associations shall accomplish form (CBP 7-19-03-B) "Consolidated Statement of Condition" and publish the same at least four (4) times in each year as may be required, and as of dates designated, by the appropriate supervising and examining department of the Central Bank. Such Statement of Condition shall be published in a newspaper of general circulation in the City/Province where a savings and loan association has its head office or, in the absence of such newspaper in such City/Province, in the City of Manila or in any other area in the region where the principal office of the association is located. A copy of such statement as published, together with the publisher's certificate, shall be submitted to the appropriate supervising and examining department of the Central Bank. SUBSECTION 2161.13 Report of stockholders'/board of directors' resolutions . All savings and loan associations are hereby required to submit to the Department of Rural Banks and Savings and Loan Associations, copies of all resolutions of the board of directors and/or of the stockholders/members of said associations. The board of directors of each association shall see to it that said resolution are prepared and filed in accordance with the following guidelines: a. All resolutions for each year adopted or approved by the board of directors or by the stockholders/members of the association shall be numbered consecutively, indicating the year and number thereof. However, the resolutions of the board and the resolutions of the stockholders should be numbered independently of each other, thus: Resolutions of Board of Directors Board Resolution No. 1970 1 Board Resolution No. 1970 2, etc. Resolutions of Stockholders/Members Resolution No. 1970 1 Resolution No. 1970 2, etc. No alphabetical insertion shall be allowed, and a certification as to the last number of the resolutions for the year, signed by the secretary and attested by the chairman of the board, shall be made and submitted to the Department within five days after the close of the year. b. Duplicate copies of the resolutions of the board of directors or of stockholders, duly signed by the required number or attested by the proper officers, shall be submitted to the Department either by personal delivery or by registered mail with return card within five days after the adoption or approval of said resolutions. Strict compliance with this requirement is enjoined and any violation hereof shall be dealt with in accordance with the provisions of Section 29(c) of the Savings and Loan Associations' Act (R.A. 3779, as amended). SUBSECTION 2161.14 Consolidation of investors' financial statements with subsidiaries/affiliates . The following guidelines shall govern the consolidation of financial statements of financial intermediaries (banks and non-banks performing quasi-banking functions) and their allied undertakings/subsidiaries/affiliates. a. Definitions . The following definitions of terms are hereby adopted: (1) Consolidated financial statements shall refer to the combined statement of condition/balance sheet and statement of income and expenses of two or more corporate entities as they would appear if they were one organization, after eliminating the effects of intercompany transactions. (2) Financial allied undertakings refer to enterprises or firms with homogenous or similar activities/business/functions with the financial intermediary and may include but not limited to leasing companies, banks, investment houses, financing companies, credit card operations, financial institutions addressed/catering to small and medium scale industries, and such other similar activities as the Monetary Board may declare as appropriate from time to time. Non-financial allied undertakings may include but not limited to warehousing companies, storage companies, safe deposit box companies, companies engaged in the management of mutual funds but not in the mutual funds themselves, management corporations engaged or to be engaged in activities similar to the management of mutual funds, insurance agencies, companies engaged in home building and home development and companies providing drying and/or including facilities for agricultural crops such as rice and corn and such other similar activities as the Monetary Board may declare as appropriate from time to time. Equity investments refer to investments in the capital stock of companies, firms or enterprises, made for purposes of control, affiliation or other continuing business advantage. (3) Subsidiary refers to a corporation or firm more than 50% of the outstanding voting stock of which is directly or indirectly owned, controlled or held with power to vote by a financial intermediary (bank and non-bank).A domestic subsidiary is any subsidiary domiciled in the Philippines and incorporated under the laws of the Philippines, while a foreign subsidiary is any subsidiary incorporated and organized under the laws of a foreign country. (4) Affiliate refers to an entity linked directly or indirectly to a financial intermediary by means of (a) ownership, control or power to vote, of 10% or more of the outstanding voting stocks of the entity, or vice versa; (b) interlocking directorship or officership; (c) common stockholders owning 10% or more of the outstanding voting stocks of each of the financial intermediary and the entity; (d) management contract or any arrangement granting power to the financial intermediary to direct or cause the direction of management and policies of the entity, or vice-versa; or (e) permanent proxy or voting trust in favor of the financial intermediary constituting 10% or more of the outstanding voting stocks of the entity, or vice-versa. (5) Cost method refers to the accounting method of recording at cost, and continuously carrying at cost, equity investment, regardless of increases or decreases in the underlying value of the investments resulting from earnings or losses of the allied undertaking/affiliate /subsidiary. (6) Equity method refers to the accounting method of recording equity investments at cost and adjusting the balance of the account to reflect increases or decreases in the underlying value of the investments resulting from earnings or losses of the allied undertakings/affiliate/subsidiary. b. Consolidation requirements (1) The financial statements of allied undertakings shall be consolidated with those of the investing financial intermediary only when the allied undertaking is a subsidiary and a financial allied undertaking as defined herein . casia (2) In the case of non-financial allied undertakings and affiliates consolidation may be required on a case-to-case basis as may be determined by the appropriate supervising and examining department of the Central Bank. (3) Financial statements of all domestic and foreign subsidiaries shall be consolidated with those of the investing financial intermediary (domestic parent),except (a) subsidiaries about to be disposed of; (b) subsidiaries where control is being exercised on a temporary basis; (c) subsidiaries whose financial statements bear a closing date different from that of the investing financial intermediary's financial statements and/or (i) the difference in closing dates exceeds three months or more; (ii) the closing dates of all the statements are not expressly indicated; (iii) the necessity of the difference to closing date is not explained; and (iv) changes in accounting periods of the affiliate/constituent companies are not disclosed, together with their financial statements. (d) subsidiaries whose business activities are so dissimilar from those of the investing financial intermediary that the presentation of separate financial statement would provide better information; and (e) foreign subsidiaries located in places where (i) there are foreign exchange restrictions; (ii) the rates of exchange fluctuate widely; (iii) there are unfavorable legislations in force; and (iv) the foreign government concerned is undergoing a process of change. c. Consolidation procedures (1) Consolidation of the financial statements shall involve the following procedures: (a) Consolidation shall be on a line-by-line basis; i.e. accounts of the investing financial intermediary and its subsidiaries to be consolidated are combined by adding together like item of assets, liabilities, revenue and expenses, except in the case of "foreign currency" of the host country where the allied undertaking/subsidiary/affiliate is located, which shall be shown under "Other Assets." (b) The following are eliminated in consolidation: (i) All intercompany transactions; for instance, rental income of a subsidiary from its premises should be netted against rent expense incurred by the investing financial intermediary for occupying said premises; (ii) All intercompany accounts/transactions that reflect the existence of a debtor-creditor relationship between the investing financial intermediary and its subsidiaries and/or between subsidiaries; and (iii) All asset accounts of the investing financial intermediary, which represent ownership of investments in subsidiaries against the capital accounts of the consolidated subsidiaries. (c) All income and expense accounts shall be closed to the capital accounts of each subsidiary. (d) All the remaining assets and liabilities of the subsidiaries shall be transferred to appropriate accounts of the investing financial intermediary. (e) For not wholly-owned subsidiaries, segregate the share of minority stockholders/interest in the capital stock and retained earnings of such subsidiaries and lodge the same under "Minority Interest in Subsidiary" account which shall be shown as a separate section between the Liabilities and Stockholders' Equity sections of the Consolidated Statement of condition. (f) Other generally accepted consolidation principles/procedures not inconsistent herewith may be adopted. (g) Consolidating adjustments and eliminations shall appear only on working papers and shall not be recorded in the books of the individual entities concerned. (2) For consolidated statement/report purposes, the following accounts shall be used for the differences, between cost and book value of equity investments on date of acquisition: (a) "Excess of Cost Over Book Value of Equity Investments" For excess of cost of equity investments over its book value. (b) "Excess of Book Value Over Cost of Equity Investments" For the excess of book value of equity investment over its cost. The first account shall be shown under OTHER ASSETS caption while the second account shall be shown under the caption UNEARNED INCOME AND OTHER DEFERRED CREDITS in the Consolidated Statement. (3) The investments (which are recorded at the cost method) of the investing financial intermediary in allied undertakings/subsidiaries/affiliates whose financial statements are not consolidated shall be adjusted for their share in the earnings or losses of such entities, with the use of the equity method as defined in Item a.(6) above. However, these adjustments shall appear only in working papers and shall not be recorded in the books of the individual entities concerned. (4) Disclosures The following schedules/disclosures shall be attached to/made in the consolidated financial statements: (1) An appropriate list/schedule of the allied undertakings/subsidiaries/affiliates showing the following information: (a) Name and nature of business; (b) Original cost of the investment; outstanding balance, book value and difference, if any, and accounting treatment of the difference; (c) Percentage of ownership/equity investment; (d) Differences in reporting dates from that of the reporting financial intermediary; (e) Whether or not their financial statements have been consolidated; and (f) Reasons for not consolidating in the case of the unconsolidated entities. cdlex (2) Where the unconsolidated subsidiaries are, in the aggregate, material/significant in relation to the consolidated financial position or operating results, summarized information as to their assets, liabilities and operating statements should be presented/indicated/shown in footnotes, or separate financial statements should be presented for such subsidiaries, either individually or in groups, where appropriate. (3) Any information on: (a) Exposure to exceptional risks of operating in other countries, including the risk of foreign currency exchange rate fluctuations. (b) The extent to which there are statutory or contractual restrictions on the distribution of the accumulated retained income of the group. d. Submission of Financial Statements . The investing financial intermediary shall, within one hundred twenty (120) days after the end of the reference calendar year, that is, at the end of December 31st of each year, submit to the appropriate supervising and examining department of the Central Bank the consolidated annual financial statements which shall be supported with the individual annual financial statements of the allied undertakings/affiliates/subsidiaries in the prescribed report. SECTIONS 2162-2164. (Reserved) SECTION 2165. Audits . The Boards of Directors of banking institutions whose primary responsibility is to exercise general supervision over the affairs of their banks, in order to determine whether operations are carried out with maximum effectiveness and economy, are hereby required to cause once every two (2) years for commercial banks and specialized government banks, and once every three (3) years for thrift banks an operations/management audit or an overall review and appraisal of management methods and performance, specifically on plans and objectives, organizational structure, systems or procedures, methods of control, means of operation, human and physical facilities, to deliberate and act on the audit report; and to submit a report (with special emphasis on management performance, policies and procedures) on the Board's actions to the Central Bank. Such operations/management audit (once every two or three years, as the case may be) shall be conducted simultaneously with the financial audit. The financial audit shall, however, be conducted annually. The board of directors of each bank shall submit an audit program before the start of the audit, to the appropriate supervising and examining department of the Central Bank, for its approval. The audit program should indicate in detail using as basis the requirements provided in Subsecs. 2165.3 and 2165.4 the scope and coverage of the audit to be conducted. In cases where the audit program will not cover certain specific requirements of this Subsection, the board of directors of the bank shall submit its justification therefor. SUBSECTION 2165.1 Who may conduct . The operations/management audit may be made by the bank's board of directors, the bank's internal auditor, or responsible employees of the bank or by the bank's external auditor hired to make the annual financial audit: Provided ,That said directors, internal auditor, responsible employees, or external auditor possess the education, training and experience to perform an operations/management audit and: Provided , further ,That the Monetary Board may, at its discretion, require the bank's board of directors to engage the services of an independent operations/management auditor acceptable to the Monetary Board. SUBSECTION 2165.2 Minimum coverage . The operations/management audit shall at least cover the following aspects which should be specified in the written instructions of the board to the party commissioned to make the operations/management audit: a. A review of past year's managerial/operational performance; b. A review of bank policies and practices; and c. An overview of operations, prospects and plans for the coming year (when required). SUBSECTION 2165.3 Minimum contents of reports . The operations/management audit report shall contain a discussion of the following aspects (this requirement shall also be mentioned in the written instructions of the board): a. Past year's managerial/operational performance (1) A general review and appraisal of past year's operational performance on the basis of the long-range plans, objectives, specific targets and strategies set forth at the start of the year; whether operations were carried out with maximum effectiveness, economy, and made in accordance with banking laws, rules and regulations. (2) An evaluation of the quality of management and executive performance based on adequacy of the organizational structure, staffing, policy and decision-making process, staff development program and compensation structure, accuracy and reliability of controls, satisfactory methods of operation, adequacy and maximum utilization of manpower and physical facilities, existence of standards of performance and measurement of results, adequacy of protective methods, whether there are existing operational weaknesses and pitfalls. (3) An evaluation of the bank's general financial condition, liquidity, solvency and profitability including the following aspects: (a) An evaluation of the bank's loan and investment portfolio covering (i) industry exposure to economic interest-blocks, (ii) regional exposure, (iii) collection experience and (iv) collateral business. (b) An evaluation of the bank's fund sources including cost of capital. b. Bank policies, practices and procedures (1) An evaluation of the policies, practices and procedures on loaning, investment and money market operations, whether they are sound and safe, well-defined and clearly stated, flexible and attuned to the economic conditions of the country, and whether there is a need for change or shift in such policies, practices and procedures. (2) A descriptive statement of relationships with subsidiaries, affiliated entities, holding companies, if any, and plans with respect to the same. c. Projection, prospect and plans (1) A narrative statement of the bank's long-range plans, objectives or goals. (2) A narrative statement of specific targets and general strategy for the incoming year based on past year's performance, long-range bank plans and objectives highlighting possible opportunities. (3) Two to three-year programs of capital and deposit build-up, and decrease in borrowings and money market activities which are high-cost sources of funds. (4) Prospects of adopting new ideas, new development and new types of equipment. The aspect of the operations/management audit report described under Item (c) above will be required only when any or all of the following conditions or circumstances exist in the operations of the bank as may be determined by the appropriate supervising and examining department: (a) Deterioration of financial condition; (b) Existence of liquidity and solvency problems; (c) Decreasing profits or incurrence of losses; (d) Existence of management problems; (e) Overextension of credit including loans to directors/officers/stockholders/related interests (DOSRI); cdta (f) Capital deficiency; (g) Decreasing trend in deposit operations; (h) Heavy borrowings; and (i) Overindulgence in money market activities as fund sources. d. Operations/management audit report . The operations/management audit report shall contain a full description of the methodology followed and the names of the audit team members. The appropriate supervising and examining department of the Central Bank at its discretion, shall specify the conditions and coverage of individual bank's operations/management audit report in certain instances where specific problem areas are identifiable. SUBSECTION 2165.4 Procedural guidelines a. Each bank shall cause an annual financial audit as required under Section 6-D of R.A. No. 337, as amended, not later than thirty (30) days after the close of the calendar year or the fiscal year adopted by the bank. Reports on such audits shall be made separately and submitted to the boards of directors and the appropriate supervising and examining department of the Central Bank not later than ninety (90) days after the start of such audit. b. The board of directors, in a regular or special meeting, shall consider and act on the operations/management audit and financial audit reports and shall submit, within 30 days after receipt of the reports, a copy of its resolution to the appropriate supervising and examining department of the Central Bank. The resolution shall show, among other things, the name of the directors present and absent, the actions taken on the findings and recommendations as well as the measures adopted by the board of directors to improve or update the bank's managerial/operational performance, policies and practices, and its systems and procedures. c. The next operations/management audit for commercial banks and specialized government banks shall be conducted after the close of calendar/fiscal year 1982, and every two years thereafter. The next operations/management audit for thrift banks shall be conducted after the close of calendar/fiscal year 1983, and every three years thereafter. (As amended by Section 2 of CBP Circular 1124 dated December 5, 1986) SUBSECTION 2165.5 Exemption . The Governor of the Central Bank may waive the operations/management audit requirement upon request of the institutions with the concurrence of the appropriate supervising and examining department: Provided ,That the request of the institution is justified and supported by a showing of managerial capability and a sound and stable financial condition. SECTION 2166. Internal Control System . Following is the set of minimum internal control standards as a guide to banks, particularly the smaller institutions, in order to help promote effective internal control systems. SUBSECTION 2166.1 Proper accounting records a. All banks should maintain proper and adequate accounting records. b. These records should be kept currently posted and should contain sufficient detail so that an audit trail is established. c. All tickets should bear official approval and should be initiated by the person originating and another person checking them. SUBSECTION 2166.2 Independent balancing a. Independent balancing shall mean that records posted by a person or cash held by a teller or cashier shall be balanced or counted by another person. b. The minimum independent balancing procedures which should be adopted are the following: (1) Monthly reconciliation of general ledger balances against their respective subsidiary and supporting records and documentations by someone other than the bookkeeper or the person handling the records. (2) Irregular and unannounced count of teller's cash and checks and other cash items at least twice a month and vault cash at least once a month by the auditor/control officer or by an officer not connected with the cash department; (3) Monthly reconciliation of due from banks/cash in banks accounts and due from/to head office/branches by someone other than the person handling the records or posting the general entries; (4) Periodic verification of securities and collaterals by someone other than their custodians; and (5) Periodic verification of the accuracy of the interest credits to deposit liabilities accounts. SUBSECTION 2166.3 Division of duties and responsibilities a. The duties of all the officers and employees should be segregated, clearly defined, understood, documented and manualized, if possible. No individual shall have complete authority and responsibility for handling all phases of any transaction from beginning to end without some check or balance from some other part of the organization. b. The physical handling of a transaction should be separated from its recording and supervision as follows: (1) A person handling cash should not be permitted to post the ledger records nor should posting of the general ledger be performed by an employee who posts the depositor's subsidiary ledgers; (2) A loaning officer should never be allowed to disburse proceeds of notes, accept note payment nor process loan ledgers; (3) The functions of issuing, recording and signing of drafts/checks should be separated; (4) Checks and other cash items should be maintained either by an employee not handling cash or by the Rack/Distributing Department provided that adequate control as to custody and disposition of funds are properly maintained; (5) The receipt of statements from depository bank should be assigned to an employee other than the one connected with the preparation, recording and signing of bank drafts; (6) Custodians of securities should not be allowed to handle security transactions; (7) Collateral appraisals should be done by an employee/officer other than the ones approving the loans; (8) Incoming checks and other cash items should be recorded chronologically in a register by an employee other than the bookkeeper before they are forwarded for posting purposes; (9) Credit reports should be obtained by someone other than lending officers; (10) Mailing of customers' statements and delinquent notices should be done by an employee other than the one who granted the loan or the one handling the records; and (11) Dispatching and delivery of current account statements should be done by someone other than those who have something to do with current account operations such as tellers and bookkeepers. c. Extensive background checking of persons intended to be assigned to handle cash and securities should be conducted. Frequent follow-up checking after their employment should also be made. SUBSECTION 2166.4 Joint custody a. Joint custody shall mean the processing of transactions in the presence of and under the direct observation of a second person. Both persons shall be equally accountable for the physical protection of the items and records involved. cdll b. Physical protection should be deemed established through the use of two locks or combinations on a file chest or vault compartment. c. Two or more persons should be assigned to each half of the control so that operating efficiency is not impaired if one person is not immediately available. d. Persons who are related to each other within the third degree of consanguinity or affinity should not be made joint custodians. e. The following should be under joint custody: (1) Cash in vault (2) All accountable forms (3) Collaterals (4) Securities (5) Documents of title and/or ownership of properties or fixed assets. (6) Dormant or inactive deposit ledgers and corresponding signature cards (7) Import documents (8) Trust receipts (9) Collection items (10) Duplicate keys, safe deposit, spare locks and keys, unrented keys to safe deposits boxes. (11) Safekeeping items (12) Vault doors and safe combinations (13) Unissued specimen signature books (14) Test key fixed numbers unissued (15) Correspondent's and institution's own telegraphic or cable test keys currently in use. SUBSECTION 2166.5 Signing authorities Signing authorities for the different levels of officers to sign for and in behalf of the institutions should be approved by the board of directors and the extent of each level of authority should be clearly defined. These signing authorities should include but need not be limited to the following: a. Lending b. Investment c. Approval of expenses d. Various supervisory reports e. Bank drafts, manager's/cashier's checks, bank money orders and certificate of time deposits. SUBSECTION 2166.6 Dual control a. Dual control shall mean the work of one person is to be verified by a second person to determine (a) that proper authority has been given to handle the transaction, (b) that the transaction is properly recorded, and (c) that proper settlement of the transaction is made. b. The routine of each transaction should be designed so that at least two or more individuals are involved in the completion of every transaction. c. The following accounts/transactions should be under dual control: (1) Cashier's/Manager's checks and Telegraphic Transfers The signature of at least two officers should be required in the issuance of cashier's/manager's checks and telegraphic transfers. The board of directors may, however, prescribe a certain predetermined amount by which one senior officer could sign checks or telegraphic transfers, subject to appropriate control measures. (2) Certificate of Time Deposit All certificates of time deposits issued should be signed jointly by two authorized officers. (3) Bank Drafts The signature of two authorized officers should be required in the issuance of bank drafts. (4) Borrowing The signature of at least two authorized officers should be required. (5) All transactions giving rise to "due to" or "due from" accounts and all instruments of remittances evidencing these transactions particularly those involving substantial amounts, should be approved by two authorized officers. SUBSECTION 2166.7 Number control a. Sequence number controls should be incorporated in the accounting system and should be used in registering notes, in issuing official checks and in other similar situations. Number control should be policed by a person designated by senior management who should be detached from the particular operations involved. b. The following are the forms, instruments and accounts that should be number controlled: (1) Bank drafts (2) Manager's and/or Cashier's checks (3) Promissory notes (4) Savings deposit accounts (5) Demand deposit accounts (6) Time deposit certificates (7) Letters of credit (8) Collection items (9) Official and provisional receipts (10) Certificate of stocks (11) Loan accounts (12) Expense vouchers SUBSECTION 2166.8 Rotation of duties a. The duties of personnel handling cash, securities and bookkeeping records should be rotated. b. Rotation assignment should be irregular, unannounced and long enough to permit disclosure of any irregularities or manipulations. c. Tellers should be relieved of their duties during the actual count of their cash accountabilities performed during annual bank examinations. SUBSECTION 2166.9 Independence of the internal auditor a. The position of internal auditor should be provided for in the by-laws together with the duties and responsibilities, scope and objectives of internal auditing. b. The internal auditor should report directly to the Board of Directors or to an Audit and Examining Committee composed of directors who are not connected with the management. c. The internal auditor should not install nor develop procedures, prepare records or engage in other activities which he normally reviews or appraises. SUBSECTION 2166.10 Direct verification a. Direct verification shall mean the confirmation of accounts or records by direct correspondence with the institution's customers. b. The following accounts, among others, should be subject to direct verification by the internal auditing staff at least once a year: (1) Balances of loans and credit accommodations of borrowers. (2) Deposit account balances particularly new deposit accounts, inactive or dormant accounts and closed accounts. llcd (3) Outstanding balances of borrowings and other liabilities. (4) Outstanding balances of receivables/payables. SUBSECTION 2166.11 Other internal control standards a.. Deposit Accounts (1) Entries to dormant account ledgers should be verified and approved by a designated officer. His initials should be placed next to the entry on the ledger sheet. (2) Dormant accounts should be segregated from active account ledgers with a separate subsidiary control. (3) Signature cards for dormant accounts should be removed from active files. (4) All new current accounts should be approved by a designated officer. (5) Signature cards and deposit ledger sheets should be authenticated by some form of validation. Subsequent changes should also be validated. (6) Signature cards and deposit ledger sheets should be accessible only to authorized persons. (7) Dates appearing on deposit tickets should be occasionally examined at irregular intervals after they have been posted to determine that posting was made on the actual date the deposit is received. (8) Withdrawals against uncleared check deposits should be allowed only upon prior approval of a responsible officer within the limits of authority set by the board of directors. (9) Checks should be cancelled as soon as they have been paid and posted. (10) Reports on closed accounts and returned checks should be prepared daily. (11) All current account statements should be mailed direct to the depositors. Undelivered statements should be retained by an organizational unit not responsible for demand deposit account processing. (12) An officer should be designated to attend to customers who report differences on their statements. (13) Checkbooks should be issued only against requisition forms signed by an authorized signatory to the account. b. Miscellaneous (1) Loan applications and related documents should be spot checked to insure their authenticity, including verification of name, residence, employment and current reputation of the borrower. (2) Employees paying checks for strangers should obtain positive identification of the person and when a large sum is involved, the account on which the check is drawn should be verified. (3) No employee should be permitted to process transaction affecting his own account. (4) Tellers and other employees having contact with customers should be prohibited from preparing deposit ticket or other records for customers. (5) All banks should have a sound recruitment policy since internal control begins from point of hiring. SUBSECTION 2166.12 Internal control procedures for dormant/inactive accounts a. Definition of dormant or inactive accounts (1) Current or checking accounts showing no activity (deposit or withdrawal) for a period of one (1) year. (2) Savings accounts showing no activity (deposit or withdrawal) for a period of two (2) years. b. Procedure for classification Initially review all deposit ledgers and segregate accounts that fall under a (2) above. At the end of every semester thereafter, review all deposit accounts and segregate those accounts that became dormant during the semester first ended. c. Internal Control Measures (1) As a matter of policy, banks should exert all efforts to prevent checking and savings accounts from becoming dormant. When it becomes apparent that an account is inactive, a short letter should be sent to the depositor encouraging him to use his account. In case of checking accounts, the bank should exert effort to assure itself that the monthly statement of accounts reach the depositors. If the depositors cannot be located, the following steps should be undertaken: (a) Check any significant change or fluctuation in the depositors' account balances over a period of time with emphasis on accounts with decreasing balances. (b) Verify apparent reactivation entries, represented either by deposit or withdrawal, that appears to have prevented the account from being classified as dormant. (c) Investigate any obvious alteration of the ledger records. (2) Segregated dormant accounts should be placed under joint custody of two responsible officers/employees. (3) A separate ledger control for dormant accounts should be maintained. (4) Signature cards for dormant accounts should also be segregated from active files and held under joint custody. (5) Entries to dormant account ledgers should be verified and approved by a designated officer. His initials should be placed next to the entry on the ledger sheet. (6) All inquiries on dormant accounts should be coursed to one officer who should obtain sufficient identification from the inquirer to assure that he is entitled to the information. (7) A trial balance of dormant account ledgers should be taken periodically and balanced with the general control account by an employee other than the bookkeeper. (8) Dormant or inactive accounts should be verified directly with depositors. (9) All transactions affecting dormant accounts should be subject to audit by the internal auditor. (10) A semestral report on deposit accounts transferred to dormant should be rendered to bank management. SECTION 2167. Bank protection . a. Objectives . These regulations are designed to: (1) Insure maximum protection of lives and property against bank robberies; (2) Prevent bank robberies by making it difficult for or discouraging would-be robbers to carry out their nefarious plans; and (3) See to it that, if robberies are indeed committed, bank employees and other witnesses can effectively help law-enforcement authorities in the identification, eventual apprehension and successful prosecution of the perpetrators thereof. LLjur b. Definitions . For purposes of these regulations, the following definitions are hereby adopted unless the context clearly indicates otherwise: (1) "Banking office" means the main office of a bank or a branch and includes an extension office, sub-office, agency or a moneyshop. (2) "Banking hours" means the time during which a banking office is open for the normal transaction of business with the public. (3) "Teller's station" or "window" means a location in a banking office at which bank customers routinely conduct transactions with the bank including a walk-up or drive-in teller's station or window. c. Designation of Security Officer . The board of directors of each bank shall appoint or designate a qualified security officer who shall be under the direct supervision of the president and shall be responsible for the development and administration of a security program and the installation, maintenance and operation of security devices in accordance with the standards prescribed by the Central Bank in separate rules and regulations. The security officer must be at least twenty-five years of age, a college graduate, with at least two years experience in the field of law-enforcement/police matters, of unquestionable integrity and of good moral character. d. Security Program . The security program of each shall be in writing, approved by its board of directors and retained in such form as will readily permit determination of its adequacy and effectiveness and shall contain provisions as may be prescribed by the Central Bank. e. Security Devices . Within thirty (30) days from the designation of the security officer in the case of a bank with less than ten (10) branches; sixty (60) days in the case of bank with ten (10) or more but less than twenty (20) branches; and ninety (90) days in the case of a bank with twenty (20) or more branches, the security officer shall, under the direction of the bank's president, conduct a security survey and submit a report on the needed security devices in each of the bank's banking offices. Banks shall effect the installation, maintenance and operation, as individually appropriate, of the following in each banking office existing as of the effectivity hereof: (1) A lighting system for illuminating, during the hours of darkness, the area around the vault, if the vault is visible from outside the banking office; (2) Tamper-resistant locks on exterior doors and windows designed to be opened; (3) An alarm system or other appropriate device for promptly notifying the nearest law-enforcement officers of an attempted or perpetrated robbery; and (4) Such other devices as the security officer shall determine to be appropriate for discouraging robberies and for assisting in the identification and apprehension of persons who commit such acts: Provided ,That the security officer shall consider, among other things, the following: (a) The incidence of crimes against the particular banking office and other business establishments in the area in which the banking office is located; (b) The amount of currency or other valuables exposed to robbery; (c) The distance of the banking office from the nearest law-enforcement officers and the time ordinarily required for such law-enforcement officers to arrive at the banking office; (d) The cost of the security devices; (e) Other existing security measures in effect at the banking office; and (f) The physical characteristics of the banking office structure and its surroundings. Each bank shall install, maintain and operate security devices which are expected to give a general level of bank protection equivalent, at least, to the standards prescribed by the Central Bank in separate rules and regulations. f. Reports . Within fourteen (14) months after the last business day of December of every year, each bank shall file with the appropriate supervising and examining department of the Central Bank a statement certifying to its compliance with the requirements of Central Bank rules and regulations on bank protection in accordance with the format shown in Appendix 10. g. Corrective Action . The Governor of the Central Bank shall designate a representative or representatives who shall be knowledgeable in bank protection to personally determine if the security measures, devices or procedures used or adopted by a bank meet the requirements of the foregoing regulations, and if based on the report of the representatives/s, the bank fails to meet the standards herein set forth, the Governor may direct or require the bank to take necessary corrective actions. h. Penalty Provision . Violation of or failure to comply with any of the provisions of this Section or of such other rules and directives which may be issued by the Central Bank in the implementation hereof shall subject the offenders to the administrative sanctions which may be imposed by the Central Bank, and/or to the penal provisions of Republic Act No. 265, as amended. SECTIONS 2168-2170. ( Reserved ). SECTION 2171. Place of board of directors' meetings . As a matter of policy, meetings of boards of directors of domestic banking institutions shall be held only within the Philippines. Domestic banking institutions shall include in their by-laws to be adopted or amended, a provision that meetings of their board of directors shall be held only within the Philippines. SECTION 2172. Voting requirements with respect to certain corporate transactions . No certificate of authority required under Sections 9 and 10 of Republic Act No. 337, as amended, shall be issued to any bank which has a provision in its by-laws requiring the concurrence of one or two directors, not constituting a majority in a quorum, for any decision of the board of directors, or a provision vesting a veto power in the hands of one or two directors, not constituting a majority in a quorum, for any decision of the board. (As deleted by CBP Circular 1177 dated June 24, 1988) SECTION 2173. ( Reserved ). SECTION 2174. Business name of stock savings and loan associations . a. Subject to prior approval of the Monetary Board, a stock savings and loan association may use the term "Thrift Bank" or "Savings and Loan Bank",or "Savings and Loan Thrift Bank" in its corporate or business name: Provided ,That this term has been duly incorporated in the corporate or business name of the stock savings and loan association as it appears in its articles of incorporation: Provided , further ,That it has fully complied with the following prescribed minimum paid-in capital: Within Metropolitan Manila and First Class A cities P4 million Within First Class B and C, Second and Third Class cities P3 million Within Fourth and Fifth Class cities and in other places P2 million If the stock savings and loan association has not fully complied with the above-mentioned minimum capital requirement, it shall still use in its name the term "Savings and Loan Association" with the option to use the term "A Thrift Bank" directly under its name, preferably enclosed in parenthesis. b. Subject to prior approval of the Monetary Board, a stock savings and loan association which has fully complied with the minimum paid-in capital of P10 million for thrift banks within Metropolitan Manila or P5 million for thrift banks outside Metropolitan Manila, may use the term "Savings Bank" in its corporate or business name: Provided ,That the term has been duly incorporated in its corporate or business name as it appears in its articles of incorporation. c. Any violation or non-compliance with the provisions of this Section shall be subject to an administrative fine of One Hundred Pesos (P100.00) a day for every day that the violation or non-compliance continues. The term "Bangko ng Bayan" shall not be used in connection with the business name of stock savings and loan associations. Any violation or non-compliance herewith shall be subject to an administrative fine of P100.00 a day for every day that the violation or non-compliance continues. (As amended by CBP Circular 1314 dated October 21, 1991) SECTION 2175. Management Contracts . The Monetary Board on January 4, 1985 adopted a policy to the effect that: a. Management contracts of banks with management firms shall be limited to consultancy and advisory services; and b. Only a natural person may be elected or appointed as an officer of a bank, without prejudice to such person being a nominee of a management corporation; provided that the responsibility and/or accountability of anyone elected or appointed to an officer position shall be personal in nature and cannot be delegated to a corporation. LLphil Existing contracts contrary to this policy should be rescinded or, if rescission is not possible, the same should not be renewed upon their expiration. Any bank entering into such contracts contrary to this policy shall be denied the credit facilities of the Central Bank. ( Effective January 29, 1985 ) SECTIONS 2176-2198. ( Reserved ). SECTION 2199. General provision on sanctions . Any violation of the provisions of this Part shall be subject to the provisions of Secs. 34 and 34-A of Republic Act No. 265, as amended. Footnotes * Within the prescribed deadline or to comply with its approved capital build-up program. PART TWO Deposit and Borrowing Operations A. DEMAND DEPOSITS SECTION 2201. Authority to Accept or Create Demand Deposits . A thrift bank desiring to accept or create demand deposits shall submit its application to the Central Bank through the appropriate supervising and examining department. Thrift banks with paid-in capital of at least P50 million may offer demand deposit facilities to all types of depositors: Provided ,That thrift banks with paid-in capital of less than P50 million which had been authorized to accept or create demand deposits as of October 7, 1983 shall be allowed to continue servicing such deposits. The total of paid-in capital (including government counterpart capital, if any, and paid-in surplus),earned surplus and undivided profits, net of (a) such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank and (b) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, stockholders, and their related interests (DOSRI) shall not be less than P50 million. Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets shall be excluded. ( Effective Oct . 21, 1981 ) SUBSECTION 2201.1 Prerequisite to accept or create demand deposits . A thrift bank applying for authority to accept or create demand deposits shall meet the following: a. The applicant must not have incurred any capital deficiency in any day computed under Sec. 30 of Republic Act No. 337, as amended, and the pertinent rules and regulations on any day during the six (6) months period immediately preceding the filing of its application, and/or any capital deficiency from the date of grant of authority to the day before checking account services are offered or extended to the public. b. It must not have incurred any net deficiency in reserves against deposit liabilities/deposit substitutes in any week during the six (6) months period immediately prior to the filing of its application and/or any net reserve deficiency from grant of authority to the day before checking account services are offered or extended to the public. c. It must have had profitable operations during the last three (3) years immediately preceding the filing of its applications. SUBSECTION 2201.2 Permit to accept or create demand deposits . A thrift bank may accept demand deposits after a permit therefore shall have been issued by the Central Bank upon the recommendation of the appropriate supervising and examining department. The permit shall be issued only after the bank shall have shown satisfactory proof: a. That its personnel who may handle demand deposits possess the necessary training or experience; b. That its facilities are adequate to service demand deposits; c. That it has adopted appropriate and adequate systems, procedures and internal control systems; and d. That is has complied with all other conditions herein imposed. For purposes of the required training and/or experience, attendance at appropriate seminars, workshops, on-the job training and/or experience of an officer/employee designated to handle the demand deposit operations for at least six (6) months may be considered. SUBSECTION 2201.3 Bonding of officers and employees . Officers and employees who have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits shall be adequately bonded and/or covered by an adequate blanket insurance. SECTION 2202. Interest on demand deposits . No interest shall be paid on demand deposits. SECTION 2203. Reserve on demand deposits . The reserve requirement on demand deposits shall be twenty three percent (23%) of such deposit liabilities ( Effective Oct . 3, 1985 ) Note: Amendments of Section 2203 as provided by the following CBP Circulars: 1) Section 3 of CBP Circular 1104 May 26, 1986; 2) Section 3 of CBP Circular 1112 dated August 4, 1986; 3) Section 5 CBP Circular 1209 dated September 1, 1989; 4) Section 5 of CBP Circular 1233 dated March 21, 1990; 5) Section 3 of CBP Circular 1261 dated November 9, 1990; 6) Section 3 of CBP Circular 1269 dated December 12, 1990; 7) Section 3 of CBP Circular 1377 dated January 21, 1993 and; 8) Section 3 of CBP Circular 1395 dated July 5, 1993 SECTION 2204. Temporary overdrawings (TODs) and drawings against uncollected deposits (DAUDs) . Thrift banks shall observe the following rules and regulations on TODs and DAUDs: SUBSECTION 2204.1 Temporary overdrawings . Temporary overdrawings against current accounts shall not be allowed, unless caused by normal bank charges and other fees incidental to handling such accounts, which in no case shall exceed Two Hundred Pesos (P200.00). Banks which violate these regulations shall be subject to a fine of one tenth of one per cent per day of violation, computed on the basis of the amount of overdrawing, without prejudice to the provisions of Sec. 2299. Fines for the violations of this Section shall be governed by the regulations on the collection of fines from banks as enumerated under Sec. 2610. Technical overdrawings arising from "force posting" in-clearing checks shall be debited by banks under "Returned Checks and Other Cash Items Not in Process of Collection" which is part of "Other Assets" in the Statement of Conditions. Items to be lodged under this account shall consist only of in-clearing checks which may result in "technically overdrawn" accounts and shall be immediately reversed the following day. The checks lodged under "Returned Checks, etc." shall either be returned or honored the following day before Central Bank clearing. The items to be used as cover for the honored checks should only consist of any of the following: a. Cash b. Cashier's, Manager's or Certified Checks c. Bank Drafts d. Postal Money Orders e. Treasury Warrants f. Duly Funded "On Us" Checks g. Fund transfers/credit memos within the same bank representing proceeds of loans granted under existing regulations. SUBSECTION 2204.2 Drawings against uncollected deposits . As a matter of policy, drawings against uncollected deposits shall be prohibited except when the drawings are made against uncollected deposits representing manager's/cashier's/treasurer's checks, treasury warrants, postal money orders and duly funded "on us" checks which may be permitted at the discretion of each bank. SECTION 2205. Checks without sufficient funds . To complement the provisions of Batas Pambansa Blg. 22, an Act penalizing the making or drawing and issuance of a check without sufficient funds or credit, the following regulations shall govern: a. The drawee bank shall stamp, write or print on a dishonored checks or on a paper attached thereto the date the check is presented for payment and the reason for the refusal to pay the same to the holder thereof. b. Where the reason for the dishonor of a check is stamped, written or printed on a paper attached to the checks, the drawee bank shall indicate the pertinent details, such as the names of the drawer, the payee and the drawee bank, the date and amount of the check, the check number and the date of dishonor. c. The drawee bank shall use only the bank for the payment in full of such check, if such be the fact. The bank shall also indicate receipt of a stop payment order. e. For local exchanges, a check dishonored by reason of insufficiency of funds or credit shall be returned by the drawee bank to the negotiating bank not later than the next regular clearing. For out-of-town exchanges, a check so dishonored shall be returned by the drawee bank to the negotiating bank within the period specified announcing the opening of clearing facilities in each of the authorized regional clearing centers. A check dishonored by reason of insufficiency of funds or credit which was not coursed through the Central Bank clearing system shall be returned by the drawee bank to the holder or the negotiating bank, as the case may be, not later than the business day following the date the check is presented for payment with the drawee bank. The negotiating bank shall, in turn, return a check dishonored by reason of insufficiency of funds or credit to the holder not later than the business day following its receipt of the dishonored check from the drawee bank. f. This Section shall not be deemed or construed to modify or amend the provisions of the Negotiable Instruments Law. g. Any bank and any of its officers and employees who violates or fails to comply with the provisions of this Section shall be subject to the penalties provided in Sec. 2299. For purposes of compliance with Item (b) of this Section, the details on the check number, the date of the dishonor of the check and the reason for such dishonor shall be considered sufficient compliance with the provisions of said Item. SECTION 2206. Current account of bank officers and employees . The following officers and employees of thrift banks are prohibited from maintaining demand deposits or current accounts with the banking office, such as the head office or branch, in which they are assigned: a. Officers and employees of the cash department; b. Officers of banking offices other than head offices, such as branches, extension offices and money shops; and c. Other officers and employees who have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits or current accounts. The abovementioned prohibition shall include the spouses and minor children under the parental authority of the officers and employees covered by the prohibition, and the business interests of such officers and employees, their spouses and minor children under their parental authority, in single proprietorships, or partnerships or corporations in which such officers and employees, individually or as a group, own or control at least a majority of the capital of the partnership or the outstanding subscribed capital stock (voting and non-voting) of the corporation. Officers and employees of thrift banks who do not have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits or current accounts, including their spouses and minor children under their parental authority, and the business interest of such officers and employees, their spouses and minor children under their parental authority, in single proprietorships or partnerships or corporations in which such officers and employees, individually or as a group, own or control at least a majority of the capital of the partnership or the outstanding subscribed capital stock (voting and non-voting) of the corporation, may maintain such deposits or accounts in any office of the banking institution where they are employed as such, including the offices in which they are assigned; officers and employees who are so responsible and those mentioned in the second paragraph of this subsection may maintain such deposits or accounts only in offices in which the officers and employees are not assigned. SECTIONS 2207-2212. ( Reserved ). B. SAVINGS DEPOSITS SECTION 2213. Interest on savings deposits . Savings deposits shall not be subject to any interest rate ceilings. SECTION 2214. Reserve on savings deposits . The reserve requirement on savings deposits shall be fourteen per cent (14%).( Effective April 25, 1984 ) (As amended by CBP Circular 1238 dated May 28, 1990) SECTION 2215. Servicing deposits outside bank premises . As a general policy, all banks may, upon application, be authorized to solicit and accept deposits outside their bank premises, subject to the following conditions: a. The proposed area where applicant bank intends to solicit should be clearly defined; b. Solicitation of deposits should only be confined within a locality where there are no other banks in operation, except applicant bank, or where it can be clearly established that the deposit potentials of the said locality are still untapped; c. Applicant bank shall institute and maintain the following minimum safeguards: (1) All deposit solicitors shall be initially bonded for at least P1,000.00, subject to the increase thereof to approximate their daily collections; (2) Deposit solicitors shall be provided with proper identification cards with photograph and signature of each respective solicitor, certified to by the appropriate officer of the bank. Said identification cards shall be worn by each solicitor at all times at the upper left breast of his outer garment when soliciting deposits; (3) Adequate insurance coverage for funds in transit (representing deposits collected outside banking premises) should be secured by applicant bank from insurance companies not included in the list of companies blacklisted by the Insurance Commissioner; (4) Deposit slips, different from that issued by tellers in the counter, shall be in booklet form, pre-numbered, in triplicate copies and in three colors, the original to be issued to the depositor, the second copy to be used for posting reference, and the third copy to be retained in the booklet; (5) All collections shall be turned over to the cashier at the end of each day, accompanied by a "Collection Summary Report" to be accomplished in duplicate which shall contain the following minimum information: (a) Date of the report (b) Names and addresses of the depositors (c) Deposit slip numbers (d) Amounts of deposit (e) Savings account and passbook numbers (f) Name and signature of solicitor rendering the report (6) Depositors shall always be required to accomplish "Signature Cards" when opening an account which card shall be used always as reference in checking the genuineness/authenticity of signatures affixed on withdrawal slips or authorizations for withdrawals; (7) Deposits/withdrawals shall be recorded by the bookkeeper or any ledger clerk, except any bank solicitor, in the depositors' ledger cards and passbooks on the same day that such deposits/withdrawals are accepted/approved by the bank. Passbooks shall be returned to the depositors not later than the following business day; (8) At the end of each month, depositors shall be advised in writing of the balances of their deposits with the bank, the advise slips of which shall never be hand-carried by the solicitors themselves; and (9) Places of assignments of bank solicitors shall be rotated, at least quarterly. d. The appropriate supervising department shall certify that the financial condition of the bank applying for authority to solicit and collect savings deposits outside its bank premises is sound and that the operations and the quality of the management thereof could reasonably assure the safety of the funds which may be entrusted to its deposit collectors and/or solicitors. SUBSECTION 2215.1 Solicitation of deposits under the TIPID Movement . The TIPID Movement Rules as embodied in Appendix 14 shall be used as the official procedural guideline in the implementation of the TIPID Movement by all participating banks. a. Segregation of TIPID Accounts . To effectively monitor the growth in savings and time deposits under the TIPID Movement, the school savings project of the National Commission on Savings, banks are hereby required to identify and segregate TIPID accounts from other accounts. TIPID accounts shall refer to savings and time deposit accounts of elementary and high school students. Accounts of schoolchildren held in trust or opened by parents or guardians, however, shall be treated as regular deposit accounts. To facilitate identification of TIPID accounts, banks shall require new depositors to indicate on the signature cards among other information, the date of birth, whether or not a student, and grade level if a student. To avoid including in the TIPID accounts the savings and time deposits of high school graduates, age eighteen (18) years shall be presumed the age at which students finish high school. Savings or time deposit accounts, therefore, of students who are 18 years old and above shall not be considered as TIPID accounts, but treated as regular deposit accounts. In the case of old accounts, banks shall exert efforts to identify and segregate TIPID accounts from regular deposit accounts until all TIPID accounts shall have been brought up-to-date. Bank shall submit their report on TIPID accounts to the Central Bank supervising department concerned in the pertinent page/attachment of the appropriate report forms. b. In the report, banks should ensure that the totals of the number and amount tally(a) under Savings Deposits as to size and source; and (b) under Time Certificates of Deposits as to size, source and maturity. SUBSECTION 2215.2 Solicitation of Deposits under the Barangay Savings Movement . Banks in the province of Batangas which may wish to participate in the pilot Barangay Savings Program may be authorized, on a case-to-case basis, to solicit deposit in designated places outside their premises on certain specific days under the Barangay Savings Movement, subject to the following rules and regulations: a. The solicitor shall be a regular employee of the depository bank; b. Solicitation will be allowed only in those areas or localities where the distance between the bank and barangay makes it difficult or otherwise impractical for a depositor to deal directly with the bank; c. Banks shall make prior arrangements with barangay officials as to the date, place, and time of solicitation and shall post notice thereof conspicuously in the agreed place of solicitation; d. The solicitor shall be initially bonded for at least P1,000.00, subject to increase to approximate the average daily collections; e. The solicitor shall be provided with an identification card with his photograph and signature, certified to by an officer of the bank. This identification card shall be worn by the solicitor at all times at the upper left breast of his outer garment when soliciting deposits; f. Adequate insurance coverage for funds in transit representing deposits collected outside banking premises shall be secured by the bank concerned from insurance companies not included in the list of companies blacklisted by the Insurance Commissioner; g. Deposit slips, different from that issued by counter tellers, shall be pre-numbered in booklet form, in triplicate and in three colors the original to be used for posting reference, the second copy to be issued to the depositor, and the third copy to be retained in the booklet; h. All collections shall be turned over to the Cashier at the end of each day, accompanied by a "Collection Summary Report" to be accomplished in duplicate which shall contain the following minimum information: date of the report; names and addresses of the depositors; savings account and passbook numbers; and the name and signature of the solicitor rendering the report; i. The depositor shall be required to accomplish a "Signature Card" when opening an account. The card shall be used as reference in checking the genuineness or authenticity of the signature affixed on withdrawal slips or authorizations for withdrawals; j. With proper safeguards, withdrawals may also be effected through the bank solicitor; k. Deposits and withdrawals shall be recorded by the bookkeeper in the depositor's ledger cards and passbooks on the same day that such deposits or withdrawals are accepted or approved by the bank. Passbooks shall be returned to the depositors not later than the next scheduled solicitation day; and l. No bank shall avail of this solicitation facility unless previously authorized by the Central Bank. For purposes of this Subsection, banks concerned may submit their request for authority to solicit deposits to the pertinent supervising department in the Central Bank. SECTION 2216. Withdrawals/Deposits . Banks are prohibited from issuing/accepting "withdrawal authority slips" or any other similar instruments designed to effect withdrawals of savings deposits without following the usual practice of requiring the depositors concerned to present their passbooks and accomplishing the necessary withdrawal slips. SECTION 2217. Dormant savings accounts . Banks may impose service of maintenance fees on dormant or inactive savings accounts. However, the rate of service charges or maintenance fees, the prescribed period of dormancy and the minimum balance of deposits before such charges or fees may be imposed, shall be properly disclosed among the terms set forth in the passbook of every depositor. ( Effective June 27 , 1985 ) SECTION 2218. Special savings deposits of farmer-borrowers . Authority shall be automatically granted to any accredited banking institution which may participate in the supervised credit program to accept special savings deposits from farmer-borrowers, subject to the following conditions: a. Only the balance of loans granted under the supervised credit program shall be deposited in the special savings deposit accounts of farmer borrowers, as an exception to Subsec. 2302.1. b. Withdrawals against such special savings deposit accounts shall be allowed only (a) in amounts specified in the approved farm plan and budget, and (b) upon certification by the technician either of the Central Bank and/or banking institution that previous releases were used in accordance with the farm plan. c. The special savings deposit shall earn interest at the same rate that the banking institution charges the borrower for such loans, as an exception to Sec. 2243. d. The special savings deposit shall be exempt from the legal reserve requirement, as an exception to the existing policies of the Monetary Board on the matter. SECTION 2219. Rental deposits of lessees . The following guidelines shall govern the opening and handling by banking institutions of deposits made by lessees pursuant to Sec. 5(b) of Batas Pambansa Blg. 25, otherwise known as the Rental Control Law; a. The deposit made by the lessee shall only be accepted by the bank under a special savings account in the name of the lessor; b. The bank shall require the lessee to submit a copy of the written notice sent to the lessor for the deposit made, stating, among others, the date and amount of the deposit and the name and address of the lessor; c. The bank, at its option, may require the lessee to submit any supporting document, such as the lease contract or official receipt of previous rentals paid, which will show the specimen signatures of the lessor, or other papers to identify the lessor; d. The bank shall segregate from its regular savings deposit accounts, and maintain a separate subsidiary control ledger for, deposits made under Section 5(b) of Batas Pambansa Bldg. 25; e. Any withdrawal against these special savings deposit accounts may only be allowed in favor of the lessee concerned before the amount deposited under consignation has been accepted by the lessor, or when authorized by the lessor; f. The expenses which may be incurred by the bank with respect to such rental deposits shall be charged against the lessor; g. All the minimum internal control standards applicable to savings deposit accounts prescribed in Sec. 2166 shall be complied with; and h. The acceptance of such rental deposits, however, shall be optional or discretionary only upon the bank concerned. SECTIONS 2220-2222. ( Reserved ). C. NOW ACCOUNTS SECTION 2223. Authority to accept NOW Accounts . Upon prior approval of the Monetary Board, a thrift bank may accept NOW accounts. NOW accounts are savings accounts from which funds may be withdrawn by means of "Negotiable Orders of Withdrawal." The privilege to maintain NOW accounts shall be limited to natural persons. A permit therefor shall be issued upon recommendation of the appropriate supervising and examining department after the applicant bank shall have presented satisfactory proof of compliance with the requirements set forth in the succeeding Subsection. SUBSECTION 2223.1 Prerequisites to accept NOW Accounts . A thrift bank applying for authority to accept NOW accounts shall meet the following requirements: a. It must have adequate capital pursuant to law and shall have complied fully with the minimum paid-in capital, as follows: Within the Metropolitan Manila and first class A cities P4 million Within first class B and C second and third class cities P3 million Fourth and fifth class cities and in other places P2 million Provided ,That a thrift bank in any of the herein capital levels may, up to December 31, 1983, apply for authority to service NOW accounts; Provided , further ,That a thrift bank which has authority to accept NOW accounts must increase its capital to at least P5 million, otherwise, the number of NOW accounts it services shall not exceed the number existing on December 31, 1983. A bank which meets the minimum paid-in capital of P10 million may apply to the appropriate supervising and examining department to offer simultaneously demand deposits and NOW accounts. For purposes of classifying cities, see Appendix 15. b. It must not have incurred on any day during the six (6) months period immediately preceding the filing of application, any capital deficiency computed pursuant to Section 30 of Republic Act No. 337, as amended, and its implementing rules and regulations. c. It must not have incurred any net deficiency in its reserves against deposit liabilities/deposit substitutes in any week during the six (6) months period immediately preceding the filing of application. d. It must have had profitable operations during the last three (3) calendar years prior to the filing of application. (As amended by CBP Circular 1239 dated May 30, 1990) SUBSECTION 2223.2 Procedural requirements . Any thrift bank desiring to offer "NOW" accounts shall submit an application in the form of a letter request addressed to the Monetary Board thru the appropriate supervising and examining department of the Central Bank which shall evaluate the same, taking into consideration, among other things, (a) the capital, financial condition and profitability or earning capacity of the applicant bank; (b) existing systems and procedures and internal control safeguards of the applicant bank; (c) the ability of the bank's personnel to handle "NOW" accounts; and (d) the general compliance by the applicant bank with banking laws, rules and policies, and all other orders or instructions of the Monetary Board and/or Central Bank Management. SECTION 2224. Interest on NOW accounts . NOW accounts shall not be subject to any interest rate ceiling. SECTION 2225. Reserve on NOW accounts . The reserve requirement on NOW accounts shall be eighteen percent (18%) of such deposit liabilities. ( Effective April 25 , 1984 ) Note: Amendments to Section 2225 as provided by the following CBP Circulars: 1) Section 3 of CBP Circular 1261 dated November 9, 1990; 2) Section 3 of CBP Circular 1269 dated December 26, 1990; 3) Section 3 of CBP Circular 1377 dated January 21, 1993 and; 4) CBP Circular 1395 dated July 5, 1993 SECTION 2226. Rules on servicing NOW accounts . The following rules shall be observed in servicing NOW accounts: a. Prior to or simultaneous with the opening of a NOW account the bank shall inform the depositor of its terms and conditions. b. The bank shall be responsible for the proper identification of its depositors; it shall require among other things two (2) specimen signatures and such other pertinent information. c. Deposits shall be covered by deposit slips in duplicate duly validated and initialled by the teller receiving the deposit. A copy of the deposit slip shall be furnished the depositor. d. NOW accounts shall be kept and maintained separately from the regular savings deposits. e. Blank Negotiable Order of Withdrawal forms shall be pre-numbered and shall be controlled as in the case of unissued blank checks. f. A bank statement shall be sent to each depositor at the end of each month for confirmation of balances. g. Banks must use the form prescribed by present rules for NOW accounts. Nothing herein shall be construed as precluding a thrift bank from applying for authority to accept both demand deposits and NOW accounts. SECTION 2227. Minimum features . The order of withdrawal form shall have a size of three (3) inches by six and three eight (6-3/8) inches, and shall be printed on security/check paper. It shall contain as a minimum the features of the pro forma order of withdrawal shown in Appendix 16. SECTION 2228. Clearing of negotiable orders of withdrawals . Any negotiable order of withdrawal which may be deposited with a bank other than the drawee bank may be cleared through the Central Bank Clearing Office in Manila and the Regional Clearing Units in regional clearing centers designated by the Central Bank in accordance with the clearing procedures stated in Sec. 2603. Nothing in this Section shall however prevent direct settlement between the parties concerned. SECTIONS 2229-2230. ( Reserved ). D. TIME DEPOSITS SECTION 2231. Interest on time deposits . Time deposits shall not be subject to any interest rate ceiling. SECTION 2232. Reserves on time deposits . The reserve requirement on time deposits with original maturities of 730 days or less shall be fourteen percent (14%) of such deposit liabilities. Effective April 25, 1984, the reserve requirement on time deposits with original maturities of more than 730 days shall be six per cent (6%) ( Effective April 25 , 1984 ) Note: Amendments to Section 2232 as provided by the following CBP Circulars: 1) Section 3 of CBP Circular 1122 dated November 28, 1986; 2) Section 1 of CBP Circular 1204 dated June 23, 1989; 3) Section 3 of CBP Circular 1207 dated August 4, 1989; 4) Section 6 of CBP Circular 1209 dated September 1, 1989; 5) Section 6 of Circular 1233 dated March 21, 1990; 6) Circular 1238 dated May 28, 1990; 7) Section 4 of CBP 1261 dated November 9, 1990 and; 8) Section 4 of CBP Circular 1269 dated December 26, 1990 SECTION 2233. Minimum size and term of time deposits . Banks shall not require a minimum amount of time deposit greater than P1,000.00. No time deposits shall be accepted for a term of less than thirty (30) days. SECTION 2234. Special time deposits . Authority shall be automatically granted to any accredited banking institution which may participate in the supervised credit program to accept special time deposits from the Agrarian Reform Fund Commission (ARFC) with interest lower than the rate allowed on time deposits accepted from the general public. SECTION 2235. Negotiable Certificates of Time Deposit . Thrift banks shall not issue negotiable certificates of time deposit except upon prior approval by the Central Bank. ( Effective July 20 , 1984 ) The issuance of negotiable certificates of time deposit shall be governed by the following rules: SUBSECTION 2235.1 Minimum features a. Form ; denomination . The negotiable certificates of time deposits may be issued in bearer or other form denoting negotiability and shall have a standard format to be prescribed by the Central Bank which shall be pre-numbered serially, predenominated and printed on security paper by the Security Printing Plant of the Central Bank. The minimum denomination shall be at the discretion of the issuing bank. No certificate payable to bearer shall contain words prohibiting its negotiation. ( Effective Jan . 1 , 1984 ). b. Term . The minimum maturity of the certificates shall be 731 days. c. Manner of issuance . The certificates shall be issued only upon receipt of funds equivalent to their face value. ( Effective April 18 , 1983 ) d. Manner of Printing . Negotiable Certificates of Deposits shall be printed on security paper by the Security Printing Plant (SPP) of the Central Bank. ( Effective Nov . 9 , 1983 ). Orders for the printing of the desired forms shall not exceed a total value equivalent to 20% of the issuing bank's capital accounts (based on the quarter immediately preceding the request for printing) at any one time. Additional orders for printing which shall result in an excess over the prescribed benchmark shall require prior Central Bank approval. ( Effective Nov . 9 , 1983 ). SUBSECTION 2235.2 Insurance coverage . The negotiable certificates of time deposit shall be insured with the Philippine Deposit Insurance Corporation (PDIC),subject to applicable rules and regulations, among others, on maximum insurance coverage, and on the requirement that banks issuing bearer certificates shall have imprinted on the instrument the following: For purposes of deposit insurance by the Philippine Deposit Insurance Corporation, the holder shall have his name registered in the books of the issuing bank. ( Effective April 18 , 1983 ). SUBSECTION 2235.3 Pre-qualification and other requirements . Thrift banks applying for authority to issue negotiable certificates of time deposit shall comply with the following requirements: 1. Minimum paid-in capital of P150 million. For this purpose, capital shall refer to the total of the unimpaired paid-in capital (including paid-in surplus),earned surplus and undivided profits net of (a) such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank, and (b) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, stockholders and their related interests (DOSRI); 2. Net profitable operations during the last three (3) years immediately preceding the date of issuance of negotiable certificates of time deposit; and 3. General compliance with banking laws, Central Bank rules and regulations, and policies and instructions of the Monetary Board. Negotiable certificates of time deposit shall be subject to applicable rules and regulations governing regular time deposits, including the twenty per cent (20%) final withholding tax and the rules on pretermination. ( Effective July 20 , 1984 ) SECTION 2236. Reserve requirements . A five per cent (5%) reserve shall be maintained against all issues of negotiable certificates of time deposit including any outstanding amount as of April 18, 1983. ( Effective April 18 , 1983 ). SECTIONS 2237-2238. ( Reserved ). aisadc E. GOVERNMENT DEPOSITS SECTION 2239. Authority to service government deposits . Except as may be authorized by existing Statutes, no private bank shall, without prior approval of the Monetary Board, accept as depository any fund or money from the Government, its branches, agencies, subdivisions, instrumentalities, including government-owned or controlled corporations, hereinafter referred to as Government and government entities';nor shall a private bank or non-bank financial intermediary, whether or not performing quasi-banking functions, borrow any fund or money from the Government and government entities, through the issuance or sale of its acceptances, notes or other evidences of debt. ( Effective Sept . 12 , 1983 ). SUBSECTION 2239.1 Banks which may accept government funds . The Philippine National Bank (PNB),the Development Bank of the Philippines (DBP),the Land Bank of the Philippines (LBP),the Philippine Amanah Bank (PAB) and any private bank duly authorized by the Monetary Board as required under this Section in cities or municipalities where there are no existing branches, agencies or extension offices of the above-named government-owned banks, may accept demand, savings or time deposits from the Government and government entities: Provided , however ,That only minimum working balances to meet monthly payroll requirement, project outlays or office operational needs of the Government entity may be held by authorized private banks: Provided , further , That for purposes of this Section, the Philippine Veterans Bank (PVB), a private bank which by its charter is a depository of government funds, need not secure prior approval of the Monetary Board to accept deposits of, and borrowings from the Government and government entities. Banks may not receive or hold as trustee, agent, administrator, financial manager or other similar capacity any fund or money from the Government and government entities. ( Effective Sept . 12 , 1983 ). SUBSECTION 2239.2 Definitions of terms . For purposes of this Section, the following terms shall have the meaning indicated unless the context clearly indicates otherwise; a. The term "government-owned or controlled corporations" shall refer to government-owned or controlled corporations which are created by special laws. It shall exclude government financial institutions such as the PNB, DBP, LBP, and PAB, corporation which are organized as subsidiaries of government-owned or controlled corporations under the provisions of Act 1459, as amended, or the New Corporation Code and private corporations which are taken over by government-owned or controlled corporations. b. The term "fund or money from the Government and government entities" includes public moneys of every sort, whether pertaining to the National Government, province, city, municipality or other branch or agency of the government, including government-owned or control corporations as above defined, and shall comprise "revenue funds", "trust funds" and "depositary funds" as these terms are defined under Section 658 of the Revised Administrative Code, to wit; "Revenue funds" comprise all government funds derived from the income of the Government in any of its branches and available for appropriation of expenditure according to law. "Trust funds" are government funds which have officially come into the possession of the Government or of a government officer as trustee, agent or administrator, or which have been received as a guaranty for the fulfillment of some obligations. "Depositary funds" are government funds over which the officer accountable therefor may retain control for the lawful purposes for which the same came into his possession being subject to his official check for such purposes. The term embraces moneys in the National Treasury in its capacity as a depository of all government moneys in depository banks. SUBSECTION 2239.3 Liquidity floor . Unless otherwise provided by the Monetary Board, deposits * SUBSECTION 2239.5 Sanctions . Any violation of this Section shall be a ground for the imposition of the following sanctions: a. The deposit account with the Central Bank of the bank concerned shall be debited by the Accounting Department of the Central Bank in the amount of the unauthorized deposit or borrowing upon receipt of a report or notice from the appropriate supervising and examining department of the Central Bank, and the deposit account of the PNB with the Central Bank shall be credited for the same amount. A copy of said report or notice of the supervising and examining department shall be furnished each to the bank concerned and the PNB; b. Any bank with deficiency in the required liquidity floor against deposits of, and/or borrowings from, the Government and government entities or with excess holdings of such deposits shall (1) be denied the credit facilities of the Central Bank; and (2) if the deficiency lasts for four (4) consecutive weeks, the bank shall be prohibited from declaring cash dividends and making new loans and investments, except investments in government securities. The prohibition shall be lifted by the Governor or the Senior Deputy Governor upon certification by the appropriate supervising and examining department that the bank has had no deficiency in its liquidity floor and no excess holdings of government deposits for at least four (4) consecutive weeks; c. In the case of non-bank financial intermediaries, the authority to engage in quasi-banking functions by the entity concerned may be suspended for such period of time as may be determined by the Monetary Board, which shall in no case be less than thirty (30) calendar days from receipt of the advice to this effect; and d. The withdrawal of previously granted authority to accept government funds. SECTIONS 2240-2241. ( Reserved ). E. INTEREST ON DEPOSIT LIABILITIES SECTION 2242. Interest on demand deposits . No interest shall be paid on demand deposits. SECTION 2243. Interest on savings deposits and NOW accounts : a. Savings deposits, including NOW accounts, shall not be subject to any interest rate ceiling. b. Banks shall compute interest on savings deposits and on NOW accounts only on the basis of either the average or actual daily balance. SECTION 2244. Interest on time deposit . Time deposits shall not be subject to any interest rate ceiling. SUBSECTION 2244.1 Time of payment . Interest on time deposit may be paid at maturity or upon withdrawal or in advance: Provided ,however, That interest paid in advance shall not exceed the interest for one year. SUBSECTION 2244.2 Treatment of matured time deposits . A time deposit not withdrawn or renewed on its due date shall be treated as a savings deposit and shall earn interest from maturity to the date of actual withdrawal or renewal at a rate applicable to savings deposits. SUBSECTION 2244.3 Pretermination . The interest of a time deposit terminated before the maturity date fixed in the certificate of time deposit shall be as follows: a. Any time deposit terminated within the first half of its maturity period shall be paid an interest rate equivalent to twenty-five per cent (25%) of the interest stipulated in the contract; b. Any time deposit terminated within the second half of its maturity period shall be paid an interest rate equivalent to fifty per cent (50%) of the interest stipulated in the contract; c. The provisions of this subsection shall not apply in the case of time deposits with maturities of more than 730 days which are preterminated more than 730 days after the date of deposit: Provided ,That if interest has been paid in advance, the corresponding rebate shall be charged against the principal of the time deposit. SECTION 2245. Payment of interest in kind . Banks shall not pay interest in kind on deposits. SECTION 2246. Sanctions . Whenever any person or entity violates any of the provisions of Secs. 2242 to 2245, the person or entity responsible for such violation shall be subject to the penalty prescribed in the first paragraph of Section 34 of Republic Act No. 265, as amended, without prejudice to any action under the provisions of Section 2299. SECTION 2247. Employees' provident fund contributions . Provident fund contributions of and for the benefit of bank employees and deposited in their own banks are exempted from the provisions of regulations on interest rates on deposits. SECTION 2248. Disclosure of effective rates of interest . All banks are required to disclose to depositors the following information on interest computation and payment on their savings and time deposits: a. Type/kind of deposit; b. Normal rate of interest and period covered; c. Manner of interest payment, i.e.,whether credited in advance or otherwise; d. Basis of interest payment, i.e.,whether based on average daily balance compounded quarterly or otherwise; e. Effective rate of interest expressed as a simple annual rate, on the basis of the information above given and indicating the formula used to arrive at the effective rate of interest; and f. Illustration of basis of computing interest on a hypothetical deposit account. Copies of the above-mentioned information shall be made available to each and every depositor by attaching these copies to savings deposit passbooks and to time deposit certificates. Posters disclosing the above information shall also be displayed conspicuously within the bank premises. Banks are also required to disclose to depositors upon request, the effective interest rates on their deposits. Non-compliance with this Section shall subject the banking institution concerned to such administrative sanctions as the Monetary Board shall impose. SECTION 2249-2252. (Reserved) . G. RESERVES AGAINST DEPOSIT LIABILITIES SECTION 2253. Accounts Subject to Reserves ; Amounts Required . The required reserves against deposits of local currency shall be as follows: a. Against demand deposits twenty three per cent (23%) of such deposit liabilities. b. Against "NOW" accounts eighteen per cent (18%) of such deposit liabilities. c. Against savings deposits other than "NOW" accounts A fourteen per cent (14%) of such deposit liabilities. d. Against time deposits; (1) With original maturities of 730 days or less fourteen per cent (14%) of such deposit liabilities. (2) With original maturities of more than 730 days six per cent (6%) of such deposit liabilities, regardless of remaining maturities. ( Effective Oct . 3, 1985 ). Note: Amendments to Section 2253 as provided by the following CBP Circulars: 1) Section 3 of CBP Circular 1104 dated May 26, 1986; 2) Section 3 of CBP Circular 1112 dated August 4, 1986; 3) Section 3 of CBP Circular 1122 dated November 28, 1986; 4) Section 3 of CBP Circular 1204 dated June 23, 1989; 5) CBP Circular 1207 dated August 4, 1989; 6) Sections 5, 6 and 7 of CBP Circular 1209 dated September 1, 1989; 7) Sections 5 and 6 of CBP Circular 1233 dated March 21, 1990; 8) Circular 1238 dated May 28, 1990; 9) Sections 3 and 4 of CBP Circular 1261 dated November 9, 1990; 10) Sections 3 and 4 of CBP Circular 1269 dated December 26, 1990; 11) Section 3 of CBP Circular 1377 dated January 1, 1993 and; 12) Section 3 of CBP Circular 1395 dated July 5, 1993 SECTION 2254. Form or Composition of Reserves . All banks and non-bank financial intermediaries are hereby enjoined to deposit cash with the Central Bank to form part of their reserve assets. ( Effective May 9, 1984 ) cdta The form in which required reserves against deposit liabilities in local currency will be held shall be as follows: a. Deposits with the Central Bank At least twenty-five per cent (25%) of the required reserves shall be in the form of deposits with the Central Bank. Effective January 1, 1982, deposits with the Central Bank of rural and thrift banks and the Development Bank of the Philippines shall be thirteen per cent (13%) of the required reserves and shall be increased at the rate of four percentage points every semester thereafter until the minimum requirements shall have been reached. In areas where the Central Bank has no regional offices, deposit balances of the required reserves of banks with the Central Bank shall be deposited with branches of the Philippine National Bank authorized to accept such deposits in trust for the Central Bank. (As deleted by CBP Circular 1131 dated January 30, 1987) b. Government securities and cash in vault The remaining portion of the required reserves may be held by all banks in the form of cash in vault and/or government securities or evidences of indebtedness of the Republic of the Philippines. For purposes of this Section, government securities which may form part of the reserves against deposit liabilities of banks shall refer to bonds or other evidences of indebtedness representing direct obligations of the Government of the Republic of the Philippines: Provided ,That such securities shall have the following minimum features/conditions: (1) The securities must bear an interest rate of not more than four per cent (4%) per annum, must be non-negotiable, and shall carry Central Bank support; and (2) The amount, maturity date and rate of interest must be definite and stated in the certificate itself. Premyo Savings Bonds (Regular and Biglang Bahay Series) shall continue to be eligible as reserves of banks against deposit liabilities in accordance with the following schedule: Per Cent of Required Ceiling on Reserve Government Requirement Securities July 1, 1983 June 30, 1984 37.5 50 July 1, 1984 June 30, 1986 18.75 25 Effective July 1, 1986, said bonds shall no longer be eligible as reserves. ( Effective Jan . 13, 1984 ) Other government securities being used for reserve purposes shall continue to be eligible as such: Provided ,That whenever said securities shall have matured, they shall be replaced by securities carrying the above features. Securities held as reserves shall be valued at cost of acquisition and the bank may keep physical possession of such securities. It may freely alter its composition: Provided ,That any substitution or acquisition satisfies the eligibility requirements prescribed in the second paragraph of Item 6 of this Section: Provided, further ,That the bank notifies the Central Bank of any such change in the prescribed forms not later than the reporting day following the change as provided in Sec. 2257. Securities counted as reserves may not be hypothecated or encumbered in any way or earmarked for any other purpose without automatically losing their eligibility as reserves. Only the buying/lending bank in a agreement covering eligible government securities may use such securities as reserves against deposits. Conversely, the selling/borrowing bank in a resale agreement covering eligible government securities may not use such securities as reserves against deposits. The list of reserve-eligible and non-eligible securities may be found in Appendix 49. ( Effective July 8, 1985 ) SUBSECTION 2254.1 Allowable drawings against reserves on deposit with CB . In connection with the bank reserves on deposit with the Central Bank to comply with legal requirements, all banks are reminded that said deposits are not regular current accounts. The use, therefore, of Central Bank checks for drawings against reserve deposits shall be limited to (a) settlement of obligations with the Central Bank; and (b) withdrawals to meet cash requirements. SUBSECTION 2254.2 Exclusion of uncleared checks and other cash items . Checks and other cash items which have not been cleared yet through the Clearing Office should not be debited to the account "Due from the Central Bank of the Philippines" and should not be considered as available reserves against deposit liabilities. Such items shall invariably be debited to the "Checks and Other Cash Items" account. Only after the checks and other cash items have been cleared through the Clearing Office can the bank debit be "Due from the Central Bank of the Philippines" account for said items. SUBSECTION 2254.3 Interest income on reserve deposits with CB . Deposits maintained by banks with the Central Bank as part of their reserve requirement shall be paid interest at four per cent (4%) per annum based on the average daily balance of said deposits to be credited quarterly. ( Effective June 1, 1984 ) SUBSECTION 2254.4 Book Entry Method for Reserve Securities . All purchases of Treasury Bonds, deposit of the paid-up capital of a proposed corporation registering with the Securities and Exchange Commission. Said certificate should be signed by a responsible official of the bank and must be notarized. Missing pages SUBSECTION 2262.3 Insurance on deposits . All banks shall indicate the coverage of the Philippine Deposit Insurance Corporation (PDIC) in each passbook, certificate of time deposit and/or cover of checkbook for demand deposit/ "NOW'' account, stating among others, the maximum amount of the insurance. SECTION 2263. Booking of Deposits and Withdrawals . The following regulations shall govern the booking of deposits and withdrawals by commercial banks, thrift banks and specialized government banks. SUBSECTION 2263.1 Clearing cut-off time . As a general rule, all deposits and withdrawals during regular banking hours shall be booked as real accounts, i.e.,credit or debit to deposit liability accounts on the date of receipt or payment thereof: Provided, however ,That a bank may set a clearing cut-off time for its head office not earlier than two (2) hours before the start of clearing at the Central Bank, and not earlier than three and one half (3-) hours before the start of clearing at the Central Bank, for all its branches, agencies and extension offices doing business in the Philippines, after which time, deposits received shall be booked as hereinafter provided: Provided, further ,That banks which are located in areas where offices and which have their own clearing arrangements may set a clearing cut-off time of their local clearing after which time, deposits received shall be booked likewise as hereinafter provided. SUBSECTION 2263.2 Definition . As used in this Section, the following terms shall have the following meanings: a. "Regular banking hours" shall refer to the banking hours reported to the Central Bank pursuant to Sec. 2156, including the extended banking hours reported for servicing deposits and withdrawals; and b. "Clearing cut-off time" shall mean the bank's closing time for the acceptance of deposits in the form of checks, bills and other demand items which will be cleared with the Central Bank clearing office or regional clearing units on the day of their receipt. SUBSECTION 2263.3 Booking of cash deposits . Cash deposits received after the selected clearing cut-off time until the close of the regular banking hours shall be booked as deposits on the day of receipt. SUBSECTION 2263.4 Booking of non-cash deposits Deposits or checks including "on us" checks, manager's/cashier's/treasurer's checks and demand drafts, which are drawn against the depository bank and all its offices, as well as treasury warrants and postal money orders, received after the selected clearing cut-off time until the close of the regular banking hours, may, at the option of the bank, be booked as deposits on the day of receipt. Other non-cash deposits received after the selected clearing cut-off time shall be treated as contingent accounts on the day of receipt and shall be booked as deposits the following banking day. SUBSECTION 2263.5 Booking of deposits after regular banking hours . Deposits, whether cash or non-cash, received after the close of the regular hours shall be treated as contingent accounts on the day of receipt and shall be booked as deposits the following banking day. SUBSECTION 2263.6 Other records required . For record and control purposes, banks shall prepare a daily abstract of deposit transactions treated as contingent accounts. SUBSECTION 2263.7 Notice required . Banks shall post at a conspicuous place near each teller's window a notice to depositors indicating their selected clearing cut-off time and a statement to the effect that non-cash items deposited after said cut-off time shall be treated as transactions for the next banking day. SUBSECTION 2263.8 Reports required . Banks shall submit a written notice on the selected clearing cut-off time of all their offices to the appropriate supervising and examining department of the Central Bank. The appropriate supervising and examining department shall be advised of any subsequent change thereon at least five (5) banking days before such change. SECTION 2264. Unclaimed Balances . All unclaimed balances, which include credits or deposits of money, bullion, securities or other evidences of indebtedness of any kind, and interest thereon, already reported to the Treasurer of the Philippines in accordance with the Unclaimed Balances Act (Act No. 3936, as amended by Presidential Decree No. 679 dated April 2, 1975) shall be transferred/reclassified from the deposit liability/other credits accounts to the liability account, "Due to the Treasurer of the Philippines," until they are deposited with or turned over to the Treasurer of the Philippines upon order of the court that the same have been escheated in favor of the Government of the Republic of the Philippines and, as such, the unclaimed balances-deposit liabilities shall no longer be covered reserves required of deposit liabilities. SECTION 2265. Acceptance of Checks Payable to the Commissioner/Collector of Customs . Notice is hereby given that the full force of the law shall be applied against any and all parties who commit any action leading to the irregular or unauthorized encashment of checks drawn in favor of the Commissioner/Collector of Customs or the deposit of said checks to the account of persons other than the Commissioner/Collector of Customs. All checks payable to the Commissioner/Collector of Customs shall be accepted for deposit only to the account of the Commissioner/Collector of Customs. Therefore, banks where the Commissioner/Collector of Customs has no account shall not encash, accept or negotiate checks payable to the Commissioner/Collector of Customs. Any attempt to defraud the government or the bank through the irregular or unauthorized encashment or deposit of these checks to accounts other than that of the Commissioner/Collector of Customs must be reported immediately by the head of the banking office to the Bureau of Customs, copy furnished the Central Bank. SECTION 2266. Deposit Pick-Up Services . Prior authority from the Central Bank is required before banks can engage in deposit pick-up services, subject to the following conditions: 1. Prior arrangement in writing shall be made between the bank and the clients deciding to avail of the service, which arrangement shall define and specify the respective responsibilities of both parties; 2. The pick up of deposits shall be made with the use of armored cars only which shall not be operated as a mobile bank nor shall be used in soliciting deposits from the general public. The armored car shall not be used in any manner in carrying out banking transactions/services other than to afford security of deposit items in transit; 3. The deposit transactions shall be booked in accordance with existing regulations; 4. The risks of loss involved in the pick-up of deposits shall be adequately covered by insurance, and the armored car to be used shall be provided with at least two (2) armed guards and supervised by at least two (2) officers of the Branch; 5. The use of a facility other than an armored car shall not be allowed; 6. Pick-up of deposits shall not be allowed on days other than the bank's regular banking days; 7. The strictest measures of safeguards, control and confidentiality will be adopted in implementing the services; and 8. Non-compliance with any of the above conditions shall automatically revoke the authority to pick up deposits. ( Effective April 16, 1985 ) SECTIONS 2267-2268. (Reserved) . I. BORROWINGS FROM THE CENTRAL BANK SECTION 2269. Rediscounting Ceilings ; Eligibility of Papers ; and Maturities . The following are the rediscounting ceilings, eligibility requirements and maturities of papers rediscounted with the Central Bank. SUBSECTION 2269.1 Rediscount ceilings . The rediscounting ceiling of banks (banks with expanded commercial banking authority, commercial banks and thrift banks) and non-bank financial intermediaries authorized to perform quasi-banking functions shall be one hundred per cent (100%) of their networth as of the end of the quarter immediately preceding the date of application for Central Bank refinancing. SUBSECTION 2269.2 Eligibility of papers . Credit instruments offered as collaterals shall be subject to the eligibility requirements provided under Sections 87 and 88 of Republic Act No. 265, as amended. SUBSECTION 2269.3 Maturities . The maturity of Central Bank loans or advances/rediscounts for commercial credit shall not exceed 180 days from the date the proceeds of such loans or advances/rediscounts are released to the applicant bank while those for production credit shall not exceed 360 days, from the date the proceeds for such loans or advances/rediscounts are released to the applicant bank. Furthermore, advances against Treasury Bills shall not exceed sixty days from the date of rediscount while those advances against other government eligible securities shall not be more than 180 days from date of rediscount. The Maturity date of the loan from the Central Bank which shall be indicated in the promissory note of the applicant bank shall be the maturity date of the collateral paper with the latest maturity. Should any amount remain outstanding on that date, the Central Bank shall debit the borrowing bank's clearing account on such date for that amount plus accrued interest due. As regards commercial credits, the maturity date of said credit instruments shall not exceed 180 days from date of rediscount, while for production credits, it shall not exceed 360 days from the date of rediscount or acquisition by the Central Bank. For loans or advances other than commercial or production credits but falling under Section 88-A of R.A. No. 265, as amended, the maturity dates shall not exceed one year from the date the proceeds of such loans or advances are released to the applicant banks. SECTION 2270. Qualifications for Availment of Credit Facilities . The following provisions shall govern the qualifications for availment of Central Bank credit facilities. SUBSECTION 2270.1 Qualifications for availment of Central Bank credit facilities by thrift banks . The qualifications for availment by thrift banks of the privilege of access to the credit facilities of the Central Bank shall be as follows: a. The thrift bank must be operating in accordance with pertinent laws and existing rules and regulations governing thrift institutions. b. It must have a duly approved program of payment to meet the minimum capital requirements and that it has complied with its approved program of capital build-up. c. The ratio of past-due direct and indirect loans to its own stockholders, directors, and officers to the aggregate past due loans must not exceed ten per cent (10%) based on the latest examination by the appropriate supervising department. d. The thrift bank has no net deficiency in reserves against deposit liabilities for the past four consecutive weeks based on the latest required reports. e. The combined capital accounts of a thrift bank have not been deficient continuously for a period of thirty days on the basis of the required reports of the Central Bank. f. Required reports are being submitted to the Central Bank on or before their respective deadlines. g. Whenever the total direct accommodations of a bank to its directors, officers, stockholders and other parties mentioned in Sec. 2329 reach 50% of the prescribed aggregate ceiling and the bank is applying for a loan or advance with the Central Bank, the Monetary Board may, upon the recommendation of the appropriate supervising and examining department, require as a condition for the extension of the credit facility the designation of a comptroller in the bank to protect the interests of the Central Bank. h. Compliance with the investment-deposit ratios for four (4) consecutive quarters shall be one of the conditions for the processing and/or approval of any application or request to avail of Central Bank credit facilities, except as may be allowed under Sec. 90 of Republic Act No. 265, as amended. SECTION 2271. Loan Values ; Rediscount and Lending Rates . The following regulations govern the loan values and rediscount rates of the Central Bank for Preferential rediscounting and the lending rates that may be charged by banks on paper rediscounted with the Central Bank: SUBSECTION 2271.1 Loan Value, Rediscount and Lending Rates . The loan value and rediscount rate for the rediscount facility of the Central Bank shall be as follows: Rediscount Loan Value Rate (in %) Eligible Papers (in %) Per Annum Agricultural Production, Cottage and Small Industries Credits, General 80 12.75 Purpose working Capital Financing and Other Short-Term Credits "The lending rates that the banks may charge on their rediscounted papers shall not be subject to any ceiling. However, the spreads made by banks shall be closely monitored periodically by the Central Bank to ensure that these are consistent with the prevailing market rates. ( Effective Nov . 29, 1985 ) Note: Amendments to 2271.1 as provided by the following CBP/BSP Circulars: 1) CBP Circular 1114 dated September 1, 1986; 2) CBP Circular 1125 dated December 15, 1986; 3) CBP Circular 1203 dated June 23, 1989; 4) CBP Circular 1252 dated September 14, 1990; 5) CBP Circular 1260 dated October 30, 1990; 6) CBP Circular 1363 dated October 29, 1992 and; 7) BSP Circular 1 dated July 30, 1993) SUBSECTION 2271.2 Scope/Definitions of Areas of Rediscounting . a. Agricultural production credits are short-term credits granted for rice, corn, sugar cane, sugar (inclusive of sugar quedan),coconut, feed grains, livestock, poultry, vegetable, aquaculture, tobacco, cotton and other products as may be determined by the Central Bank. b. Loans generated from Special Time Deposits (STDs) shall not be eligible for rediscounting. ( Effective Nov . 29, 1985 ) SUBSECTION 2271.3 Rediscount of non-traditional export papers with Central Bank Regional Offices . Rural banks with a rating of "A" or "B" as well as thrift banks with similar or equivalent rating may rediscount their eligible papers covering non-traditional export at the Central Bank Regional Offices at San Fernando, La Union, Cebu City and Davao City: Provided ,That: a. The risk assets ratio is not below 10%; b. Ratio of past due loans to total portfolio does not exceed 25%. c. The rural bank has not exceeded its rediscounting ceiling; and d. There are no material exceptions noted by the DRBSLA or DCSB. The procedures governing availments under this scheme shall be as follows: (1) The proceeds of any rediscounting application of an eligible rural/thrift bank shall be credited, for its own account, to the demand deposit account of its designated depository commercial bank on the same date the application is filed with the CB Regional Offices: Provided ,That such application is received at or before 12:00 noon. (2) If after due processing, any or all of the papers offered/rediscounted are found ineligible/unacceptable for the loan, the rural/thrift bank concerned shall be required to immediately pay in full the loan value of the ineligible/unacceptable collaterals and the recurrence of such exceptions for three (3) consecutive times shall automatically subject the rural/thrift bank to the pre-examination of its applications for a period of six (6) months. SECTION 2272. (Reserved) . SECTION 2273. Rediscounting of specific papers . Rediscounting of specific papers shall be governed by the regulations enumerated hereunder. SUBSECTION 2273.1 Papers pertaining to agrarian reform credit under Presidential Decree No . 717 . Promissory notes and other credit instruments pertaining to agrarian reform credit as defined under Presidential Decree No. 717 5-29-75 extended by any banking institution to beneficiaries of agrarian reform, may be rediscounted with the Central Bank at preferential rates and loan values. (Please refer to Sec. 2271 for the provisions of the regulations on loan values and rediscount/interest rates). a. Other rules and regulations (1) Papers required To avail itself of the rediscounting privilege of the Central Bank, the thrift bank shall file the corresponding application indicating, among others, the following: (a) Amount applied for; (b) Term of the loan or advance applied for; (c) Purpose/s of the loan or advance; and (d) Nature of the loan or advance whether supervised credit or non-supervised credit. which must be supported by the following: (a) Credit instruments, duly endorsed, together with the corresponding schedule and/or schedule of amortizations offered as collateral for loan or advance from this Bank; asiadc (b) Resolution of the bank's board of directors authorizing the application for credit accommodation and designating the officer/s to act for the applicant bank; and (c) Copy of the latest financial statements/reports (statements of condition, income and expense and report of required and available reserves against deposit liabilities). In addition to the papers mentioned above, the following shall also be submitted in connection with loans or advances under the supervised credit scheme: (a) Duly accomplished farm plan and budget, which shall be prepared by an accredited technician who should be knowledgeable about the project being financed; and (b) Certification by a government technician that the papers being rediscounted cover loans granted to beneficiaries of agrarian reform. (2) Eligible papers Credit instruments offered as collaterals shall be subject to the eligibility requirements provided under Subsec. 2269.2. For papers covering loans under the Masagana 99 and Masaganang Maisan and Feed-grains Programs, the maximum loan amount per hectare shall be P1,600.00 for Masagana 99; P500 for corn and sorghum and P650 for soybeans. (3) Rediscount/interest rates The rates of interest to be assessed on loans and advances covering agrarian reform credit shall be as provided under Sec. 2271. It is understood that all unsecured loans to beneficiaries of agrarian reform under "Masagana 99" and "Masaganang Maisan" financing programs shall have an Agricultural Guarantee Fund (now the Philippine Crop Insurance Corp.) coverage in order to be eligible for rediscounting at the preferential rate of 1%. (4) Maturity period The maximum period for rediscounting loans or advances against eligible papers shall be as follows: (a) For loans secured by agricultural papers or the production of rice not exceeding 270 days; and for corn and commercial papers not exceeding 180 days. (b) For loans secured by other production credit papers not exceeding 360 days. It is understood that the terms of the loans granted by institutional borrowers shall be synchronized with the maximum maturities of their own loans from the Central Bank as outlined in Appendix 18 hereof. (5) Credit limit Borrowings secured by agrarian reform credit papers shall be chargeable against the rediscount ceiling of commercial and thrift banks. (6) Repayments The loan value, plus accrued interest, of collections received before maturity of the collaterals or of maturing collaterals shall be immediately remitted to the Central Bank. SUBSECTION 2273.2 Masagana 99 and Masaganang Maisan papers . The guidelines embodied in Appendix 19 shall be observed by thrift banks in their supervised credit lending operations should they wish to avail themselves of the privilege of access to the credit facilities of the Central Bank for Masagana 99 and Masaganang Maisan food production papers. SUBSECTION 2273.3 Papers supported by pledges of blue chip/high grade shares of stock a. Coverage Promissory notes held by banks secured by pledges of high grade/blue chip shares of stock shall be eligible for rediscounting with the Central Bank. b. Criteria for selecting high grade/blue chip shares The Central Bank, in consultation with the Securities and Exchange Commission shall determine what are high grade/blue chip shares for purposes of this Subsection. c. Terms and conditions of rediscounting (1) The promissory notes shall be rediscounted at 80% loan value of the face amount/outstanding balance thereof as of the date of rediscounting: Provided ,That the total face amount/outstanding balance of paper belonging to one borrower which may be rediscounted with the Central Bank shall not exceed P100,000; (2) Rediscounting availments shall be assessed an interest of 8% per annum, in accordance with Subsec. 2271.2.a(2); (3) The rate of interest that may be charged by banks on paper rediscounted with the Central Bank in accordance with the provisions of this Subsection shall not exceed 14% per annum inclusive of service and other charges; (4) The period for each rediscounting availment shall not exceed one hundred eighty days; and (5) Upon maturity of the loan, the bank's demand deposit account with the Central Bank shall be automatically debited for the principal amount or outstanding balance thereof, plus accrued interest. d. Eligible banks Banks that meet the following requirements shall be allowed to avail of this rediscounting facility: (1) Those without serious exceptions or deficiencies in their operations; (2) Those eligible to rediscount with the Department of Loans and Credit, Central Bank (DLC-CB),under existing rules and regulations and with unused rediscounting ceiling at the time of application for rediscounting. SUBSECTION 2273.4 Papers pertaining to the Maisagana Program . The following requirements shall be complied with by banks other than rural banks desiring to participate in the Maisagana Program: a. The bank's ratio of past due loans to total loan portfolio shall not exceed 20%; b. The bank has not incurred chronic deficiencies in reserve requirements and capital requirements during the last six months prior to participation in the Maisagana Program; and c. There are no irregularities/major violations in the operation of the bank. Past due loans of farmer-borrowers under the Maisagana Program shall be excluded in the computation of the total past due loans of banks seeking financial assistance from the Central Bank. SECTION 2274. Lender-of-Last-Resort Facility of the Central Bank . Pursuant to the provisions of Republic Act No. 265, as amended, the Monetary Board promulgated the following guidelines to govern the grant by the Central Bank of special credit accommodations to banks and non-bank financial intermediaries performing quasi-banking functions. SUBSECTION 2274.1 Nature of special credit accommodations . The Central Bank, as lender of last resort, may extend loans, advances, rediscounts and such other forms of credit accommodations to banks and non-bank financial intermediaries performing quasi-banking functions to provide them with liquidity in times of need. SUBSECTION 2274.2 Conditions to access . (1) The loans to directors, officers, stockholders and their related interests of the bank or non-bank financial intermediary performing quasi-banking functions applying for/seeking to avail itself of this special credit accommodation shall not exceed the prescribed aggregate or individual ceiling and the ceiling on unsecured loans and such loans shall all be in current status; and (2) the loan portfolio arrearages in the bank or non-bank financial intermediary performing quasi-banking functions must not exceed one and a half times the average of arrearages in the particular sector of the industry to which the financial intermediary belongs, as of the end of the quarter preceding the application for availment. SUBSECTION 2274.3 Terms of credit a. Interest rate The rate of interest chargeable on availment of such credit accommodation shall be an amount equivalent to a rediscount reference rate plus an additional rate. The rediscount reference rate shall be established by the Central Bank from time to time. In determining the rate, the Central Bank shall take into consideration the average effective yield rate charged or received by banks and non-bank financial intermediaries performing quasi-banking functions on the purchase of commercial paper without recourse. The additional rate to be imposed over and above the rediscount reference rate shall not be less than two (2) percentage points, with the applicable additional rate to be determined by the Central Bank on the basis of the prevailing monetary situation. This rediscount reference rate and the additional rate established for any given time shall be made public by the Central Bank and applied uniformly to all borrowers during that period. b. Security Any paper, irrespective of maturity, eligible under Section 87 or Section 88 of Republic Act No. 265, as amended, shall be acceptable security for this credit facility. c. Loan values The loan values of the paper offered as collateral shall be eighty per cent (80%) of the amount still due and outstanding on the paper offered as collateral. d. Repayment period The term of the credit accommodation shall not exceed ninety (90) days. SUBSECTION 2274.4 Quota . Availment by any authorized financial intermediary under this facility shall not exceed ten per cent (10%) of its net worth, net of valuation reserves, as of the end of the quarter preceding the date of application. In the case of branches of foreign banks, the quota shall be ten per cent (10%) of the assigned capital as of the date of application. Additionally, an authorized financial intermediary or a branch of a foreign bank may avail itself of this facility to the extent equivalent to a further five per cent (5%) of its net worth, net of valuation reserves, as of the end of the quarter preceding the date of availment or assigned capital as the case may be. Any availment of this special credit facility shall fall within the unavailed basic rediscount ceiling of the authorized financial intermediary or the branch of a foreign bank as the case may be. SUBSECTION 2274.5 Interest/penalty rates on lender of last resort facility and overdrawings Thrift bank availments under the "lender-of-last-resort" facility and overdrawings with the Central Bank shall be charged the following interest/penalty rates: An interest rate of 12% per annum plus liquidated damages of 5% per annum for delayed payments on emergency loans; Liquidated damages of 5% per annum for delayed payments on "lender-of-last-resort" facility loans in addition to the existing rate of interest equivalent to the rediscount reference rate plus an additional rate of not less than two (2) percentage points; and A minimum interest rate of 16% per annum or the prevailing average interbank call loan rate, whichever is higher, plus 5% per annum on overdrawings in the demand deposit accounts with the Central Bank. SECTION 2275. Central Bank Lending to Long-term Lending Institutions . Loan availments under Section 88 of R.A. No. 265, as amended, shall be subject to the following terms and conditions: a. Loan value shall be computed on the basis of payments, installments, or amortizations falling due over a period not exceeding three (3) years from the date of loan or advance with the Central Bank; b. The Central Bank shall charge an interest rate equivalent to the current lending rate minus 6%;and c. The maximum lending rate that may be charged by banks for papers with more than one year maturity shall be governed by the provisions of Sec. 2271. SECTION 2276. Repurchase Agreements with the Central Bank . Banks, investment houses and other non-bank financial intermediaries performing quasi-banking functions are allowed to enter into repurchase agreements with the Central Bank on their holdings of CBCIs and other government securities. SECTION 2277. (Reserved) . SECTION 2278. Recording and Reporting Requirements . The bank's liability for the discounted and/or rediscounted papers "with recourse" with the Central Bank and/or other financial intermediaries shall be recorded and shown as "Bills Payable" in all reports submitted to the Central Bank. The loans and discounts, bills purchased, acceptances and other accounts affected by such discounting and/or rediscounting transactions shall remain as part of the bank's loan portfolio. A footnote in the financial statement shall indicate the outstanding balance of the discounted and/or rediscounted loans. SECTION 2279. Facility to Committed Credit Line Issuers . a. Nature of Special Credit Accommodations The Central Bank may extend a loan to any bank which on its own or as a member of a group of banks, provides a committed credit line facility to a corporation proposing to issue commercial paper. b. Conditions to Access A bank applying for a loan pursuant to the provisions of this Subsection shall submit to the Central Bank documents showing that it has extended a committed credit line to a commercial paper issuer and that such issuer has availed itself of said credit line. c. Terms of the Credit (1) Interest Rate The rate of interest chargeable on the availment of this credit facility shall be that which is equivalent to 80% of the total of interest and fees received by the bank from the issuer, net of provision for gross receipts tax paid by the bank on such income. (2) Security The promissory note executed by the commercial paper issuer in favor of the bank for the amount drawn against the committed credit line shall be the security for this credit facility. (3) Loan Values The loan value of paper offered as collateral shall be 10% of the amount still due and outstanding on the paper offered as collateral. (4) Repayment Period The term of the credit accommodation may not exceed 90 days and shall be non-renewable. d. Ceiling If availment of this credit facility is outside the other rediscount ceiling of the bank, it shall be limited to the extent of 15% of the net worth of the bank. SECTION 2280. (Reserved) . J. DEPOSIT SUBSTITUTE OPERATIONS (QUASI-BANKING FUNCTIONS) SECTION 2281. Deposit Substitute Instruments . Any deposit substitute transaction by a bank shall be limited to its own promissory notes, repurchase agreements, and certificates of assignment/participations with recourse. SUBSECTION 2281.1 Prohibitions against the use of acceptances, bills of exchange and trust certificates . Acceptances, bills of exchange, and trust certificates shall not be used by financial intermediaries, banks and non-banks, as evidence of deposit substitute liabilities in connection with their quasi-banking functions. The prohibition shall not apply to the acceptance or negotiation of bills of exchange in connection with trade transactions, or to the issuance of trust certificates creating trust relationships. SUBSECTION 2281.2 Negotiation of promissory notes Negotiable promissory notes acquired by banks and non-banks in connection with their quasi-banking functions, shall not be negotiated by mere indorsement and/or delivery, if they do not conform with the minimum features prescribed under Subsec. 2281.3 hereof. If these notes do not contain the features, their negotiation shall be covered by any of the appropriate deposit substitute instruments above-mentioned. SUBSECTION 2281.3 Minimum features of deposit substitute instruments . Deposit substitute instruments issued by entities performing quasi-banking functions shall have the following minimum features: a. The present value and maturity value and/or the principal amount and interest rate and such other information as may be necessary to enable the parties to determine the cost or yield of the borrowing or placement shall be specified. b. The date of issuance shall be indicated at the upper right corner of the instrument, and directly below which shall be the maturity period or the word "demand",if it is a demand instrument. c. The payee may be identified by his trust account/deposit account number in both negotiable and non-negotiable instruments. d. Securities which are the subject of a repurchase agreement or a certificate of assignment/participation with recourse, shall be particularly described on the face of said instruments or on a separate instrument attached and specifically referred to therein and made an integral part thereof as to the maker, value, maturity, serial number, and such other particulars as shall clearly identify the securities. e. The instrument shall provide for the payment of liquidated damages, in addition to stipulated interest, in case of default by the maker or issuer, as well as attorney's fees and costs of collection in case of suit. f. A conspicuous notice at the lower center margin of the face of the instrument that the transaction is not insured by the Philippine Deposit Insurance Corporation shall be indicated. g. The corporate name of the issuer shall be printed at the upper center margin of the instrument and directly below which shall be a designation of the instrument, such as "Promissory Note" or "Repurchase Agreement". h. The words "duly authorized officer" shall be placed directly below the signature of the person signing for the maker or issuer. cdtech i. Each instrument shall be serially pre-numbered. j. The copy delivered to the payee shall bear the word "Original" and the copies retained by the issuer shall be identified as "Duplicate","File Copy" or words of similar import. k. Only security paper with adequate safeguards against alteration or falsification shall be used. Borrowings of banks and non-bank financial intermediaries performing quasi-banking functions from the loans and discounts window of either banks or non-bank financial intermediaries shall be exempted from the documentation requirements prescribed in this Subsection: Provided , That the exemption from the documentation requirements prescribed in this Subsection shall not be construed or interpreted as exempting said borrowings from other provisions of this Section and from other Central Bank regulations on deposit substitutes. SUBSECTION 2281.4 Prescribed instruments . Deposit substitute instruments shall conform to the language to be prescribed by the Central Bank. Any substantial deviation therefrom or any additional stipulation therein shall be referred to the Central Bank for prior approval. The size and appearance of these instruments should not be similar to the size and appearance of checks. In connection with the above paragraph, shown in Appendix 20 are the samples of standardized instruments as evidence of deposit substitute liabilities, viz: a. Promissory note b. Repurchase agreement c. Certificate of assignment with recourse (liability of financial intermediary is primary) d. Certificate of assignment with recourse (liability of financial intermediary is secondary) e. Certificate of participation with recourse (liability of financial intermediary is primary) f. Certificate of participation with recourse (liability of financial intermediary is secondary) Financial intermediaries performing quasi-banking functions are therefore advised to issue only deposit substitute instruments which conform to the prescribed provisions; said entities are further advised that rubber stamping, typewriting or handwriting some provisions shall not be considered compliance with said regulations. SUBSECTION 2281.5 Call slip/tickets for 24-Hour loans . Call slips or tickets may be used to evidence call loan transactions of not more than twenty-four hours maturity or to cover reserve deficiencies. In all other cases, call loan transactions shall be evidenced by promissory notes containing the minimum features prescribed in Subsec. 2281.3 hereof. SUBSECTION 2281.6 Physical delivery of securities Securities, warehouse receipts, quedans and other documents of title which are the subject of quasi-banking function shall be physically delivered to the lender/purchaser together with the principal/overlying borrowing instrument, or to a custodian bank as signified in writing by the lender/purchaser: Provided ,That the custodian bank is not related directly or indirectly to the borrowing/selling entity: Provided, further ,That a bank engaged in quasi-banking functions may not be allowed custodianship functions for securities issued or owned by the same, or securities in bearer form. The delivery shall be effected upon payment and shall be evidenced by a securities delivery receipt duly signed by authorized officer/s of the entity performing quasi-banking functions and the lender/purchaser, or by the custodian bank. The principal borrowing instrument without underlying securities, warehouse receipts, quedans, or other documents of title shall likewise be physically delivered to the lender/purchaser. SUBSECTION 2281.7 Other rules and regulations governing the issuance and treatment of deposit substitute instruments a. If there is any stipulation that payment of the deposit substitute shall be chargeable against a particular deposit account, it shall further provide that the liability of the maker or issuer of the instrument shall not be limited to the outstanding balance of said account. b. Any agreement allowing the issuer or maker to substitute the underlying securities shall further provide that the actual substitution shall be with the prior written consent of the payee. c. Automatic renewal upon maturity of the instrument may be effected only under terms and conditions previously stipulated by the parties. d. Stipulations between the maker or issuer and the payee which are embodied in separate instruments shall be specifically referred to in the deposit substitute and made an integral part thereof. e. In the case of repurchase agreements and certificates of assignment/participation with recourse, the stipulation shall clearly state either (1) that the underlying securities are being delivered to the buyer or assignee as collaterals or (2) that the ownership thereof is being transferred to the buyer or assignee. SUBSECTION 2281.8 Sanctions . Any entity performing quasi-banking functions which violates or fails to comply with these regulations on the standardization and issuance of deposit substitute instruments shall be liable to such administrative sanctions as the Central Bank shall determine, in addition to the penalties provided for under Section 34 of Republic Act No. 265, as amended. SECTION 2282. Maturity ; Matured and Unclaimed Deposit Substitute . a. The minimum term of any deposit substitute transaction shall be fifteen (15) days: Provided, however ,That interbank borrowings shall not be subject to this limitation. b. Banks performing quasi-banking functions shall continue to hold such matured and unclaimed liabilities as deposit substitutes subject to reserves: Provided ,That unclaimed and matured deposit substitute instrument shall be payable on demand and shall earn interest or yield from maturity to actual withdrawal or renewal at a rate applicable to a deposit substitute with a maturity of fifteen (15) days. SECTION 2283. Reserve requirement . All banking institutions, including banks with expanded commercial banking authority, authorized to engaged in quasi-banking functions shall maintain a twenty-three per cent (23%) reserve, effective Oct. 3, 1985) against deposit substitute liabilities as defined in Section 100-A of Rep. Act No. 265, as amended, with original maturities of 730 days or less, except short-term borrowings from banks and non-bank financial institutions as defined in Sec. 2343 for which the reserve requirement shall be one percent (1%); Provided, however ,That said short-term borrowings shall be covered by promissory notes which are non-negotiable, non-transferable/non-assignable, not subject of repurchase agreements or of certificates of participation/assignment with recourse, and shall be duly stamped as such by the bank or non-bank financial institution authorized to engage in quasi-banking functions concerned. ( Effective Oct . 3, 198 5) Note: Amendments to first paragraph of Section 2283 as provided by the following CBP Circulars: 1) Section 4 of CBP Circular 1104 dated May 26, 1986; 2) Section 4 of CBP Circular 1112 dated August 4, 1986; 3) Section 2 of CBP 1119 dated October 10, 1986; 4) Section 4 of CBP Circular 1190 dated November 10, 1988; 5) Section 7 of CBP Circular 1209 dated September 1, 1989 and; 6) Section 8 of CBP Circular 1233 dated March 21, 1990; Effective April 25, 1984 the reserve requirement on deposit substitute liabilities with original maturities of more than seven hundred thirty (730) days shall be six per cent (6%). Note: Amendments of Section 2283 as provided by the following CBP Circulars: 1) Section 4 of CBP Circular 1122 dated November 28, 1986; 2) Section 4 of CBP Circular 1204 dated June 23, 1989; 3) Section 3 CBP Circular 1207 dated August 4, 1989; 4) Section 8 of CBP Circular 1209 dated September 1, 1989; 5) Section 9 of CBP Circular 1233 dated March 21, 1990; 6) Section 5 of CBP Circular 1261 dated November 9, 1990; 7) Section 5 of CBP Circular 1269 dated December 26, 1990; 8) Section 4 of CBP Circular 1377 dated January 21, 1993 and; 9) Section 3 of CBP Circular 1395 dated July 5, 1993 SUBSECTION 2283.1 Composition of Reserves The composition of the reserve shall be (a) at least twenty-five per cent (25%) in the form of deposit balances with the Central Bank, and (b) the remaining seventy-five per cent (75%) in the form of cash in vaults and/or evidences indebtedness or obligations of the Government, its political subdivisions or instrumentalities. The holdings of such securities as reserves shall be subject to the same rules and regulations as those prescribed in the second to the last paragraph of Sec. 2254.b. For purposes of this Subsection, government securities which may form part of the reserves against deposit substitute liabilities of banks shall refer to bonds or other evidences of indebtedness representing direct obligations of the Government of the Republic of the Philippines: Provided ,That such securities shall have the following minimum features/conditions: a. The securities must bear an interest rate of not more than four per cent (4%) per annum, must be non-negotiable and shall carry Central Bank support; and b. The amount, maturity date and rate of interest must be definite and stated in the certificate itself. Premyo Savings Bonds (Regular and Biglang Bahay Series) shall continue to be eligible as reserves of banks against deposit substitute liabilities in accordance with the following schedule: LexLib January 1, 1984 June 30, 1984 37.5 50 July 1, 1984 June 30, 1986 18.75 25 Effective July 1, 1986, said bonds shall no longer be eligible as reserves. ( Effective Jan . 13, 1984 ) Other government securities being used for reserve purposes shall continue to be eligible as such: Provided ,That whenever said securities shall have matured, they shall be replaced by securities carrying the above features. The required reserves against marginal deposits shall first be satisfied before any of the available reserves can be utilized in complying with the reserves on deposit/deposit substitute liabilities. SUBSECTION 2283.2 Reserve deficiencies . Whenever the reserve position of any bank computed in the manner specified in Subsec. 2255 is below the required minimum, it shall pay the Central Bank one-tenth of one per cent (1/10 of 1%) per day on the amount of the deficiency; Provided, however ,That a bank shall be permitted to offset any reserve deficiency occurring one or more days of the week covered by the report against excess reserves which it may hold on other days of the same week, and shall be required to pay the penalty only on the average daily net deficiency during the week. In case of abuse, a bank shall automatically lose the privilege of offsetting reserve deficiency in the aforesaid manner until such time that it maintains its daily reserve position at the required minimum for at least four consecutive weeks. As used in this Subsection, "abuse" in the privilege of offsetting reserve deficiencies against excess reserves shall mean having reserve deficiencies occurring three or more times during any given week for four consecutive weeks, whether or not resulting in net weekly deficiencies. SUBSECTION 2283.3 Chronic reserve deficiency ; penalty . In cases where the bank chronically has reserve deficiency in deposit/deposit substitute liabilities, the bank shall be denied the credit facilities of the Central Bank; and the Monetary Board may: (a) limit or prohibit the making of new loans or investments by the bank; and (b) require that all or part of the net profit of the bank be assigned to surplus. The Board of Directors of said bank shall be notified of such chronic reserve deficiency and the penalties therefor, and be required to immediately correct the reserve position of the bank. As used in this Subsection, "chronic reserve deficiency" shall mean having a net reserve deficiency for four consecutive weeks. SUBSECTION 2283.4 Report of compliance . Every bank shall make a weekly report to the Central Bank of its daily required and available reserves on deposit substitute liabilities to be submitted not later than the close of the fourth banking day following the reference week. The report shall be accomplished in the prescribed forms. SECTION 2284 Minimum Trading Lot . The minimum size of any single deposit substitute transaction by a bank performing quasi-banking functions shall be P50,000, irrespective of maturity. No bank performing quasi-banking functions shall issue deposit substitute instruments in the name of two or more persons or accounts. For purposes of this Section, the following shall be considered as one person or account: (a) husband and wife and (b) "in trust for" (ITF) arrangements. (As amended by CBP Circular 1341 dated May 25, 1992) SECTION 2285. Yield/Interest Rates on Deposit Substitutes . Deposit substitutes of banks performing quasi-banking functions shall not be subject to yield or interest rate ceilings. SUBSECTION 2285.1 (As deleted by Circular No. 889 dated August 27, 1982) SUBSECTION 2285.2 Time and payment of interest Interest or yield on deposit substitutes may be paid at maturity or in advance: Provided, however ,That interest or yield paid in advance shall not exceed the interest for one year. SUBSECTION 2285.3 Interest/Yield on preterminated deposit substitutes a. Any deposit substitute terminated within the first half of its maturity period shall be paid an interest or a yield rate equivalent to twenty-five per cent (25%) of the interest stipulated in the contract; b. Any deposit substitute terminated within the second half of its maturity period shall be paid an interest or a yield rate equivalent to fifty per cent (50%) of the interest stipulated in the contract; and c. The provisions of this Subsection shall not apply in the case of deposit substitutes with maturities of more than 730 days which are preterminated more than 730 days after the date of placement; Provided, however ,That if the interest or yield has been paid in advance, the corresponding rebate shall be charged against the principal of the deposit substitute. SUBSECTION 2285.4 Sanctions . Whenever any person or entity violates any of the provisions of this Section, the person or persons responsible for such violation shall be subject to the penalty prescribed in Section 10 of Act No. 2655, as amended, without prejudice to any action under the provisions of Sec. 2299. SECTION 2286. (Reserved) . SECTION 2287. Money Market Placements of Rural Banks . All banks and non-bank financial intermediaries performing quasi-banking functions shall not accept money market placements of rural banks unless the latter present a certification under oath stating (a) that they do not have overdue special time deposits; (b) that they have no past due obligation with the Central Bank or other government financial entities; (c) the amount of their current obligations, if any, with said government financial entities; and (d) the amount of their total outstanding money market placements. However, in no case shall such financial intermediaries sell receivables to rural banks without recourse. SUBSECTION 2287.1 Definition of terms . As used in this Section, the following terms shall have the following meanings: a. Money market placements shall include investments in debt instruments, including purchase of receivables with recourse to the lending institution, except purchase of government securities on an outright basis. b. Government securities shall include evidences of indebtedness of the Republic of the Philippines, the Central Bank of the Philippines and other evidences of indebtedness or obligations of government entities the servicing and repayment of which are fully guaranteed by the Republic of the Philippines. c. Persistent violation shall mean the violation of any of the provisions of these rules by the director or officer concerned for four or more times within a 12-month period from the date the first offense was committed. SUBSECTION 2287.2 Conditions required for placements not covered by prohibition . Placements accepted which are otherwise not covered by the above prohibition must comply with the following conditions: a. that total money market placements of rural banks as stated in the certification, including the placement being accepted by the entity concerned shall not exceed the rural bank's combined unimpaired capital accounts or net worth less current obligations with the Central Bank or other government financial entities; b. that maturity of the money market placement shall not exceed sixty (60) days; and c. that placements shall be evidenced in all cases by promissory notes of accepting entities/repurchase agreements and/or certificates of participation/assignment with recourse and that underlying instruments shall be Central Bank Certificates of Indebtedness or other government securities the servicing and repayment of which are guaranteed by the Republic of the Philippines. SUBSECTION 2287.3 Transition period . Outstanding money market placements of rural banks covered by this prohibition as of July 28, 1977 may be allowed until the maturity dates of the placements but shall not be subsequently renewed. SUBSECTION 2287.4 Reporting requirements . The monthly sworn statement of Quasi-Banking Operations for banks and non-banks shall henceforth include a certification to the effect that the entity has not accepted money market placements as herein defined from rural banks covered by the prohibition and that said money market placements comply with the conditions prescribed in Subsec. 2287.2. SUBSECTION 2287.5 Sanctions . Violation of the provisions of this Section shall be a ground for suspension or after due hearing, removal from office of the directors/officers of banking institutions responsible therefor, without prejudice to the imposition of the other sanctions provided in Sec. 2299. For purposes of this Subsection, the penalty of suspension and removal from office shall be imposed as follows: a. 1st offense suspension between 15 days to one month. b. 2nd offense suspension between one to three months c. 3rd offense suspension between four to six months d. Persistent violation removal from office. Persistent violation for purposes of this Section shall mean the violation of any of the provisions of this Section by the director or officer concerned for four or more times within a 12-month period from the date the first offense was committed. Any bank or non-bank financial intermediary performing quasi-banking functions found violating or not complying with the provisions hereof may be subject to the following sanctions or penalties: a. Suspension or revocation of the authority to engage in quasi-banking functions: b. Penalties prescribed under Sec. 2299. SECTION 2288. Transactions with controlled corporation . A corporation performing quasi-banking functions shall not relend to or purchase receivables or other obligations of other corporations majority of the voting stock of which is owned by subject corporation, unless the terms of the transactions are not more favorable than those of other similar transactions. Any renewal or extension thereof shall comply with said limitations. SECTION 2289. Sundry provisions on quasi-banking functions . The following rules and regulations shall govern the quasi-banking operations of thrift banks: SUBSECTION 2289.1 Elements of quasi-banking . The essential elements of quasi-banking are: a. Borrowing funds for the borrower's own account; b. Twenty or more lenders at any one time; c. Methods of borrowing are issuance, endorsement, or acceptance of debt instruments of any kind, other than deposits, such as acceptances, promissory notes, participations, certificates of assignment or similar instruments with recourse, trust certificates, repurchase agreements, and such other instruments as the Monetary Board may determine; and d. Purpose which may be for (1) relending, or (2) purchasing receivables or other obligations. SUBSECTION 2289.2 Definition of terms and phrases . The following terms and phrases shall be understood as follows: a. Borrowing shall refer to all forms of obtaining or raising funds through any of the methods and for any of the purposes provided in Subsec. 2289.1 whether the borrower's liability thereby is treated as real or contingent. b. For the borrower's own account shall refer to the assumption of liability in one's own capacity and not in representation, or as an agent or trustee, of another. c. Purchasing of receivables or other obligations shall refer to the acquisition of claims collectible in money, including interbank borrowings or borrowings between financial institutions, or of securities, of any amount and maturity, from domestic or foreign sources. d. Relending shall refer to the extension of loans by an institution with antecedent borrowing transactions. Relending shall be presumed, in the absence of express stipulation, when the institution is regularly engaged in lending. e. Regularly engaged in lending shall refer to the practice of extending loans, advances, discounts or rediscounts as a matter of business; continuous or consistent lending as distinguished from isolated lending transactions. SUBSECTION 2289.3 Transactions not considered quasi-banking . The following shall not constitute quasi-banking functions: a. Borrowing by commercial, industrial and other non-financial companies through any of the means listed in Subsec. 2289.1 hereof, for the limited purpose of financing their own needs or the needs of their agents or dealers; and b. The mere buying and selling without recourse of instruments mentioned in Subsec. 2289.1: Provided that: 1) The institution buying and selling without recourse shall indicate in conspicuous print on its instrument the phrase "without recourse","sans recourse" or any combination of words of similar import that will convey the absence of liability or guarantee of liability by said institution; and 2) In the absence or the phrase "without recourse","sans recourse" or words of similar import, the instrument so issued, endorsed or accepted, shall automatically be considered as falling within the purview of these regulations. (Additional provision as provided by CBP Circular 1234 dated April 6, 1990) SUBSECTION 2289.4 Pre-conditions for the exercise of quasi-banking functions . Only banks and non-banks authorized to engage in quasi-banking functions may undertake or perform quasi-banking functions as defined in Subsec. 2289.1: Provided ,That the following pre-conditions are complied with: a. a minimum paid-in capital of P50 million; b. at least a majority of the voting stock shall be owned by citizens of the Philippines; c. at least a majority of the members of the Board of Directors shall be citizens of the Philippines; cdti d. that the managerial staff possess the integrity, experience and expertise which provide reasonable assurance that the enterprise is being conducted with financial prudence. SUBSECTION 2289.5 Certificate of Authority from the Central Bank . Banks and non-banks possessing the qualifications in Subsec. 2289.4 and desiring to engage in quasi-banking functions shall first obtain a Certificate of Authority from the Central Bank of the Philippines by filing; a. An Information Sheet; b. Individual bio-data of directors and members of the managerial staff, signed by them under oath; and c. a borrowing-investment program for one year, which should include at the minimum, planned distribution of portfolio as to 1) underwriting (for investment houses); 2) commercial paper markets; 3) stocks and bonds; 4) government securities; 5) receivables financing discounting and factoring; 6) leasing 7) direct loans; and expected sources of funds to support investment program classified as to 1) maturity; short, medium and long-term; 2) interest rates; and 3) domestic or foreign sources whether institutional or personal. SUBSECTION 2289.6 Issuance of Commercial Paper . The issuance of commercial paper by thrift banks authorized to perform quasi-banking functions shall be in compliance with the applicable provisions of the SEC rules on registration of commercial papers appended hereto as Appendices 21 and 22. "Thrift banks not authorized to perform quasi-banking functions may issue commercial paper exempt per se under Sections 4 (f) and 7.g. of the New Rules on Registration of Short Term Commercial Papers and the New Rules on the Registration of Long-Term Commercial Papers, respectively; Provided ,That such commercial paper shall not be issued to more than 19 lenders. "No commercial paper shall be issued in the name of two or more persons or accounts, as defined under existing rules of the Central Bank ( Effective April 29 , 1985 ) SECTION 2290. Without Recourse Transactions . SUBSECTION 2290.1 Prohibited practices . Any of the following practices or practices similar and/or tantamount thereto in connection with a without recourse transaction is hereby prohibited and existence of any shall render the financial intermediary and its directors/officers/employees responsible therefor to sanctions provided in (b) below: (1) Issuance of postdated checks of the financial intermediary, whether for its own account or as an agent of the debt instrument issuers, in payment of the debt instrument sold, assigned or transferred without recourse; or (2) Issuance by the financial intermediary of any form of guaranty on sale transactions or on negotiations or assignment of debt instruments without recourse; and (3) Payment with its own funds by the financial intermediary which assigned, sold or transferred the debt instrument without recourse, unless the financial intermediary can show that the issuer has with the said financial intermediary funds corresponding to the amount of the obligation. K. OTHER BORROWINGS SECTION 2291. Borrowing from the Government . Any financial intermediary as well as directors/officers/employees thereof, which engages in any or similar practices referred to above shall be subject to the sanctions provided in Secs. 34-A and 34-B of Republic Act No. 265, as amended, without prejudice to the provisions of Sec. 34 of the same Act. (As amended by CBP Circular 1242 dated June 20, 1990) (Additional provisions as provided by CBP Circular 1153 dated September 3, 1987) SECTION 2292. Borrowings from trust departments or managed funds of banks or investment houses . Funds borrowed by banks or non-bank financial intermediaries performing quasi-banking functions from trust departments or managed funds of banks or investment houses in the latter's capacity as fund managers are not considered as interbank borrowings and, therefore, are subject to: a. Reserve requirement on deposit substitutes under Sec. 2283; b. Minimum 15-day maturity period under Sec. 2282; c. Minimum trading lot rule under Sec. 2284; and d. 20% final withholding tax on deposit substitutes. SECTION 2293. ( As deleted by Section 8 of CBP Circular 1059 dated April 29, 1985 ) SUBSECTION 2293.2 Deleted by Cir . 1059 SUBSECTION 2293.3 Deleted by Cir . 1059 SECTION 2294. ( Reserved ). SECTION 2295. Mortgage/chattel mortgage certificates . With prior approval of the Monetary Board, thrift banks, whether or not authorized to engage in quasi-banking functions, may issue and deal in mortgage and chattel mortgage certificates exclusively for the purpose of financing the following loans: a. Equipment loans; b. Mortgage loans for acquisition of machinery and other fixed installations; c. Loans for the conservation, enlargement or improvement of productive properties; and d. Real estate mortgage loans (1) for the construction, acquisition, expansion or improvement of rural and urban properties; (2) for the refinancing of similar loans and mortgages; and (3) for such other purposes as may be authorized by the Monetary Board. (1) The certificates shall be issued at a minimum denomination of P20,000 for a term of at least four (4) years, and with interest not to exceed the rates prescribed for borrowings with similar maturities. (2) The amount of certificates which a thrift bank may issue shall not exceed an amount equivalent to fifty per cent (50%) of the total amortizations falling due during the projected term of the certificates on the mortgages/chattel mortgages pooled for the purpose of the issue. The maturity of the certificates shall in no case be later than any of the maturities of the mortgages/chattel mortgages constituting the pool. Mortgages and chattel mortgages on "past due loans" as defined under existing regulations shall not be eligible for the pool. All outstanding certificates shall constitute a prior preferred lien on payments or amortizations on the mortgages and chattel mortgages constituting the pool. LLphil (3) If at any time during the term of the certificates, the aggregate outstanding amount thereof should exceed the ceiling as provided in (2) above on account of any deficiency or inadequacy of the mortgages or chattel mortgages resulting from prepayments by the mortgage or chattel mortgage debtors or by the mortgages or chattel mortgages becoming past due as determined by existing regulations, the issuing bank shall provide additional mortgages or chattel mortgages as are current and necessary to cover the deficiency. (4) The issuing thrift bank shall enter into an Agreement with another bank which shall constitute the latter as custodian of the mortgages/chattel mortgages pooled for the purpose of the issue, as transfer agent of the Certificates, and as its paying and securing agent, and in general shall specifically state (a) the rights, obligations and liabilities of the issuing bank and custodian bank; (b) the rights of the holders of the certificates; (c) the mortgages making up the pool; and (d) the aggregate value of the certificates that may be issued. The Agreement shall be available for inspection at reasonable hours during business days to the holders of the certificates, or their duly authorized representatives. (5) The certificates shall have the following minimum features: (a) The certificate shall be 13 inches in length and 8.5 inches in width, and shall be serially pre-numbered and printed on security paper with safeguards against alterations and/or falsifications; (b) The description of the certificates, i.e.,"Mortgage Certificate" or "Chattel Mortgage Certificate",shall be printed on the upper center margin of the certificate; (c) The certificate shall indicate its date of issuance, the amount or denomination thereof, the rate of interest expressed as a percentage on an annual basis, and the term or maturity thereof; (d) The certificate shall contain a conspicuous notice at the lower margin thereof that the same is not insured by the Philippine Deposit Insurance Corporation (PDIC);and (e) The copy of the certificate to be issued to the investor shall be stamped or printed with the word "Original" and the copies retain by the issuer as "Duplicate copy, "File copy",or words of similar import. (6) Effective 1 January 1982, a five per cent (5%) reserve shall be maintained against all issues of mortgage/chattel mortgage certificates including any outstanding amount as of said date. The Monetary Board may change the required reserves as may be necessary. (7) Any thrift bank desiring to apply for authority to issue mortgage/chattel mortgage certificates may submit its application to the appropriate supervising and examining department of the Central Bank duly accompanied by the following documents: (a) Pro-forma copies of the mortgage/chattel mortgage certificates proposed to be issued and the "Agreement referred to in Item (4) thereof; (b) Statement setting forth the details or particulars of the mortgages/chattel mortgages to be pooled for purposes of the issue and the purpose for which the proceeds will be used; and (c) Other records or data as the appropriate supervising and examining department may deem necessary for the proper evaluation of the bank's application. SECTIONS 2296-2298. ( Reserved ). SECTION 2299. General provisions on sanctions . Unless otherwise indicated therein, any violations of the provisions of Secs. 2201 to 2298 shall be subject to the provisions of Secs. 34 and 34-A of Republic Act No. 265, as amended. * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas . PART FOUR Trust and Other Fiduciary Functions A. TRUST OPERATIONS SECTION 2401. Authority to perform trust functions . With prior approval of the Monetary Board, thrift banks may undertake trust functions. SECTION 2402. Scope of trust regulations . These regulations, shall govern the trust operations of trust companies, banks and investment houses. SUBSECTION 2402.1 Definitions . For purposes of these regulations, unless the context clearly connotes otherwise, the following shall have the meaning indicated: a. Trust operations or trust business shall refer to the administration, holding and management by a trustee of funds and/or property for the use, benefit, or advantage of the trustor or of others called beneficiaries. b. Trust account shall refer to the transactions arising from the fiduciary relationship established between a trustor and a trust company, a bank or an investment house authorized to administer and manage a particular fund and/or property as trustee. c. Investment authority shall refer to the power conferred by law, court order, or governing trust instrument to make, select or change investments. d. Common trust fund A common trust fund is a fund maintained by a trust company, bank or investment house authorized to perform trust functions, exclusively for the collective investment and reinvestment of certain moneys received in its capacity as trustee. SECTION 2403. Pre-requisites for engaging in trust business . A trust company, bank or investment house before it may engage in trust business shall comply with the following requirements: a. The applicant is authorized in its articles of incorporation to engage in trust business. The specific duties and responsibilities of the Committee or officers entrusted with management and supervision of trust operations shall be provided in the by-laws or in a resolution duly passed by the board of directors. b. Before transacting trust business, the applicant shall deposit with the Central Bank cash or eligible securities amounting to at least P250,000.00 as security for the faithful performance of trust duties, in accordance with the requirements of Sec. 2404 hereof. c. In the case of a bank or investment house, the applicant must also show that: 1) it has complied with the maximum capitalization requirements under existing regulations; 2) Its operations during the year immediately preceding the filing of the application have been reasonably profitable; 3) It has not exceeded the ceilings on credit accommodations to directors, officers, stockholders and their related interests for three (3) or more times during the year previous to the filing of application nor at any time while the application is being processed; 4) Its net worth has not been deficient for five (5) or more times within a thirty (30) day period during the last six (6) months immediately preceding the date of filing the application nor at any time while the application is being processed. In case of deficiency the application shall not be processed for the next sixty (60) calendar days without prejudice to its revival/re-submission after said period; 5) Its net worth has not been deficient continuously for a period of thirty (30) days or more during the last twelve (12) months immediately preceding the date of filing the application or at any time while the application is being processed. In case of deficiency, the application shall not be processed for the next twelve (12) months without prejudice to its revival/re-submission after said period; 6) It has not incurred net deficiencies in reserves against deposit/deposit substitute liabilities for four (4) consecutive weeks preceding the date of filing the application nor at any time while the application is being processed. In case of deficiency, the application shall be processed only after it shall have had no net reserve deficiencies for eight (8) consecutive weeks: Provided ,That in case the applicant has incurred net deficiencies in reserves for eight (8) consecutive weeks during the last twelve (12) months immediately preceding the date of filing the application, said application shall not be processed for the next twelve (12) months without prejudice to its revival/re-submission after said period; and 7) It has shown substantial compliance with pertinent laws, rules, regulations, policies and instructions of the Central Bank. SECTION 2404. Security for the faithful performance of trust duties . The deposit as security for the faithful performance of trust duties required under Sec. 2403.b hereof shall be increased or decreased on the basis of the end-of-month average of trust assets held by the trustee during the immediately preceding semester as follows: Volume of trust assets Required trust deposit (In million pesos) with the Central Bank P35.500 and below P250,000 36.601 but not over P71.000 500,000 71.001 but not over 106.500 750,000 106.501 but not over 142.000 1,000,000 A deposit of P250,000.00 shall be required for every additional (P35.5 million of trust assets in excess of P142 million: Provided , however ,That an additional deposit of one per cent (1%) of trust assets representing common trust funds shall also be deposited with the Central Bank from which common trust funds shall have preferred claims. The increase in the deposit shall be made by the trustee within sixty (60) days from the end of the immediately preceding semester. Securities which may be deposited as security for the performance of trust duties shall consist of bonds issued by the Republic of the Philippines or by the Central Bank or bonds the servicing and repayment of which are fully guaranteed by the Republic of the Philippines: Provided ,That other kinds of securities may be declared eligible by the Monetary Board. SECTION 2405. Non-trust agreements . An agreement or instrument containing any or all of the following features shall not be construed as an agreement constituting a trust relationship: a. Where the risk or responsibility is exclusively with the trustee in case of loss in the investment of the trust funds when such loss is not due to the failure of the trustee to exercise the skill, care, prudence and diligence required by law; b. Where there is a fixed rate of interest or return or there is a guarantee of income, although indeterminable, in favor of the trustor or beneficiary: Provided , however ,That trust arrangements where funds are disposed of in fixed-income generating investments or debt instruments shall not be considered non-trust agreements when the agreement categorically states that the fixed rate of interest or return thereon is neither assured nor guaranteed by the trustee but is for the account and risk of the trustor or beneficiary; c. Where the duties of the trustee are merely advisory or recommendatory or are purely ministerial in nature; and d. Where there is a preponderance of purpose or of intent that the agreement or instrument creates a relationship, other than that of a trustor-trustee relationship as determined by the Governor or Monetary Board upon the findings and recommendations of the appropriate supervising and examining department of the Central Bank. SECTION 2406. Mergers and consolidations of financial institutions . In mergers and consolidations of financial institutions one or more of which have authority to engage in trust operations, the surviving or the consolidated institution, as the case may be, may continue performing trust operations subject to evaluation by the appropriate supervising and examining department of the Central Bank, taking into account the pertinent requirements of Sec. 2403 hereof. SECTION 2407. Responsibilities of administration . The following guidelines shall govern the responsibilities of the board of directors, officers, committees, or officer-in-charge in the administration of the trust: SUBSECTION 2407.1 Role of the board of directors . The board of directors shall have general authority and responsibility for the proper administration and management of trust business. It shall determine and formulate policies with regard to the proper management of each trust account, which may include investment, reinvestment and disposition of funds or property and the review of the actions of all officers, employees and committees designated to manage said accounts. The board of directors may delegate responsibility for the acceptance, relinquishment, review or management of trust accounts to a committee or officer: Provided , however ,That the board of directors shall be held responsible in general for all acts of such committee or officer. SUBSECTION 2407.2 Officers . Trust operations shall be under the supervision of officers who shall, in addition to meeting the qualification standards prescribed for officers of banks or NBQBs, possess the necessary technical expertise in trust business. SUBSECTION 2407.3 Committees : officer-in-charge . The responsibility for trust transactions may be delegated by the board of directors to a committee whose members shall preferably not be involved in other operations of the bank or the investment house, or to an officer-in-charge who shall not be involved in other operations of the trustee institution. The committee duly constituted or the officer duly authorized by the board of directors shall act within the sphere of authority which may be delegated by the Board such as acceptance or release of trust accounts; the initial review of assets placed under the trustee's custody; the investment, reinvestment and disposition of funds or property; continuous review to determine the advisability of retaining or disposing of assets for an account which must be done at least once every twelve (12) months, and/or to determine whether the account is being managed in accordance with the instrument creating the trust. prcd SECTION 2408. Transactions requiring prior authority . Unless prior to its execution the specific transaction has been expressly authorized in writing by the trustor, beneficiary or other party in interest, or by a court of competent jurisdiction, the trustee shall not undertake any or all of the following transactions for the account of a trust: a. Purchase or acquire property from, or otherwise sell, transfer, assign or lend money or property to any of the departments, directors, officers, stockholders, or employees of the trustee or relatives within the first degree of consanguinity or affinity, or the related interest of such directors, officers and stockholders; b. Invest in equities or purchase debt instruments of the trustee or of a corporation in which the trustee owns at least fifty per cent (50%) of the subscribed capital or voting stock in its own right and not as trustee, nor in a representative capacity, or purchase debt instruments of its directors, officers, stockholders, their relatives within the first degree of consanguinity or affinity, or their related interest, or of its employees; and c. Sell, transfer, assign, or lend money or property from one trust account to another trust account. In obtaining the authority, the relationship of the trustee and the other party involved in the transaction shall be fully disclosed in writing to the trustor, beneficiary, party in interest or the court concerned. Such disclosure together with the authority shall be considered as part of the instrument creating the trust. Directors, officers, stockholders, their relatives or related interests covered by this Section shall be those considered as such under existing regulations on loans to directors, officers, etc. of banks and NBQBs. The procedural and reportorial requirements in said regulations must be complied with in case of transactions involving persons and entities mentioned in paragraphs "a" and "b" of this Section. d. Commingle trust funds for the purpose of complying with the prescribed minimum denomination of principal amount of a duly registered commercial paper. ( Effective April 29 , 1985 ). SECTION 2409. Ceilings on loans ; other requirements . Trust loans shall be subject to: a. The loan limit to a single borrower prescribed under existing laws/regulations for banks or investment houses, as the case may be; b. Quantitative ceilings provided under existing laws whenever applicable, and loan ceilings to DOSRI as prescribed under existing regulations for banks and investment houses, as the case may be, and c. The requirements of Sections 76 and 77 of R.A. No. 337, as amended. For purposes of computing the single borrower's limit, the total loans granted by the trust department and by the bank or investment house proper to the same person, firm or corporation shall be reckoned with. SECTION 2410. Disposition of accounts ; limitations on loans and investments . Assets received in trust or on deposit for the use, benefit or behalf of others by a trust company, a bank or investment house shall in general be administered in accordance with the terms of the instrument creating the trust: Provided ,That no trust account involving funds of the Government, its branches, agencies, subdivisions, instrumentalities, including government-owned or controlled corporations, shall under any circumstance be accepted under a "Bearer account","Numbered account" or other similar arrangement. When the trustee is granted discretionary powers in the disposition of trust accounts, and unless otherwise directed in the trust instrument, loans and investment of trust funds shall be limited to the following transactions: a. Loans secured by a hold-out on, assignment or pledge of deposits maintained either with the trustee or other banks, of deposit substitutes of the trustee itself or mortgage and chattel mortgage bonds issued by the trustee: Provided ,That clean loans for personal and household finance may be granted, but which shall not exceed the borrower's deposit/deposit substitute with the trustee plus his four months' salary or regular income in the case of a permanent employee or wage earner; b. Medium-term loans (1) For livestock breeding and production, with maturities up to three years secured by a lien on the animals, in an amount not exceeding fifty per cent (50%) of the commercial value of the animals at the time the loan is made but similar additional loan up to fifty per cent (50%) may be made as the value of the stock increases; or (2) for the acquisition of fertilizers and any instruments, machinery and other movable equipment used in the production, processing, transformation, handling or transportation of agricultural and industrial products, with maturities up to five years, secured by the assets acquired with the proceeds of the loan: Provided ,That for both types of loans, the trustee may require as additional security a lien or mortgage on other properties of the debtor: Provided , further ,That said liens need not be constituted if the borrower executes a mortgage on real estate property seventy per cent (70%) of the appraised value of which equals or exceeds the amount of the loan granted; c. First Mortgage loans (1) For the construction, acquisition, expansion or improvement of rural and urban properties, or for the refinancing of similar loans and mortgages, with maturities of not more than twenty (20) years; or (2) For the conservation, enlargement or improvement of productive properties, or the acquisition of machinery or other fixed installations, with maturities up to ten (10) years; or (3) For such other purposes as may be prescribed by the trustee provided the amount of the loan shall not exceed sixty per cent (60%) of the appraised value of the real estate and insured improvements thereof, securing such loan; d. High-grade bonds and other evidences of indebtedness and loans against such obligations; e. Drafts, bills of exchange, acceptances, or notes arising out of current commercial transactions which are endorsed or accepted by any solvent bank operating in the Philippines provided the aggregate investments in this class shall not exceed ten per cent (10%) of the total trust assets of the trustee; f. Collateral trust bonds or notes, or obligations secured by such bonds or notes, secured by a first mortgage or by a participating interest in a first mortgage on improved urban or rural real estate in cities and municipalities of the Philippines: Provided ,That during that period the earnings of the property mortgaged and available for paying interest have been equal to at least two hundred per cent (200%) of the annual interest payable on account of all first mortgage obligations outstanding. No such bonds or notes, or obligations secured thereby, shall be purchased by the trustee if the aggregate of first mortgage obligations outstanding against the property exceeds seventy per cent (70%) of the appraised value thereof; g. Loans secured by the pledge to the corporation of gold or silver bullion: Provided ,That the loans shall not exceed ninety per cent (90%) of the value of the pledge by which the loan is secured; h. Equities of allied undertakings as may be approved by the Monetary Board for banks; and i. Other loans and investments as the Monetary Board may allow. In the case of government funds, investment shall be limited to: a. Treasury notes or bills, Central Bank Certificates of Indebtedness and other government securities or bonds, and such other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines; b. Repurchase agreements with any of those mentioned in Item "a" above, as underlying instruments thereof; c. Savings or time deposits with government-owned banks: Provided ,That in no case shall any such savings or time deposit accounts be accepted or allowed under a "Bearer","Numbered Account" or other similar arrangement; and d. Other investments as the Monetary Board may allow. SECTION 2411. Separation of accounts . All moneys, properties or securities received by any trustee as such shall be kept separate and distinct from all other funds, properties and assets of its general business and shall be under the joint custody of at least two officers and employees in charge of trusts. The trust operation shall have books and records separate and independent from other books and records of the other businesses of the trustee. Each account shall have a record separate from all other accounts and shall be adequately identified. SECTION 2412. Fees and commissions . A trustee shall be entitled to reasonable fees and commissions which shall be determined on the basis of the cost of services rendered and the responsibilities assumed, except in the case of judicial trusts where the compensation shall be that allowed or approved by the court. In no case shall such fees and commissions be determined on the basis of the excess of the income derived from the investment of the trust and other trust funds over a certain amount or percentage. No trustee shall solicit or receive rebates on commissions, fees and other payments for the services rendered to the trust account or beneficiaries of the trust account by stockholders, real estate brokers, insurance agents and similar persons or entities unless the rebates, fees and other payments shall accrue to the benefit of the trust account or the beneficiaries thereof. cd SECTION 2413. Required surplus . Every trustee corporation, before the declaration of dividends shall carry to surplus at least ten per cent (10%) of its net profits realized out of its trust operations since the last preceding dividend until the surplus shall amount to twenty per cent (20%) of its authorized capital stock and no part of such surplus shall at any time be paid out in dividends, but losses accruing in the course of its business may be charged against surplus. SECTION 2414. Establishment of common trust fund . Any trust company, bank or investment house authorized to perform trust functions may establish, administer and maintain one or more common trust funds, subject to the following limitations: a. In the case of trusts other than guardianships, conservatorships or court trusts, the investments in common trust funds may be made in the instrument creating the trust, or upon amendment thereof with prior consent of all the beneficiaries or other party in interest. b. In the case of guardianships, conservatorships or court trusts, such investments in common trust funds may be made only upon court approval. c. No solicitation of participations/funds from the public shall be undertaken until after thirty (30) business days have elapsed from the date of receipt of the plan by the Central Bank, as required in Subsec. 2414.1. SUBSECTION 2414.1 Trust plan . Each common trust fund shall be established, administered and maintained in accordance with a written declaration of trust, referred to as the "plan" which shall be approved by the board of directors of the trustee and copy submitted to the Central Bank thirty (30) business days prior to its implementation. The plan shall make provision on the following matters: a. Manner in which the fund is to be operated; b. Investment powers of the trustee with respect to the fund, including the character and kind of investments which may be purchased by the fund; c. Allocation, apportionment, distribution dates of income, profit and losses; d. Terms and conditions governing the admission or withdrawal of investments or participations in the fund; e. Auditing and settlement of accounts of the trustee with respect to the fund; f. Basis and method of valuing assets in the fund; g. Basis upon which the fund may be terminated; h. Mechanics of expansion and contraction of units and/or participations comprising the fund; and i. Such other matters as may be necessary or proper to define clearly the rights of participants in the common trust fund. The provisions of the plan shall control all participations in the fund and the rights and benefits of all persons interested in such participations, as beneficiaries or otherwise. The plan may be amended by resolution of the board of directors of the trustee: Provided , however ,That participants in the fund shall be immediately notified of such amendments and shall be allowed to withdraw their participations if they are not in conformity with the amendments made: Provided , further ,That amendments to the plan shall be submitted to the Central Bank for notation within ten (10) business days from approval of the amendments by the board of directors. A copy of the plan shall be available at the principal office of the trustee during regular office hours, for inspection by any person having an interest in a trust whose funds are invested in the plan, or by his authorized representative. Upon request, a copy of the plan shall be furnished such person. SUBSECTION 2414.2 Management of common trust funds . The trustee shall have the exclusive management and control of each common trust fund administered by it, and the sole right at any time to sell, convert, reinvest, exchange, transfer or otherwise change or dispose of the accounts comprising the fund. The trustee may charge a fee for the management of any common trust fund administered by it: Provided ,That the fee corresponding to each participant shall be limited to his pro rata shares in the participations in the fund. The trustee may reimburse itself out of the common trust fund for such reasonable expense incurred by it in the administration of such fund. The trustee shall designate clearly upon its records the trust accounts owning participation in the common trust fund and the extent of the interests of such accounts. The trustee shall not, without the prior written consent of the trustor or beneficiary, negotiate nor assign the trustor's beneficial interest in the common trust fund. No trust account holding a participation in a common trust fund shall have or be deemed to have any ownership or interest in any particular account or investment in the common trust fund but shall have only its proportionate beneficial interest in the Fund as a whole. SUBSECTION 2414.3 Trustee as participant in common trust fund . A trustee administering a common trust fund shall not have any interest in such fund other than in its capacity as trustee nor make any loans on the security of a participation in such fund: Provided , however ,That a trustee which simultaneously administers funds for its employees may invest such funds in the common trust fund. The trustee may acquire an interest in a participation in the common trust fund in the case of a foreclosure or to prevent a loss: Provided ,That such participation shall be withdrawn on the first instance that such withdrawal can be effected. SUBSECTION 2414.4 Exposure limit to single person/entity . No investment for a common fund shall be made in stocks, bonds or other obligations of any one person, firm or corporation, if as a result of such investment the total amount invested in stocks, bonds or other obligations issued or guaranteed by such person, firm or corporation would aggregate in excess of fifteen per cent (15%) of the market value of the fund: Provided ,That this limitation shall not apply to investments in securities issued by the Republic of the Philippines or by the Central Bank or securities fully guaranteed by the Republic of the Philippines. SECTION 2415. Miscellaneous provisions . The following rules and regulations shall also be observed by trust companies, banks, and investment houses relative to their trust operations: SUBSECTION 2415.1 Reports required . Every trustee shall render reports on the trust accounts to the trustor, beneficiary or other party in interest or the court concerned or any party duly designated by court order, as the case may be. The report shall be in such form and frequency as required under the agreement: Provided ,That it contains sufficient information to appraise the party concerned of the significant developments in the administration of the account during the period covered. SUBSECTION 2415.2 Reports to Central Bank . Each trustee shall submit to the Central Bank such reports as may be prescribed by the appropriate supervising and examining department of the Central Bank. SUBSECTION 2415.3 Audits . The trust operations shall be included in the annual operations/management and financial audit required under Sec. 2165. SUBSECTION 2415.4 Borrowing from trust departments or managed funds of banks and investment houses . The provisions of Sec. 2292 shall govern borrowings from trust departments or managed funds. Loans granted to foreign firms which are funded by moneys held by banks and non-bank financial intermediaries as trustee, are considered as peso borrowings within the purview of Sec. 2346.4. These loans should thus be posted in the Schedule of Peso Borrowings of said firms as required under the terms and conditions of their respective borrowing authority issued by the Inter-Agency Committee on Domestic Borrowings of Foreign Firms. SECTIONS 2416-2420. ( Reserved ). B. FUND MANAGEMENT SECTION 2421. Scope of regulations . The following regulations govern management of funds by banks and non-bank financial intermediaries performing quasi-banking functions. LLcd SUBSECTION 2421.1 Definition . For purposes of these regulations, "financial manager" shall refer to a bank, or a non-bank financial intermediary performing quasi-banking functions engaged in the business of administration and management of property, or money or its equivalent as agent or representative of the owner or of a third person. SECTION 2422. Responsibilities of administration . The board of directors shall be responsible for the proper exercise of the fund management powers vested in the financial manager. It shall determine and formulate policies with regard to the proper management of each account, which include investment, reinvestment and disposition of the fund or property under management, and the review of the actions of all officers, employees and committees designated to manage the funds or accounts, especially in the absence of specific agreement on investments, or in the case of discretionary accounts. No account shall be accepted without the prior approval of the board of directors or its duly designated committee or officer. Upon acceptance of an account, a prompt review of all the assets placed under management shall be made. Thereafter, a review shall be made at least once every twelve (12) months to determine the advisability of retaining or disposing of such assets. The funds shall be administered with the skill, care, prudence and diligence necessary under the circumstances then prevailing that a prudent man, acting in like capacity and familiar with such matters, would exercise in the conduct of an enterprise of like character and with similar aims. The duties and functions of the officers and employees involved in the fund management operations shall be clearly defined and distinguished from other operations/functions of the financial manager. SECTION 2423. Minimum features of management contract . To distinguish fund gathering activities pursuant to fund or portfolio management contracts from borrowings through deposit substitutes, loans or trust agreements, the contract shall have the following minimum features: a. There shall be no stipulation whereby legal title to the money or property for management is transferred to the financial manager while beneficial title is retained by the client or reserved for a third party beneficiary. b. The contract shall be clear that the financial manager acts only in a representative capacity and therefore his acts are designed to be those of his client. c. The contract shall not stipulate fixed interest. d. Any arrangement based on "income expectation" or like terms, shall be clarified by including a clause that said "income expectation" or like terms is not a guaranty of return or income, nor does it entitle the client to a fixed interest or return on the money invested; and e. There shall be a stipulation that in case of withdrawals and/or termination of contract, agreement, etc.,before the agreed period, the client shall be entitled to such income as the money invested may have earned, less commission, if any. SECTION 2424. Authorized investment , prohibition . Investments shall be made in accordance with the terms of the agreement, either in the name of the owner of the fund or in the name of the financial manager in his capacity as agent specifically indicated in the covering documents. When the agreement does not specify the character or class of investments, the investments shall be limited to debt and equity securities contained in the list approved by the board of directors or its duly designated committee. Said list shall be evaluated and approved by the board of directors at least once every twelve (12) months: Provided , however ,That in case the list was approved by the committee, a copy thereof shall be submitted to the board for ratification in its next regular or special meeting. Except as may be provided in the agreement, at least seventy-five per cent (75%) of the funds shall be placed in diverse securities taking into account (a) the purposes of the fund management; (b) the amount of the fund; (c) financial and industrial conditions; (d) the type of security; (e) distribution as to industries; and (f) dates of maturity. Funds for investment in securities shall be invested in high-grade securities acceptable as collateral under Central Bank rules. Investments in other securities shall be made with the consent or instruction of the fund owners. Funds shall not be invested in securities being underwritten by the financial manager or in securities of, or property acquired from the financial manager which may affect or influence the judgment of the financial manager in making the investment or in acquiring the property, unless the relationship is disclosed in writing to the owner(s) of the funds and the written consent of the latter is secured prior to the transaction: Provided , however ,That investments in securities issued by the Republic of the Philippines or of the Central Bank or other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines underwritten by the financial manager shall not be covered by the aforementioned prohibition: Provided , further , That investments in direct or indirect credit accommodations to directors, officers and stockholders shall not exceed the ceilings provided under existing Central Bank regulations, and Provided , finally ,That all loans from managed funds shall be subject to the single borrower limit prescribed for banks and non-bank financial intermediaries performing quasi-banking functions as the case may be, under existing regulations. For purposes of these regulations, funds shall be considered invested in securities of, or property acquired from, the financial manager when the transaction is with: a. Any of the departments, branches or units, directors, officers, stockholders or employees of the financial manager. b. The spouse or relative within the first degree of consanguinity or affinity of such director, officer or employee; c. A partnership (or a partner for the account of the partnership) of which such director, officer or employee (or his spouse or relative within the first degree of consanguinity or affinity) is a general partner; d. A co-owner with such director, officer or employee (or his spouse or relative within the first degree of consanguinity or affinity) of the property, except when the transaction refers only to said co-owner's undivided interest; e. A corporation, association or firm of which any director, or officer of the financial manager is also an officer or director of said corporation, except in the case of a single officers, employees and/or their spouses or relatives within the first degree of consanguinity or affinity hold or own more than fifteen per cent (15%) of the subscribed capital stock of said corporation or of the equity of such association or firm; or f. A corporation, association or firm of which any director, or officer of said corporation, except in the case of a single director/officer interlock for the sole purpose of protecting the credit exposure of the financial manager, or by reason of the director's/officer's expertise and professional management capabilities in the highly specialized or technical field of operations of the corporation, association or firm. SUBSECTION 2424.1 Commingling of Funds . No financial manager shall commingle the funds of two or more accounts for the purpose of investing in the money market. However, managed funds may be commingled for the purpose of complying with the prescribed minimum denomination or principal amount of a duly registered commercial paper; Provided ,That the owners of the funds specifically agreed in writing to such commingling. ( Effective April 29 , 1985 ). SECTION 2425. Separation of accounts ; reports . All monies, properties or securities received by a financial manager shall be kept separate and distinct from the funds, properties and other assets used in the conduct of its general business. The fund management operation shall have books and records separate and independent from other books and records of the financial manager and shall follow the Manual of Accounts for Fund Managers prescribed by the Central Bank. Each account shall have a record separate from all other accounts, and the investments of each account except in case of authorized commingled investments, shall be kept physically separated and be adequately identified from the investments of other accounts. Every financial manager shall render reports on the managed funds to the owner of the fund, beneficiary or any party duly designated as the case may be. The report shall be in such forms and frequency as required under the fund management agreement: Provided ,that it contains sufficient information to apprise the party concerned of the significant developments in the administration of the account during the period covered. In addition, each financial manager shall submit to the appropriate supervising and examining department of the Central Bank such reports as may be required. cdLL SECTION 2426. Fees and commissions for fund/portfolio management services . A financial manager shall be entitled to reasonable fees and commissions which shall be determined on the basis of the cost of services rendered and the responsibilities assumed. In no case shall such fees and commissions be determined on the basis of the income derived from the investment of the fund/portfolio over a certain amount or percentage. No financial manager shall solicit or receive rebates on commissions, fees and other payments for the services rendered to the owners or the fund/portfolio by stockbrokers, real estate brokers, insurance agents and similar persons or entities unless the rebates, fees and other payments shall accrue to the benefit of the fund. SECTION 2427. Security for faithful performance of fund management duties . As security for the faithful performance of fund management duties, banks and non-bank financial intermediaries performing quasi-banking functions with fund management operations shall deposit with the Central Bank cash or eligible securities, on the basis of the end-of-month average of funds managed by the financial manager during the immediately preceding semester, in accordance with the following schedule: Volume of managed funds Required deposit (In million peso) with the Central Bank P35.500 and below P250,000 P35.501 but not over P71.000 P500,000 P71.001 but not over P106.500 P750,000 P106.501 but not over P142.000 P1,000,000 A deposit of P250,000.00 shall be required on each P35.5 million, or fractional part thereof, of managed funds in excess of P142 million. Any increase in the deposit shall be made by the financial manager within sixty (60) days from the end of the immediately preceding semester. ( Effective Dec . 20, 1983 ). Securities which may be deposited as security shall consist of bonds issued by the Republic of the Philippines or the Central Bank or bonds the servicing and repayment of which are fully guaranteed by the Republic of the Philippines: Provided ,That other kinds of securities may be declared eligible by the Monetary Board. SECTIONS 2428-2470. ( Reserved ). C. OTHER FIDUCIARY FUNCTIONS SECTIONS 2471-2498. ( Reserved ). SECTION 2499. General provision on sanctions . Any violation of the provisions of this part shall be subject to the sanctions in Sections 34, 34-A and 34-B of Republic Act No. 265, as amended, and/or Sections 12 and 16 of Presidential Decree No. 129, as amended, as the case may be, without prejudice to other sanctions as may be provided by law. PART SIX Miscellaneous A. OTHER OPERATIONS SECTION 2601. Purchase and Sale of Government Securities . The purchase and sale of government securities shall be subject to the provisions of Section 2389 to Subsection 2389.4 ( Effective Jan . 28, 1983 ). SUBSECTION 2601.1 Central Bank Certificates of Indebtedness . For purposes of clarification, the phrase "to be held in trust" as embodied in the last sentence of paragraph 4 of the Service Agency Agreement in the sale of Central Bank Certificates entered into by and between the bank and duly accredited service agencies which reads: "4. ...The agency, in this connection is allowed to retain twenty per cent (20%) of the proceeds of its sale of CBCI to be held in trust for servicing interest and other requirements of the CBCI." should be construed to mean that the fund so retained pursuant to the aforementioned Service Agency Agreement shall be held for the Central Bank under a special account. Such special account shall not be considered a deposit and therefore, not subject to reserve requirement. SUBSECTION 2601.2 DBP Bonds . Commercial banks and their branches, as well as rural banks and private development banks, which are duly accredited by the DBP as sales and service agencies for its bond marketing operations, are authorized to open and maintain special DBP accounts arising out of the proceeds of DBP bonds sold by said service agencies. The grant to service agency banks of DBP of the authority to accept DBP savings or time deposits is an exception to the provisions of Sec. 2239: Provided ,That: a. Such deposits shall be limited to the proceeds from sales of DBP Progress Bonds; b. Such deposits shall be subject to the reserve requirements on savings and time deposits. Such DBP savings and time deposits shall be exempt from the liquidity floor requirement on government deposits. SUBSECTION 2601.3 Premyo Savings Bonds . In implementation of Ministry Order No. 4-79, series of 1979, providing for the payment of prizes of winning Premyo Savings Bonds "Biglang-Bahay" series, in the form of cash at the option of the Human Settlements Development Corporation (HSDC) if the holder thereof is a service agency, the following procedure shall be observed; casia a. The service agency shall prepare the usual prize claim for Premyo Savings Bonds. b. The prize claim shall be forwarded to the HDSDC with the request that payment be made in the form of cash. c. On the basis of the above prize claim, the service agency bank shall debit the account "Due to CB-PSBs" (20% retention). d. The Securities Servicing Department shall respond to the above debit only upon receipt of the prize claim, payment of which in the form of cash, has been approved by the HSDC. The 30% sales retention privilege for servicing winning Premyo Savings Bonds shall be allowed, Provided ,That the purchased bonds are consigned to branches within 90 days from the date of purchase and not held as legal reserves. In the event that the bonds are not consigned within 90 days from date or purchase, or that a portion or all of these bonds are reverted for use as legal reserves, the authorized service agency shall remit 1/3 of the 30% retained proceeds to the Central Bank within 10 days after the 90-day period if not consigned within the reglementary period or after it has been reverted for use as legal reserve. SUBSECTION 2601.4 National Housing Authority (NHA) Bonds . NHA Bonds may be marketed through direct sale to CB-accredited dealers or through auction: Provided ,That the holders shall discount the bonds exclusively with CB accredited dealers in consultation with the Central Bank: and, Provided , further ,That bonds issued through NHA's lending through-bonds programs shall be in small staggered amounts not exceeding the aggregate amount of P50 million for the first series. The basic features of the NHA Bonds are as follows: Interest 8.5 per cent interest per annum, tax exempt Total issue P150 million Maturity Five Year Guarantee Fully and unconditionally guaranteed as to principal and interest by the Republic of the Philippines. Other features a. May be callable in whole or in part by NHA before maturity; b. May be utilized in fulfillment of the bonding requirements in contracts with NHA. c. Considered as authorized investments of insurance companies, and d. May be utilized to settle obligations with NHA. Use of proceeds For funding requirements of the housing program of NHA for 1982. SECTION 2602. Collection of customs duties/taxes levies and other revenues . The regulations on the revised coverage and procedures in the collection of customs duties, taxes, levies and other revenues through the banking system are the following: SUBSECTION 2602.1 Coverage . For more effective accounting and control of revenue collection, all those presently accredited agent banks with Demand Deposit (DD) accounts with the Central Bank of the Philippines and specialized government banks (Development Bank of the Philippines, Land Bank of the Philippines and Philippine Amanah Bank) and their branches/extension offices/agencies are authorized to collect (a) customs duties, taxes and other levies, (b) import processing fees, and (c) export/premium duties: Provided , however ,that the collection of taxes from government-owned and controlled corporations shall be made only through banking offices of the Philippine National Bank and other government banks, including the Development Bank of the Philippines. ( Effective July 2, 1985 ). SUBSECTION 2602.2 Collection and reporting of Internal Revenue Taxes . The participating banks which are duly accredited by the Bureau of Internal Revenue to accept payment of internal revenue taxes shall be governed by BIR Revenue Regulations No. 5-84 dated May 29, 1984, as amended by Revenue Regulations No. 1-85 dated January 28, 1985, contained in Appendix 48 of this Book. ( Effective July 2, 1985 ). SUBSECTION 2602.3 Collection and reporting of customs duties . The participating banks are authorized to accept payment of customs duties, taxes and other levies, and import processing fees under the following procedures: a. The collecting bank shall acknowledge receipt of payments of customs duties, taxes and other levies, and import processing fees by issuing Official Receipts (ORs) in forms to be requisitioned by the Head Office from the General Services Division, Bureau of Customs, Manila. b. The collecting bank shall book all such collections and credit same to the special account 'Due to Central Bank Bureau of Customs'. c. The branch shall report by telephone, telex or other means to its Head Office, at the end of each day, total collections for the day and the inclusive serial numbers of ORs issued, to be used as basis for the preparation by their respective Head Offices of the Consolidated Report of Daily Collections of Customs, Duties, Taxes and Other Levies (RC 82-0035). d. The Head Office and its branches shall accomplish the Abstract of Daily Collections of Customs Duties, Taxes and Other Levies (RC 82-006) and submit the same, duly supported with copies of Orders of Payment (OPs),Official Receipts (ORs),Release Certificates (RCs) and commercial invoices on the same day to the offices indicated in the form. e. The Head Office of the participating banks shall consolidate all Reports of Collections with those of its branches and submit the original of the Consolidated Report on Daily Collections of Customs Duties, Taxes and Other Levies (RC 82-005) to the Accounting Department, Central Bank of the Philippines, Manila, on the 10th calendar day following the date of collection. Simultaneously, the remaining copies shall be distributed to the officer indicated in the form. ( Effective August 13, 1982 ). SUBSECTION 2602.4 ( As deleted by Section 2 of CBP Circular No . 884 dated August 13, 1982 ) SUBSECTION 2602.5 Collection and reporting of export/premium duties . The participating banks are authorized to accept payment of export/premium duties under the following procedures: a. The collecting bank shall deduct from the export proceeds the estimated amount of export/premium duties due from the export shipment upon negotiation of the shipping documents but shall collect the exact and correct amount of such duties upon presentation of the Order of Payment (OP) issued by the Export Coordinating Division, Bureau of Customs (For Port of Manila) or the Collector of Customs concerned. b. The collecting bank shall issue the corresponding ORs in forms to be requisitioned by the Head Office from the General Services Division, Bureau of Customs, Manila. c. The collecting bank shall book all such collections and credit same to the special account "Due to Central Bank Export/Premium Duty." d. The branch/extension office/agency shall. (1) report by telephone, telex or other means to its Head Office, at the end of each day, total collections for the day and the inclusive serial numbers of ORs issued, to be used as basis for the preparation by the respective Head Offices of the Consolidated Report on Daily Collections of Export/Premium Duty (RC 82-007);and cdpr (2) accomplish the Abstract of Daily Collections of Export/Premium Duty (RC 82-008) and submit the same, duly supported with copies of OPs and ORs, within ten (10) calendar days from date of collection to the offices indicated in the form. e. The Head Office of the collecting bank shall: (1) consolidate its report of collection with those of its branches/extension offices/agencies and submit to the Bureau of Customs Unit, CB Complex, the Consolidated Report of Daily Collections of Export/Premium Duty (RC 82-009) on the day following the date of collection; and (2) consolidate the Abstract of Daily Collections of Export/Premium Duty (RC 82-01-10) with those received from branches/extension offices/agencies. The original of the Consolidated Abstract of Collections of Export/Premium Duty (RC 82-011) shall be submitted to the Accounting Department, Central Bank of the Philippines, Manila, on the 10th calendar day following the date of collection. Simultaneously, the remaining copies, with the supporting OPs and ORs, shall be submitted to the Bureau of Customs Unit, CB Complex, Manila. SUBSECTION 2602.6 Debit/credit advises . The Accounting Department, Central Bank of the Philippines, Manila, shall debit the demand deposit (DD) accounts of the banks concerned for the total daily collection, which is due for remittance on the 10th calendar day from the date of collection (based on either forms RC 82-005, RC 82-007 or RC 82-011).Said Department shall also credit on the same day the accounts of the Treasurer of the Philippines for all such remittances of tax collections, duties, fees and other levies. "Copies of debit/credit advices to Authorized Agent Banks (AABs) shall be furnished the BIR Unit, CB Complex, Manila. ( Effective July 2, 1985 ). SUBSECTION 2602.7 Reconciliation of revenue collections . The Bureau of Customs shall report to the Supervision and Examination Sector, Central Bank of the Philippines, Manila, any unreported collection or other discrepancies discovered for proper examination. The Central Bank shall take appropriate action, through the Accounting Department, either by debiting or crediting the demand deposit account of the bank concerned upon advice by the Supervision and Examination Sector on the results of the investigation. ( Effective July 2, 1985 ). SUBSECTION 2602.8 Penalty for willful delay on the reporting of collections/remittances . In the event the Bureau of Customs shall discover, in the course of its verification, any willful delay in the reporting of collections and remittances by banks, said Bureau shall advise the Accounting Department of the Central Bank to debit the demand deposit account of the bank concerned with the corresponding penalty therefor, in accordance with Subsec. 2602.10. ( Effective July 2, 1985 ). SUBSECTION 2602.9 Policy Formulating Body . The Ministry of Finance, in consultation with other government agencies/offices, may issue further guidelines/rules and regulations on revenue collections as may be deemed necessary, and the same, except those pertaining to the collection of internal revenue taxes, shall be subject to the approval of the Monetary Board. ( Effective July 2, 1985 ). SUBSECTION 2602.10 Fines for delayed reports/remittances of collections . Any banking institution authorized to collect customs duties, taxes and other levies and export premium duty, which shall willfully delay the submission of report and remittance of its collection to the Central Bank within the period prescribed thereon, shall pay fines in accordance with the following schedule: For delay in For delay submission in remittance of report of collection a. Per banking day of P10 plus 1/30 of 1% default for the first 5 on the amount banking days of default of delayed remittance b. Per banking day of P15 plus 1/15 of 1% default for the next on the amount 5 banking days of of delayed default remittance c. Per banking day P20 plus 1/10 of 1% of default for on the amount the succeeding of delayed banking days of remittance default Provided ,That: (1) Fines imposed above shall not be in excess of P500 a day; (2) The default shall start to run on the day following the last day required for submission of the report or remittance, as the case may be. However, should the last day of filing fall on a non-banking day in the locality where the reporting bank is situated the default shall start on the day following the next banking day; and (3) The manner of payment or collection of fines enumerated under Subsec. 2610 shall apply. ( Effective July 2, 1985 ). SUBSECTION 2602.11 Interest on monthly collections of over P40 million . A 3% interest per annum shall be imposed on total collections of customs duties, export/premium duties and import processing fees by each authorized agent bank (AAB) in excess of forty million pesos (P40 M) a month, said interest to be computed monthly by the Accounting Department, Central Bank, on the basis of reports of all revenue collections submitted thirty (30) days after the end of each month, by the Bureau of Customs. ( Effective July 2, 1985 ). As soon as the monthly reports of all revenue collections are consolidated and the corresponding interest thereon computed, the Accounting Department, Central Bank, shall forward to the AABs concerned a statement of interest to be paid. Agent Banks may, within a period of thirty (30) days from date the Statement of Interest is acknowledged, advise, the Accounting Department, Central Bank, of any discrepancies noted thereon. Otherwise, upon the lapse of said period, the Accounting Department shall debit their demand deposit accounts for whatever interest may be due on all collections in excess of the prescribed ceiling. SECTION 2603. Clearing operations . Any thrift bank authorized to accept demand deposits may participate in the Central Bank clearing operations and shall comply with the following rules and regulations: SUBSECTION 2603.1 Clearing regulations in general . a. Time and place of exchanges . The clearing of checks, bills and other demand items contemplated in this Section shall be conducted in the premises of the Central Bank on the ground floor of the Central Bank Building and at such other places in regional clearing centers which the Central Bank may designate. The hour for making such exchanges shall be at 4:00 P.M. on each business day as well as on all local holidays in the clearing centers and/or at such other times which may be fixed by the Central Bank. b. Settling clerks . The head office of each bank, institution or entity together with all its branches within designated clearing areas (Appendix 38) shall be considered as one (1) unit and shall be represented by one or more (but not exceeding six) competent clerks/representatives to deliver and receive the items to be exchanged. The facsimile signatures and NBI clearances of representatives shall be submitted to the Accounting Department. All representatives shall be issued their respective ID cards which shall be presented for admission in the clearing office or regional clearing units. c. Items for clearing . All checks and documents payable on demand and drawn against a bank/branch, institution or entity allowed to clear may be exchanged through the Clearing Office in Manila and the Regional Clearing Units in regional clearing centers designated by the Central Bank. As evidence of the channel through which they were negotiated, all items to be exchanged shall be properly endorsed and guaranteed before being sent to the Clearing Office/Unit and shall bear the name of the bank/branch, institution or entity to which they belong. Likewise they shall be impressed by sending bank/branch, institution or entity with a special stamp to the effect that they have been cleared through the clearing facilities of the Central Bank. The Clearing Office/Unit of the Central Bank shall in no way be responsible for any flaw or defect in the items or for any irregularity whatsoever in any of their features. d. Clearing procedures (1) Procedure for regular clearing . Each bank/branch, institution or entity, through its representative/s, shall deliver their respective demands in sealed envelopes made out separately against the other banks/branches, institutions or entities allowed to clear. The total of each demand shall be listed in a certified adding machine tape attached to the sealed envelope. In the acknowledgment of receipt of the demands against the bank/branch, institution or entity he represents, the settling clerk concerned shall prepare and sign a Clearing Office Statement (Clearing Form No. 4) in duplicate for local clearing. The original and duplicate of the statement shall be submitted to the Chief, Clearing Office, in Manila or the Regional Clearing Officer in the regional clearing centers. The original shall be retained and shall be the basis for settlement of clearing balances in the respective deposit accounts with the Central Bank. The duplicate, duly authenticated by the Chief, Clearing Office or the Regional Clearing Officer concerned, shall be returned to the bank/branch, institution or entity concerned through their clearing representatives. The duplicate shall be the basis of each bank/branch, institution or entity for taking up corresponding entries in their respective books of accounts on the date of clearing. For out-of-town clearing, the Clearing Office Statement (Clearing Form No. 4-A) shall be prepared in quadruplicate for authentication by the Clearing Officer who retains one copy. The third copy shall be returned to the sending bank/branch, institution or entity through their respective clearing representatives. The original and duplicate shall be shipped to or retained in the Manila Clearing Office, as the case may be. Out-of-town demands presented in a clearing center against a bank without any branch in that particular clearing area shall be delivered to the Clearing Officer who shall prepare a debit advice (Clearing Form No. 4-B) for the head office of the drawee bank/branch concerned in the Manila clearing area. In acknowledgment of receipt of out-of-town demands, the duplicate of the Clearing Office Statements and/or the original of the debit advice/s, settling clerks of respective drawee banks/branches in each clearing center shall sign the shipping manifest. These clearing office statements and/or the debit advice/s shall serve as bases for the head offices in the Manila clearing area to record the results of out-of-town exchanges in their books on the date of receipt. LLpr Clearing operations between regional clearing centers and the Manila clearing center is shown in Appendix 39 (Tarlac, Tarlac used as sample). (2) Procedure for special clearing . Demands may be presented directly to the drawee banks/branches, institutions or entities concerned at times other than that specified in Item "a".For this purpose, the Special Clearing Receipt (Cash Form No. 10) shall be used. The original and duplicate copies of the receipt shall be retained by the sending bank/branch, institution or entity and the triplicate shall be delivered to the drawee bank/branch. At the following clearing session, the original of the Special Clearing Receipt shall be presented as a demand against the bank/branch, institution or entity concerned. Nothing in this paragraph shall prevent direct settlement between the parties concerned. (3) Procedure for Returned Items . Items which should be returned for any reason whatsoever shall be presented not later than the next regular clearing for local exchanges. Out-of-town exchanges shall be returned within the period specified in the Memorandum to Authorized Agent Banks announcing the opening of clearing facilities in each of the authorized regional clearing centers. Items for return shall be sealed in special red envelopes and shall be considered and accounted for as debits to the demanding banks/branches, institutions or entities and credits to the returning banks/branches, institutions or entities. Nothing in this paragraph shall prevent direct settlement of returned items between the parties concerned. Items which have been the subject of a material alteration or items bearing a forged endorsement when such endorsement is necessary for negotiation shall be returned within twenty-four (24) hours after discovery of the alteration or the forgery but in no event beyond the period fixed or provided by law for filing of a legal action by the returning bank/branch, institution or entity sending the same. Missorts or items misdirected through clearing shall be returned at the next clearing session in special yellow envelopes and shall be accounted for as debits to the bank/branch, institution or entity which had mis-directed the items. 4) Procedure for excluded member(s) . In case any bank/branch, institution or entity is excluded from clearing on any day on account of tardiness or absence, value shall be given to deliveries of the others present for credit to their accounts in accordance with normal settling procedures. The total of said deliveries shall be debited to the account of the excluded bank/branch, institution or entity. The bank/branch, institution or entity excluded from clearing shall, as heretofore, send its representative to the Clearing Office/ Unit to prepare the clearing statement and accept deliveries on it. In case of failure to send its representative, the Clearing Office/Unit shall, in the meantime, receive such deliveries which should be picked up by the excluded bank/branch, institution or entity not later than 5:30 P.M. on the same day. In the event of strike or force majeure which prevents a bank/branch, institution or entity allowed to clear from having access to its records or otherwise ascertaining whether checks delivered to it shall be honored or returned, notice of such circumstances shall immediately be given to the Central Bank Clearing Office/Unit. In such cases, items drawn against the bank/branch, institution or entity concerned shall not be presented for clearing. e. Loss of clearing items . Any loss or damage arising from theft, pilferage, or other causes affecting items in transit shall be for the account of the sending bank/branch, institution or entity concerned. Inter-regional clearing operations shall be governed by other rules and regulations as embodied in Subsec. 2603.2. SUBSECTION 2603.2 Inter-regional clearing operations in Visayas and Mindanao . Inter-regional clearing operations shall be conducted in Visayas and Mindanao through the facilities of seven (7) Central Bank Regional Clearing Units located in Bacolod, Cagayan de Oro, Cebu, Davao, Iloilo, Tacloban and Zamboanga Cities. Checks received by banks/branches in one clearing area against banks/branches located in the other clearing areas may be presented for clearing subject to the rules and regulations embodied in Subsec. 2603.1. a. Items for clearing . Items for clearing shall consist of demand items consisting of checks and/or other documents drawn against banks/branches located in each of the following clearing areas: Other Cities Within the Clearing Centers Clearing Areas Bacolod City None Cagayan de Oro City None Cebu City Mandaue Davao City None Iloilo City None Tacloban City None Zamboanga City None b. Settlement of clearing balances . Clearing balances of participating banks/branches shall be debited or credited, as the case may be, to the clearing accounts of their respective head offices in Manila in the afternoon of the same day the demands are presented for clearing. c. Miscellaneous provisions . Checks for inter-regional clearing shall be sealed in special brown envelopes measuring 7" x 11" with the destination "To Cebu" or "To Zamboanga",etc. as the case may be, properly stamped in bold letters of not less than one (1) inch. The left side of the envelope shall bear one inch stripe according to the following color scheme: Regional Clearing Unit Color Bacolod Green Cagayan de Oro White Cebu Blue Davao Red Iloilo Violet Tacloban Royal Blue Zamboanga Gray All participating banks shall keep photocopies/microfilms of checks presented for clearing. Any loss or damage arising from theft, pilferage, or other causes affecting items in transit shall be for the account of the sending bank/branch, institution or entity concerned. d. Guidelines for inter-regional clearing . (1) For an orderly process of exchanges, each bank/branch representative shall deposit the demand envelopes against drawee banks/branches located in other Regional Clearing areas in the respective compartments assigned to each of the participating banks/branches. (2) The bank/branch representatives shall sort the demand envelopes received according to destination. Amount of demands shall be posted as Debits (Items Received) in their respective Clearing Statements (Clearing Form 4-a) to be prepared in four (4) copies for distribution as follows: Original Sending Clearing Unit Duplicate Sending Bank/Branch Triplicate Head Office of Drawee Bank/Branch Quadruplicate Drawee Bank/Branch (3) The Regional Clearing Officer shall sort according to bank/branch and destination the demand envelopes delivered for account of banks without branches in his clearing area. Corresponding Debit Statement (Clearing Form 4-B) shall be prepared in three (3) copies for distribution as follows: Original Head Office of Drawee Bank/Branch Duplicate Drawer Bank/Branch Triplicate Sending CB Clearing U nit (4) The quadruplicate of the Clearing Statements and duplicate of the Debit Statements shall be attached to the demand envelopes for shipment to the Regional Clearing Units concerned. In acknowledgment of receipt of inter-regional demands, clearing representatives of respective banks/branches at destination shall sign the covering manifest (in duplicate).Original shall be returned to the sending clearing unit. (5) In the Regional Clearing Unit where the demands are presented, a Clearing Advice (Form 4-B (a)) shall be prepared for inter-regional as well as local and out-of-town (Manila) clearing results reflected in clearing statements and debit statements. After the 9:00 A.M. clearing session, the results of the inter-regional clearing transactions shall be posted in the Clearing Advice, striking a sub-total to determine that it is in balance. In the same Clearing Advice, the results of local and on Manila clearing shall be posted after the 4:00 P.M. session to complete the transactions for the day. The original of the clearing advice shall be sent to the Head Office of the Drawee Bank/Branch thru the Clearing Operations Division, Manila, bound together with: (a) The duplicate of the local and out-of-town (Manila) clearing statements; (b) Triplicate of inter-regional clearing statements; (c) The originals of the debit statements; and (d) The demand envelopes containing "On Manila" checks/returns. The Clearing Advice shall be the basis for entries in the books of accounts of the bank Head Offices concerned. The duplicate of the Clearing Advice shall be forwarded to the Drawee Bank/Branch while the third copy shall be retained as office file of the Regional Clearing Unit. (6) The daily results of both local, out-of-town (Manila) and inter-regional clearing shall be summarized in the consolidated clearing proof sheet. For purposes of transmission to the Head Office through the DEX machine, the results of clearing as reflected in the consolidated proof sheet shall be condensed in Clearing Form 4-C(a).Any exception or observation which requires immediate attention shall be explained in the memorandum portion. (7) All Regional Clearing Officers shall acknowledge receipts of all incoming pouches and/or shall give notice of delay/non-arrival of pouch/es or other exception/s to the sending clearing unit concerned on the Confirmation Slip not later than the following business day. If for any reason, clearing is suspended or there is no demand against any of the other clearing units and as no pouch will be sent to all or any of the clearing units, the Confirmation Slip, which shall be placed in an envelope properly addressed to the clearing unit concerned and duly marked in bold letters "CONFIRMATION SLIP FOR IMMEDIATE TRANSMITTAL TO ADDRESSEE," shall be sent through the pouch to Manila. A duplicate of the Confirmation Slip for file of the Clearing Operations Division, Manila Office shall be stapled to the envelope. (8) All shipments of pouches shall be accompanied by a checklist and manifest which shall be properly acknowledged by the receiving clearing unit. A separate transmittal letter shall be prepared in duplicate for all communications addressed to other departments which are sent through the general-purpose pouch under the responsibility of the Administrative Department, Manila. The original shall be properly marked "For the Communications Center," while the duplicate shall be returned to the sending Regional Clearing Unit with the acknowledgement of the personnel in-charge of opening the pouch in the Communications Center. (9) All clearing pouches arriving late in the afternoon and in the evening may be picked up from the Airport in the morning of the following day for delivery to the drawee bank at the 9:00 A.M. clearing session. For security reasons, those arriving on Friday night shall be picked up on Saturday morning. SECTION 2604. Miscellaneous operations . The following rules and regulations shall govern the operations specified herein: SUBSECTION 2604.1 Private development banks as collection agencies of the DBP . DBP is authorized to deposit with private development banks proceeds of collections effected by them subject to the following conditions: a. The private development banks shall not receive any commission as such collection agencies of DBP; b. DBP shall place as savings deposit with these private development banks all proceeds of collections effected by them which savings deposits shall earn interest at the going rate; c. At the end of each month, one-third (1/3) of the balance of such savings deposits shall be placed in a one-year time deposit with interest at the going rate, while two-thirds (2/3) of the balance shall be retained in the savings deposit; and d. Withdrawals by DBP shall be effected only from, and shall not exceed, the savings deposit balance. Such deposits are exempted from the liquidity floor requirement: Provided, however ,That they shall be subject to the reserve requirement on deposits. SUBSECTION 2604.2 Consignee of PNB money orders . Stock savings and loan associations are authorized to sell Bank Money Orders (BMOs) of the Philippine National Bank (PNB),subject to the terms and conditions contained in the agreement to be entered into by and between the Philippine National Bank and the stock savings and loan associations concerned, the gist of which agreement is embodied in Appendix 40. SUBSECTION 2604.3 Operation of cash dispensers . Banks may operate/install cash dispensing machines without prior approval from the Central Bank, subject to the following conditions: a. The bank shall install the machines in its own premises and shall provide/put up adequate security measures for the bank and its depositors; cdlex b. The bank shall assure the Central Bank that this banking service shall not allow the grant of any gift, promotional offer/give-away or any additional compensation for deposits to be maintained except that which normally accrues to savings deposits; and c. The bank shall submit to the appropriate supervising and examining department for its information/records, a copy each of all brochures/pamphlets/literatures dealing with this banking service. SUBSECTION 2604.4 Operation of armored cars . Banks shall use armored cars to afford security in collecting and/or delivering cash or securities and other valuables from or to their clients, branch or extension offices or the Central Bank, provided ,such armored cars are not operated as mobile banks, and provided, further ,that banks shall secure prior Central Bank authority before they can engage in deposit pick-up services. ( Effective April 16, 1985 ). SUBSECTION 2604.5 Foreign exchange dealers . Thrift Banks (Private Development Banks, Savings and Mortgage Banks, and Savings and Loan Associations) and Rural Banks shall, upon prior application, be designated as Authorized Foreign Exchange Dealers of the Central Bank. As such, they may purchase for pesos foreign currencies from foreign tourists, other non-residents including balikbayans, and residents, subject to the following terms and conditions: a. The foreign currencies which may be purchased shall be limited to those which are acceptable to the Central Bank. At present, these are: (1) U.S. Dollar (2) Canadian Dollar (3) Australian Dollar (4) Singapore Dollar (5) Hongkong Dollar (6) Malaysian Dollar (7) Swiss Franc (8) French Franc (9) Belgian Franc (10) Pound Sterling (11) Deutsche Mark (12) Japanese Yen (13) Netherlands Guilder (14) Italian Lira (15) Austrian Schilling (16) Saudi Arabian Rial (17) Kuwait Dinar (18) Bahrain Dinar b. Such foreign currencies shall be purchased at rates not lower than the minimum buying rates prescribed by the Central Bank as indicated in the "Bulletin on CB Buying Rates for Acceptable Currencies" issued daily by the International Treasury Office, Foreign Exchange Department, Central Bank; c. Central Bank official receipts shall be issued for all purchases of foreign currencies; d. All such foreign currencies purchased from the persons named in the first paragraph hereof shall be sold for pesos either to Authorized Agent Banks or directly to the Central Bank within three (3) business days from the date of acquisition, provided that the sale of checks shall always be to authorized Agent Banks; e. A quarterly report of all such purchases and sale of foreign currencies shall be submitted to the Foreign Exchange Department of the Central Bank not later than fifteen (15) days following the end of every quarterly period, together with the following supporting documents: (1) Duplicate copies of the CB official receipts issued covering purchases of foreign currencies; (2) Copies of credit advises or receipts issued by Authorized Agent Banks or the Central Bank to which the foreign currencies were eventually sold; and (3) Such other schedules which may be required to be submitted to the Foreign Exchange Department of the Central Bank; * Condition that such contract/agreement for time and space can be cancelled/terminated immediately whenever the client bank is directed by the Central Bank to desist or discontinue the particular advertisement in question. g. Responsibility for compliance with the above rules and regulations rests with the bank officers or directors who caused the approval or placement of such advertisement. SECTION 2608. Assessment fees a. The par value of CBCIs held by banks on consignment basis and which are lodged under contingent accounts shall be excluded in determining total assets for purposes of computing the assessment fees chargeable against banks under Sec. 28 of Republic Act No. 265, as amended. b. Annual assessment fees of stock savings and loan associations to defray the cost of maintaining the Department of Rural Banks and Savings and Loan Associations as contemplated in Sec. 28, Paragraph (c) of Republic Act No. 3779 (Savings and Loan Association Act),as amended by Presidential Decree No. 113, dated January 29, 1973, shall be collected as follows: (1) Where the stock savings and loan association maintains a deposit account with the Central Bank, its deposit account shall be debited by the Central Bank Accounting Department upon receipt of the notice of the assessment from the Department of Rural Banks and Savings and Loan Associations. The association shall be advised accordingly. (2) Where the association does not maintain a deposit account with the Central Bank or where its deposit account is insufficient to cover the assessment fee, the Accounting Department shall bill said association for the full amount of the fee or for the balance thereof not covered by its deposit account, as the case may be. Within thirty days from receipt of the bill, the association shall make the corresponding remittance to the Central Bank Accounting Department. Failure to pay the bill within the prescribed period shall subject the association to administrative sanction. SECTION 2609. Reproduction and use of facsimiles of government securities, currency notes and coins . The following rules and regulations shall govern the reproduction and use of facsimiles of government securities, Philippine legal tender and commemorative coins and Central Bank notes. SUBSECTION 2609.1 Facsimiles of government securities . In addition to those mentioned in Secs. 98, 115 and 122 of Republic Act No. 265, as amended, the following rules and regulations shall govern the reproduction and use of facsimiles of government securities: a. No person or entity shall design, engrave, print, make or execute in any other manner, or issue, distribute, circulate or use any handbill, advertising, placard, circular, card or object whatsoever bearing the likeness or similitude of government securities issued by and/or through the Central Bank of the Philippines, or any part thereof, whether in black and white or any color or combination of colors, without prior written authority therefor having been secured from the Governor of the Central Bank. b. The reproduction and use of facsimiles of government securities referred to in the foregoing paragraph may be authorized by the Governor of the Central Bank for printed illustrations in articles, books, journals, newspapers, or other similar materials, and for numismatic, educational, historical, newsworthy, or other purposes which do not tend in any way to defeat the objectives underlying the promulgation of these regulations: Provided, however ,That any such illustration shall be in black and white, and of a size less than three-fifths (3/5) or more than one and one-half (1-) times in size of the government securities being illustrated. The procedural guidelines for filing applications for reproduction and use of facsimiles of government securities are embodied in Appendix 41. SUBSECTION 2609.2 Facsimiles of Philippine legal tender and commemorative coins . Pursuant to the provisions of Sec. 14 of Republic Act No. 265, otherwise known as the Central Bank Act, in relation to Section 52 of the same Act as amended by Presidential Decree No. 72, the following regulations governing the reproduction and use of facsimiles of Philippine legal tender and commemorative coins are hereby promulgated. a. No person or entity shall design, engrave, make or execute in any other manner, or use, issue or distribute any object whatsoever bearing the likeness or similitude as to design, color or the inscription thereon of any of Philippine legal tender and commemorative coins or any part thereof, in metal form, irrespective of size and metallic composition, without prior authority from the Governor of the Central Bank. b. The reproduction and use of facsimiles of Philippine coins referred to in Item "a" may be authorized by the Governor of the Central Bank for printed illustrations in articles, books, journals, newspapers, or other similar materials, and for numismatic, educational, historical, newsworthy or other purposes which do not tend to defeat the objectives underlying the promulgation of these regulations. SUBSECTION 2609.3 Facsimiles of Central Bank notes . Pursuant to the provision of Sec. 14 of Republic Act No. 265, otherwise known as the Central Bank Act, in relation to Sec. 52 of the same Act, the following rules and regulations governing the use and reproduction of facsimiles of Central Bank notes are hereby promulgated: a. No person or entity shall design, engrave, print, make or execute in any other manner, or utter, issue, distribute, circulate, or use any handbill, advertisement, placard, circular, card or any object whatsoever bearing the likeness or similitude of any currency note issued by the Central Bank of the Philippines, or any part thereof, whether in black and white or any color or combination of colors, without prior authority therefor having been secured from the Governor of the Central Bank. b. The reproduction and use of facsimiles of Central Bank notes referred to in Item "a" may be authorized by the Governor of the Central Bank for printed illustrations in articles, books, journals, newspapers, or other similar materials, and for numismatic, educational, historical, newsworthy or other purposes which do not tend in any way to defeat the objectives underlying the promulgation of these regulations: Provided, however ,That any such illustration shall be in black and white, and of a size not less than three-fifths (3/5) or more than one and one-half (1-) times in size of the currency note being illustrated. SECTION 2610. Collection of fines from banks The following regulations shall govern the collection of fines imposed on banks for willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor: a. Banks shall, within thirty (30) calendar days from receipt of the statement of account from the Central Bank, pay the fines imposed thereon for willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor. b. For banks which maintain demand deposit account with the Central Bank, fines which are unpaid after the lapse of the thirty-day period shall be automatically debited against the corresponding demand deposit account of the bank concerned: Provided ,That if the balance of the bank's account is insufficient to cover the fines due, such fines shall be paid not later than the following banking day. For the purpose of this paragraph "banking day" means a day on which the Central Bank and the head office of the bank are open for business. SECTION 2611. Guidelines governing the exchange of credit information . The following guidelines shall govern the exchange of credit information among financial intermediaries. SUBSECTION 2611.1 Participating institutions a. In general, all financial intermediaries including GSIS and SSS which are required to submit periodic reports on credit and equity exposures as prescribed under existing regulations and such other financial institutions which the Governor/Monetary Board may require to submit similar reports, are qualified to participate in the Credit Information Exchange System. b. Any participant which is not up-to-date in the submission of its reports on credit and equity exposures shall not be entitled to credit information from the System. SUBSECTION 2611.2 Procedures a. Credit Inquiry Form 1) The prescribed credit inquiry form, shall be accomplished by the requesting institution and signed by its duly authorized officer. The name(s) and specimen signature(s),of the officer(s) authorized to sign the form, as well as subsequent changes in the authorized signatory shall be reported to the Department of Loans and Credit, Central Bank of the Philippines. 2) Prior clearance shall be obtained from the subject of inquiry which shall be indicated by the signature of the subject in the space provided for the purpose in the credit inquiry form, duly authenticated by the requesting institution. The consent of the subject is a pre-condition to the release of the credit information to the inquiring institutions. 3) The participant shall submit to the Department of Loans and Credit, Central Bank of the Philippines, the duly accomplished credit inquiry form. The System will assign Reference Number for each inquiry received for identification in the credit information report. 4) The credit inquiry form shall be automatically rejected by the System if the participant is not entitled to obtain credit information by virtue of Subsec 2611.1 "b" above. 5) All inquiries received shall be acted upon immediately. If the information cannot be released immediately, for one reason or another, the participant's representative shall be advised of the expected time and date of release thereof. 6) Financial intermediaries and government institutions, agencies and corporations shall not be the subject of inquiry. b. Credit Information Report 1) The reply format to be issued by the System shall indicate the inquiry number and date, but not the name of the subject. 2) The receipt of the Credit Information Report from the System shall be acknowledged by the participating institution's duly authorized representative by signing in the Register Book to be maintained for the purpose. SUBSECTION 2611.3 Available information a. List of financial institutions to which the subject has outstanding obligations. b. Aggregate amount of the outstanding obligations classified into "current" and/or "past due" whenever applicable, of the subject with all the reporting institutions, broken down into: 1) Loans 2) commercial papers/receivables/bonds purchased or sold with recourse 3) Lease contracts receivable 4) Stand-by letters of credit and/or guarantee 5) Regular and deferred letters of credit/authority to purchase 6) Commercial papers/receivables sold on a without recourse basis 7) Foreign borrowings c. Value of collaterals on aggregate basis. d. Aggregate equity investment of the reporting institutions with the subject corporation/individual. e. Total assets and net worth of the subject. SUBSECTION 2611.4 Sources of information . The information on the credit accommodations and equity investment of a borrower or groups of borrowers involving P1 million and above shall be based on data furnished by all banks (except rural banks),investment houses, finance companies and investment companies, including the GSIS and SSS and such other institutions which the Governor/Monetary Board may authorize to participate as compiled and computerized by the Central Bank for the purpose of credit information exchange among the participating institutions. SUBSECTION 2611.5 Costs . Initially and until revoked, revised or modified by subsequent orders/circulars, the participants shall be charged for administrative expenses a nominal fee of P50.00 for every reply to an inquiry. SECTION 2612. Clean note policy . In order to effect an expeditious withdrawal from circulation of unfit currency notes and allow the Central Bank to maintain a clean note policy, the guidelines and procedures embodied in Appendices 42, 43 and 44 shall strictly be observed. (As amended by CBP Circular 1176 dated May 25, 1988) SECTIONS 2613-2698 (Reserved) SECTION 2699. General provision on sanctions . Any violation of the provisions of this Part shall be subject to the penal provisions of Secs. 34 and 34-A of Republic Act No. 265, as amended. cdlex * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas . APPENDIX 1 FORMAT AFFIDAVIT ON TRANSFERS OF STOCK (Appendix to Subsec. 2131.4 (d)) REPUBLIC OF THE PHILIPPINES ) ) SS. AFFIDAVIT I, _______________________________________________, also known as ______________________________________________, with business address at ______________________________________________, and residential address at ________________________________, after having been duly sworn to in accordance with law depose and state that: 1. I am the transferee of __ (state quantity)__ shares of voting stocks of ___ (state name of bank) hereinafter to be referred to for brevity as "Bank",by virtue of ____ (state instrument of transfer) dated __________________. 2. In acquiring equity holding in the Bank, I acted with full awareness and understanding that the Bank is a duly organized domestic banking corporation, exercising and enjoying a right, franchise and privilege to engage in commercial banking business, decreed by law to be a nationalized industry, wherein at least seventy percent (70%),or with the authority of the Monetary Board and the approval of the President of the Philippines, sixty percent (60%) of the voting stock should be owned by citizens of the Philippines and that there exists prohibitions under the law against the holding by a corporation of voting stocks in excess of thirty percent (30%),or by any person or group of persons who are related to each other within the third degree of consanguinity or affinity or by corporations wholly-owned or majority of the voting stock of which is owned by such person or group of persons, in excess of twenty percent (20%) of the voting stock of the Bank. 3. Consonant with the policy of the Government as provided for in Commonwealth Act No. 108, as amended, otherwise known as the Anti-Dummy Law, and Republic Act No. 337, as amended, otherwise known as the General Banking Act, I hereby declare as follows a. The _ (state instrument of transfer) was not falsely simulated to evade the provisions of the New Constitution and Commonwealth Act No. 108, or the provisions of Republic Act No. 337, as amended, particularly Sections 12, 12-A, 12-B and 12-D imposing maximum equity holdings by any person or persons related to each other within the third degree of consanguinity or affinity, or corporations. b. The said shares of stock were acquired by me for valuable consideration from funds provided by me. c. As such transferee, I have title over the said shares of stock. 4. This Affidavit is executed for the purpose of stating under oath my bona fide title over the shares of voting stocks of the Bank, that in acquiring title over said shares I gave valuable consideration and that I shall comply with the requirements of all laws, rules, regulations with respect to my conduct as stockholder of the Bank. IN WITNESS WHEREOF, I hereby affix my signature this __________ day of __________________, 19 _______. ______________________ Affiant SUBSCRIBED and sworn to before me this ______________ day of _______, 19 ______, affiant exhibiting to me his Residence Certificate No. _________, issued at ____________________, 19 _____. Notary Public Doc. No. _________ Page No. _________ Book No. _________ Series of 19 _______ APPENDIX 2 SAFEGUARDS IN CONNECTION WITH BONDING OF ACCOUNTABLE OFFICERS AND EMPLOYEES OF STOCK SAVINGS AND LOAN ASSOCIATIONS (Appendix to Sec. 2148) 1. The Teller . He should not be allowed to accumulate more than a specific maximum amount to be determined by the association but in no case to exceed P10,000 in cash at any given time while in the performance of his duties. The procedures in this regard are as follows. a. Cash . All cash in excess of the maximum amount determined by the association shall be turned in to the cashier. When deposits received by a teller will increase his cash in excess of the maximum limit, the teller will immediately make a cash turn-in of, at least, the excess. Thus, although his transactions during the day may total more than the maximum limit, the amount of money directly in his custody at any given time will never exceed the limit. LLjur b. Checks and Other Cash Items . All COCI received by a teller should be stamped as "NON-NEGOTIABLE".The stamping should be made diagonally on the face of the check. Thus, all checks that are received by the tellers lose their further negotiability. There should, however, be an agreement with the association's depository banks whereby they will accept for deposit only to the account of the association the COCI previously stamped by the tellers as "NON-NEGOTIABLE".Therefore, only the association and nobody else can further negotiate these checks and only the association's depository bank will accept them and solely for deposit to its account. Thus, even in the remote possibility that someone presents a COCI stolen from the association to one of its depository banks, it will not be accepted for encashment. 2. The COCI Clerk . In view of the fact that all COCI received by the tellers are stamped "NON-NEGOTIABLE" as detailed above, the COCI clerk who records and processes these checks carries no accountabilities whatsoever. From the moment that a check is received up to the moment that it is deposited to the account of the association with one of its depository banks, that check is just a piece of paper to be processed and recorded. It will only reassume its negotiability upon its receipt by the association's depository bank. In cases, however, where checks are received by mail, the COCI clerk shall be charged with the duty of stamping the checks as "NON-NEGOTIABLE". 3. As an added precautionary measure, the manager/accountant/loan officer should check from time to time whether all COCI items received are stamped "NON-NEGOTIABLE".In the event that a COCI is not so stamped and results in financial loss on the part of the association, the employee charged with the duty to stamp and who failed to do so, shall be held personally responsible, together with the manager/accountant/loan officer, for the loss. MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES (Book II) Insert No. 82-2 (Page App. 3-1 of Book II) As of July 31, 1982 The list of reports required of Thrift Banks is amended by inserting after CBP-7-16-02 PDB*** (Statement of Condition) the following: "New Form No. Subject of Report Frequency Deadline xxx xxx xxx xxx " Report on Trust/Fund Semestral On or before Management Opera- (as an Attach- the 10th day tions ment to CBP- following end 7-16-02) of reference semester." APPENDIX 3 REPORTS REQUIRED OF THRIFT BANKS (Appends to Sec. 2161 (b) ) A. Required of Savings and Mortgage Banks and Private Development Banks New Form No. Subject of Report Frequency Deadline CBP-7-16-01 * Consolidated Report of Required Weekly Four banking days from end of and Available Reserve against reference week except for the report Deposit Liabilities for the week wherein the end of month falls in which case the deadline shall be the 7th banking day after the end of the month or the 4th banking day after the end of reference week, whichever is later. CBP-7-16-01.1 Report of Cash on Hand Weekly Four banking days from end of reference week except for the report for the week wherein the end of month falls in which case the deadline shall be the 7th banking day after the end of the month or the 4th banking day after the end of reference week, whichever is later. CBP-7-16-01.2 Special Time Deposits and Weekly Four banking days from end of Reserves Against Them reference week except for the report (Consolidated) for the week wherein the end of month falls in which case the deadline shall be the 7th banking day after the end of the month or the 4th banking day after the end of reference week, whichever is later. CBP-7-16-01-3 Supporting Schedules of Item 3.a Weekly Four banking days from end of in CBP-7-16-01 reference week except for the report for the week wherein the end of month falls in which case the deadline shall be the 7th banking day after the end of the month or the 4th banking day after the end of reference week, whichever is later. CBP-7-16-01-A Report of Changes in the Composi- As changes Two banking days following the tion of Securities (except Premyo occur day of change Savings Bonds) Held as Reserves for Deposit Liabilities CBP-7-16-01-B Report of Changes in the As changes Four banking days after end Composition of Premyo Savings occur of week except for the report for Bonds Held as Reserves for the week wherein the end of month Deposit Liabilities falls in which case the deadline shall be the 7th banking day after the end of the month or the 4th banking day after the end of reference week, whichever is later. CBP-7-16-01-C *** Consolidated Report of Required Weekly reference week and Available Reserves Against Deposit Liabilities CBP-7-16-01-C.1 *** Report of Cash on Hand Weekly reference week CBP-7-16-02-SB ** ) Statement of Condition Quarterly Ten banking days after end of CBP-7-16-02 PDB *** ) quarter * For banks which are not participating in CRDC Program. ** For savings banks only. *** For private development banks only. CBP-7-16-02SB-A * ) Selected Financial Accounts *** Part I Quarterly Ten banking days after end of CBP-7-16-02PDB-A ** ) Part II-Semestrally quarter CBP-7-16-02 SB.1 * ) Breakdown of Due from/Due to Quarterly Ten banking days after end of CBP-7-16-02 Local Banks and Domestic quarter PDB.1 ** ) Deposit Liabilities CBP-7-16-02.2 SB * ) Breakdown of Domestic Deposits Quarterly Ten banking days after CBP-7-16-02.2 PDB ** ) end of quarter CBP-7-16-03 SB * ) Consolidated Statement of Condition Quarterly The original and published CBP-7-16-03 PDB ** ) (Published) reports within 12 and 20 banking days, respectively, from receipt of call to the bank by the DCSB Director CBP-7-16-04-PDB ** Consolidated Report of Income, Semestral Twenty banking days after end of Expenses, Undivided Profits and calendar semester/year Surplus Accounts CBP-7-16-04-SB * Consolidated Report of Income, Semestral Twenty banking days after end of Expenses, Undivided Profits and calendar semester/year Surplus (Free) CBP-7-16-04A SB * ) Report of Income and Expenses Semestral Ten banking days after end of CBP-7-16-04A PDB ** calendar semester/year CBP-7-16-05 Consolidated Statement of Condition Monthly Seven banking days after end of month CBP-7-16-05-B ** Consolidated Statement of Condition Monthly Seven banking days after end of month CBP-7-16-05 B.4 ** Schedule of Outstanding Loans to Quarterly (an Seven banking days after end Directors, Officers and Stockholders attachment to of quarter and their Related Interests CBP-7-16-05-B ** ) (DOSRI) CBP-7-16-05.1 Breakdown of Due from/Due to Quarterly (an Seven banking days after end Local Banks and Domestic Deposit attachment to of quarter Liabilities Banks CBP-7-16-05-B ** ) CBP-7-16-05.2 Breakdown of All Deposit Liabilities Quarterly (an Seven banking days after end by Type attachment to of quarter CBP-7-16-05-B ** ) CBP-7-16-05.3 Breakdown of Borrowings/Funds Quarterly (an Seven banking days after end Obtained attachment to of quarter CBP-7-16-05-B ** ) CBP-7-16-05.4 Computation of Investment Deposit Quarterly Seven banking days after end Ratio of quarter * For savings banks only. ** For private development banks only. *** To be submitted in lieu of CBP 7-16-02 SB and CBP 7-16-04 A by each extension office/savings agency/sub-branches/money shop under the supervision of reporting branch/office. CBP-7-16-05.5 Bills Payable Deposit Seven banking days Substitute Outstanding Monthly after end of month CBP-7-16-05.6 Breakdown of Private Loans and Monthly Seven banking days Investments in Bonds and Other after end of month Debt Instruments CBP-7-16-05.7 Breakdown of Bills Payable and Monthly Seven banking days Deposit Substitutes Contingent after end of month CBP-7-16-05.8 Breakdown of Peso Time Certificates Monthly Seven banking days after end of Deposits as to Maturity of month CBP-7-16-05.9 Schedule of Reconciling Items Quarterly Twenty-five banking days after Lodged in Due From/Due to end of quarter Head Office, Branches and Agencies CBP-7-16-05.10 Breakdown of Loan Portfolio and Monthly Seven banking days after end Investment Accounts Classified of month as to Type of Borrowers CBP-7-16-05.11 Breakdown of Deposit Liabilities Monthly Seven banking days after end of Private Residents of the of month Philippines CBP-7-16-05.12 Breakdown of Other Assets and Monthly Seven banking days after end Liabilities of month CBP-7-16-05.13 Miscellaneous Monthly Seven banking days after end CBP-7-16-05.14 Additional Information for Agri- of month cultural Credit Loan P.D. 717 CBP-7-16-06 Consolidated Report of Invest- Monthly Seven banking days from ment in Bonds and Other Debt reference month Instruments and Selected Trading Account Securities CBP-7-16-07 * Statement of Capital Required and Weekly Four banking days after end Capital Accounts under Sec. 22 or of week except for the week 30 of R.A. 337, as amended wherein the end of month falls in which case the deadline shall be the 7th banking day after the 4th banking day after the end of reference month or the 4th banking day after the end of reference week, whichever is later. * For banks which are not participating in CDRC Program. CBP-7-16-07-A Daily Report on Compliance Weekly Four banking days after end with Aggregate Ceiling on Direct/ of week except for the week Indirect Credit Accommodations wherein the end of month falls to Directors/Officers/Stock in which case the deadline shall holders/Related Interest (DOSRls) be the 7th banking day after the 4th banking day after the end of reference month or the 4th banking day after the end of reference week, whichever is later. CBP-7-1647-B) Daily Report on Compliance with Weekly Four banking days after end CBP-7-1647-B-1) Individual Ceiling on Direct Credit of week except for the week Accommodations to Directors/ wherein the end of month falls Officers/Stockholders in which case the deadline shall be the 7th banking day after the 4th banking day after the end of reference month or the 4th banking day after the end of reference week, whichever is later. CBP-7-16-08 Consolidated Report on Govern- Monthly Seven banking days after ment Funds Held end of reference month CBP-7-16-08.1 Breakdown of Government Funds Monthly Seven banking days after Held in the Form of Deposit end of reference month Liabilities CBP-7-16-08.2 Breakdown of Government Funds Monthly Seven banking days after Held in the Form of Trust Funds end of reference month CBP-7-16-08.3 Breakdown of Government Funds Monthly Seven banking days after Held in the Form of Other Non- Deposit Liabilities CBP-7-16-11 List of Stockholders and Their Complete list- Complete list-twelve banking Stockholdings yearly Changes days from beginning of year quarterly Changes-seven banking days after end of quarter CBP-7-16-12 Report on Dividends Declared On every Ten banking days after date of declaration dividend declaration CBP-7-16-13 Consolidated Report on Compliance Semi-annually Fifteen banking days after end of with Aggregate Ceiling on Credit semester Accommodations to Directors/ Officers/Stockholders/Related Interests (DOSRls) CBP 7-16-13-A Report on Stockholdings of Bank's Semi-annually Fifteen banking days after end of Directors/Officers/Stockholders/ semester Relatives in Borrowing Corporation/ Association/Firm CBP-7-16-15 Consolidated Report on Com- Semi-annually Fifteen banking days after end of pliance with Individual Ceiling on semester Credit Accommodation to Directors/Officers/Stockholders CBP-7-16-15.A Report on Financing Plan for Semi-annually Fifteen banking days after end of Officers semester CBP-7-16-15.B Report on Financing Plan for Semi-annually Fifteen banking days after end of Employees semester CBP-7-16-15.C Contingent Accounts of Directors/ Semi-annually Fifteen banking days after end of Officers/Stockholders/Related semester Interests (DOSRls) CBP-7-16-16 Schedule of Banking Hours and As changes occur Seven banking days prior to Days effectivity of change CBP-7-16-17 Reports of Loans Granted under As loan is Twenty banking days from date Sec. 83 of R.A. 337, as amended approved of approval of loan, whether direct or indirect, granted to any bank director or officer CBP-7-16-18 SB * Biographical Data of Directors/ Annually and as Within twenty-five banking days CBP-7-16-18 PDB * Officers changes in the after end of calendar year, seven composition of banking days after election/ the Board of appointment directors/ officers occur CPB-7-16-19 Report on Compliance with the Quarterly After end of quarter Obligation to Withhold the Tax on Interest Income of Non- Resident Foreign Individuals or Corporations Not Engaged in Trade or Business in the Philippines CBP-7-16-20 Report on Crimes/Losses As crime or Within forty-eight hours from incident occurs knowledge of crime or incident CBP-7-16-21 Notice/Application for Write- As write-off Twenty-five banking days prior off of Loans and Advances occurs to the intended date of write-off CBP-7-16-22 *** Consolidated Report of Required Weekly Four banking days after end of and Available Reserves against reference week except for the Deposit Substitutes and Inter- report for the week wherein the bank Loans end of month falls in which case the deadline shall be the 7th banking day after the end of reference week, whichever is later CBP-7-16-25 Sworn Statement on Quasi- Monthly Fifteen banking days after end Banking Operations of reference month * For savings banks only. ** For private development banks only. *** For banks which are not participating in CDRC Program. CBP-7-16-27 Consolidated Report on the Utiliza- Monthly Twelve banking days after end tion of Loanable Funds Set Aside of reference month for Agrarian Reform Credit/ Agricultural Credit CBP-7-16-27-A Consolidated Report on Existing Monthly Twelve banking days Eligible Government Securities after end of reference Held for Temporary Investment month CBP-7-16-29 Application for the Temporary as application is Not later than the banking Use of CBCls and Other Govern- made day immediately following ment Securities with Remaining the day when the bank incurred Maturities of LESS than Two (2) a reserve deficiency Years Not Otherwise Eligible as Reserves Against Deposit Liabilities CBP-7-16-31 Sworn Statement on Real Estate As transaction is Ten banking days after Transaction approved approval of transaction CBP-7-16-32 Loans/Credit Granted to Builders Monthly Five banking days after end or Purchasers of Units/Shares in of month Condominium Projects, Country Clubs, Sports Clubs and Other Real Property Developments CBP-7-16-35 Reports on Credit and Equity P20M and above on or before the 10th day Exposures to Individuals/Com- exposure 2 of the month following the panies/Groups Aggregating times (every first reference month P1 Million/P20 Million and and second month above of the quarter) P1M and above On or before the 15th exposure banking day following the quarterly reference month CBP-7-16-35 Schedule of Total Assets and (to follow (to follow deadline of Annex "A" Net Worth of Borrowers, frequency of above above report to which Issuers, Lessees and Accountees report to which attached) Reported in Section I and VII attached) of CBP-7-16-35 Report of outstanding loans Monthly Within 10 banking days granted secured by pledges/ after the end of reference assignment of shares of stock month (whether partially or fully secured) Unnumbered (No. Information Required Under Yearly Not later than end of January of the prescribed form) Memorandum to all Banks and following year Non-Bank Financial Intermediaries dated October 28, 1975 Unnumbered Reconciliation Statement Between Head Office and Branch Transactions (Unnumbered List of Unresponded or Outstanding As necessary Within 30 days after six-months period Items for More than Six Months in Monthly Reconciliation Statements of Head Office and Branch Transactions B. Required of Stock Savings and Loan Associations CBP 7-19-01.A Daily Report on Compliance with 6 banking days after Individual Ceiling on Direct end of reference week Credit Accommodations to Directors/ Officers/Stockholders CBP 7-19-01.B Daily Report on Compliance with 6 banking days after Aggregate Ceiling on Direct/Indirect end of reference week Credit Accommodations to Directors/ (Effective May 24, 1984) Officers/Stockholders/Related Interest (DOSRI) CBP-7-19-01-B *** Consolidated Weekly Reports Weekly Thursday following reference on Required and Available week Reserves Against Deposit Liabilities CBP-7-19-01.C Certification on the Daily Report 6 banking days after on Compliance with Individual end of reference week Ceiling on Direct Credit Accommodations (Effective May 24, 1984) to Directors/Officers/Stockholders CBP-7-19-02-B *** Statement of Capital Required Weekly Thursday following and Capital Accounts under reference week Sections 22 or 30 of Republic Act No. 337, as amended * For banks which are not participating in CDRC Program. CBP-7-19-04-B Consolidated Monthly Statement Monthly on or before the 10th of the of Condition following month CBP-7-19-04-B.1 Consolidated Monthly Schedule Monthly on or before the 10th of the of Savings and Time Deposits following month CBP 7-19-04-B.2 Report on Status of Outstanding 10 banking days after Loans to Directors/Officers/ end of reference quarter Stockholders and their Related (Effective May 24, 1984) Interests (DOSRI) CBP-7-19-04-B.4 * Statement of Condition Quarterly 10th day after end of reference quarter CBP-7-19-04.B SLA Breakdown of Domestic Deposits Quarterly 10th day after end of reference quarter CBP-7-19-05-B Consolidated Semi-Annual Report Semi-annually on or before the 30th day after of Earnings, Expenses, Surplus and the close of every semester Dividends CBP-7-19-05-B.1 * Statement of Income and Expenses Quarterly 10th day after end of reference quarter CBP-7-19-06-B Consolidated Report of Invest- Monthly On or before the 10th of the ments in Loans and Discounts following month CBP-7- 1 9-07-B Consolidated Cash Flow Monthly On or before the 10th of the following month CBP-7-19-08-B Consolidated Condensed Statement Annually On or before the 60th day after Condition December 31 CBP-7-19-09-B Consolidated Report on the Monthly Within 12 days after the end Utilization of Loanable Funds of applicable month Set Aside for Agricultural Credit CBP-7-19-10-B.2 ** Report on Beneficiaries Loan Quarterly On or before the 10th day (Sub-loan Application) after each quarter CBP-7-19-10-B.2.1 ** Consolidated Report on Existing Monthly 12 banking days after end of Eligible Government Securities reference month Held for Temporary Investment CBP-7-19-10-B.3 * Loan (Sub-Loan) Portfolio Quarterly On or before the 10th day after each quarter CBP-7-19-10-B.4 * Loan (Sub-Loan) Portfolio by Size Quarterly On or before the 10th day after each quarter * Applicable only to stock SLAs with branches. ** Applicable only to participating stock SLAs in the CB:IBRD Third Rural Credit Project. ** Applicable only to SLAs authorized to accept government deposits. CBP-7-19-10-B.5 ** Recoveries and Maturity Extension Quarterly On or before the 10th day after each quarter CBP-7-19-10-B.6 * Quarter-end Status of overdue Quarterly On or before the 10th day after Loan Principal and Interest each quarter CBP-7-19-11 List of Stockholders and their a. Complete list 12 banking days Stockholdings from beginning of year b. Changes 7 banking days after end of quarter (effective May 24, 1984) CBP-7-19-12-B Report on Financing Plan for Officers Semi-annually 15 banking days after end of reference semester CBP-7-19-12-B.1 Report on Financing Plan for Employees Semi-annually 15 banking days after end of reference semester CBP-7-19-13 Consolidated Report on Compliance 15 banking days after with Aggregate Ceiling on Credit end of semester Accommodations to Directors/ Officers/Stockholders/Related Interest (DOSRIs) CBP-7-19-13.A Report on Stockholdings of Banks' 15 banking days after end of semester Directors/Officers/Stockholders/ (effective May 24, 1984) Relatives in Borrowing Corporation/ Association/Firm CBP-7-19-15 Consolidated Report on Compliance 15 banking days after end of semester with Individual Ceiling on Direct Credit Accommodations to Directors, Officers/ Stockholders CBP-7-19-15.C Contingent Accounts of Directors/ 15 banking days after end of semester Officers/Stockholders/Related (effective May 24, 1984) Interests CBP-7-19-16 ** Consolidated Report on Government Monthly Three (3) banking days after Funds Held the end of the month CBP-7-19-16.1 ** Breakdown of Government Funds Monthly Three (3) banking days after held in the Form of Deposit Liabilities the end of the month * Applicable to participating stock SLAs in the CB IBRD Third Rural Credit Project. ** Applicable only to SLAs authorized to accept government deposits. CBP-7-19-16.2 ** Breakdown of Government Funds Monthly Three (3) banking days after Held in the Form of Non-Deposit the end of the month Liabilities CBP-7-19-41-B Plantilla of Organization Annually and January 31 of every year and ten days whenever after any change changes occur CBP-7-19-42 SLA Biographical Data of Directors/ Annually Within 25 banking days after end of Officers calendar year CBP-7-19-45-B Application for Availment of the Everytime an Not later than the banking day Privilege to Use CBCIs and Other application is immediately following the day when Government Securities with made the bank incurred a reserve deficiency Remaining Maturities of Less Than Two Years Not Otherwise Eligible as Reserves Against Deposit Liabilities CBP-7-19-45-B.1 Investment in Securities (to accompany Everytime an Tuesday following reference week CBP 7-19-45-B) application is made CBP-7-19-46-B Sworn Statement on Real Estate As transaction is Ten banking days after approval of Transaction approved transaction Report of Loans Granted As loan is 20 banking days from date of approval under Sec. 83 of R.A. approved of loan, whether direct or indirect, 337, as amended granted to any bank director or officer (effective April 25, 1984) ** Applicable only to SLAs authorized to accept government deposits. CBP-7-19-50B Report on Crimes/Losses As crime or Within forty eight hours from incident occurs knowledge of the crime or incident Unnumbered (No Serial Number of Time Deposits Everytime a new prescribed form) set of certificates is printed Specimen Signature of Signing Annually Upon assumption of office Officers/Directors Report of Change of Directors/ As changes occur Within 10 days after any such Principal officers change CBP-7-16-35 Report on Credit and Equity Ex- P20 M and above On or before the 10th day of posure to Individuals/Companies/ exposure 2 the month following the Groups Aggregating P1/P20 times (every first reference month Million and Above and second month of the quarter) P1 M and above On or before the 10th day of exposure the month following the quarterly reference quarter CBP-7-16-35- Schedule of Total Assets and Net Quarterly On or before the 10th day of Annex "A" Worth of Borrowers, Issuers, the month following the Lessees and Accountees Reported reference quarter in Sections I to Vll of CBP-7-16-35 Bonding of Accountable officers As necessary Before assumption of office and Employees Audit Engagement Contract of an Annually Upon consummation of contract Independent CPA Affidavit of the Publication of Annually Within 2 weeks after publication Mailing of Year-End Financial or mailing Statements Notice Application for Write-Off As write-off 30 days prior to the intended date of of Loans occurs write-off Report on CB:IBRD Arrearages Monthly On or before the 10th of the month following the reference month or every CB:IBRD application whichever is less frequent Information Required Under As changes occur Immediately after change Memorandum to All Banks and Non-Bank Financial Intermediaries dated October 28, 1975 Loans/Credits Granted to Builders Monthly Five banking days after end of or Purchasers of Units/Shares in month Condominium Projects, Country Clubs, Sports clubs and Other Real Property Developments Reconciliation Statement Bet- Yearly Not later than end of January ween Head Office and Branch of the following year Transactions List of Unresponded or Outstanding As necessary Within 30 days after six-month Item for More than Six Months period in Monthly Reconciliation Statements of Head Office and Branch Transactions Copy of the Written Approval of Everytime a loan is Immediately after approval of Any Loan Granted to officers and/ granted to any the loan or Directors director and/or officer Report of Discrepancies of Accounts Everytime a Within 15 days from discovery discrepancy of discrepancy occurs Certification as to the Last Number Annually Five days after the close of the of Board Resolution Adopted year Duplicate of Board Resolution Every meeting Within 5 days after adoption or approval Annual Report of Management to Annually Stockholders Covering Results of Operations for the Past Year Audited Financial Statements for the Annually Ninety days after the start of the audit Past Year Prepared by the External Auditor Categories of Reports: Category A-1 CBP 7-16-03SB, CBP 7-16-03PDB and CBP 7-19-03-B (Consolidated Statement of Condition Published) Category A-2 CBP 7-16-02SB ) CBP 7-16-02PDB ) Statement of Condition CBP 7-19-04-B.4 ) CBP 7-16-05 ) CBP 7-16-05-B ) Consolidated Statement of Condition Category B All other reports not mentioned in Category A-1 and A-2 above. Memo Outstanding Monthly Within 10 banking days June 11, 1984 Loans Secured by Shares after the end of reference month. of Stocks of Other Banks/ NBQBs CBP-7-16-35-DCSB Revised report on trust and fund Quarterly 10 banking days from end management operations of reference quarter (Effective Feb. 28, 1983) Categories of Report: Category A-1 CBP 7-16-03SB, CBP 7-16-03 PDB and CBP 7-19-03-B (Consolidated Statement of Condition Published) Category A-2 CBP 7-16-02SB ) CBP 7-16-02 PDB ) Statement of Condition CBP 7-19-04-B.4 CBP 7-16-05 ) Consolidated Statement of Condition CBP 7-16-05-B Category B All other reports not mentioned in Category A-1 and A-2 above. MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES (Book II) Insert No. 82-1 (Page App. 3-1 of Book II) As of July 31, 1982 The list of reports required of Thrift Banks is amended by inserting after CBP 7-16-02 PDB*** (Statement of Condition) the following: "New Form Subject of Report Frequency Deadline No. xxx xxx xxx " Report on Status/Fund Semestral On or before the Management Operations (as an attach- 10th day following ment to CBP- end of reference 7-16-02) semester." MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES (Book II) Insert No. 82-1 (Page App. 3-2 of Book II) As of July 31, 1982 The list of reports required of thrift banks is amended by inserting after CBP 7-16-05 the following: "New Form Subject of Report Frequency Deadline No. xxx xxx xxx " Report on Status of Quarterly Seven banking Outstanding Loans to (As an attach- days after end Directors, Officers, ment to CBP- of quarter." Stockholders and their 7-16-05) Related Interests APPENDIX 8 CERTAIN INFORMATION REQUIRED FROM BANKS AND NON-BANK FINANCIAL INTERMEDIARIES (Appendix to Subsec. 2161.3) 1. Name of Institution 2. Address 3. P.O. Box Number 4. Cable address or cable code 5. Board of Directors including Corporate Secretary; a. Names of Chairman, Vice-Chairman and Directors b. Number of directors per By-laws c. Number of vacancies in the Board d. Names of corporations where they serve as Chairman of the Board or as President and names of other business enterprises of which they are proprietors or partners e. For the Corporate Secretary, indicate if he is also a Director f. Date of annual election of directors per By-laws 6. Executive officers including Auditor: a. Names and titles b. Telephone Number of each officer (office c. For the Executive Vice-President, state the names of corporations where he serves as Chairman of the Board and names of other business enterprises of which he is proprietor or partner d. For Vice-Presidents and other officers with non-descriptive titles, indicate area of responsibility, e.g.,Vice-President for Operations or Vice-President, International Department e. For commercial banks, savings and mortgage banks, private development banks, DBP, Land Bank and Amanah Bank, include from President to Department Heads f. For investment houses, financing companies, investment companies and security dealers/brokers, include from President to Vice-President g. For rural banks, stock savings and loan associations, non-stock savings and loan associations and building and loan associations, include from President to Accountant h. For lending investors, include only the two highest officers 7. Branches, agencies and extension offices: a. Name of branch, agency or extension office, e.g.,Quiapo Branch or Makati Agency b. Address c. Names and telephone numbers of: (1) Manager (2) Cashier (3) Accountant d. For agencies and extension offices, indicate name of mother branch. The Director SES Department Central Bank of the Philippines A. Mabini St.,Manila Dear Sir: This is to inform your Office that during the annual/special meeting of the stockholders of _______________________________, and pursuant to the Articles of (Name of Bank/NBQB) Incorporation and By-Laws of __________________________________________, (Name of Bank/NBQB) the undersigned was duly elected to the position of Chairman/Vice-Chairman/Director of the Board of Directors. I officially assumed my duties as Chairman/Vice-Chairman/Director effective the business hours of ____________________________. (Date) I was likewise elected/appointed as Chairman/Vice-Chairman/Member of the following Committee/s of ___________________________________: (Name of Bank/NBQB) 1. 2. 3. I further certify that I own _______________________ ( ) shares of the capital (Name of Bank/NBQB) stock of ______________________ which share/s stand in my name on the books of ______________________________. (Name of Bank/NBQB) Very truly yours, ATTESTED BY: (Name and Signature) Corporate Secretary (Position/Designation) APPENDIX 9 DOCUMENTS/INFORMATION ON ORGANIZATIONAL STRUCTURE AND OPERATIONAL POLICIES (Appendix to Subsec. 2161.3) 1. Chart of the firm's organizational structure or any substitute therefor; 2. Name of departments/units/offices with their respective functions and responsibilities; 3. Designation of positions in each department/unit/office with the respective duties and responsibilities; 4. Manual of Instructions or the like embodying the operating policies/procedures of each department/unit/office, covering such areas as: a) Signing/delegated authority; b) Procedure/flow of paper work; and LibLex c) Other matters. 5. Memoranda-Circulars or the like issued covering organizational and operational policies; 6. Sample copies of each of the forms/reports used by each office/unit/department other than those submitted to the Central Bank; and 7. Such other documents/information which may be required from time to time by the supervisory/regulatory department concerned. APPENDIX 14 TIPID MOVEMENT MANUAL (Appendix to Subsec. 2215.1) I. Concept The TIPID Movement is a school savings project of the National Commission on Savings. The name of the movement is derived from the Tagalog word "Tipid" which means thrift. It is also an acronym for Thrift Incentives for Progress through Industry and Discipline which sums up the philosophy behind the project. Thus the title suggests the training of school children in the habit of thrift and the mobilization of their small savings through the medium of banks. Savings may come from income derived through the children's labor and industry or through postponement of present spending in favor of satisfying more important future needs. The TIPID Movement, which is being implemented by the Department of Education and Culture, the banks and the Central Bank, is aimed towards instilling in students the benefits to be gained from the good habit of saving in banks for himself in particular, and for the nation in general. cdpr II. Purpose Saving is a desirable habit and a form of discipline that ought to be developed in a person at an early age. The purpose of the TIPID Movement therefore is to inculcate in school children the habit of thrift and teach them the value and advantages of saving in banks. III. Savings Club The principal instrument of action of the TIPID Movement is the Savings Club which will be organized in all elementary and secondary schools, both private and public, in the entire country. It is, therefore, advisable that savings clubs be organized as early as possible. A. Objectives of the Club 1. To encourage the habit of thrift among school children and motivate them to save in banks. 2. To seek and develop sources of income for its members; and 3. To promote the role of savings club as an effective savings vehicle for the students. B. Club Members Every student in the elementary and secondary schools, both public and private, is eligible to be a member of the TIPID savings club organized in his class or grade level. C. Club Officers The savings club is an organization of, by and for the school children. As such, its officers shall be chosen exclusively from among its members. D. Responsibilities of Officers The primary responsibility of the club officers shall be to administer the affairs of the club. They shall formulate and implement measures that will help in achieving the club's objectives. The savings club shall choose its depository bank. In the case of schools where there are more than one savings club (i.e. each class or grade has a savings club),a committee consisting of their respective presidents or representatives assembled for the purpose shall choose one depository bank for the entire school. The chosen depository bank shall be advised officially by the president of the club or, as the case may be, by the chairman of the committee, of its designation, the advice to be attested to by the head or principal of the school E. Club Adviser The teacher-in-charge of the class shall serve as adviser of the savings club and, as such, shall guide the officers of the club in the formulation and implementation of the programs and projects of the club. The moral influence of the teacher-adviser will play an important role in the accumulation of savings by the club members. Under the guidance of the teacher-adviser, the savings club shall set a savings goal on a daily, weekly, or monthly basis for the club. The adviser may, when needed, set aside for the activities of the club, a class period such as the social studies period. To enable them to gain knowledge of banking, school children shall be encouraged under the TIPID Movement to transact directly with banks or the bank's solicitors in the schools. The teacher-adviser shall foster this objective of the Movement by refraining from taking custody of, or assuming responsibility for, the money of the children. IV. Sources of Savings Under the TIPID Movement, savings, to be meaningful, should come primarily from income generated through the productive efforts of the student himself. Thus, an integral part of the TIPID Movement is the encouragement of students to engage in productive endeavors such as: 1. raising a backyard garden (vegetables, ornamental plants, flowering plants, etc.); 2. running errands and doing odd jobs; 3. making leather, wood and other handicraft products; 4. buying and selling scrap paper, old newspapers, etc.;and 5. running other small scale or home industries. The assistance of government agencies, particularly barangay and civic organizations, may be sought in this regard. V. Participation of Banks in the Movement All banks are eligible to participate in the TIPID Movement. However, a participating bank shall have to notify the Central Bank Committee on Savings. This notification may be in the form of a letter of manifestation to be submitted by the bank together with the advice of the school savings club that it has been chosen the depository bank. A bank which is not the official depository bank of any school savings club but which services deposits of school children may also participate in the Movement by notifying the Central Bank Committee on Savings. When promoting the TIPID Movement, participating banks may distribute gifts or "giveaways beyond the 30-day limit stipulated under Subsec. 2261.2 and may be allowed to do so even on occasions other than (a) the inauguration or transfer of office; (b) a bank anniversary celebration; and (c) the Christmas season. However, all other provisions governing the distribution of gifts or "giveaways" shall be complied with. Banks are urged to encourage and support school projects which will help generate income for students. Bank officers are also encouraged to appear in symposia and other less formal gatherings inside the school premises for the purpose of motivating school children to save. A. Depository Bank 1. Any bank may be the depository of the accumulated savings of the members of the school savings Cub. 2. In areas where there exists only one bank, that bank shall, as a matter of course, be the depository bank. 3. In towns/cities where there is more than one bank, the depository bank shall be the one chosen by the school savings club. B. Solicitation The depository bank is authorized to solicit deposits of students within the premises of the school. Whenever practicable or within its means, therefore, the depository bank should send a solicitor to the school to service deposits and withdrawals of the students. The following shall be observed by the solicitor when servicing deposits and withdrawals: 1. The authorized solicitor who shall be properly bonded, shall present a letter of introduction addressed to the head of the school, together with the bank's prescribed identification card which the solicitor shall wear at all times during the solicitation. 2. Depositors shall be required to accomplish "Signature Cards" when opening an account. 3. Pre-numbered deposit slips, in duplicate, shall be used. The duplicate shall be given to the depositor and the original retained to serve as posting medium. 4. With proper safeguards, withdrawals may also be effected through the bank solicitor. 5. At the close of every solicitation day, a Report of Deposit Collection shall be accomplished in triplicate (original to bank, and a copy each to solicitor and school) by the solicitor. Inclusive number of used deposit slips, accomplished withdrawal and collection slips as shown in the report shall be turned over to and acknowledged by the cashier. 6. Passbooks shall be returned to the depositors not later than the following soliciting day. A copy of the Report of Deposit Collection of the last soliciting day shall be submitted to the head of them school. 7. The bank shall arrange with the school the dates, place and time of solicitation and shall post notices thereof in a conspicuous place in the school premises. C. Quarterly Report To enable the Central Bank to monitor effectively the trend of savings deposits under the TIPID Movement, banks shall submit a quarterly report form duly accomplished not later than fifteen (15) banking days from the end of the quarter covered by the report. For purposes of the quarterly report, TIPID Movement accounts shall consist of all student deposit accounts in participating banks of elementary and secondary schools. VI. Presidential Decree on Deposits of Minors Under Presidential Decree No. 734 dated June 25, 1975, minors who are at least seven (7) years of age, able to read and write, have sufficient discretion, and are not otherwise disqualified by any other incapacity, are given special capacity and power, in their own right and in their own names, to make savings or time deposits with and withdraw the same as well as receive interest thereon, from banking institutions without the assistance of their parents or guardians. Parents and guardians, however, may deposit for their minor children and wards, respectively. APPENDIX 15 EXCERPTS FROM PRESIDENTIAL DECREE NO. 465 ON THE CLASSIFICATION OF PROVINCES, CITIES AND MUNICIPALITIES (Appendix to Subsec. 2223.1) "SECTION 1. Classification of Provinces and Cities . Provinces and cities, except Manila and Quezon City, are divided into five main classes according to their average annual income during the last four fiscal years, as follows: (a) First Class . The provinces and cities that have obtained an average total revenue of three million pesos or more per annum; (b) Second Class . The province and cities that have obtained an average total revenue of three one million five hundred thousand pesos or more but less than three million pesos per annum; (c) Third Class . The provinces and cities that have obtained an average total revenue of one million pesos or more but less than one million five hundred thousand pesos per annum; (d) Fourth Class . The provinces and cities that have obtained an average total revenue of five hundred thousand pesos or more but less than one million pesos per annum; and (e) Fifth Class . The provinces and cities that have obtained an average total revenue of less than five hundred thousand pesos per annum. Revenue ,as used herein, shall be interpreted to mean all income and receipts accruing to the province or city except unappropriated balances, proceeds from bond issues, proceeds from or repayment of loans, aid from National Government, private contributions or donations, return of advances to economic enterprises, sales of fixed assets, income from sale of real property, prior year's adjustment, and other receipts not regularly recurring each fiscal year. "SECTION 2. Classification under this Decree . Upon the effectivity of this Decree, and for each period of four consecutive fiscal years thereafter, the Secretary of Finance shall classify all provinces and cities, except Manila and Quezon City, which shall remain as special class cities, on the basis of the average total revenues of each province or city derived during the last four consecutive fiscal years immediately preceding such classification according to the provisions of this Decree as certified by the Chairman, Commission on Audit; Provided ,That the first classification shall take effect July first, nineteen hundred and seventy-four; Provided, further ,That a province or city which has been existence for a period of less than four full fiscal years immediately preceding the initial classification herein provided shall be classified on the basis of its average income during such lesser number of full fiscal years immediately following its organization as such province or city; and Provided, finally ,That no readjustment of classification shall be made oftener than once in four consecutive fiscal years after the first classification provided in this Decree, except in cases of diminishing revenues when the Secretary of Finance may order at any time the readjustment of the classification of any province or city in accordance with the foregoing schedule." aisadc APPENDIX 16 PRO-FORMA ORDER OF WITHDRAWAL FOR "NOW" ACCOUNTS (Appendix to Sec . 2227) The order of withdrawal form shall have a size of three (3) inches of six and three eight (6-3/8) inches, and shall be on security/check paper. It shall contain as a minimum the features contained in the following pro-forma order of withdrawal: FRONT Acct. No. __________ No. ___________ ORDER OF WITHDRAWAL "NOW" ACCOUNTS _____________, 19 ____ Pay to __________________ the amount of PESOS ____________ (P______) NAME OF DRAWEE BANK Address __________________ Drawer/Depositor BACK Important 1. This order of withdrawal shall be payable only to a specific person, natural or juridical, and not to bearer nor to the order of a specific person. 2. Only the payee can encash this order of withdrawal with the drawee bank, or deposit it in his account with the drawee bank or with any other bank. APPENDIX 17 SEC PRESCRIBED FORMAT FOR CERTIFICATION ON DEPOSIT (Appendix to Subsec. 2262.b) ___________________ (Date) The Securities and Exchange Commission Greetings : This is to certify that there is on deposit with this bank the sum of ________________________ (P _______________) in the name of Treasurer-in-trust for _________________________ which is in the process of incorporation. The said deposit is clear and free from liens, restriction, condition or holdout and may be withdrawn in behalf of said company upon presentation of proof of due incorporation thereof. __________________________ (Bank) By: __________________________ (Designation) SUBSCRIBED AND SWORN to before me this ______ day of ______, 19___, at ___________________ affiant exhibiting to me his/her Residence Certificate No. A- ___________________, issued at _____________ on ____________, 19______. Notary Public Until December 31, 19 ______ PTR No. _______________ Issued at _______________ On ___________________ Doc. No. ___________ Page No. ___________ Book No. __________ Series of 19_________ APPENDIX 18 MAXIMUM MATURITY OF LOANS FROM THE CENTRAL BANK TO INSTITUTIONAL BORROWERS (Appendix to Subsec. 2273) I. Farm Crops A. 150 days White Corn B. 180 days Sorghum Soybean Yellow Corn C. 210 days Citrus * Mango * Rice ** D. 240 days Atis * Chico * E. 270 days Cotton F. 360 days Abaca ** Ginger Banana ** Papaya * Cassava Pineapple * Coconut * Sugar * Coffee * II. Poultry, Fish and Livestock A. 90 days Poultry: Broiler B. 120 days Fish C. 180 days Poultry: Duck raising (Production, day old 4 mos.) Livestock: Rabbit D. 210 days Livestock: Goats E. 270 days Poultry: Duck raising (Duck egg Production 4 mos. old stock) Livestock: Hog Raising Fattening (2) mos. old stock) F. 360 days Poultry: Egg production (ready to lay pullets) Livestock: Cara beef (yearling stock);Cattle Raising Cattle fattening 270-360 days (1-1 & yrs. old stock) Hog Raising Fattening (2 mos. old stock) III. Vegetables A. 90 days Mustard Pechay B. 130 days Sweet green corn C. 150 days Cabbage Giant Pepper Carrot Sweet potato Cauliflower D. 180 days Beans (red, Baguio, Bongo Navy) Cowpea Okra Cucumber Peanut Garlic Peas Irish potato Sitao Melon E. 210 days Ampalaya Tomato F. 270 days Onion G. 300 days Lima (patani) Squash Sequidillas Upo H. 360 days Chayote Footnotes * Financing starts on established and fruit-bearing age-crop. ** Financing starts six months after planting. *** Maximum maturity of loans to finance non-high yielding, traditional varieties - 270 days. APPENDIX 19 REDISCOUNTING PRIVILEGES UNDER THE SUPERVISED CREDIT PROGRAM (Appendix to Subsection 2273.1) Thrift banks may rediscount eligible Masagana 99 and Masaganang Maisan papers at 100% loan value of the outstanding balance or unpaid portion thereto and at the preferential rate of 1% per annum, subject to the following conditions: a. That the loans granted to farmer-borrower shall be strictly under the Supervised Credit System. The borrowers/projects financed by these loans shall be reviewed from time to time by agricultural credit supervisors of the Central Bank to determine their compliance with these guidelines. b. All unsecured loans shall be covered by guarantee under the Land Bank "Agricultural Guarantee Fund". c. An interest reduction of two per cent (2%) per annum shall be granted to farmer-borrowers who fully liquidate their loans on or before maturity in which case the interest collected shall not exceed ten cent (10%) per annum. For this purpose, a stipulation to this effect shall be embodied in the covering promissory note of the farmer-borrowers, otherwise, the promissory note is not eligible and acceptable for rediscounting. Maximum ; amount per loan application and frequency of rediscounting .There shall be no limit on the amount of loan application and the number of times a bank may avail itself of rediscounting facilities of the Central Bank provided that such availments shall not exceed its rediscount ceiling as provided for under Subsec. 2269.1. Access to the Central Bank Credit Facilities .The qualifications for availment by thrift banks of the credit facilities of the Central Bank are provided for under Sec. 2270. Maturity Period .The maturity of Central Bank loans or advances secured by eligible Masagana 99 and Masaganang Maisan papers covering production credits shall not exceed 210 days and 150 days, respectively. Loan Documentation Required .All Banks applying for a loan with the central Bank shall submit to the Department of Loans and Credit the following papers: a. Loan application in duplicate, duly accomplished and signed by two (2) duly authorized officers of the bank; b. Original and two (2) copies of the bank's promissory note in favor of the Central Bank, also duly signed by the authorized officers of the bank; c. Certifications Certifications by the bank technician(s) that the loans listed in the rediscount schedules were granted under the supervised credit scheme, and by the bank president/manager that the unsecured loans pertaining to "Masagana 99 and Masaganang Maisan" are covered by the Agricultural Guarantee Fund; d. Rediscount schedule supported by: 1. Farmer-borrowers' promissory notes, duly endorsed by two (2) authorized officers of the bank. 2. Farmer-borrowers' applications and farm plans and budgets consolidated in one sheet (back to back); 3. Certification by barangay captains as to identity of Masagana 99 or Masaganang Maisan farmer-borrower; that such borrower is a bona fide member of a selda of his barangay and cultivating a certain hectarage of riceland or cornland; 4. Real estate mortgage or chattel mortgage duly registered, if the loans are covered by a mortgage on real estate or personal properties; 5. Co-maker's statement in the absence of real estate mortgage or chattel mortgage. APPENDIX 20 Original SAMPLES OF STANDARDIZED INSTRUMENTS EVIDENCING DEPOSIT SUBSTITUTE LIABILITIES (Appendix to Subsec. 2281.4) Serial No. _______ ____________________________________ (Name of Intermediary) PROMISSORY NOTE Issue Date :__________, 19_____. Maturity Date :__________, 19_____. FOR PESOS ________________________________ (P________) RECEIVED. ___________________________ (Present Value/Principal) (Name of Issuer/Maker) promises to pay ___________________________ or order, the sum of PESOS ___________________________ (Name/Account Number of Payee) (Maturity Value/Principal & Interest) (P_________),subject to the terms and conditions on the revise side hereof. ___________________________ Duly Authorized Officer NOT INSURED WITH THE PHILIPPINE DEPOSIT INSURANCE CORP, (PDIC) 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 ( ) Collateralized/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. Repurchase Agreement 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. 2. No Pretermination Vendor shall not repurchase subject security/ies before the repurchase date stipulated on the face of this document. 3. Liquidated Damages 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. 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. Certificate of Assignment With Recourse TERMS & CONDITIONS OF CERTIFICATE OF ASSIGNMENT WITH RECOURSE 1. No Pretermination Assignor shall not pay nor repurchase subject security/ies before the maturity date thereof. 2. Liquidated Damages In case of default, the Assignor shall be liable, in addition to interest, for liquidated damages of __ (amount of %) plus attorney's fees of __ (amount of %) and costs of collection in case of suit. 3. Delivery/Custody of Securities ( ) Physically delivered to assignee ( ) Evidenced by Custodian Receipt No. ______________ dated __________, issued by _________________, 4. Separate Stipulations ( ) This Agreement is subject to the terms and conditions of ______________ _____________________, dated ____________________ executed by __( name of party/ies) and made an integral part hereof. Certificate of Assignment With Recourse TERMS & CONDITIONS OF CERTIFICATE OF ASSIGNMENT WITH RECOURSE 1. No Pretermination Assignor shall not pay nor repurchase subject security/ies before the maturity date thereof. 2. Liquidated Damages In case of default, the Assignor shall be liable, in addition to interest, for liquidated damages of __ (amount of %) plus attorney's fees of __ (amount of %) and costs of collection in case of suit. 3. Delivery/Custody of Securities ( ) Physically delivered to assignee ( ) Evidenced by Custodian Receipt No. ______________, dated _______________, issued by _________________, 4. Separate Stipulations ( ) This Agreement is subject to the terms and conditions of _______________ _____________________, dated ____________________ executed by __ (name of party/ies) and made an integral part hereof. Certificate of Participation with Recourse TERMS & CONDITIONS OF CERTIFICATE OF PARTICIPATION WITH RECOURSE 1. No Pretermination Issuer shall not pay nor repurchase the participation before the maturity date of subject security(ies). 2. Liquidated Damages In case of default, the issuer of this instrument shall be liable, in addition to interest, for liquidated damages of __ (amount of %) plus attorney's fees of _ (amount of %)_ and costs of collection in case of suit. 3. Delivery/Custody of Securities ( ) Physically delivered to participant ( ) Evidenced by Custodian Receipt No. ________________________ dated ________________________, issued by _________________, 4. Separate Stipulations ( ) This Agreement is subject to the terms and conditions of (described document) dated ______________ executed by ____ (name of party/ies) and made an integral part hereof. Certificate of Participation With Recourse TERMS & CONDITIONS OF CERTIFICATE OF PARTICIPATION WITH RECOURSE 1. No Pretermination Issuer shall not pay nor repurchase the participation before the maturity date of subject security(ies). 2. Liquidated Damages In case of default, the issuer of this instrument shall be liable, in addition to interest for liquidated damages of _ (amount of %) ,plus attorney's fees of _ (amount of %)_ and costs of collection in case of suit. 3. Delivery/Custody of Securities ( ) Physically delivered to participant ( ) Evidenced by Custodian Receipt No. ________________________ dated ________________________, issued by _________________, 4. Separate Stipulations ( ) This Agreement is subject to the terms and conditions of (described document) dated ________________ executed by ___ (name of party/ies) and made an integral part hereof. APPENDIX 21 NEW RULES ON REGISTRATION OF SHORT TERM COMMERCIAL PAPERS (Appendix to Subsec. 2293) Pursuant to Presidential Decree No. 678, as amended by Presidential Decree No. 1798, and other existing applicable laws, the Commission hereby promulgates the following new Rules and Regulations governing short term commercial papers, in the interest of full disclosure and protection of investors and lenders in accordance with the monetary and credit policies of the Central Bank. SECTION 1. Scope . These Rules and Regulations shall apply to short term commercial papers issued by corporations. SECTION 2. Definition . For the purpose of these Rules, the following definitions shall apply: (a) Commercial paper is an evidence of indebtedness of any corporation to any person or entity with a maturity of three hundred sixty-five (365) days or less. (b) Interbank loan transactions shall refer to borrowings between and among banks and non-bank financial intermediaries duly authorized to perform quasi-banking functions. (c) Issue means creation of a commercial paper and its actual or constructive delivery to the payee. SECTION 3. Registration of Commercial Papers . Any corporation desiring to issue commercial paper shall apply for registration with, and submit to, the Commission the following: (a) Ordinary Registration (1) Sworn Registration Statement in the prescribed form; (2) Board resolution signed by majority of its members (a) authorizing the issue of commercial paper, (b) indicating the aggregate amount to be applied for, (c) providing that the registration statement shall be signed by the principal executive officer, the principal operating officer, the principal financial officer, the comptroller or principal accounting officer or persons performing similar functions, and (d) designating at least two senior officers with a rank of vice-president or higher, or their equivalent, to sign the commercial paper instruments to be issued; (3) The latest audited financial statements; and should the same be as of a date more than three (3) months prior to the filing of the registration statement, an unaudited financial statement as of the end of the immediately preceding month: Provided, however ,That such unaudited financial statement shall be certified under oath by the accountant and the senior financial officer of the applicant duly authorized for the purpose and substituted with an audited financial statement within one hundred twenty (120) days after the end of the applicant's fiscal year. (4) Schedules A to L based on sub-section (3) above in the form attached as Annex "A"; (5) A committed credit line agreement with a bank, or any financial institution which may be qualified subsequently by the Central Bank, earmarked specifically for repayment of aggregate outstanding commercial paper issues on a pro rata basis, with the following features: (i) A firm irrevocable commitment to make available funds to cover at least 20% of the aggregate commercial papers outstanding at any time: Provided ,That if the commitment is extended by a group there shall be a lead bank or any financial institution which may be qualified subsequently by the Central Bank acting for the group; (ii) The commitment shall be effective for as long as the issues are outstanding and may be renewed by the bank or any financial institution which may be qualified subsequently by the Central Bank; (iii) The request for drawdown shall be addressed to the bank or any financial institution which may be qualified subsequently by the Central Bank, which request shall be duly signed by a member of the board of directors and a senior financial officer of the commercial paper issuer duly authorized for the purpose by an appropriate board resolution which shall also provide for the designation of the alternate signatories (likewise a member of the board of directors and a senior financial officer); (iv) A provision that availments shall be allowed only for repayment of commercial papers which are due and payable in accordance with the terms of the commercial paper; (6) A selling agreement for the commercial paper issues with an expanded commercial bank or an investment house, or any financial institution which may be qualified subsequently by the Central Bank, with minimum conditions that the selling agent, among others, shall be responsible for ensuring that the issuer observes the provisions of these rules pertaining to the use of proceeds of the committed credit line and, with the issuer, shall be jointly responsible for complying with all reportorial requirements of the Commission and the Central Bank in connection with the commercial paper issue, it being understood that the primary responsibility for the submission of the report to said regulatory agencies is upon the selling agent: Provided, however ,that if the commercial paper issuer is unable to provide the information necessary to meet such reportorial requirements, the selling agent shall, not later than two (2) working days prior to the date when the report is due, notify the Commission of such inability on the part of the issuer: Provided, finally ,That if the selling agreement is with a group, composed of expanded commercial banks and/or investment houses or any financial institutions which may be qualified subsequently by the Central Bank, there shall be a syndicate manager acting and responsible for the group. (7) Income statements for the immediate past three (3) fiscal years audited by an independent certified public accountant: Provided That, if the applicant has been in operation for less than three years, it shall submit income statements for such number of years that it has been in operation. LexLib (8) A printed copy of a preliminary prospectus approved by the applicant's Board of Directors which, among others, shall contain the following: (i) A statement printed in red on the left hand margin of the front page of the following tenor: "A registration statement relating to these short term commercial papers has been filed with, but has not yet been approved by, the Securities and Exchange Commission. Information contained herein is subject to completion or amendment. These short term commercial papers may not be sold nor may an offer to buy be accepted prior to the time the registration statement is approved. This preliminary prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these commercial papers in the Philippines as such offer, solicitation or sale is prohibited prior to registration under the Securities Act, as amended by P.D. No. 678 and P.D. No. 1798." (ii) Aggregate maximum amount applied for, stated on the front page of the prospectus; (iii) Description and nature of the applicant's business; (iv) Intended use of proceeds; (v) The nature of the firm, irrevocable and committed credit line, the amount of the line which shall be at least 20% of the aggregate outstanding commercial paper issues (proceeds of which shall be allocated on a pro rata basis to the aggregate outstanding commercial paper issue regardless of the order of their maturities),and the manner of availment as stipulated in the credit line agreement between the bank and the issuer; (vi) The provision in the selling agreement naming the selling agent and the responsibilities of the selling agent in connection with, among others, the use by the issuer of the proceeds of the bank committed credit line and the reportorial requirements under these rules; (vii) Other obligations of the commercial paper issuer classified by maturities (maturing within six (6) months; from six (6) months to one (1) year, over one (1) year, and past due amounts); (viii) Encumbered assets; (ix) Directors, officers, and stockholders owning 2% or more of the total subscribed stock of the corporation, indicating any advance to said directors, officers and stockholders; (x) List of entities where it owns more than 33-1/3 of the total equity; as well as borrowings from and advances to said entities; (xi) Financial statements for the immediate past three (3) fiscal years audited by an independent certified public accountant Provided ,That, if the applicant has been in operation for less than three years, it shall submit financial statements for such number of years that it has been in operation. (b) Special Registration In the case of special registration provided for under Section 10 hereof, the following shall, in addition to the immediately preceding requirements, be prepared and submitted by the selling agent on behalf of the applicant: (1) Projected annual cash flow statement as of the date of filing presented on a quarterly basis supported by schedules on actual maturity patterns of existing receivables and liabilities (under six (6) months; six (6) months to one (1) year; over one (1) year and past due amounts) and inventory turnover as of the end of the month prior to the filing of the registration statement; and (2) Complementary financial ratios for each of the immediate past three (3) fiscal years: (i) Ratio of (a) the total of cash on hand, marketable securities, current receivables to (b) the total of current liabilities; (ii) Debt to equity ratio, with debt referring to all kinds of indebtedness including guarantees; (iii) Ratio of (a) net income after taxes to (b) net worth; (iv) Net profits to sales ratio; and (v) Such other financial indicators as may be prescribed by the Commission. These additional data shall likewise be incorporated in the prospectus. (c) The Commission may, whenever it deems necessary, impose other requirements in addition to those enumerated in subsections (a) and/or (b) above. SECTION 4. Commercial Papers Exempt Per se . The following specific debt instruments are exempt per se from the provisions of these Rules: (a) Evidence of indebtedness arising from interbank loan transactions; (b) Evidence of indebtedness issued by the national and local governments; (c) Evidence of indebtedness issued to the Central Bank under its open market and/or rediscounting operations; (d) Evidence of indebtedness issued by the Central Bank of the Philippines, Philippine National Bank, Development Bank of the Philippines, Land Bank of the Philippines, Government Service Insurance System and the Social Security System; (e) Evidence of indebtedness issued to the following primary institutional lenders: banks, non-bank financial intermediaries authorized to engage in quasi-banking functions, 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 Res. No. 1051 dated June 19, 1981, insurance companies, government financial institutions and pawnshops; Provided all such evidences of indebtedness shall be held on to maturity and shall neither be negotiated nor assigned to any one other than the Central Bank, and the Development Bank of the Philippines with respect to private development banks in connection with their rediscounting privileges; (f) Evidence of indebtedness the total outstanding amount of which does not exceed Five Million Pesos (P5,000,000.00) and issued to not more than ten (10) primary lenders other than those mentioned in subsection (e) above, which evidence of indebtedness shall be payable to a specific person and not to bearer and shall neither be negotiated nor assigned but held on to maturity; (g) Evidence of indebtedness denominated in foreign currencies; and (h) Evidence of indebtedness arising from bona-fide sale of goods or property. SECTION 5. Other Commercial Papers Exempt from Registration . Commercial papers issued by any financial intermediary authorized by the Central Bank to engage in quasi-banking functions shall be exempt from registration under Section 3, but shall be subject to payment of the exemption fee as provided under Section 15 and to the reportorial requirements under Section 17, all under these Rules. SECTION 6. Prohibition . No commercial paper except of a class exempt under Sections 4 and 5 hereof, shall be issued unless such commercial paper shall have been registered under these Rules: Provided ,That no registered commercial paper issuer may issue commercial paper exempt per se under Section 4 (f) hereof. SECTION 7. Compliance with Central Bank Quasi-Banking Requirements . Nothing in these Rules shall be construed as an exemption from or a waiver of the applicable Central Bank rules/regulations or circulars governing the performance of quasi-banking functions or financial intermediaries duly authorized to engage in quasi-banking activities. Any violation of said Central Bank rules/regulations or circulars shall be considered a violation of these rules and regulations. cdlex SECTION 8. Action on Application for Registration (a) Within sixty (60) days after receipt of the complete application for registration, the Commission shall act upon the application and shall in the appropriate case grant the applicant a Certificate of Registration and Authority to Issue Commercial Papers. (b) The Commission shall return any application for registration, in cases where the requirement of applicable laws and regulations governing the issuance of commercial papers have not been complied with, or for reasons which shall be so stated. SECTION 9. Ordinary Registration . If the value of commercial papers applied for, when added to the total outstanding liabilities of the applicant, does not exceed three hundred percent (300%) of networth based on the financial statements referred to under Section 3(a) (3),the commercial papers shall be registered upon compliance with the requirements specified in Section 3(a) hereof. The same principle shall apply in the case of renewal of the Authority to Issue Commercial Paper. SECTION 10. Special Registration . If the value of commercial papers applied for exceeds three hundred per cent (300%) of networth as contemplated in the preceding section, it shall be subject to compliance with the requirement under Section 3(b) hereof. SECTION 11. Validity Period of the Authority to Issue Commercial Paper . The authority to issue commercial paper shall be valid for a period of three hundred sixty five (365) days which shall be indicated in the Authority to Issue Commercial Paper; Provided That renewal thereof, upon application filed at least forty five (45) days prior to its expiry date, may be for a period shorter than three hundred sixty-five (365) days. SECTION 12. Conditions of the Authority to Issue Commercial Paper (a) In the event that the commercial paper issuer fails to pay in full any commercial paper upon demand at stated maturity date, the Authority to Issue Commercial Paper is automatically suspended. The selling agent shall, within the next working day, notify the Commission thereof and the Commission shall forthwith issue a formal Cease and Desist Order enjoining both the issue and the selling agent from further issuing or selling commercial papers. (b) Whenever necessary to implement the monetary and credit policies promulgated from time to time by the Monetary Board of the Central Bank, the Commission may suspend the Authority to Issue Commercial Paper, or reduce the authorized amount thereunder, or schedule the maturities of the registered commercial paper to be issued. SECTION 13. Basic Features of Registered Commercial Papers (a) All registered commercial paper instruments shall have a standard format, serially pre-numbered and denominated. The instrument shall state, among others, the debt ceiling of the registrant and a notice that information about the registrant submitted in connection with the registration and other reportorial requirements from the issuer is available at the Commission and open to public inspection and that the issuer is not authorized by the Central Bank to perform quasi-banking functions. (b) A specimen of the proposed commercial paper instrument shall be submitted to the Commission for approval of the text thereof. (c) The approved instrument shall be printed by the Central Bank Security Printing Plant pursuant to a prior authorization from the Commission, and shall be released by the Commission to the issuer. SECTION 14. Minimum Maturity Value . The maturity value of each registered commercial paper instrument shall not be lower than Three Hundred Thousand Pesos (P300,000). SECTION 15. Fees . Every registrant shall pay the following fees: (a) Upon application for registration, and for renewals thereof, a filing fee of not more than 1/50th of 1% based on the total commercial paper proposed to be issued. (b) For issuers of commercial paper exempt under Section 5 hereof, an annual exemption fee of P10,000. SECTION 16. Notice of Availment . Whenever the credit line is drawn upon, the selling agent and/or issuer shall within two (2) working days immediately following the date of drawdown notify the Commission of such event indicating the amount availed of and the total availment as of that given time. SECTION 17. Periodic Reports (a) Issuers of registered commercial papers and those exempt under Section 5 hereof shall submit to the Commission and the Central Bank the following reports in the prescribed form: (1) Monthly reports on commercial papers outstanding as at the end of each month, to be submitted within ten (10) working days following the end of the reference month; (2) Quarterly reports on commercial paper transactions accompanied by an interim quarterly financial statement to be submitted within thirty (30) calendar days following the end of the reference quarter; and (3) For issuers whose application for registration was under Section 10 hereof, the projected quarterly cash flow statements with the corresponding quarter's actual figure to be submitted within ten (10) working days following the end of the reference quarter; (b) These periodic reports shall be signed under oath by the corporate officers authorized pursuant to a board resolution previously filed with the Commission; (c) Issuers whose offices are located in the provinces may submit their reports to the nearest extension offices of the Commission. SECTION 18. Administrative Sanctions . If the Commission finds that there is a violation of any of these Rules and Regulations and implementing circulars or that any issuer, in a registration statement and its supporting papers, as well as in the periodic reports required to be filed with the Commission and the Central Bank, has made any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or refuses to permit any lawful examination into its corporate affairs, the Commission shall, in its discretion, impose any or all of the following sanctions: dctai (a) Suspension, or revocation, after proper notice and hearing of the Certificate of Registration and Authority to Issue Commercial Paper; (b) A fine in accordance with the guidelines that the Commission shall issue from time to time: Provided, however ,That such fine shall in no case be less than P200 nor more than P50,000 for each violation plus not more than P500 for each day of continuing violation. (c) Other penalties within the power of the Commission under existing laws; and (d) The filing of criminal charges against the individuals responsible for the violation. SECTION 19. Cease and Desist Order . The Commission may, on its own motion or upon verified complaint by an aggrieved party, issue a Cease and Desist Order ex-parte if the violation(s) mentioned in Section 18 may cause great or irreparable injury to the investing public or may amount to palpable fraud or violation of the disclosure requirements of the Securities Act and of these Rules and Regulations. The issuance of such Cease and Desist Order automatically suspends the Authority to Issue Commercial Paper. Such Cease and Desist Order shall be confidential in nature until after the imposition of the sanctions mentioned in Section 18 shall have become final and executory. Immediately upon the issuance of an ex-parte Cease and Desist Order, the Commission shall notify the parties involved and schedule a hearing on whether to lift such order or to impose the administrative sanctions provided for in Section 18 not later than Fifteen (15) days after receipt of notice. SECTION 20. Repealing Clause . These Rules and Regulations supersede the Rules on Registration of Commercial Papers dated December 10, 1975, and all the amendments to said Rules. All other rules, regulations, orders, memoranda circular of the Commission which are inconsistent herewith are likewise hereby repealed or modified accordingly. SECTION 21. Transitory Provision . Any authority to Issue Commercial Paper valid and subsisting as of the date of the effectivity of these Rules and Regulations, shall remain valid and upon its expiration may, at the discretion of the Commission and subject to such conditions as it may impose, be renewed on the basis of the Rules of Registration of Commercial Papers dated December 10, 1975 for an aggregate period not exceeding fifteen (15) months from its expiry date. SECTION 22. Effectivity . These Rules and Regulations shall take effect on December 11, 1981. Mandaluyong, Metro-Manila, Philippines, December 80, 1981. (SGD.) MANUEL G. ABELLO Chairman Securities and Exchange Commission APPROVED: (SGD.) ALFREDO PIO DE RODA, JR. Acting Minister Ministry of Finance (SGD.) JAIME C. LAYA Chairman Monetary Board of the Central Bank of the Philippines APPENDIX 22 SEC RULES ON REGISTRATION OF LONG TERM COMMERCIAL PAPERS AND BONDS (Appendix to Subsec. 2293) Pursuant to Presidential Decree No. 678 and existing laws, the Securities and Exchange Commission hereby promulgates the following rules on close-end registration of commercial papers with face maturities of 366 days or more and bonds, referred to in Section 3(d) of the Rules on Registration of Commercial Papers dated December 10, 1975, in the interest of full disclosure and protection of investors and lenders. SECTION 1. Scope . These rules shall cover the following corporations issuing commercial papers with face maturities of 366 days or more and bonds; (a) Financial intermediaries, banks and non-banks performing quasi-banking functions; (b) Other corporate issuers of long term commercial papers and bonds the aggregate amount to be issued or the outstanding issue of which is P1 million or more: (i) Which will be negotiated to any number of persons; or (ii) Which will be primarily issued to twenty (20) or more lenders/investors. No commercial papers with face maturities of 366 days or more and bonds shall be issued or negotiated unless the same have been registered or are exempt pursuant to these rules. It is understood that any corporation performing quasi-banking functions shall, in addition to the registration requirement of these rules, be subject to the provisions of existing regulations on securing a certificate of authority to perform quasi-banking functions. Regulations prescribing the registration of commercial papers by issuers not otherwise covered by these rules shall be promulgated at such time as the Commission deems necessary and appropriate in the public interest. SECTION 2. Definitions . For the purpose of these rules, unless the context otherwise indicates, the following definition of terms is hereby adopted: (a) Commercial Paper is an instrument evidencing indebtedness of any person or entity, specifically banks and non-banks performing quasi-banking functions, which is issued, endorsed, sold, transferred or in any manner conveyed to another person or entity, either with or without recourse. Examples of commercial papers are promissory notes, repurchase agreements, and/or similar instruments. (b) Issue means creation of real or contingent liability relative to commercial papers. It includes the roll-overs and/or extension of maturing commercial papers. (c) Negotiation is the transfer including the assignment of an instrument whether negotiable or non-negotiable or of any underlying rights/interests thereof with the necessary formality so as to constitute the transferee a holder or payee thereof. (d) Affiliate is a concern linked directly or indirectly to another by means of: (1) Ownership, control and power to vote, of 10% or more of the outstanding voting securities; (2) Interlocking directorship/officership; (3) Common major stockholders, i.e. owning 10% or more of the outstanding voting securities; (4) Management contract or any arrangement granting power to direct or cause the direction of management and policies; (5) Voting trustee holding 10% or more of the outstanding voting securities. (6) Permanent proxy constituting 10% or more of the outstanding voting securities; (e) Subsidiary means a company 50% or more of the outstanding voting securities of which are directly or indirectly owned, controlled, or held with power to vote, by another. cdlex SECTION 3. Registration (a) Requirements The applicant for the registration of commercial papers with face maturities of 366 days or more and bonds shall submit the following documents in quintuplicate. 1. Registration Statement, in the prescribed form and with the prescribed annexes thereto: a) LT 10 Commercial and Industrial Corporations b) LT 20 (A) Banks authorized to engage in quasi-banking functions c) LT 20 (B) Banks not authorized to engage in quasi-banking functions d) LT 30 (A) Non-bank financial intermediaries authorized to engage in quasi-banking functions e) LT 30 (B) Non-bank financial corporations not authorized to engage in quasi-banking functions f) LT 40 Exempt issuers; 2) Resolution approved by the stockholders owning at least a majority of the subscribed capital stock certified under oath by the corporate secretary, authorizing the issuance and creation of said commercial papers and bonds, respectively; 3) Immediately preceding three (3) years financial statements certified by an independent Certified Public Accountant; 4. A cash flow and projected balance sheet/income statement certified under oath by the Treasurer or any Senior Financial Officer covering the period during which said commercial papers and bonds shall be outstanding; 5. Sample form of the debt instruments in accordance with SEC Memorandum Circular No. 5, Commercial Paper Series, dated June 10, 1976; 6. A copy of any prospectus, brochure, advertisement, letter or communication which the applicant intends to circulate in connection with the issue; 7. Certificate of creation of bonded indebtedness as approved by the Commission pursuant to Section 17 of the Corporation Law; 8. Trust indenture, the terms and conditions of which shall be on an arm's length basis executed by and between the applicant and a qualified trust corporation which is neither an affiliate nor a subsidiary of the applicant; 9. A schedule of the assets to be used as collateral certified under oath by the Treasurer or any Senior Financial Officer of the applicant, in case of mortgage or collateral bonds; and 10. In case of financial intermediaries not authorized to engage in quasi-banking functions, a board of resolution to the effect that the applicant will not engage in such activity as defined under the existing regulations on quasi-banking. Compliance with Nos. 7, 8, 9 shall only be required of issuers of bonded indebtedness: Provided ,That issuers of long term commercial papers which are secured either by mortgage or pledge of real and personal properties shall likewise comply with requirement No. 9. (b) The Commission may waive the need for the disclosure of any portion of a material instrument and/or contract if the applicant requests and the Commission agrees that disclosure of such portion would impair the value of the instrument or contract and would not be necessary for the protection of lenders/investors. (c) The acceptance of the registration application is not a guarantee that the Commission has evaluated the registration papers. SECTION 4. Close-end Registration . Registration of commercial papers with face maturities of 366 days or more and bonds as herein required shall be a closed-end process. This means that the principal amount of any outstanding issue in any manner re-acquired, pursuant to the terms and conditions of the issue cannot be resold or reissued but has to be retired and deducted from the aggregate amount which the issuer is authorized to borrow under the registration statement filed by such issuer. Nothing herein shall authorize financial intermediaries engaged in quasi-banking functions to preterminate their commercial paper issue in violation of applicable Central Bank regulations. SECTION 5. Notice and Hearing . (a) For applicants which have commercial papers with maturities of 366 days or more and bonds outstanding prior to the effectivity of these rules: 1. Upon submission and receipt of the registration statement duly accomplished together with all the required annexes and supporting documents, the Commission shall publish once at the expense of the applicant, such fact of filing in a newspaper of general circulation in the Philippines reciting that a registration statement for the sale of such commercial papers and bonds has been filed with it, and that the said Registration Statement, as well as all the requisite papers attached thereto, are open to inspection during business hours by interested parties; 2. Seven days after such publication, the Commission shall issue a provisional permit authorizing the sale of such commercial papers and bonds in the Philippines, which shall be valid for a period of 90 days; 3. During this period, the Commission shall review and evaluate the applicant's application. The Commission may, if it finds necessary, call the officers of the applicant to a closed-door conference hearing; 4. On or before the expiration of the period of 90 days, the Commission shall issue an order authorizing the sale of said commercial papers and bonds unless it needs additional information or materials in which event, the Commission shall issue its decision not later than 10 days after the submission thereof, beyond the said 90-day period; 5. The applicant shall publish ONCE, the fact that the regular authority has been issued by the Commission in a newspaper of general circulation throughout the Philippines in such size, form and content as prescribed by the Commission. (b) For applicants which do not have any commercial paper with face maturities of 366 days or more and bonds outstanding prior to the effectivity of these rules: 1. The Commission shall issue its decision not later than 90 days after submission of the completed application for registration. In the event the Commission shall require additional information, the Commission's decision shall in no case be issued later than ten (10) days after submission of the additional information beyond the aforesaid 90-days period; 2. During this period, the Commission shall review and evaluate the application. If necessary, the Commission may call the officers of the applicant to a closed-door conference-hearing; 3. After the Commission issues the registration authority, the applicant shall publish notice thereof ONCE in a newspaper of general circulation throughout the Philippines, in such size, form and content as prescribed by the Commission. c) The Commission shall return any application for registration, if: 1. The requirements of applicable laws and regulations governing the issuance of long term commercial papers and bonds have not been complied with; 2. The issuance of the long term commercial papers and bonds will be in conflict with public interest and national policies; 3. Not all information necessary for a proper evaluation of the worthiness of the long term commercial papers and bonds have been disclosed in the registration statement, and 4. The information disclosed by the applicant in its application for registration is erroneous or may result in a misleading conclusion. SECTION 6. Exemption from registration . The following need not be registered under these rules: a) Loans and advances of the Central Bank under its open market and/or rediscounting operations; b) Long-term commercial papers and bonds issued by the National and Local Governments, Central Bank of the Philippines, Philippine National Bank, Development Bank of the Philippines, Land Bank of the Philippines, Government Service Insurance System, Social Security System; c) Long-term commercial papers and bonds issued by such other government financial entities as may be determined by the Commission upon the recommendation of the Central Bank; and d) Commercial papers with face maturities of 366 days or more and bonds issued by corporate issuers other than financial intermediaries, banks or non-banks performing quasi-banking functions, the total amount to be issued or the outstanding amount of which is less than a million or P1 million or more but is neither negotiated to any number of persons, nor primarily issued to twenty (20) or more lenders: Provided ,however, the said corporate issuers shall, prior to issuance of its long-term commercial papers and bonds, file an information statement (LT-10) with the Commission: Provided, further ,That for purposes of determining exemption under this sub-paragraph, papers of subsidiaries, affiliates, holding companies or any other related companies shall be aggregated and considered as one issue. cdlex SECTION 7. Submission of Inventories . The following inventories as at July 31, August 31 and September 30, 1976 shall be submitted to the Commission not later than the thirtieth day of October 1976: a) A list of outstanding commercial papers with face maturities of 366 days or more and bonds issued or held by each financial intermediary authorized to engage in quasi-banking functions covered by LT 20(A) and LT 30(A) in the prescribed form and content (CP Form QB 2-3-01); b) A list of the outstanding commercial papers with face maturities of 366 days or more and bonds issued by corporations covered by LT 10, LT 20(B) and LT 30(B) by accomplishing CP Form 101; CP Form 102. SECTION 8. Periodic Reports . Monthly and quarterly reports in quintuplicate, shall be submitted on or before the 15th day following the end of each month and within thirty (30) days following the end of each quarter, respectively, in the prescribed forms herein indicated, as follows: I. Monthly Reports of long term commercial papers and bonds outstanding, declared overdue and/or restructured, money serviced where paying agent function is retained and other off-balance sheet items serviced: A. CP Form M-2-3-01 for financial intermediaries engaged in quasi-banking functions covered by LT 20 (A) and LT 30 (A); B. CP Form M-101 or CP Form M-102 for other issuers covered by LT 10, LT 20 (B) and LT 30 (B). II. Quarterly Report signed under oath by the President or any other officer duly authorized to do so by the Board of Directors, specifying any change in the original registration statement or information statement of the corporations: A. CP Form Q-2-3-01 for financial intermediaries covered by LT 20 (A) and LT 30 (A); B. CP Form Q-1 for all registered assets covered by LT 10, LT 20 (A) and LT 30 (B); C. CP Form Q 40-1 for all exempt issuers covered by LT 40. The Commission may require the submission of such other permanent reports or statements as it may deem necessary in the interest of the public. SECTION 9. Filing Fees . Every applicant shall pay a minimum fee of P1,000.00 or 1/50th of 1% whichever is higher, based on the total commercial papers and bonds registered but not to exceed P10,000.00. SECTION 10. Central Bank Supervisory Powers . The Monetary Board shall also have the power of supervision in the enforcement of these rules, concurrent with the Commission and, without prejudice to the provisions of the succeeding paragraph, impose administrative sanctions as circumstances warrant. SECTION 11. Administrative Sanctions . If after due notice and hearing, the Commission finds that there was a wilful intent to submit inadequate disclosures or to deceive through the filing of inaccurate information in the registration statements and/or the periodic reports/or there is a violation of any of the above regulations, the Commission may subject the violator to any of the following penalties: a) Suspension or revocation of selling authority; b) A fine of not less than P200 for every day the violation persists; c) Other penalties within the power of the Commission under existing laws; and d) The filing of criminal charges against the corporation and its principal officers. SECTION 12. Effectivity . These rules shall take effect on October 15, 1976. Ortigas Avenue, Pasig, Metro-Manila, Philippines, October 15, 1976. APPROVED: (SGD.) ANGEL L. LIMJOCO, JR. Chairman Securities and Exchange Commission (SGD.) G. S. LICAROS Chairman Monetary Board of the Central Bank of the Philippines APPENDIX 24 FORMAT OF DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION (Appendix to Subsec. 2305.1) ____________________________________ (Business Name of Creditor) DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION (As Required under R.A. 3765, Truth in Lending Act) NAME OF BORROWER _______________________________________________ ADDRESS ___________________________________________________________ 1. LOAN GRANTED (Amount to be financed) P (A) 2. FINANCE CHARGES: Not Deducted Deducted From From Proceeds of Loan a. Interest __% p.a. from ____ to ____ P______ P_______ ( ) Simple ( ) Monthly ( ) Compound ( ) Quarterly ( ) Semi-Annual ( ) Annual b. Non-Interest Charges _______ _______ c. Commitment fee _______ _______ d. Guarantee fee _______ _______ e. Other charges incidental to the extension of credit (Specify): _________________________ _______ _______ Total finance charges P P (B) ====== ====== 3. NON-FINANCE CHARGES a. Insurance Premium P______ P______ b. Taxes _______ _______ c. Documentary/Science Stamps _______ _______ d. Notarial fees _______ _______ e. Others (Specify): _______ _______ ________________________ _______ _______ ________________________ _______ _______ Total non-finance charges P P (C) ====== ====== 4. TOTAL DEDUCTIONS FROM PROCEEDS OF LOAN (B plus C) P______ (D) 5. NET PROCEEDS OF LOAN (A less D) P ===== 6. PERCENTAGE OF FINANCE CHARGES TO TOTAL AMOUNT FINANCED _______% 7. EFFECTIVE INTEREST RATE _______% p.a. (Method of computation attached) 8. SCHEDULE OF PAYMENT a. Single payment due on ________ P (Date) ====== b. Total Installment Payments Payable in _____________ months/year P (no. of payments) ====== at P _______ each installment. 9. COLLATERAL This loan is wholly/partly secured by (check) real estate chattels government securities UNSECURED 10. ADDITIONAL CHARGES IN CASE CERTAIN STIPULATIONS ARE NOT MET BY THE BORROWER Nature 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 Borrower over Printed Name) DATE ___________________ NOTICE TO BORROWER: YOU ARE ENTITLED TO A COPY OF THIS PAPER WHICH YOU SHALL SIGN. APPENDIX 25 FORMAT OF ABSTRACT OF "TRUTH IN LENDING ACT" (Republic Act No. 2305.6) ABSTRACT OF "TRUTH IN LENDING ACT" (Republic Act No. 3765) SECTION 1. This Act shall be known as the "Truth in Lending Act." SECTION 2. Declaration of Policy . It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy. xxx xxx xxx SECTION 3. As used in this Act, the term xxx xxx xxx (3) "Finance charge" includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may by regulation prescribe. xxx xxx xxx SECTION 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information: (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; (3) the difference between the amounts set forth under clauses (1) and (2); (4) The charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; (5) the total amount to be financed; (6) the finance charge expressed in terms of pesos and centavos; and (7) the percentage that the finance charge bears to the total amount to be financed expressed as a single annual rate on the outstanding unpaid balance of the obligation. xxx xxx xxx SECTION 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charge required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. xxx xxx xxx (c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less than P1,000 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both. xxx xxx xxx (e) Any final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated this Act shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto. LLjur SECTION 7. This Act shall become effective upon approval. Approved, June 22, 1963. APPENDIX 26 CENTRAL BANK CREDIT PRIORITY CLASSIFICATION SYSTEM (Appendix to Subsec. 2311.2) Priority I a. Production of agricultural, including forestry and fishery, and industrial goods which (1) posses growth potential in competitive domestic and world markets, (2) contribute most to the development of the economy, (3) provide for the satisfaction of basic wants of the population as a whole, and (4) require resources in addition to their self-financing capabilities. b. Marketing of export products, primarily those goods that contain the maximum possible domestic processing and labor content. c. Marketing in the internal market of domestic products which fall under Priority I and imported basic consumer goods by Filipino no merchandisers. d. Importation and marketing of capital equipment, raw materials and supplies for the production and distribution of Priority I products. e. Public utilities which are not over-crowded and are necessary to support the production and distribution of Priority I goods or to satisfy basic wants. f. Other services which are not over-crowded and which are necessary for (1) the development of desirable knowledge and skills, (2) the support of the production and distribution of Priority I products, and (3) the promotion of tourism and cultural pursuits. g. Construction of (1) infrastructure projects, (2) physical plants necessary for the production and distribution of Priority I products and services, and (3) individual low cost housing for the lower income groups of the population. cdlex Priority II a. Production and distribution of goods and services which do not qualify under the Priority I category. b. Real estate loans (construction, acquisition, development and refinancing of real estate) other than those specified under Priority I. c. Consumption. d. Other non-productive and speculative activities. ECONOMIC ACTIVITIES FALLING UNDER PRIORITY I A. Economic Activities Eligible for Credits up to Eighty Per Cent (80%) of Loan Value of Credit Instrument 1. Agriculture, Fisheries and Forestry a. Agriculture 1) Abaca 2) Cassava 3) Cattle and dairy farms 4) Coconut 5) Coffee and cocoa 6) Corn 7) Palay or rice 8) Piggery 9) Poultry 10) Ramie 11) Rubber plantation 12) Sugar a 13) Other fruits and vegetables b. Fisheries 1) Fishponds and inland fishing 2) Marine fishing c. Forest 1. Forest nurseries and reforestation projects 2. Mining and Quarrying a. Metal Mining 1) Chromite 2) Copper 3) Iron 4) Lead 5) Manganese 6) Mercury and quicksilver 7) Nickel 8) Zinc b. Non-Metallic Mining 1) Asbestos 2) Sulphur 3) Coal 4) Gypsum 3. Manufacturing a. Basic Metal Industries 1) Blast furnaces, steel work and rolling mills 2) Iron and steel basic industries 3) Iron and steel foundries 4) Non-ferrous metal basic industries b. Chemical and Chemical Products 1) Basic chemicals 2) Drugs and other pharmaceutical preparations 3) Fertilizer c. Coconut Products and their Preparation 1) Coconut oil, edible 2) Coconut oil, inedible 3) Copra meal and cake d. Electrical Machinery, Apparatus and Appliances 1) Transmissions and distribution equipment e. Food Manufacturing 1) Canning and preserving of fish and other sea foods a) Fish canning 2) Canning and preserving of fruits and vegetables a) Canning, drying, brining, pickling or otherwise preserving or preparing vegetables b) Canning, drying or otherwise preparing and preserving fruits 3) Slaughtering, preparation and preserving of meat 4) Sugar factories and refineries a) Sugar refining plants a 5) Miscellaneous food preparation a) Prepared feeds for animals and fowls f. Furniture and Fixtures Manufacture 1) Rattan and bamboo furniture g. Leather and Leather Products 1) Tanning and finishing h. Lumber and Wood Products 1) Veneer, plywood and prefabricated products i. Machinery, Equipment, Accessories and Parts 1) Agricultural machinery 2) Engines and turbines 3) Industrial, construction and mining machinery j. Non-Metallic Products 1) Cement k. Paper and Products 1. Pulp, paper and paperboard l. Petroleum and Coal Products 1) Coke m. Textile, Cordage and Twines Manufacture 1) Cordage, rope, twines and nets 2) Hemp milling, abaca stripping and baling establishments 3) Knitting mills 4) Spinning, weaving and finishing or textiles n. Transportation Equipment and Parts 1) Aircrafts and parts 2) Motor vehicles, equipment and parts 3) Motorcycles, bicycles and parts 4) Railroad equipment 5) Ships and boats o. Miscellaneous Manufacturing Industries 1) Laboratory, engineering and medical instruments 4. Construction a. Contract 1) Building construction 2) Commercial and industrial projects 1 5. Public Utilities a. Ice and ice refrigeration plants b. Operation of Wharves, Dry docks, Etc. c. Warehousing d. Water Supply and Sanitary Services 1) Irrigation systems 2) Water supply systems 6. Commerce a. Export Products 1 b. Importation of Capital Goods and Raw Materials 1 c. Domestic Trade (Filipino only) Wholesale and Retail 1 B. Economic Activities Eligible for Credits up to Sixty Per Cent (60%) of the Loan Value of the Credit Instrument * 1. Agriculture, Fisheries and Forestry a. Agriculture 1) Citrus 2) Cotton 3) Salt farming 4) Soybean 5) Other root crops 2. Mining and Quarrying a. Metal Mining 1) Gold 2) Silver b. Non-Metallic Mining 1) Asphalt 2) Marble 3. Manufacturing a. Chemical and Chemical Products 1) Dyeing and tanning materials 2) Explosives (excluding firecrackers) b. Coconut Products and their Preparations 1) Desiccated coconut c. Electrical Machinery, Apparatus and Appliances 1) Communication equipment 2) Dry cells and storage batteries d. Food Manufacturing 1) Canning and preserving of fruits and vegetables a) Fruits and vegetables, sauces and seasoning 2) Dairy products a) Milk processing 3) Miscellaneous food preparations a) Coffee roasting, grinding and/or processing e. Furniture and Fixture Manufacture 1) Wood furniture f. Lumber and Wood Products 1) Cork 2) Sashes and doors 3) Sawn and planed lumber 4) Wooden box 5) Wood chips g. Machinery, Equipment, Accessories and Parts 1) Office and store machines and devices h. Metal Industries 1) Cutlery, handtools and general products 2) Fabricated structural and metal products 3) Tin and aluminum ware i. Non-Metallic Products 1) Glass and glass products 2) Structural clay products j. Textile, Cordage and Twines Manufactures 1) Jute bags and sacks k. Miscellaneous Manufacturing Industries 1) Cottage native handicraft industries 2) Footwear (other than rubber) 3) Photographic and optical goods 4. Construction a. Contract 1) Building construction a) Commercial and industrial projects 1 2) Highway and street construction (including road building) 5. Public Utilities a. Common Carriers 1) Airlines and other air transportation 2) Motor vehicles 3) Railroads and railway companies 4) Steamboats and steamship lines b. Communication 1) Telecommunication (cable, mail and express, telegraph, telephone) c. Electricity, Gas and Steam 1) Electric, light, heat and power d. Water Supply and Sanitary Services 1) Garbage, sewerage and disposal system 6. Services a. Business and Professional Services 1) Engineering and technical services b. Educational Services 1) Private vocational trade schools 2) Public universities and higher educational institutions 3) Public vocational and trade schools c. Medical and Other Health services 1) Public health services d. Recreation Services 1) Theatrical production (i.e.,all performing arts) e. Research and Scientific Institutions 7. Financial a. Banks 1) Private development banks 2) Rural banks 8. Commerce a. Export Products 1 b. Importation of Capital goods and Raw-Materials 1 c. Domestic Trade (Filipino only) Wholesale and Retail 1 9. Other Activities a. Loans for Other Dollar-Earning Purposes not elsewhere Classified (included in this category are the construction, development and operation of first class hotels which cater to the needs of the tourist industry) C. Economic Activities Eligible for Credits up to Sixty Per Cent (60%) of the Loan Value of the Credit Instrument * 1. Agriculture, Fisheries and Forestry a. Agriculture 1) Pineapple 2) Tobacco, native b. Fisheries 1) Fishery services 2) Pearl fishing and culture, shell gathering and other marine products c. Forestry 1) Forest services 2) Timber tracts 2. Mining and Quarrying a. Non-Metallic Mining 1) Mineral salt 2) Silica 3. Manufacturing a. Apparel and Other Finished Products Made from Fabrics and Similar Materials 1) Embroidery shops 2) Wearing apparel b. Chemicals and Chemical Products 1) Paints, varnishes and lacquers 2) Soaps and other cleansing preparations c. Coconut Products and their Preparation 1) Copra d. Electrical Machinery, Apparatus and Appliances 1) Electric lamps 2) Household appliances 3) Radios, televisions, telephone receiving sets, electronic tubes and components cdlex e. Food Manufacturing 1) Canning and preserving of fish and other sea foods a) Fish sauce (patis) manufacture b. Shellfish curing, smoking, salting or pickling, n.e.c. 2) Cocoa, chocolate and sugar confectionery a) Cocoa and chocolate processing factories 3) Grain mill products a) Corn mills b) Rice mills c) Tuber flour mills d) Wheat flour 4) Miscellaneous food preparations a) Salt manufacture b) Starch and its products c) Vegetable lard and margarine manufacture d) Vermicelli and noodles manufacture f. Lumber and Wood Products 1) Creosoting and other wood treating g. Metal Industries 1) Fabricated wire products 2) Metal stamping, coating and engraving h. Non-Metallic Products 1) Plastic products 2) Pottery, china, earthenware 3) Concrete aggregates 4) Concrete products i. Paper and Paper Products 1) Coated and glazed paper products j. Printing, Publishing and Allied Industries 1) Book publishing and printing 2) Newspaper and periodical publishing k. Tobacco 1) Cigar and cigarette factories (native) l. Oxygen, acetylene and similar products 2) Silver and gold work without precious stones 3) Musical instruments and parts a) Blank recording discs b) Metal stampers 4. Construction a. Contract 1) Building construction a) Government projects b) Commercial and industrial projects 1 2) Heavy construction (including bridges and irrigation projects) b. Personal 1) Construction (not exceeding P30,000) 2) Reconstruction (not exceeding P30,000) 5. Public Utilities a. Electricity, Gas and Steam 1) Gas manufacture and distribution 2) Steam heat and power b. Water Supply and Sanitary Services 1) Drainage system 6. Services a. Medical and Other Health Services 1) Private health services 1 b. Recreation Services 1) Motion picture production 7. Financial 1) Commercial banks 2) Savings and mortgage banks 8. Commerce a. Exports Products 1 b. Importation on Capital Goods and Raw Materials 1 c. Domestic Trade (Filipino only) Wholesale and Retail 1 Footnotes a Authorized up to December 31, 1979. a Authorized up to December 31, 1979 (Circular 444) 1 To follow rating of economic activities included in this list. * For updated regulations on loan values, please see Subsec. 2271.1. for non-export oriented small-scale/cottage industries increased to 80%,and for the production of rice and corn, poultry and piggery, fishing feed grains and sorghum, seeds and seedlings, food production, food processing, domestic fertilizer production and food manufacturing for domestic consumption, loan value is increased to 100%. APPENDIX 27 Prescribed Format of Transfer Ticket for Interbank Loans APPENDIX 29 SUGGESTED DEBT-TO-EQUITY RATIO OF BORROWING FOREIGN FIRMS (Appendix to Subsec. 2346.2) GROUP A 60:40 (a) Firms registered under the Investment Incentives Act (R.A. No. 5186) and Export Incentives Act (R.A. No. 6135). (b) Firms registered with the Export Processing Zone Authority. (c) Central Bank certified export-oriented firms. (d) Firms entitled to incentives under other laws or Presidential Decrees. (e) 1. Companies or firms engaged in the generation or distribution of energy; 2. Companies or firms engaged in the manufacture or processing of the following essential commodities: a. Animal feeds b. Cement c. Chemicals and fertilizers d. Drugs and medicines e. Flour f. Products which are classified as essential commodities in the list of National Economic and Development Authority including the following; rice, corn, some basic cuts of meat, cooking oil, laundry soap, lumber and plywood, galvanized iron sheets, writing pads and notebooks. g. Iron, steel, copper, tin plates and other basic mineral products; h. Milk i. Newsprint j. Tires k. Sugar l. Textile and garments 3. Companies engaged in exploration, development, mining, smelting or refining of coal, oil, iron, copper, gold and other minerals; 4. Companies or firms which are actually engaged in manufacturing activities covered by Defense contracts. cdlex GROUP B 55:45 First engaged in other manufacturing activities. GROUP C 50:50 Firms engaged in non-manufacturing activities. APPENDIX 30 SUGGESTED ANNUAL BUILD-UP PROGRAM OF BORROWING FOREIGN FIRMS (Appendix to Subsec. 2346.2) CATEGORY (AS CLASSIFIED AT THE END AT THE END AT THE END IN APP . 29) OF 1ST YEAR OF 2ND YEAR OF 3RD YEAR Group A Total debt-to- equity ratio of 80:20 70:30 60:40 Group B Total debt-to- equity ratio of 75:25 65:35 55:45 Group C Total debt-to- equity ratio of 70:30 60:40 50:50 APPENDIX 31 LIST OF POTENTIAL SMALL INDUSTRIES FOR IGLF FINANCING (Appendix to Subsec. 2351.2) Food Products 1. Processed meat and seafoods including canned or packaged, dehydrated 2. Processed fruits and vegetables including juices, canned, dehydrated 3. Coffee, processed 4. Spices such as processed ginger, pepper, onion, garlic 5. Cereal preparations 6. Starches 7. Processed seaweeds 8. Sauces and salad dressings 9. Processed cheese 10. Confectionery 11. Cocoa and cocoa preparations such as cocoa butter 12. Chocolate and chocolate preparations 13. Noodles 14. Catsup 15. Baking powder 16. Peanut butter 17. Coco products 18. Fruits and flower wine 19. Castor oil Wood Products 1. Parquet tiles 2. Mouldings 3. Doors and fixtures 4. Shelves and cabinets 5. Caskets 6. Carvings and lattice works 7. Pallets 8. Bamboo products 9. Sandals and shoes 10. Gun stocks 11. Furniture, complete or knocked down parts 12. Toys and sporting goods 13. Household utensils of wood Paper Products 1. Boxes and packaging materials 2. Carbon paper including diazo paper, electrostatic copy papers 3. Pulp from indigenous raw materials Fiber Products 1. Coconut coir 2. Carpets and rugs 3. Cordage, twines, rope, fishing nets, abaca and synthetic Processed Rubber Products 1. Adhesives 2. Rubber latex 3. Crumb rubber 4. Camel back 5. Gums 6. Rubber tiles 7. Tubes and hoses 8. Rubber gloves 9. Rubber tires and inner tubes 10. Curing tube and sectional air bag 11. Rubber automotive parts such as vibration dampers caps; weather strips, handles and pedals, carpet underlay made of rubber 12. Rubber toys and sporting goods 13. Rubber belts Chemicals and Chemical Products 1. Almaciga resin (processed) 2. Silica gel 3. Iron oxide 4. Enzymes (from substantially domestic sources) 5. Glazing putty 6. Ink 7. Cosmetics, perfumery 8. Wax and wax products 9. Glues 10. Photographic chemicals 11. Mosquito coils 12. Modified hard resins 13. Chemical solvents 14. Charcoal 15. Refined glycerine 16. Alcohol 17. Blowing agents from rubber and plastic compound 18. Essential oils 19. Disposable hypodermic needle and syringe 20. Fiber-tipped pens 21. Chemical gypsum 22. Organic fertilizer Pharmaceutical Products 1. Pharmaceuticals 2. Wadding, gauze, bandages, adhesives, similar articles 3. Dentures and fillings Textile Products 1. Fabrics of abaca, sinamay, burlap, jusi, pineapple and other bast fibers 2. Specialty garments such as laces, garters, band, towels 3. Embroideries 4. Non-woven fabrics and articles thereof 5. Other made-up articles of textiles, plastic, rubber and leather 6. Garments (at least 70% of production must be exported) only for Mindanao 7. Tablecloths 8. Mosquito nets 9. Processed abaca fiber Non-Metallic Products 1. Marble slabs, tile chips and curios 2. Cement additives 3. Asphalt batching 4. Reinforced fiber glass products 5. Processed marble blocks 6. Cement floor tiles 7. Asbestos tiles 8. Pipes and tubes, asbestos cement 9. Roofing tiles and fire bricks 10. Clay products such as pottery roofing tiled and paste frits 11. Ceramic products such as tiles (glazed, vitrified),sanitary ware sinks, bidets, etc.,except dinnerware 12. Safety glass 13. Asbestos fibers 14. Coal, limestone, clay, marble 15. Silicon metal 16. Silicon carbide 17. Hollow blocks Metallic Products 1. Pyrite (roasted and unroasted) 2. Pyrite cinders or iron sulfite 3. Manganese concentrates 4. Silver concentrates and bars 5. Prefabricated and fabricated structural products made of iron and steel and cement and other materials (except ordinary hollow blocks) 6. Steel drums 7. Pails 8. Bolts and nuts 9. Household utensils made of metal including enamelled utensils 10. Kitchen appliances and tools hand-operated such as meat grinders, coconut graters 11. Cutlery such as scissors, blades, tailor's shears, shovels, spades, rakes, saws, knives 12. Razor blades cdlex 13. Building hardware such as hinges, door knobs, door bolts and window rotor-operators 14. Safes (e.g. record safes and tapeguards) 15. Strong boxes, armored and reinforced strong room doors and compartments and fittings (e.g. insulated filing cabinets) 16. Filing cabinets, racks, sorting boxes, paper trays, paper rests and similar office equipment of base metal 17. Gas lamps 18. Metallic closures and screw caps 19. Toys and sporting goods 20. Flatware 21. Locks 22. Buckles and metal plated accessories Machinery and Equipment and Parts 1. Parts of trucks, passenger trucks, automobiles and other commercial vehicles 2. Rice mill parts 3. Tractor parts 4. Bicycles and parts 5. Loom needs 6. Grain dryers 7. Palay thresher (power operated) 8. Disc plows, disc harrows and roto tillers 9. Sewing machines and parts Electrical Machinery Equipment and Parts 1. Formed aluminum parts such as door shelves, food shelves and/or parts thereof 2. Welding electrodes 3. Motor control center 4. Hermetic compressors cdlex 5. Evaporators 6. Condensers and heat exchangers 7. Fire alarm systems 8. Fluorescent and mercury lamp ballasts 9. Storage batteries 10. Electrical and electronic machinery, equipment, apparatus, parts, components 11. Bus ducts 12. Light dimmers 13. Graphite electrodes 14. Magnetic starters 15. Flashlights 16. Ignition coils 17. Transceivers 18. Electrical tape 19. Film capacitors Transport Equipment and Parts 1. Motor vehicle transmission 2. Automotive propeller shafts 3. Automotive clutches 4. Camshafts for engines 5. Electric motors for automotive use 6. Motorcycle parts Other Products 1. Animal feeds (outside Metro Manila) 2. Garment hangers of wood, plastic or metal 3. Plastic products such as light diffusers, footwear, containers, sheets, raincoats, packaging materials, brushes, brooms, gloves, toothbrushes, toys and sporting goods, optical frames 4. Tanned leather 5. Leather products such as purses, wallets, belts, straps, gloves, footwear 6. Handicrafts such as lampshades, placements, shellcraft, hats, household utensils, toys and sporting goods 7. Umbrellas 8. Jewelry (except precious stones) 9. Pins 10. Clasps, hooks, eyes, buckles, etc. of base metal 11. Musical instruments and parts 12. Buttons 13. Zippers 14. School and office supplies such as fasteners, pencils, folders, paper clips, pens and holders, bookbinders, rulers, desk pieces, etc. 15. Waste recycling 16. Threads of cotton or synthetic fiber 17. Cufflinks 18. Plaques and trophies APPENDIX 32 RULES AND REGULATIONS GOVERNING THE GUARANTEE COVERAGE OF FOOD QUEDAN AND CHATTEL MORTGAGE ON FOOD DEPOSITS UNDER THE PROGRAM Pursuant to Letters of Instructions No. 704, 1024 and 1139 dated June 9, 1978, May 22, 1980 and May 25, 1981, respectively, and Executive Order No. 849 dated November 26, 1982, the following rules and regulations governing the operations of the guarantee coverage of food quedan/chattel mortgage on food deposits apply: LexLib a Definition of terms Unless otherwise specified, the following terms used in this Appendix shall mean: (1) Fund The Quedan Guarantee Fund established under LOI No. 704, as amended, to guarantee the existence of food in storage covered by food quedan/chattel mortgage up to eighty percent (80%) of the outstanding loan. (2) Food Quedan (FQ) simply known otherwise as quedan, a negotiable warehouse receipt by the terms of which the food deposit in a bonded warehouse duly licensed by NFA/Bureau of Domestic Trade, shall be delivered to the depositor or upon his order, or to bearer or holder in due course for value of the said receipt upon demand. (3) Food deposit a quantity of grains, grains substitutes and non-grain food commodities delivered to and accepted by a bonded warehouseman for the purpose of storage and for which a quedan is issued/chattel mortgage executed, or the quantity of said food commodities owned by a bonded warehouseman stored in his warehouse and for which a quedan is issued/chattel mortgage executed, subject to NFA's requirements as to previous inspection and affidavit of ownership of the commodity in case of grains and/or grains substitutes. For purposes of these rules, grains and grains substitutes shall include palay, milled rice, corngrains, sorghum, soybeans, mongo and peanuts. Non-grain food commodities shall include, but shall not be limited to garlic, onions, potatoes, oranges, pomelo, cheese curd, cheese pimiento, assorted meat, beef trimmings, boneless beef, broilers, cocoa butter, briskets, lamb legs, pork fats, veal hinds, processed fruits, dried squid, marine products, shark meat, smoked fish, ham, processed meat, fruit and orange concentrates. (4) NFA the National Food Authority, a body corporate organized and existing under and by virtue of Presidential Decree No. 4, as amended by the Presidential Decrees No. 699, 1485 and 1770, for the integrated growth and development of the food industry. (5) Board a group of officials, otherwise known as the Quedan Guarantee Fund Board, which is empowered to administer the Fund, and is composed of the NFA Administrator as Chairman, with the Central Bank Governor and the Minister of the Budget or their duly authorized representatives as members. (6) Food businessman (FB) an NFA licensed/registered food businessman; NFA accredited farmer, Area Marketing Cooperative (AMC)/Samahang Nayon endorsed by the Bureau of Cooperatives Development (BCOD) and likewise licensed/registered with NFA; or producer/processor/manufacturer/trader of food commodities other than grains or grains substitutes. (7) Borrower a food businessman who intends to secure or in fact has secured a loan from lending bank by pledging food quedans or executing a chattel mortgage on food deposits. (8) Lending bank any banking institution organized and existing under the laws of the Republic of the Philippines and duly authorized by the Central Bank of the Philippines and accredited by the Quedan Board to participate in the Food Quedan Financing Program. (9) Maturity of the loan the due date for the full payment of the loan granted by a lending bank to a food businessman as appearing in the promissory note and/or other legal document, or an earlier date than as above specified brought about by confirmed findings in a joint inspection that the food deposit is wholly or partially non-existent. (10) Bond an undertaking conditioned to respond or answer for the value of food commodities actually delivered and received at any time the warehouseman is unable to return said food deposit or to pay for its value. b. Purpose of the Fund The Fund has been established to further strengthen the integrity and acceptability of the food quedan/chattel mortgage on food deposits by undertaking to guarantee the existence of food deposits when said quedan is pledged/chattel mortgage executed by a food businessman with a lending bank and thereby develop the quedan/chattel mortgage as a convenient credit instrument for chanelling the banking sector's loanable funds to augment the food businessman's working capital for food procurement operation and enhance the stabilization of farm prices of storable food commodities. c. Administration of the Fund The Fund shall be administered as hereunder outlined: (1) The funds and monies accruing to the Fund shall be administered by the Board; (2) The Board shall adopt such policies, rules and regulations as may be necessary to administer the fund and to effectively achieve the objective of the Food Quedan Financing Program; (3) The Board management staff shall assist in the processing of application for guarantee coverage, claims for guarantee payments of lending banks and in other matters pertaining to the administration of the Fund. d. Eligible quedan/chattel mortgage for guarantee coverage Only food quedans pledged/chattel mortgage covering food deposits stored in a duly licensed bonded warehouse executed by a food businessman for the purpose of securing commodity loan from a lending bank shall be eligible for guarantee coverage. e. Extent of the coverage The Fund shall guarantee the existence of food deposits stored in a duly licensed bonded warehouse covered by quedan pledged or chattel mortgage executed in favor of a lending bank under the Food Quedan Financing Program up to an amount equivalent to eighty percent (80%) of the outstanding loan. f. Extent of liability of the Fund The liability of the Fund to the lending bank shall be up to eighty percent (80%) of the outstanding loan, inclusive of interest as of maturity date of loan, after deducting the sales proceeds of existing food deposits, if any, Provided ,that the non-payment of said loan is due to the instances enumerated in Item "m" hereof. g. Requirements for guarantee coverage A lending bank desiring to avail of the guarantee coverage on quedans pledged/chattel mortgage for commodity loans to food businessman must comply with the following requirements: (1) The execution of a guarantee agreement with the Board in a prescribed form. (2) After the execution of the guarantee agreement and for as long as it is in full force and effect, the lending bank shall submit to the Board, or to the regional/provincial offices of the National Food Authority (NFA) within fifteen (15) calendar days from the date of release of loans, the list of quedans/chattel for guarantee coverage in a prescribed form. The list shall be submitted directly to the Board or to the nearest NFA office, either through personal delivery or through registered mails. In the first case, the date of acknowledgment by any authorized representative of the Board/NFA on the copies of list filed or submitted and in the second case, the date of mailing postmarked on the envelope or the registry receipt shall be considered as the date of filing or submission; and (3) The remittance of the guarantee fee to the Board directly or thru the nearest NFA office together with the list of quedans/chattel mortgage for guarantee coverage. h. Effectivity of guarantee coverage After the list of quedan/chattel mortgage for guarantee coverage shall have been submitted by the lending bank and consequently approved by the Board, the effectivity of the guarantee coverage shall retroact to the date of the submission of the said list as provided for in item "g(2)" above. All quedan/chattel mortgage loans with approved guarantee coverage shall continue to enjoy said guarantee even after the execution of a food trust receipt (FTR) pursuant to the guidelines on its use under the Food Quedan Financing Program and except as provided under Item "p (4)" hereof. i. Guarantee fee A guarantee fee of one percent (1%) per annum of the amount of every loan extended to food businessman shall be paid by the lending bank to the Board. Said fee shall not be passed on to the borrower and shall be non-refundable. j. Joint inspection of stocks In the event of failure of food businessman to pay wholly or in part his loan upon maturity, the lending bank shall, within fifteen (15) calendar days, notify the Board after which a joint inspection by authorized representatives of the lending bank, the Board and NFA shall be conducted for the purpose of assessing the quality and quantity of the food deposit covered by the quedan/chattel mortgage. A joint inspection may, likewise, be conducted even before the maturity of the loan at the instance of the lending bank, the Board or NFA. After the joint inspection, a report in a standard format shall immediately be submitted to the Board. k. Sale of food deposits upon maturity of the loan if on the basis of the findings of the joint inspection the existing food deposit is deemed sufficient to satisfy the outstanding loan, the lending bank shall allow the sale thereof by the borrower, within a reasonable period, under the supervision of the Board and/or NFA and proceeds of sale shall be applied to the outstanding loan. In case there has been a reduction in the quantity of food deposits and the value of the remainder is not sufficient to satisfy the outstanding loan, the lending bank shall, likewise, allow the sale of said stocks by the borrower as above specified and proceeds of sale shall be applied to the outstanding loan. The loan balance shall, thereafter, be subject for claim against the Fund to the extent provided for in Item "f" above. l. Purchase guarantee of food deposit If the existing food deposit cannot be sold at a price higher than the prevailing NFA's buying price or government support price, as the case may be, NFA shall purchase such portion of the existing food deposit equivalent to the outstanding loan covered by food quedan/chattel mortgage at the prevailing government support price and the sale proceeds thereof shall be applied for payment of the outstanding loan. m. Claim against the Fund The lending bank may file a claim against the guarantee fund to the extent provided for in Item "f" above, in case the loan is not fully paid upon maturity, in any of the following instances: (1) When there is total non-existence of stocks covered by pledged quedans/chattel mortgage as verified by the findings of joint inspection; or (2) When there has been a reduction in the quantity of food deposits covered by quedan/chattel mortgage, the sales proceeds of the remainder is not sufficient to satisfy the outstanding loan. n. Payment of claim The Board shall pay the guarantee claim within fifteen (15) working days from receipt thereof, to the extent allowed under Item "f" subject to the conditions set forth in Items "I" and "m" and after the lending bank shall have filed a claim for guarantee payment in the prescribed form; Provided ,that the guarantee coverage shall not have been cancelled or nullified under any of the grounds enumerated in Item "p". o. Application and remittance of recoveries Any amount recovered or collected from the borrower and/or the bonds subsequent to the payment of claim against the fund shall be applied to the unpaid loan on a pro rata basis of eighty percent (80%) to the fund and twenty percent (20%) to the lending bank. The collected amount due the Fund shall, without necessity of demand, be remitted to the Board within fifteen (15) calendar days from date of collection, otherwise, the lending bank shall pay an amount equivalent to one percent (1%) per month on the amount due as liquidated damages and another one percent (1%) per month as interest thereon computed from the date of collection up to the date of remittance. In addition, such violation shall constitute a ground for disapproval of future application for guarantee coverage. p. Grounds for cancellation or nullification of guarantee coverage Any of the following shall be a ground for cancellation or nullification of guarantee coverage and/or non-payment of guarantee claims: (1) When there is collusion between the borrower and the lending bank in the extension of credit to the prejudice of the Fund. Collusion exists when: (a) the borrower and the official(s) and/or employee(s) of the lending bank enter into an agreement for fraudulent purposes or whenever said parties conspire to defraud the Fund; or (by the lending bank receives the sales proceeds under the Food Trust Receipt Agreement for deposit in the name of the borrower before maturity of the loan but subsequently allows withdrawal of the same by the borrower without payment of the loan, in violation of the provisions of said Agreement and to the prejudice of the Fund; (2) When the lending bank makes false statements, misrepresentation, omission or concealment in the reports submitted to, and/or in the claims filed with the Board; (3) When the lending bank violates any of the provisions of these rules and regulations; and (4) When the lending bank fails to submit a copy of the Food Trust Receipt Agreement within fifteen (15) calendar days from date of execution of the FTR to the Quedan Board or the nearest NFA office. The aforementioned grounds shall not preclude the Board from cancelling or nullifying its guarantee coverage for other causes concerning fraud, bad faith or other machinations. q. Applicability of other Penalties The penalties provided for in these rules and regulations shall be without prejudice to the imposition of other administrative sanctions as well as the filing of civil and/or criminal cases as may be warranted by circumstances. APPENDIX 33 IMPLEMENTING GUIDELINES OF THE COTTON SUPERVISED CREDIT FINANCING PROGRAM Crop Year 1982-1983 (Appendix to Sec. 1358) I. INTRODUCTION The Philippine imports about 35,000 metric tons or 200,000 bales of cotton worth $40M annually requiring the expenditures of precious foreign exchange. To save scarce foreign exchange resources and to assure the stable supply of cotton which could be grown profitably in our country, there is a felt need to grow cotton locally as an import substitute. Growing cotton locally will save foreign exchange, increase farm incomes, provide additional employment, reduce the cost of cotton to textile millers and assure the supply of cotton regardless of the foreign exchange reserve position of the country. A commercial -scale cotton-growing program would improve complex problems and would require massive use of resources which would need cooperation and coordination from both government and private sectors. The successful implementation of a program with this magnitude would require a centralized direction, management and supervision. Thus, in December 22, 1973, President Marcos signed P.D. No. 350 which was later amended by P.D. No. 1063 entrusting the Philippine Cotton Corporation the responsibility of undertaking and coordinating a Cotton Production Program in the country. To ensure the success of the program, the Philippine Cotton Corporation, in cooperation with the agencies of the government and private, is providing credit with the package of technology to the farmers. The Cotton Financing Program is to be administered by the CB-DRBSLA through rural banks, stock savings and loan associations, the Philippine National Bank, the Development Bank of the Philippines, the Land Bank of the Philippines and private commercial banks under the Supervised Credit Program whereby adequate credit and competent technical assistance are timely extended to cotton-farmer-borrowers. Under this scheme, the farmer-borrowers agree in writing that he will apply improved practices necessary to conserve the land, improve its fertility and increase its production and abide by the approved farm plan and budget jointly prepared by him and the Philippine Cotton Corporation production technician. II. OBJECTIVES A. General To attain self-sufficiency in cotton within the shortest possible time. B. Specific 1. To increase the production and farm income of farmers. 2. To reduce our foreign exchange expenditures. 3. To generate employment particularly in the rural areas. III. STRATEGY OF IMPLEMENTATION A. Funding The Philippine Cotton Corporation deposited the amount of P5M with the CB-DRBSLA under a Special Time Deposit to augment the initial deposit made by the National Food and Agriculture Council for cotton financing, which is to be utilized as seed starter fund by the participating financial institutions for granting production loans to cotton farmers. B. "Seed" STD Funding and Procedures 1. The PhilCotton production technicians assist farmer-borrowers in the preparation of their farm plans and budgets. These are submitted to the participating bank together with the other required documents. 2. The participating bank prepares an STD application based on the target areas prepared by the Philippine Cotton Corporation which will be the basis for granting STDs by the CB-DRBSLA. 3. The participating bank submits the STD application to CB-DRBSLA. The application shall be supported by the required number of blank STD certificates, the latest statement of financial condition and other CB requirements. 4. CB-DRBSLA processes and approves the STD application of the participating bank. 5. CB-DRBSLA furnishes CB-DLC two copies of the approved applications which shall be the basis of rediscounting of the participating bank concerned. The latter in turn furnishes CB-DLC regional office a copy of subsequent rediscounting of the participating bank. 6. CB-DRBSLA fills up the STD certificates and releases the STD to the participating bank by credit advice or telegraphic transfer to the participating bank's depository bank. 7. The term of the STD shall be ninety (90) days: Provided ,That if loans to eligible borrowers are one hundred per cent (100%) funded by STD the term of such STD shall be two hundred ten (210) days. ( Effective December 17, 1984 ) C. Additional STD Funding and Procedures 1. In addition to the provisions on the use of the COTTON LOAN FUND as a starter fund, the CB-DRBSLA shall be authorized to grant additional STDs to participating banks which may be unable to get additional funds for releases to cotton farmers through rediscounting. 2. Initial STDs amounting to 50% of the total credit requirements per hectare of cotton financed shall be issued under this special CSCP. This shall have a term of 90 days. In cases where subsequently, additional STD funding is provided, the initial STD term shall be extended by 120 days. STDs issued in addition to the original releases shall mature 210 days from the date of initial STD. Second and third STD releases shall not exceed 25% of the total credit requirements per hectare per release and shall be made 8 and 12 weeks, respectively, after the first STD release. D. Rediscounting . All eligible papers may be rediscounted with the Central Bank's Department of Loans and Credit (CB-DLC) at such value and rate as may be prescribed by the Central Bank: Provided ,That loans to eligible borrowers that are one hundred per cent (100%) funded by STD shall not be rediscountable. ( Effective December 17, 1984 ) 1. The participating bank rediscounts the promissory note with CB-DLC submitting with the rediscounting schedule a copy of the borrowers' application and promissory note and Farm Plan and Budget. 2. Upon approval of the participating bank's application, CB-DLC automatically credits 50% of the rediscounting proceeds to the participating bank's STD account with CB-DRBSLA, and the remaining 50% to the participating bank's depository bank. The participating banks are notified by telegram. E. Policies and Procedures 1. Project Areas The project areas shall be those determined by the Philippine Cotton Corporation as suitable for cotton production. These include the following areas and other areas/provinces which will be officially announced by Philcotton from time to time: Area I Ilocos Norte, Ilocos Sur, Abra Area II La Union, Pangasinan, Zambales Area III Cagayan, Kalinga-Apayao Area IV Isabela, Nueva Vizcaya, Quirino Area V Tarlac, Nueva Ecija, Pampanga, Bulacan Area VI Rizal, Laguna, Batangas, Cavite, Mindoro Area VII Negros Occidental, Iloilo, Antique, Capiz, Aklan Area VIII South Cotabato, Sultan Kudarat, Maguindanao Area IX Cebu, Negros Oriental, Misamis Oriental, Bukidnon 2. Eligible Borrowers a. Only bona-fide individual farmers, corporations, partnerships, associations and cooperatives, as recommended/accredited by the PCC in coordination with the lending bank in designated project areas who are interested in growing cotton are qualified under the program. b. Farmers with past dues on M-99 loans up to P3,000 may qualify for a cotton loan. It is left to the discretion of the manager to accept the loan application of farmer-borrowers with past dues of more than P3,000 considering his past experience and evaluation of the loan application. 3. Requirements The following requisite documents as attachments to a farmer-borrower's loan application shall be submitted to the bank. Cotton technicians shall ensure the completion and thoroughness of said documents to initiate and prevent delays in processing activity. Moreover, participating banks are likewise enjoined to refrain from additional requirements inconsistent with the guidelines. 1. Farm Plan and Budget to be prepared by the farmer with the assistance of the cotton production technicians. 2. Certificate of Identity of the farmer-borrower signed by the Barangay Captain or Samahang Nayon President of NFAC Identification Card. 3. The farmer must sign a Marketing Agreement with PhilCotton. 4. Additional requirements such as the farmers' ID picture and residence certificate. 5. For agrarian reform beneficiaries, a MAR certificate is required. 4. Loan per Hectare The amount of the loan shall be as follows: a. For farmers applying for cotton loans for two (2) hectares or less, maximum amount of P3,000 per hectare shall be granted b. For farmers applying for cotton loans for more than two (2) hectares, a maximum amount of P4,300 per hectare shall be granted. c. For farmers who may need to purchase sprayers, an additional loan of up to P700 per hectare shall be granted. d. The proceeds of the loan shall be budgeted as shown in the attached Farm Budget. 5. Loan Releases a. Upon approval of the loan, the entire loan proceeds shall be released and automatically credited to the Special Savings Deposit (SSD) account in the name of the borrower. This SSD shall earn interest at the same rate such borrower has been charged on his loan. (Effective Dec. 17, 1984) b. Loan releases shall be based on the farm plan and budget upon the recommendation of the PhilCotton production technician. 6. Security of the Loan a. For individual farmer-borrowers applying for cotton loans for six hectares or less, a chattel mortgage on the standing crop or deed of assignment of produce shall suffice. In such cases, registration of the chattel mortgage or deed of assignment shall be done by the participating bank. The registration fee shall be for the account of the farmer. b. For areas beyond six hectares per borrower, the manager of participating banks shall have the discretion as to the required collateral and securities consistent with their bank's lending policies and guidelines. 7. Processing of Loan Application a. The participating bank shall begin accepting cotton loan applications effective January and shall process them within 1 month from date of receipt of complete application forms and requirements and effect provisional approval thereon or certify eligibility of farmer for cotton financing subject to the provisions of the succeeding paragraph. b. Unless otherwise indicated, the final loan approval shall be subject to the repayment of the borrower's outstanding obligations of restructuring of the unpaid portion of the current loan. The matured portion of the restructured loan shall be deducted from the proceeds of the seedcotton sales of the borrower to PhilCotton. However, such deductions shall not exceed 30% of the net proceeds due to the borrower after deducting the cotton loan and interest that may have accrued thereon. 8. Maturity of the Loan All loans shall mature within a period of seven (7) months or 210 days. 9. Interest and Other Charges Loans shall be subject to a maximum interest equivalent to MRR 90 less 2 percent per annum, inclusive of service and other charges: Provided ,That loans that are one hundred per cent (100%) funded by STD shall bear interest of fifteen per cent (15%) per annum, inclusive of all charges, or at such rate as may be prescribed by the Central Bank. (Effective Dec. 17, 1984) 10. SSD Withdrawal and Purchasing of Inputs a. All cash withdrawals from the SSD must be in accordance with the farm plan and budget. b. Purchase of needed production inputs like seeds, fertilizer, sprayer and chemicals shall be done through the chit system or purchase order. Banks shall be prohibited from specifying the dealer where the inputs will be purchased. Farmers shall be left to choose among the dealers which are accredited. c. Based on the actual needs of the crop, the production technician issues the chit indicating the name of the farmer, effective date of chit input/amount required. The technician issues the participating bank's and dealer's copies to the farmer and retains stub for reference. d. Chits must be validated by bank prior to use. A validated chit is good only for a period of 15 days. Unused chits may however be revalidated subject to approval by bank. e. Liquidation of serviced chits shall be accomplished weekly upon dealer's presentation of a summary of serviced chits with the corresponding invoice receipts. f. Before a farmer-borrower can make use of chits, he must first have it validated. 1. Farmer takes accomplished chit to the participating banks. 2. The participating bank verifies the schedule of input releases and the corresponding amount to be withdrawn against the SSD. 3. Farmer accomplishes withdrawal slip from the SSD. 4. The participating bank stamps its seal on both copies and returns dealer's copy to the farmer. A validated chit is good only for fifteen days. Hence, the farmer-borrower must withdraw his inputs from the accredited dealer within the indicated term. If, however, the farmer fails to get his inputs from the dealer within the specified span of time, he could revalidate his expired chits, subject to the approval of the technician and the participating bank involved. 5. Farmer brings validated chit to an accredited dealer. 6. Dealer issues the input with an invoice receipt indicating clearly the name, quantity and price of the inputs. g. Liquidation of serviced chits is done weekly upon dealer's presentation of a summary of serviced chits with the corresponding invoice receipts. 11. Repayment and Marketing Strategy a. At the start of the cropping season, the Philippine Cotton guarantees a floor price and market to the farmer-borrowers involved in the cotton financing program. The floor price shall be announced at least two (2) months prior to the start of the planting seasons. b. Farmers shall deliver their produce to PhilCotton collection centers where they will be issued receipts indicating the quantity and value of harvest delivered. c. PhilCotton shall deposit adequate funds for seed-cotton purchases with the participation bank at least two (2) weeks before purchasing. d. PhilCotton shall pay the cotton deliveries through the lending bank. e. The lending bank credits the amount to the farmer's account to offset his loan. Any excess amount is given to the farmer. 12. Restructuring Participating banks shall be allowed to restructure the loans granted under this program in case of force majeure or fortuitous events upon certifications by Area Production Technician, duly attested by his Area Supervisors and subject to verification by the CB Agricultural Credit Supervisors for RBs/SLAs or by the representatives of PNB, DBP, LBP, or the Private Commercial Banks. 13. Guarantee Feature The Philippine Crop Insurance (PCIC) shall guarantee any loss up to 85% that may be incurred by the RB/SLA as a result of non-payment of loans due to unforeseen circumstances beyond the control of the farmer borrower under the Agricultural Guarantee Program. The guarantee fee of one per cent (1%) of the amount of production loans granted shall be paid by the banking institution to the PCIC regional office concerned. 14. Monitoring Participating banks shall accomplish a monthly progress reports to be submitted to the CB-Department of Rural Banks and Savings and Loan Associations (DRBSLA) and to PhilCotton. A standard supervised credit monitoring form shall be used for this purpose. 15. Evaluation of Farm Projects After the End of the Crop Year The Technician evaluates the projects after the end of the crop season to determine the problems encountered by the farmer-borrowers in order to formulate recommendations/solutions to improve the farmers future farming operations. 16. Saving Consciousness To instill savings consciousness among cotton borrowers, they shall be encouraged to maintain a portion of the net proceeds of their seedcotton sales in a savings account with the lender bank. FARM BUDGET * (One-Hectare Cotton Farm) FIRST RELEASE (5-21 days before planting) Land preparation (Cash) P400 Seeds 60 P460 SECOND RELEASE (1-7 days before planting) Fertilizer 1 (Chit) 370 Chemicals 2 (Chit) 40 Irrigation fee/rental/gasoline 3 (Chit) 105 Labor 4 (Planting, fertilizing, irrigation) (Cash) 450 965 THIRD RELEASE (7-14 days aster emergence) Chemicals (Chit) 160 Labor (spraying, spot weeding, off-bearing) (Cash) 100 260 FOURTH RELEASE (21-35 days after emergence) Fertilizer (Chit) 380 Chemicals (Chit) 270 Irrigation fee/rental/gasoline (Chit 105 Labor (fertilizing, spraying, irrigating, spot weeding, hilling-up) (Cash) 225 980 FIFTH AND SUBSEQUENT RELEASES (61-110 days after emergence) Based on the actual needs of the farmer as certified by the cotton production technician Chemicals 480 Irrigation fee/rental/gasoline 100 Transportation 5 120 Labor (spraying, spot weeding, irrigating) 200 Harvesting 450 Others 6 125 Contingency 160 1,635 SUB-TOTAL 4,300 7 LESS: Non Cash Labor Expense/Contingency 1,300 TOTAL P3,000 8 Footnotes 1. Assuming a 15% increase in prevailing market prices, fertilizer budget is computed for late planting using ammonium sulfate. For early planting and if urea is used, fertilizer is much lower. cdta 2. Assuming a 15% increase in prevailing market price. 3. Pump-irrigate 4. At P15 per day, assuming 122 man-days. 5. At P0.10/kg. within a 30 km. radius assuming a 1.2 ton yield. 6. Include drying, storing, packaging, delivery 7. Maximum amount of farmer cultivating more than two (2) hectares. 8. Maximum amount for farmer cultivating two (2) hectares or less. Assuming 80% farmer's equity, 20% hired labor. * Based on Technical Recommendation for CY 1979-80. For farmers who may need to buy sprayers, a maximum amount of P700 will be provided in addition to the farm budget per hectare. APPENDIX 34 RULES AND REGULATIONS ON THE GUARANTEE COVERAGE OF THE AGRICULTURAL GUARANTEE FUND (AGF) OF LOANS UNDER SUPERVISED CREDIT FOR COTTON PRODUCTION. * (Appendix to Subsec. 2360.2.e (13)) The following rules and regulations shall govern the guarantee coverage by the Agricultural Guarantee Fund (Republic Act No. 6390) of loans under supervised credit for cotton production. a. Definition of terms . Unless otherwise specified, the following definitions of terms, shall be used in these rules and regulations: (1) Guarantee fund This term shall refer to the Agricultural Guarantee Full created under Republic Act No. 6390 (which is being used to cover cotton production loans and shall be known hereafter as the AGF); (2) Land Bank A body corporate organized and existing under and by virtue of Republic Act No. 3844, as amended, and the Administrator of all Agricultural Guarantee Funds pursuant to Presidential Decree No. 251. (3) Banking institution Any commercial bank, savings and mortgage bank, development bank, rural bank, or stock savings and loan association granting production loans under these rules and regulations. (4) Guarantee A collateral undertaking of the Guarantee Funds to indemnify in part, a banking institution from non-payment of production loan due to production loss suffered by the borrower. (5) Production Loan Sum of money extended by a banking institution to a borrower, repayable over a period of not more than one (1) year, for the purpose of financing the production under supervised credit of cotton and granted to borrowers each tilling not more than six (6) hectares of irrigated land. (6) Supervised credit A system of lending wherein the farmer-borrower agrees in writing that he will apply proven farm practices necessary to conserve the land, improve its fertility and increase its production, and abide by the approved farm plan and budget prepared by an accredited supervised credit technician. (7) Borrower Any person or entity granted a production loan by a banking institution. (8) Production loss Damage to crop financed by a production loan caused by pests, disease and natural calamities (typhoon, flood, drought, volcanic eruption, earthquake and such other fortuitous events) which are beyond the control of the borrower and not traceable to any contributory fault or negligence on his part. (9) Restructuring of loan Extending the maturity period of the production loan granted by a banking institution to a borrower who suffered production loss to not more than three (3) years from date of restructuring, together with a commitment form the banking institution to grant the borrower a new production loan to enable him to replant and thus generate funds from subsequent plant harvests to repay the restructured loan. b. Loans eligible for guarantee coverage . Only production loans as defined herein are eligible for the guarantee coverage. c. Extent of guarantee . The guarantee undertaking of the funds shall be equivalent to 85% of the outstanding balance of the loan exclusive of interest, or 85% if the production loss, whichever is lower; Provide, however ,That the production loss occurred within the term of the loan. d. Requisites for guarantee coverage . A banking institution desiring to avail of the guarantee coverage for its production loans must comply with the following requirements: (1) It must execute a continuing guarantee agreement with the Land Bank in the prescribed form (LBP 02-141-2). (2) Upon effectivity of the continuing guarantee agreement, and for as long as the same is in full force and effect, the banking institution shall submit to the Land Bank for guarantee coverage all eligible production loans. These production loans shall be listed in the prescribed; forms (LBP 02-142-2) which must be submitted to the Land Bank within twenty (20) days from the date of initial release of such loans by the banking institution, but not later than the date of planting. (3) Submission of the list may be effected directly to the Land Bank either through personal delivery or by mail. The date of submission of the list shall be determined by the date of acknowledgment by any authorized representative of the Land Bank appearing on the copies of the list submitted, if the list is submitted by personal delivery, or by the date of mailing postmarked on the envelope or the registry receipt, if list is sent by mail. LibLex (4) A guarantee fee of one percent (1%) of the amount of production loans granted shall be paid by the banking institution to the Land Bank. The check/draft representing payment of the corresponding guarantee fee shall be remitted to the Land Bank together with the list of production loans submitted for guarantee coverage. Said guarantee fee shall be non-refundable, except the amount pertaining to ineligible loans. (5) Failure on the part of the banking institution to submit the list of production loans and to remit the corresponding guarantee fee to the Land Bank within the prescribed period shall render the loans ineligible for guarantee coverage. e. Authority of Land Bank to inspect records of banking institution . For as long as the continuing guarantee agreement between the Land Bank and the banking institution is in force, it shall be incumbent upon the banking institution to allow the Land Bank, through its duly authorized representative, to inspect the banking institution's books of accounts and other records relating to any loan covered by guarantee. f. Filing of notice of possible production loss . It shall be the responsibility of the banking institution to notify the Land Bank of possible production loss suffered by its borrowers. For this purpose, the following guidelines shall be followed: (1) Where the cause of production loss is of general knowledge in the community such that it cannot possibly escape the attention of the management of the banking institution, the banking institution must notify the Land Bank in writing or by telegram of possible production loss suffered by its borrowers within ten (10) days from the date of occurrence of the cause. (2) Where the cause of production loss is not of general knowledge, the banking institution must notify the Land Bank in writing or by telegram of possible production loss suffered by its borrowers within ten (10) days from its receipt of the report of the production technician concerned. The production technician shall, for this purpose, notify the banking institution, as follows: (a) In case of flood (i) Running flood water . The production technician (including production technicians privately-hired by lending institutions) shall notify the bank concerned of the possible crop damage not more than five (5) days after water recession. In case the duration of the flood exceed more than one (1) week, estimates on damage to rice/cotton shall be based on plant stage. On the other hand, should water last more than three (3) days, complete damage on cotton, corn, sorghum and soybean shall be presumed. (ii) Stagnant flood water . The production technician (including production technicians privately-hired by lending institutions) shall notify the bank concerned of the possible crop damage not more than five (5) days after water recession. In case the duration of the flood exceeds more than one (1) week, estimates on damage to rice/cotton shall be based on plant stage. On the other hand, should flood water last more than three (3) days, complete damage on cotton, corn, sorghum and soybean shall be presumed. (b) In case of drought . If a 30-day-dry spell prevails in the area, the production technician (including production technicians privately-hired by lending institutions) shall notify the lending institution concerned of the possible crop damage not more than five (5) days after the 30th day. In case substantial rain occurs within/after the investigation period, re-assessment of the estimate on crop damage shall be done within ten (10) days immediately a week after the rain occurs. Estimates on damage to cotton, rice, corn and soybeans shall be based on the critical stage of the plant ranging from day-old to seventy five day-old (seedling vegetative to flowering/heading stage).However, for sorghum which has some degree of tolerance except at seedling stage, notification of the possible crop damage shall be made not more than five (5) days after the 40th day. (c) In case of plant pests and diseases . The production technician (including production technicians privately-hired by lending institutions) shall notify the lending institution concerned of the possible crop damage not more than five (5) days after the outbreak of the plant disease/infestation and shall copy furnish any BPI/UPCA/IRRI crop protection specialist present in the area The BPI/UPCA/IRRI crop protection specialist shall furnish the Committee of Government Adjusters a certification on said plant infection/infestation not more than five (5) days from receipt of the production technician's notification. (d) Failure of the banking institution to notify the Land Bank of the possible loss in the manner specified above shall render its guarantee claim resulting from such losses, ineligible for payment unless otherwise allowed by the Land Bank Board of Directors under certain exceptions and meritorious cases. g. Filing of claim for guarantee payment After having notified the 'Land Bank of possible production loss suffered by its borrowers in accordance with Item "f" hereof, the banking institution, in filing a claim for guarantee payment, shall: (1) Restructure the loans it had granted to the borrowers who sustained production loss in accordance with the Central Bank guidelines for restructuring of loans. (2) Commit itself (LBP 02-145-2) to, among other things, grant new production loans to the farmer-borrowers who sustained production loss so as to enable them to generate funds to repay their loans. (3) Submit to the Land Bank its claim for guarantee payment in the prescribed form (LBP 02-143-2) not later than six (6) months from the occurrence of the cause of the production loss, duly supported by the following documents: (a) Affidavit of loss (LBP 02-143A-2); (b) List of probable losses on loans under guarantee coverage (LBP 02-143B-2); (c) Production technician's report on probable production loss/damages (LBP 02-143C-2); (d) Adjuster's verification report (LBP 02-143D-2); (e) List of restructured loans duly certified to by an authorized officer of the banking institution indicating the names and addresses of the borrowers as well as the amounts and terms of the loans (LBP-02-143E-2);and (f) Such other documents as may be required by the Land Bank. h. Advance against the claim . Upon receipt of all documents duly and properly accomplished supporting a claim, the Land Bank shall, unless the claim is disapproved or is defective, or unless the banking institution refuses to sign the commitment mentioned in Items "g" and "i",make an advanced equivalent 85% of the outstanding balance of the loan or 85% of the production loss, whichever is lower, which shall be documented as a special time deposit with a term that will be co-terminus with the term of the loan as restructured. (1) In the event the loan has been restructured for a period shorter than three (3) years, the banking institution may, in meritorious cases and in accordance with Central Bank guidelines, again extend the restructuring periods: Provided ,That the total of the restructuring periods shall not be more than the maximum of three (3) years from the date of original maturity of the loan. In such a case the corresponding maturity of the special time deposit is likewise extended to be co-terminus with the new term of the restructured loan, upon receipt of a written advice of extension from the banking institution. (2) Under certain circumstances and whenever the banking institution may require immediate financial assistance in order to refinance its farmer-borrowers who suffered production loss, said banking institution may be allowed to draw up to 60% of the amount to be advanced in the form of a special time deposit as mentioned above notwithstanding deficiencies in the documentation of the claim provided the following requirements are met: (a) Filing of a written request relative thereto by the banking institution at the offices of the Land Bank. (b) Submission of at least the following basic documents; (i) Claimed for losses under Continuing Guarantee Agreement (LBP 02-143-2); (ii) Affidavit of Loss (LBP 02-143A-2); (iii) List of Probable Losses on Loans under Guarantee Coverage (LBP 02-143B-2) duly concurred in by the the Philcotton Production Technician. (3) Execution of a deed of undertaking (LBP 02-145-A-2) showing among other matters, that the banking institution shall: (i) Comply with all the requirements of Items "g" and "i"; (ii) Submit all documents in support of the claim within six (6) months from occurrence of the loss; and (iii) Be liable to the attendant penalties in case of non-compliance thereof. i. Commitment of the banking institution as a pre-condition of an advance against the claim . The advance referred to in the preceding Section shall not be made unless the banking institution, in addition to the commitment referred to in Item "g",makes a commitment (LBP 02-145-2) to: (1) Continue to exert the same diligent efforts in collecting the loans which are the subject of the claim and exhaust all avenues open to it as it might have exercised and availed of if no guarantee had been furnished by the Fund; (2) Adopt, after consultation with the Land Bank, such measures as may be recommended by the Land Bank to facilitate collection of the guaranteed loan; and (3) Keep the Land Bank posted on the status of unpaid production loans at least once every semester or as often as necessary by accomplishing and submitting LBP 02-144-2. j. Collection on restructured loans . As installments of payments on the restructured loans are received from borrowers, the banking institution shall, within ten (10) days from receipt hereof, remit 85% of said installments or payments to the Land Bank as partial liquidation of the special time deposit. Should it fail to effect such remittance within the prescribed period, the banking institution shall pay an amount equivalent to one percent (1) per month as liquidated damages in addition to payment of interest at the rate of one per cent (1%) per month, from the date of collection up to the date of remittance. Remittances of said collection shall be without necessity of demand. In addition, such failure may constitute a ground for the cancellation of the guarantee agreement. k. Application of special time deposit as guarantee payment and collections effected after maturity of restructured loans . Upon maturity of a restructured loan or in case it has been extended in accordance with Item "h" and upon the lapse of the final maturity period of the restructured loan as extended, the remaining balance of the special time deposit shall be applied as payment for losses arising from non-collection of such restructured loan: Provided, however ,That before effecting such application, the banking institution shall furnish the Land Bank with a list of restructured loans that have matured for purposes of adjudicating payment in the manner specified above: and Provided, further ,That the banking institution shall execute a deed of subrogation and undertaking (LBP 02-146-2) subrogating its rights in favor of the Land Bank to the extent of 85% of the unpaid balance of the production loan; continue effecting collection of the unpaid balance, and remit the same to the Land Bank in the manner and subject to the penalties prescribed under Item "j". (1) In applying the special time deposit as guarantee payment, the banking institution shall indicate in the subsidiary loan record of the farmer-borrower concerned the particular entry as guarantee payment of the Land Bank and a memorandum entry that the farmer-borrower's obligation to the extent of the outstanding balance shown therein plus the guarantee payment still subsist. (2) Subsidiary loan records for unpaid loans of which guarantee payments had been duly adjudicated by the Land Bank shall be maintained by the banking institution for a period of at least five (5) years from the date said loans were originally granted and shall not be disposed of without prior approval of the Land Bank. l. Reports on recoveries . Starting from the final adjudication of payment, the banking institution shall submit to the Land Bank within thirty (30) days after each semester a status report in the prescribed form (LBP 02-144-2) showing, among others, the names and addresses of the borrowers, original amounts of loans, the outstanding balances of the loans, amounts and dates of payments of claims by the Land Bank, and collection thereon. m. Grounds for cancellation of guarantee coverage . The following shall constitute grounds for cancellation of guarantee coverage and non-payment of guarantee claim: (1) Where the banking institution has allowed the borrower to deviate from the approved project/farm plan and budget and/or divert the proceeds of his loan to purposes other than those for which it was granted. (2) Where there was collusion between the borrower and the banking institution in the extension of credit to the prejudice of the Land Bank. A collusion exist whenever the borrower and official(s),and/or employee(s) of the banking institution enter into an agreement for a fraudulent purpose or whenever said parties conspire to defraud the Land Bank. (3) Where the banking institution granted additional loans to the borrower without the favorable recommendation of the supervised credit technician. cdtech (4) Where the loan was already overdue at the time the guarantee agreement was executed. (5) Where the banking institution made any material false statement, misrepresentation, omission, or concealment in reports submitted to, and/or in the claims filed with the Land Bank (6) Where the banking institution did not remit within the prescribed period, the 85% share of the Fund on collections of loans which were subject of advance/guarantee payments, and/or violated any of the provisions of these rules and regulations. n. Applicability of other penalties . The penalties provided for in these rules and regulations shall not preclude the application, or shall be without prejudice to the imposition of other administrative sanctions as well as the filing of criminal cases as may be warranted by the circumstances. cdll o. Effectivity . These rules and regulations took effect on August 3, 1973. Footnotes * Presidential Decree No. 1467, as amended by Presidential Decree No. 1733 has transferred the administration of the Agricultural Guarantee Fund to the Philippine Crop Insurance Corporation, and abolished the Agricultural Guarantee Fund Board. APPENDIX 35 Sources of Seedstocks/Grasses (Appendix to Subsec. 2362.5.a.(5)) Available Region Name & Address of Farm Seedstock Grasses I Baguio Stock Farm Stylo Napier Baguio City Ipil-ipil Para Grass Centro Guinea Grass Setaria Kikuyo Agoo, Breeding Station Stylo Alabang X Agoo, La Union Siratro Guinea Ipil-ipil Napier Para Grass Star Grass Kabayan Breeding Station Centro Napier Kabayan, Benguet Siratro Para Grass Ipil-ipil Guinea Grass Stylo Star Grass Sta. Barbara Breeding Center Stylo Sta. Barbara, Pangasinan Siratro Bontoc Artificial Breeding Center Stylo Napier Bontoc, Mt. Province Ipil-ipil Guinea Grass Centro Alabang X II Cabagan Breeding Station Stylo Star Grass Cabagan, Isabela Siratro Guinea Grass Napier Isabela Breeding Station Stylo Napier Gamu, Isabela Alabang X Mt. Province Breeding Station Ipil-ipil Napier Tabuk, Kalinga-Apayao Stylo Bayombong Artificial Breeding Ipil-ipil Napier Center, Bayombong, Nueva Vizcaya Para Grass III Mariang Sinukuan Stock Farm Ipil-ipil Napier Magalang, Pampanga Palayan Stock Farm Centro Alabang X Palayan City Star Grass Napier Bulacan Breeding Station Ipil-ipil Napier San Ildefonso, Bulacan Para Grass Tarlac Breeding Station Ipil-ipil Napier Paraiso, Tarlac Centro Para Grass Alabang X Zambales Breeding Station Ipil-ipil Napier San Marcelino, Zambales Alabang X Camiling Breeding Center Ipil-ipil Napier Camiling, Tarlac Alabang X IV Alabang Stock Farm Sorghum Napier Muntinlupa, Metro Manila Ipil-ipil Para Grass Siratro Alabang X Star Grass Marinduque Breeding Station Ipil-ipil Napier Sta. Cruz, Marinduque Alabang X Mindoro Breeding Station Ipil-ipil Para Grass Calapan, Or. Mindoro Napier La Mesa Dam Forage Project Stylo Para Grass Novaliches, Quezon City Centro Star Grass Ipil-ipil Setaria Siratro Pigeon Grass Guatemala V Milagros Stock Farm Stylo Alabang X Milagros, Masbate Centro Napier Star Grass Setaria Albay Breeding Station Ipil-ipil Alabang X Camalig, Albay Napier Star Grass Catanduanes Breeding Station Centro Napier Viga, Catanduanes Ipil-ipil Alabang X Stylo Masbate Breeding Station Centro Napier Masbate, Masbate Stylo Star Grass Ipil-ipil Pandan Breeding Station Centro Napier Pandan, Catanduanes Siratro Star Grass Ipil-ipil Stylo San Pascual Breeding Station Centro Napier San Pascual, Masbate Siratro Alabang X Stylo Para Grass Virac Breeding Station Ipil-ipil Napier Virac, Catanduanes Centro Alabang X Siratro Gubat Breeding Station Stylo Napier Gubat, Sorsogon Centro VI Dumarao Stock Farm Stylo Napier Dumarao, Capiz Centro Alabang X Star Grass Para Grass La Carlota Stock Farm Stylo Napier La Carlota, Neg. Occ. Star Grass Guinea Grass Para Grass Himamaylan, Breeding Station Stylo Star Grass Himamaylan, Neg. Occ. Ipil-ipil Guinea Grass Kennedy Grass Iloilo Breeding Station Stylo Alabang X Calinog, Iloilo Para Grass Napier Star Grass Lambunao Breeding Station Stylo Guinea Grass Lambunao, Iloilo Siratro Kennedy Grass Star Grass Para Grass Malay Breeding Station Stylo Napier Malay, Aklan Ipil-ipil Kennedy Grass VII Ubay Stock Farm Centro Napier Ubay, Bohol Stylo Guinea Grass Balamban Breeding Station Stylo Napier Balamban, Cebu Ipil-ipil Guinea Grass Cebu Breeding Station Ipil-ipil Napier Cebu City Para Grass Alabang X Guinea Grass Hamil Grass Negros Oriental Breeding Station Ipil-ipil Napier Siaton, Negros Or. Centro Para Grass Stylo San Jose Breeding Station Ipil-ipil Napier San Jose, Negros Or. Stylo Para Grass VIII Can-avid Breeding Station Stylo Napier Can-avid, Eastern Samar Centro Alabang X Villaba Breeding Station Stylo Napier Villaba, Southern Leyte Centro Alabang X Ipil-ipil IX PADAP-BAI Joint Project Centro Napier Baga-Lupa, Pagadian City Stylo Basilan Breeding Station Stylo Napier Basilan City Centro Alabang X X Bukidnon Stock Farm Centro Napier Malaybalay, Bukidnon Stylo Setaria Sitraro Star Grass Alabang X XI Davao Breeding Station Centro Napier Bago Inigo, Toril Para Grass Davao City Alabang X XII Lanao Sur Breeding Station Stylo Napier Bayang, Lanao del Sur Centro Alabang X Nuling Breeding Station Ipil-ipil Napier Sultan Kudarat, Maguindanao Stylo Alabang X APPENDIX 36 MODEL NO. I BALANCE SHEET PROJECTION END OF YEAR (Pesos) (Appendix to Subsec. 2362.12) PROJECT YEAR 1 2 3 4 5 ASSETS Cash 374 134 34 74 254 Stock Inventory value at the end 3,800 3,800 3,800 3,800 3,800 Total Assets 4,174 3,934 3,834 3,874 4,054 ===== ===== ===== ===== ===== LIABILITIES Loan 4,000 3,000 2,000 1,000 - Equity (Networth) 174 934 1,834 2,874 4,054 Total Liabilities and Capital Stock 4,174 3,934 3,834 3,874 4,054 ===== ===== ===== ===== ===== PROJECTED INCOME STATEMENT (Pesos) Sales: - 1,600 1,600 1,600 1,600 Less: Operating Expenses: Drugs and Medicines 40 50 50 50 50 Feed Supplements 160 160 160 160 160 Salt and Minerals 16 20 20 20 20 Miscellaneous 50 50 50 50 50 Interest Charges 480 480 360 240 120 Bank Charges 80 826 80 840 60 700 40 560 40 420 Net Income (Loss) (826) 760 900 1,040 1,180 ==== === === ==== ==== Return on Investment 19.0% 22.5% 26% 29.5% Total Income in 5 years P3,880 Average yearly income 776% Average ROI 19.4% Payback Period 5 years INCOME AND EXPENSES (Pesos) Income: Sales - 1,600 1,600 1,600 1,600 Expenses: Variable Cost * / 3,066 280 280 280 280 Fixed Cost 560 560 420 280 140 Profit/Loss: (3,626) 760 900 1,040 1,180 Add: Estimated Value of animal retained (breeder and calf) 3,800 3,800 3,800 3,800 3,800 Gross Income 174 4,560 4,700 4,840 4,980 ===== ===== ===== ===== ===== CASH FLOW ITEMS 1 2 3 4 5 CASH FLOW Loan Proceeds 4,000 Sales 1,600 1,600 1,600 1,600 Total 4,000 1,600 1,600 1,600 1,600 CASH OUTFLOW: Purchase of Stock 2,800 Drugs and Medicines 40 50 50 50 50 Feed Supplements 16 20 20 20 20 Salt and Minerals 160 160 160 160 160 Miscellaneous ** 50 50 50 50 50 Interest and Bank Charges 560 560 420 280 140 Payment of Loan 1,000 1,000 1,000 1,000 Total 3,626 1,840 1,700 1,560 1,420 ===== ===== ===== ===== ===== Cash Balance 374 (240) (100) 40 180 Cash Balance of Last Year 374 134 34 74 Acc. Cash Balance 134 34 74 254 OPERATING EXPENSES Variable Cost: Cost of Stock 2,800 Drugs and Medicines 40 50 50 50 50 Salt and Minerals 16 20 20 20 20 Feed Supplements 160 160 160 160 160 Miscellaneous * 50 50 50 50 50 Total Variable Cost 3,066 280 280 280 280 Fixed Cost: Interest Expense 480 480 360 240 120 Bank Charges 80 80 60 40 20 Total Fixed Cost 560 560 420 280 140 Total Operating Expenses 3,626 840 700 560 420 ==== ==== ==== ==== ==== LOAN AMORTIZATION SCHEDULE Loan Year Beginning Amortization Principal Bank Balance Balance Payment Interest Charges 1 4,000 560 480 80 4,000 2 4,000 1,560 1,000 480 80 3,000 3 3,000 2,420 2,000 360 60 2,000 4 3,000 1,280 1,000 240 40 1,000 5 1,000 1,140 1,000 120 20 NUMBER OF HEAD AND VALUE OF STOCK PURCHASES AND SALES 1 2 3 4 5 No. Value No. Value No. Value No. Value No. Value (P) (P) (P) (P) (P) Purchases: Heifer Breeder 1 2,800 Total 1 2,800 == ===== Sales: Fattened Cattle 1 1,600 1 1,600 1 1,600 1 1,600 Yearling 1 1,600 1 1,600 1 1,600 1 1,600 Total 1 1,600 1 1,600 1 1,600 1 1,600 == ===== == ===== == ===== == ==== MODEL NO. II BALANCE SHEET PROJECTION END OF YEAR (Pesos) I T E M S PROJECT YEAR 1 2 3 4 5 ASSETS: Cash 3,412 3,772 4,412 4,332 7,532 Stock Inventory Value at the end 3,800 3,880 3,880 3,880 3,880 TOTAL ASSETS 7,212 7,572 8,212 8,132 11,332 ===== ===== ===== ===== ===== LIABILITIES: Loan 6,000 4,000 2,000 Equity (Networth) 1,212 3,572 6,212 8,132 11,332 Total Liabilities and Capital Stock 7,212 7,572 8,212 8,132 11,332 ===== ===== ===== ===== ===== PROJECTED INCOME STATEMENT (Pesos) Sales: 6,810 8,410 8,410 8,410 8,410 Less: Cost of stock sold 4,400 4,400 4,400 4,400 4,400 Gross Margin 2,410 4,010 4,010 4,010 1,010 Less: Operating Expenses: Drugs and Medicines 120 130 130 130 130 Feed Supplements 480 480 480 480 480 Salt and Minerals 48 50 50 50 50 Miscellaneous 150 150 150 150 150 Interest Expense 1,200 720 480 240 Bank Charges 200 2,198 120 1,650 80 1,370 40 1,090 810 Net Income (Loss) 212 2,360 2,640 2,920 3,200 ==== ==== ==== ==== ==== Return on Investment (ROI) 2.12% 23.6% 26.4% 29.2% 32.0% Total Income in 5 years P11,332.00 Average yearly Income 2,266.40 Average ROI 22.6% Payback Period 5 years INCOME AND EXPENSES PROJECT YEAR ITEMS 1 2 3 4 5 Income: Sales 6,810 8,410 8,410 8,410 8,410 Expenses: Variable Cost * 7,998 5,210 5,210 5,210 Fixed Cost 1,400 9,398 840 6,050 560 5,770 280 5,490 5,210 5,210 Profit/Loss (2,588) 2,360 2,640 2,920 3,200 Profit/Loss Add: Estimated value of animals retained (breeder & calf) 3,800 3,800 3,800 3,800 3,800 GROSS INCOME 1,212 6,160 6,440 6,720 7,000 CASH FLOW Cash Inflow: Loan Proceeds 10,000 Sales 6,810 8,410 8,410 8,410 8,410 Total 16,810 8,410 8,410 8,410 8,410 CASH OUTFLOW: Purchase of Stock 7,200 4,400 4,400 4,400 4,400 Drugs and Medicines 120 130 130 130 130 Feed Supplements 480 480 480 480 480 Salt and Minerals 48 50 50 50 50 Miscellaneous ** 150 150 150 150 150 Interest and Bank Charges 1,400 840 560 280 Payment of Loan 4,400 2,000 2,000 2,000 Total 13,398 8,050 7,770 7,490 5,210 ===== ===== ===== ===== ===== Cash Balance 3,412 360 640 920 3,200 Cash Balance of Last Year 3,412 3,772 4,412 4,332 Acc. Cash Balance 3,772 4,412 4,332 7,532 OPERATING EXPENSES Variable Cost: Cost of Stock 7,200 4,400 4,400 4,400 4,400 Drugs and Medicines 120 130 130 130 130 Salt and Minerals 48 50 50 50 50 Feed Supplements 480 480 480 480 480 Miscellaneous ** 150 150 150 150 150 Total Variable Cost 7,998 5,210 5,210 5,210 5,210 Fixed Cost: Interest Expense 1,200 720 480 240 Bank Charges 200 120 80 40 Total Fixed Cost 1,400 840 560 280 Total Operating Expenses 9,898 6,050 6,770 5,490 5,210 ==== ==== ==== ==== ==== NUMBER OF HEAD AND VALUE OF STOCK PURCHASES AND SALES 1 2 3 4 5 No. Value No. Value No. Value No. Value No. Value (P) (P) (P) (P) (P) Purchases: Heifer breeder 1 2,800 Fatteners 2 4,400 2 4,400 2 4,400 2 4,400 2 4,400 Total 3 7,400 2 4,400 2 4,400 2 4,400 2 4,400 == ===== == ===== == ===== == ===== == ==== Sales: Fattened Cattle 2 6,810 2 6,810 2 6,810 2 6,810 2 6,810 Yearling 1 1,600 1 1,600 1 1,600 1 1,600 Total 2 6,810 3 8,410 3 8,410 3 8,410 3 8,410 == ===== == ===== == ===== == ===== == ==== LOAN AMORTIZATION SCHEDULE Loan Year Beginning Amortization Principal Bank Balance Balance Payment Interest Charges 1 10,000 5,400 4000 1,200 200 6,000 2 6,000 2,840 2,000 720 120 4,000 3 4,000 2,560 2,000 480 80 2,000 4 2,000 2,240 2,000 240 40 5 MODEL NO. III BALANCE SHEET PROJECTION END OF YEAR (Pesos) ASSETS Cash 6,450 6,408 6,906 11,964 17,022 Stock Inventory Value at the end 3,800 3,800 3,800 3,800 3,800 Total Assets 10,250 10,208 10,706 15,764 20,822 ===== ===== ===== ===== ===== LIABILITIES Loan 8,000 4,000 Equity (Networth) 2,250 6,208 10,706 15,764 20,822 Total Liabilities and Capital Stock 10,250 10,208 10,706 15,764 20,822 ===== ===== ===== ===== ===== MODEL NO. III PROJECTED INCOME STATEMENT PROJECT YEAR ITEMS 1 2 3 4 5 Sales: 13,620 15,220 15,220 15,220 15,220 Less: Cost of stock sold 8,800 8,800 8,800 8,800 8,800 Gross Margin 4,820 6,420 6,420 6,420 6,420 Less: Operating Expenses: Drugs and Medicines 200 210 210 210 210 Feeds Supplements 800 800 800 800 800 Salts and Minerals 80 82 82 82 82 Miscellaneous 250 250 250 250 250 Interest Charges 1,920 960 480 Bank Charges 320 3,570 160 2,462 80 1,902 1,342 1,342 Net Income (Loss) 1,250 3,958 4,518 5,078 5,078 ==== ==== ==== ==== ==== Return on Investment (ROI) 7.81% 24.74% 28.24% 31.74% 31.74% Total Income in 5 years P19,882 Average Yearly Income 3,976.40 Average ROI 24.85% Payback Period 4 years INCOME AND EXPENSES Income: Sales 13,620 15,220 15,220 15,220 15,220 Expenses: Variable Cost * 12,930 10,142 10,142 10,142 10,142 Fixed Cost 2,240 15,170 1,120 11,262 560 10,702 Profit/Loss (1,550) 3,958 4,518 5,078 5,078 Profit/Loss Add: Estimated value of animals retained (breeder & calf) (3,800) 3,800 3,800 3,800 3,800 GROSS INCOME 2,250 7,758 8,318 8,878 8,878 ===== ===== ===== ===== ===== OPERATING EXPENSES (Pesos) Variable Cost: Cost of Stock 11,600 8,800 8,800 8,800 8,800 Drugs and Medicines 200 210 210 210 210 Salt and Minerals 80 82 82 82 82 Feed Supplements 800 800 800 800 800 Miscellaneous 250 250 250 250 250 Total Variable Cost 12,930 10,142 10,142 10,142 10,142 Fixed Cost: Interest Expense 1,920 960 480 Bank Charges 320 160 80 Total Fixed Cost 2,240 1,120 560 Total Operating Expenses 15,170 11,262 10,702 10,142 10,142 ==== ==== ==== ==== ==== MODEL NO. III CASH FLOW ITEMS PROJECT YEAR 1 2 3 4 5 Cash Inflow Loan Proceeds 16,000 Sales 13,620 15,220 15,220 15,220 15,220 Total 29,620 15,220 15,220 15,220 15,220 ====== ====== ====== ====== ====== Cash Outflow: Purchase of Stock 11,600 8,800 8,800 8,800 8,800 Drugs and Medicines 200 210 210 210 210 Feed Supplements 800 800 800 800 800 Salt and Minerals 80 82 82 82 82 Miscellaneous * 250 250 250 250 250 Interest and Bank Charges 2,240 1,120 560 Payment of Loan 8,000 4,000 4,000 Total 23,170 15,262 14,702 10,142 10,142 ===== ===== ===== ===== ===== Cash Balance 6,450 (42) 498 5,058 5,058 Cash Balance of Last Year 6,450 6,408 6,906 11,964 Acc. Cash Balance 6,408 6,906 11,964 17,022 LOAN AMORTIZATION SCHEDULE (Pesos) Loan Year Beginning Amortization Principal Bank Balance Balance Payment Interest Charges 1 16,000 10,240 8,000 1,920 320 8,000 2 8,000 5,120 4,000 960 160 4,000 3 4,000 4,560 4,000 480 80 NUMBER AND VALUE OF STOCK PURCHASES AND SALES (Pesos) 1 2 3 4 5 No. Value No. Value No. Value No. Value No. Value (P) (P) (P) (P) (P) Purchases: Heifer breeder 1 2,800 Fatteners 4 8,800 4 8,800 4 8,800 4 8,800 4 8,800 Total 5 11,600 4 8,800 4 8,800 4 8,800 4 8,800 == ===== == ===== == ===== == ===== == ==== Sales: Fattened Cattle 4 13,620 4 13,620 4 13,620 4 13,620 4 13,620 Yearling 1 1,600 1 1,600 1 1,600 1 1,600 Others Total 4 13,620 5 15,220 5 15,220 5 15,220 5 15,220 == ===== == ===== == ===== == ===== == ==== MODEL NO. IV BALANCE SHEET PROJECTION END OF YEAR (Pesos) ITEMS PROJECT YEAR 1 2 3 4 5 ASSETS Cash 11,488 10,763 10,878 17,833 24,788 Stock Inventory value at the end 3,800 3,800 3,800 3,800 3,800 Total Assets 15,288 14,563 14,678 21,633 28,588 ===== ===== ===== ===== ===== LIABILITIES Loan 12,000 6,000 - Equity (Networth) 3,288 8,563 14,678 21,633 28,588 Total Liabilities and Capital Stock 15,288 14,563 14,678 21,633 28,588 ===== ===== ===== ===== ===== PROJECTED INCOME STATEMENT (Pesos) Sales: 20,430 22,030 22,030 22,030 22,030 Less: Cost of stock sold 13,200 13,200 13,200 13,200 13,200 Gross Margin 7,230 8,830 8,830 8,830 8,830 Less: Operating Expenses Drugs and Medicines 280 290 290 290 290 Feed Supplements 1,120 1,120 1,120 1,120 1,120 Salt and Minerals 112 115 115 115 115 Miscellaneous 350 350 250 350 350 Interest Expense 2,640 1,440 720 Bank Charges 440 4,942 240 3,555 120 2,815 1,875 1,875 Net Income (Loss) 2,288 5,275 6,115 6,955 6,955 ==== ==== ==== ==== ==== Return on Investment (ROI) 10.4% 23.98% 27.79% 31.61% 31.61% Total Income in 5 years P27,588 Average Yearly Income 5,517.50 Average ROI 25.08% Payback Period 4 years INCOME AND EXPENSES Income: Sales 20,430 22,030 22,030 22,030 22,030 Expenses: Variable Cost * 17,862 15,075 15,075 15,075 15,075 Fixed Cost 3,080 20,942 1,680 16,755 840 15,915 Profit/Loss (512) 5,275 6,115 6,955 6,955 Profit/Loss Add: Estimated value of animals retained (breeder & calf) 3,800 3,800 3,800 3,800 3,800 GROSS INCOME 3,288 9,075 9,915 10,755 10,755 ===== ===== ===== ===== ===== OPERATING EXPENSES ITEMS PROJECT YEAR 1 2 3 4 5 Variable Cost: Cost of Stock 16,000 13,200 13,200 13,200 13,200 Drugs and Medicines 280 290 290 290 290 Salt and Minerals 112 115 115 115 115 Feed Supplements 1,120 1,120 1,120 1,120 1,120 Miscellaneous ** 350 350 350 350 350 Total Variable Cost 17,862 15,075 15,075 15,075 15,075 Fixed Cost: Interest Expense 2,640 1,440 720 Bank Charges 440 240 120 TOTAL FIXED COST 3,080 1,680 840 Total Operating Expenses 20,942 16,755 15,915 15,075 15,075 ===== ===== ===== ===== ===== CASH FLOW Cash Inflow: Loan Proceeds 22,000 Sales 20,430 22,030 22,030 22,030 22,030 Total 42,430 22,030 22,030 22,030 22,030 ====== ====== ====== ====== ====== Cash Outflow: Purchase of Stock 16,000 13,200 13,200 13,200 13,200 Drugs and Medicines 280 290 290 290 290 Feed Supplements 1,120 1,120 1,120 1,120 1,120 Salt and Minerals 112 115 115 115 115 Miscellaneous * 350 350 350 350 350 Interest and Bank Charges 3,080 1,680 840 Payment of Loan 10,000 6,000 6,000 Total 30,942 22,755 21,915 15,075 15,075 ===== ===== ===== ===== ===== Cash Balance 11,488 (725) 115 6,955 6,955 Cash Balance of Last Year 11,488 10,763 10,878 17,833 Acc. Cash Balance 10,763 10,878 17,833 24,788 LOAN AMORTIZATION SCHEDULE Loan Year Beginning Amortization Principal Bank Balance Balance Payment Interest Charges 1 22,000 13,080 10,000 2,640 440 12,000 2 12,000 7,680 6,000 1,440 240 6,000 3 6,000 6,840 6,000 720 120 NUMBER AND VALUE OF STOCK PURCHASES AND SALES (Pesos) 1 2 3 4 5 No. Value No. Value No. Value No. Value No. Value (P) (P) (P) (P) (P) Purchases: Heifer breeder 1 2,800 Fatteners 6 13,200 6 13,200 6 13,200 6 13,200 6 13,200 Total 7 16,000 6 13,200 6 13,200 6 13,200 6 13,200 == ===== == ===== == ===== == ===== == ==== Sales: Fattened Cattle 6 20,430 6 20,430 6 20,430 6 20,430 6 20,430 Yearling 1 1,600 1 1,600 1 1,600 1 1,600 Total 6 20,430 7 22,030 7 22,030 7 22,030 7 22,030 == ===== == ===== == ===== == ===== == ==== Footnotes * Includes Cost of stock. ** Include Procurement and Marketing Cost of Stock. * Excludes cost of stock. * Includes cost of stocks. * Includes Procurement and Marketing Cost of Steels. APPENDIX 37 REGIONAL GROUPINGS OF PROVINCES AND CITIES FOR PURPOSES OF THE REQUIRED INVESTMENT DEPOSIT OF THRIFT BANKS IN A REGION (Appendix to Subsec. 2393.6) Region No. I Ilocos Region 1. Ilocos Norte 2. Ilocos Sur 3. Abra 4. La Union 5. Benguet 6. Mountain Province 7. Pangasinan 8. Baguio City 9. Laoag City 10. Dagupan City 11. San Carlos City Region No. II Cagayan Valley Region 1. Batanes 2. Cagayan 3. Isabela 4. Nueva Vizcaya 5. Quirino 6. Ifugao 7. Kalinga-Apayao Region No. III Central Luzon Region 1. Tarlac 2. Nueva Ecija 3. Pampanga 4. Zambales 5. Bulacan * 6. Bataan 7. Angeles City 8. Cabanatuan City 9. Olongapo City 10. Palay City 11. San Jose City (Nueva Ecija) Region No. IV Metropolitan Manila Area 1. Manila 2. Quezon City 3. Pasay City 4. Caloocan City 5. Makati 6. Mandaluyong 7. San Juan 8. Las Pias 9. Malabon 10. Navotas 11. Pasig 12. Pateros 13. Paraaque 14. Marikina 15. Muntinlupa 16. Taguig 17. Valenzuela Region No. IV-A Southern Tagalog Region 1. Towns of Rizal not included in Metropolitan Manila Area 2. Cavite 3. Laguna 4. Batangas 5. Quezon 6. Aurora (sub-province) 7. Marinduque 8. Mindoro Oriental 9. Mindoro Occidental 10. Romblon 11. Palawan 12. Batangas City 13. Lipa City 14. Cavite City 15. Lucena City 16. San Pablo City 17. Tagaytay City 18. Trece Martires City 19. Puerto Princesa City Region No. V Bicol Region 1. Camarines Norte 2. Camarines Sur 3. Albay 4. Catanduanes 5. Masbate 6. Sorsogon 7. Iriga City 8. Legaspi City 9. Naga City Region No. VI Western Visayas Region 1. Negros Occidental 2. Iloilo 3. Guimaras (sub-province) 4. Antique 5. Aklan 6. Capiz 7. Bacolod City 8. Bago City 9. Cadiz City 10. Iloilo City 11. La Carlota City 12. Roxas City 13. San Carlos City 14. Silay City Region No. VII Central Visayas Region 1. Negros Oriental 2. Siquijor 3. Cebu 4. Bohol 5. Bais City 6. Canlaon City 7. Cebu City 8. Danao City 9. Dumaguete City 10. Lapu-Lapu City 11. Mandaue City 12. Tagbilaran City 13. Toledo City Region No. VII Eastern Visayas Region 1. Northern Samar 2. Eastern Samar 3. Western Samat 4. Leyte 5. Southern Leyte 6. Biliran (sub-province) 7. Calbayog City 8. Ormoc City 9. Tacloban City Region No . IX Western Mindanao Region 1. Zamboanga Del Norte 2. Zamboanga Del Sur 3. Basilan 4. Sulu 5. Tawi-Tawi 6. Dapitan City 7. Dipolog City 8. Pagadian City 9. Zamboanga City Region No. X Northern Mindanao Region 1. Camiguin 2. Misamis Oriental 3. Misamis Occidental 4. Bukidnon 5. Agusan del Norte 6. Agusan del Sur 7. Surigao del Norte 8. Cagayan de Oro City 9. Gingoog City 10. Oroqueta City 11. Ozamis City 12. Tangub City 13. Surigao City 14. Butuan City Region No. XI Southern Mindanao 1. Davao del Norte 2. Davao Oriental 3. Davao del Sur 4. South Cotabato 5. Surigao del Sur 6. Davao City 7. General Santos City Region No. XII Central Mindanao Region 1. Lanao del Norte 2. Lanao del Sur 3. Maguindanao 4. North Cotabato 5. Sultan Kudarat 6. Iligan City 7. Marawi City 8. Cotabato City Footnotes * Excluding the town of Valenzuela which is included in Region IV Metropolitan Manila Area pursuant to PD 824. APPENDIX 38 LIST OF CLEARING CENTERS (Appendix to Subsec. 2603.1.b) Clearing Centers Address Suburban Towns and Cities within the Clearing Areas Manila Ground Floor of the Central Bank Building Quezon City, Pasay City, Caloocan City San Juan, Mandaluyong, Makati, Paraaque, Navotas, Malabon, Marikina, Pasig-Metro Manila Angeles City Tablante-Tungol Building Dau (Mabalacat),Guagua, San Fernando Rizal St.,Angeles City Pampanga Bacolod City 1 Villasor Building Lacson St.,Bacolod City Baguio City 2nd Floor, RCBC Building 85 Harrison Road, Baguio City Batangas 3rd Floor, Philbanking Building Tanauan - Batangas Cor. P. Burgos St. & Silang St., Batangas City Cabanatuan City 2nd Floor, Liwas Building P. Burgos Ave.,Cabanatuan City Cagayan de Oro City 1 Trinidad Building Cor. Yacapin & Corales St., Cagayan de Oro City Cauayan, Isabela 2nd Floor, Rural Bank of Cauayan Building Cauayan, Ilagan, Rizal Avenue, Cauayan, Isabela Santiago - Isabela Cebu City 1 4th Floor, SSS Building Mandaue- Cebu Jones Avenue, Cebu City Cotabato City 2nd Floor, CHT Building Magallanes St.,Cotabato City Dagupan City 2nd Floor, R. Villamil Building Urdaneta - Pangasinan Perez Blvd. & Burgos St. San Carlos City Dagupan City Davao City 1 C.B. Regional Office Building Panabo - Davao del Sur Pres. Quirino Ave.,Davao City Dumaguete City 1 Mezzanine Floor, Julio Sy Building V. Locsin St. Cor. Cervantes St. Dumaguete City General Santos City 2nd Floor, Metro Bank Building Pioneer Avenue, General Santos City Iligan 2nd Floor, Dy Pico Building Quezon Avenue cor. Echiverri St. Iligan City lloilo City 1 Doa Maruja Building Corner Burgos & Rizal Sts. Iloilo City Kalibo 2nd Floor, RSL Building Archbishop Reyes St. Kalibo, Aklan Laoag City 2nd Floor, Young's Buildings Batac - Ilocos Norte Nolasco St.,Laoag City Vigan - Ilocos Sur Legaspi City 2 3rd Floor, Del Rosario Building II Daraga, Tabaco, Ligao, Albay J.P. Rizal St.,Legaspi City Lucena City Bartolome Sy Building Quezon Avenue, Lucena City Naga City 2 6th Floor, PNB Building Iriga - Camarines Sur Gen. Luna St.,Naga City Ozamis City Ground Floor, Tan-Lion Building Cor. F. Gomez & T. Cebedo Sts. Ozamis City San Fernando, La Union 3rd Floor, C.B. Regional Office Building Quezon Avenue, San Fernando La Union Surigao City Virginia Yutiamco Building Corner Kaimo & Burgos Streets Tacloban City Mezzanine Floor, Uy Ting Koc Building Senator Enage St.,Tacloban City Tarlac, Tarlac 2nd Floor, T.N. Asiaten Building Paniqui, Tarlac F. Taedo St.,cor. Panganiban St. Tarlac, Tarlac Tuguegarao, Cagayan Eleuterio B. Cruz Building Corner Gonzaga & Mabini Sts.,Tuguegarao, Cagayan Zamboanga City 1 2nd Floor, LHB Building 1 Veterans Avenue, Zamboanga City Footnotes 1. Participants in the inter-regional clearing operations in Visayas and Mindanao areas. 2. Participants in the inter-regional clearing operations in Southern Luzon area. APPENDIX 39 CLEARING OPERATIONS BETWEEN REGIONAL CLEARING CENTERS AND THE MANILA CLEARING CENTER (Appendix to Subsec. 2603.1.d) Exchanges of clearing items among branches of commercial and savings banks in Tarlac, Tarlac, will be conducted at 4:00 P.M. on each business day as well as on all local holidays in the premises of the Tarlac Regional Clearing unit in accordance with the rules and Regulations embodied in Subsec. 2603. 1(d). Simultaneously, "On Tarlac" checks and "On Manila" checks may be presented for clearing respectively through the Manila Clearing Office and the Tarlac Regional Clearing Unit. In Manila 4:00 P.M. - Manila banks deliver "On Tarlac" checks and dishonored "On Manila" checks picked up at 4:00 P.M. of the previous day. Manila Banks pick up "On Manila" checks and returned "On Tarlac" checks delivered at 4:00 P.M. at Tarlac the previous day. In Tarlac 4:00 P.M. - Tarlac banks deliver "On Manila" checks and dishonored "On Tarlac" checks picked up at 4:00 P.M. of the previous day. - Tarlac banks pick up "On Tarlac" checks and the returned "On Manila" checks delivered at 4:00 P.M. at Manila the previous day. If not returned on schedule, it is understood that "On Tarlac" and "On Manila" checks delivered to the Manila Clearing Office and Tarlac Regional Clearing Unit, respectively, will be considered "good" after 4:00 P.M. on the third business day following the date of delivery. ITEMS FOR CLEARING Items for clearing shall consist of checks and documents payable on demand and drawn against banks in Manila and its suburbs (Quezon City, Pasay City, Caloocan City, San Juan, Mandaluyong, Makati, Paraaque, Navotas, Malabon, Marikina and Pasig-Metro Manila) on one hand and banks in Tarlac, Tarlac on the other. SETTLEMENT OF BALANCES Clearing balances of participating banks in Tarlac, Tarlac, shall be debited or credited, as the case may be, to the clearing accounts of their respective head offices with the Central Bank in the afternoon on the date of clearing. MISCELLANEOUS Out-of-town checks shall be sealed in special brown envelope measuring 7" x 11" with the destination "To Tarlac" or "To Manila",as the case may be, properly stamped in bold letters of not less than one (1) inch and three (3) orange stripes, 1/1" wide on the right edge. cdlex Banks shall microfilm all out-of-town checks. APPENDIX 40 GIST AGREEMENT BETWEEN PHILIPPINE NATIONAL BANK AND STOCK SAVINGS AND LOAN ASSOCIATIONS AS CONSIGNEE OF PNB BANK MONEY ORDERS (Appendix to Subsec. 2604.2) 1. The Philippine National Bank will deliver to a savings and loan association, as consignee, bank money orders which the latter will sell and dispose to the public. 2. The consignee association will collect fees from purchasers, and the fees will be shared by the PNB and the consignee on a fifty-fifty basis; 3. The consignee association will remit to the PNB at a designated period the proceeds of sales for the past week, together with the latter's corresponding share of the fees collected; 4. The consignee association will maintain either a savings or current account with the PNB from which the PNB may reimburse itself of any amount due from the consignee; 5. The consignee association may encash or accept for deposit or payment bank money orders, and reimbursement may be made through clearing or by depositing the cashed bank money orders with its savings or current account with the PNB; any stock savings and loan association that enters into this consignment agreement with the PNB shall, however, furnish the appropriate supervising and examining department of the Central Bank with a copy of said agreement, duly signed by the parties. cdlex APPENDIX 42 CLEAN NOTE POLICY (Appendix to Sec. 2612) To effect an expeditious withdrawal from circulation of unfit currency notes in order that the Central Bank (CB) could maintain a clean note policy, all banks including their provincial branches shall observe the following guidelines and procedures: 1. Banks shall identify and sort their cash deposit into (a) clean or fit notes and (b) dirty-mutilated or unfit notes in accordance with the descriptive "Currency Guide for Bank Tellers, Money Counters and Cash Custodians". 2. Banks shall provide separate containers with padlocks duly sealed for the clean or fit notes and dirty/mutilated or unfit notes. A separate deposit slip shall be accomplished by the depositing bank for each category. The deposit slip for unfit currency notes shall be clearly labelled as "unfit". 3. Whenever there are different denominations to be deposited, bundles/packages of 100-,50-,and 20-piso denominations may be placed in one container and 10-,5- and 2-piso denominations in another container. 4. Only dirty/mutilated or unfit notes shall be shipped to the Central Bank. Provincial branches of the PNB authorized to maintain Cash-Held-In-Trust (CHIT) account may make direct shipments to the CB Cash Department or to the nearest CB Regional Offices, Sub-Regional Offices or Cash Units. Provincial branches of banks and other provincial branches of PNB may make direct deposits to the CB Regional Office, Sub-Regional Office or Cash Unit or PNB branch authorized to maintain CHIT account for the Central Bank. 5. The CB Cash Department, Regional Office, Sub-Regional Offices, Cash Units, and PNB branches authorized to maintain CHIT account for the Central Bank, may refuse acceptance of cash deposits not accomplished in accordance with these guidelines. LLjur APPENDIX 43 GUIDELINES AND PROCEDURES TO GOVERN SHIPMENT OF UNFIT/MUTILATED CURRENCY NOTES TO THE CENTRAL BANK, CASH DEPARTMENT, REGIONAL OFFICES AND CASH UNITS (Appendix to Sec. 2612) Clean currency notes still fit for circulation, deposited by banks to the Central Bank for credit to their demand deposit account will be accepted by the Central Bank Cash Department, after package and bundle count only has been made and shall no longer be subjected to piece-by-piece verification by the Central Bank before the same shall be reissued. For purposes of these guidelines clean notes shall be referred to herein as "fit" currency notes. In order that "fit" currency notes accepted by the Central Bank can be immediately reissued to service cash withdrawals of banks, the following guidelines and procedures shall govern such deposits and withdrawals: 1. Banks shall sort their deposits of currency notes into "fit" and "unfit" notes. For purposes of identifying and segregating "fit" from "unfit" currency notes, the descriptive "Currency Guide for Tellers, Money Counters and Cash Custodians" shall be strictly followed. 2. Banks shall provide separate containers with padlocks duly sealed for the fit and unfit notes and a separate deposit slip shall be accomplished for each category. 3. Deposits of fit currency notes shall be verified, arranged, and placed in containers in the following manner: a. Notes of a single denomination must be arranged face and top up in packages of 100 pieces each; b. The wrapper of each package shall be plainly marked with: (1) the denomination and amount of currency in the package; (2) the date of verification; (3) the printed name(s) and signature(s) of the bank's employee(s) who performed the verification; (4) the name of the depositing bank. c. Pins, clips and staple wires, if any, must be removed prior to deposit in order to avoid possible injury to employees and damage to equipment; d. Individual packages of 100 notes each shall be bound in standard units as follows: cdlex Standard Unit Denomination No . of Packages Amount 100-piso 1 to 10 P10,000 to P100,000 50-piso 1 to 10 P5,000 to P 50,000 20-piso 10 P20,000 10-piso 10 P10,000 5-piso 10 P5,000 2-piso 10 P2,000 e. Notes of different denominations should not be mixed in a single package/bundle. 4. Upon delivery of the currency notes to the Central Bank Cash Department, the representative(s) of the depositing bank shall open the containers and, in his presence, package and bundle count shall be made by CB CD Accountable Officer concerned. If found in order, said officer(s) shall acknowledge receipt of the currency deposits. 5. The bundles of currency notes shall be returned to the containers, sealed and padlocked with the key retained and controlled by the representative of the depositing bank. 6. The Central Bank shall service cash withdrawals from the unverified fit currency note deposits previously made by the same bank. LLphil 7. Only authorized representatives of the depositor-bank can open the sealed container(s) corresponding to their unverified fit currency notes deposits from which the Central Bank shall draw to service cash withdrawals of same bank. It is understood that said representatives shall have with them all keys to the containers of their fit currency note deposits whenever they are assigned to CB Cash Department to effect cash withdrawals. 8. Banks must notify the Central Bank at least one (1) day prior to their intended cash withdrawals. 9. Checks presented for withdrawals after 12:00 Noon shall be accepted by the Cash Department for processing and the servicing thereof shall be effected the following day. 10. The authorized representative(s) of the withdrawing bank shall conduct a bundle/package count of the cash withdrawn from their unverified fit currency note deposits before leaving the teller's counter/cash withdrawal area at the Central Bank Cash Department, witnessed by authorized representative(s) of the Central Bank. Any shortage/overage found in the verification by package/bundle count of the case withdrawn shall be brought to the attention of the Central Bank and shall be debited/credited accordingly to their demand deposit account. The Central Bank shall not honor any shortage/overage found after the authorized bank representative(s) have left the teller's counter/cash withdrawal area. 11. Receiving and releasing banks' deposits shall end at 3:00 P.M.,the closing time for banking hour. 12. It is understood that there will be no changes in the existing procedures governing the deposit and verification by the Central Bank of unfit currency notes. 13. The Central Bank reserves the right to conduct piece-by-piece verification on the fit currency deposits whenever it deems necessary. APPENDIX 44 GUIDELINES AND PROCEDURES TO GOVERN VERIFICATION OF CURRENCY NOTES DEPOSITED BY BANKS TO THEIR DEMAND DEPOSIT ACCOUNT WITH THE CENTRAL BANK (Appendix to Section 2612) The following guidelines and procedures shall govern shipments of dirty/mutilated or unfit currency notes by provincial branches of banks and by provincial, city and municipal treasurers to the Central Bank Cash Department and CB Regional Offices, Sub-Regional Offices or Cash Units. 1. Unfit/mutilated currency notes shall refer to those notes described in the Guidelines and Procedures to Govern Verification of Currency Notes Deposited by Banks to their Demand Deposit Account with the Central Bank (App. 43). LexLib 2. Only dirty/mutilated or unfit currency notes shall be shipped to the Central Bank. Provincial branches of banks and provincial, city and municipal treasurers may make direct shipments of such currency to the Central Bank Cash Department or to the nearest CB Regional Offices, Sub-Regional offices and Cash Units. 3. Preparation of Currency Shipment a. Currency notes of a single denomination must be arranged face and top up in packages of one hundred (100) pieces each, banded with paper strap/wrapper. The paper strap/wrapper of each package shall be plainly marked with: the denomination and amount of currency in the package; the date of verification; the initials of person(s) who performed the verification; and the name of the depositing bank, or remitting provincial, city or municipal treasurer. Pins, clips and staple wires, if any, must be removed from the notes prior to shipment in order to avoid possible injury to employees involved in the verification thereof and damage to equipment. Individual packages of 100 pieces each shall be bound in standard units of ten (10) packages each of the same denomination to make a bundle. Every bundle shall be well secured with twine or rubber bands. b. Under no circumstances shall notes of different denominations be mixed in a single package or bundle, nor shall currency notes in loose pieces be forwarded to the Central Bank Cash Department, Regional Offices, Sub-Regional Offices and Cash units. Such loose notes shall be retained until additional pieces of the same denomination sufficient to complete a package have been accumulated. c. Fragments of currency or torn notes which clearly represent and retain three fifths (3/5) or more of its surface shall be carefully mended with transparent tape on the back (not on the face) in a manner which preserves as nearly as possible the original design and size of the note. 4. Packing - a. Currency notes arranged in packages and bundles as herein provided shall be wrapped in thick Manila paper, properly sealed with wax and placed inside wooden (3/4" lumber) boxes measuring 26"L x 17"W x 16"H which shall be strongly fastened with nails, banded with steel wire strap and sealed with sealing wax. The seal must be embedded on the wood to cover the joints. The original packing list/invoice showing the total amount and the denominational breakdown of the currency, duly certified by the head of the branch of bank or the provincial, city or municipal treasurer making the shipment and the auditor thereof, shall be placed inside the box. b. Whenever there are different denominations to be shipped, bundles/packages of 100-,50- and 20-piso denominations may be placed in one (1) box and the 10-,5- and 2-piso denominations in a separate box, with corresponding packing lists. c. As a precautionary measure no indication which would purportedly reveal the content shall appear outside of the package/box except the addressee and sender. 5. The maximum amount of currency to be shipped shall not exceed FORTY MILLION PESOS (P40,000,000.00) for any one shipment in any given day. 6. Shipments of currency notes shall be effected through the Philippine Air Lines (PAL),being the government flag carrier. In places where PAL plane service is not available, the currency may be shipped by boat or through armored car. 7. Method of Shipment and Security Measures a. At least two (2) working days before anticipated or actual shipment of currency is made, the shipper bank shall advise its head office and the Central Bank by coded telegram (using a set of codes previously agreed upon) of intended shipment, stating the amount, number of boxes, name of the carrier, flight number and the date of shipment. Upon receipt of advice, the Head Office shall immediately notify the Cash Department by telephone which shall be followed by a Confirmation letter. The Central Bank must be advised immediately through the fastest means of communications regarding any cancelled or delayed shipments. b. Currency shipment shall be delivered into the custody of the carrier (PAL),accompanied and witnessed by responsible personnel of the shipper and by armed escorts or guards. c. No shipment shall be made when its arrival at destination will be on a Saturday, Sunday or holiday, unless delay is due to circumstances beyond control, in which case the Central Bank should be duly informed thereof. 8. The Central Bank shall duly acknowledge by confirmation-letter receipt of the shipment, subject to verification. The corresponding credit advice shall be transmitted to the Head Office of the Bank concerned, copy furnished the shipper-branch or agency, subject to subsequent adjustments for any shortages, overages, no value, counterfeits and/or other discrepancies found upon verification of shipment. In case the shipper is a provincial, city or municipal treasurer, the Central Bank shall send the corresponding CB Expense Check as payment/redemption thereof. 9. Insurance coverage for every shipment of currency shall be arranged by the Central Bank through the CB Self-Insurance System upon receipt of advice from the shipper. The insurance coverage shall be against loss by theft, robbery or any cause whatsoever from the time the shipment leaves the premises of the shipper until the shipment shall have been delivered inside the Central Bank vaults. The Central Bank will not assume any risk of loss, damage or pilferage on any shipment not made in conformity with the provisions of these Guidelines nor those caused by the infidelity, fraud or dishonesty of the personnel or security escorts of the shipper 10. Only freight and insurance charges shall be for the account of the Central Bank and shall be payable at the Central Bank Head Office or its Regional Offices. Freight charges must be manifested in the corresponding airway bill in case of shipment by plane or bill of lading if by boat, and must be arranged on a "CB-Charge Account" basis. 11. In case fit currency notes and coins are found in a shipment, freight and insurance charges and other related expenses thereof shall be for the account of the shipper. 12. Verification of Shipments - All currency shipped to the Central Bank shall be received subject to verification. Opening of the containers on scheduled date of verification shall be done by authorized representatives of shipper-bank's Head Office and actual piece-by-piece verification of the currency shall be made only in the presence of said representatives of Head Office, in case the shipper is a bank, or in the presence of the Auditor of the Central Bank or its authorized representatives, in case the shipper is a provincial, city or municipal treasurer. APPENDIX 45 AN ILLUSTRATIVE CASE ON THE STEPS TO BE TAKEN BY THE RB/SLA IN THE RESTRUCTURING OF CB:IBRD LOANS UNDER THE 3RD & 4TH RURAL CREDIT PROJECTS (Appendix to 2359.21) Case A loan of P180,000 was granted on September 5, 1975 for the purchase of a 4-wheel tractor and attachments to mature in 7 years. AMORTIZATION SCHEDULE Principal Interest Total Balance Due Date P P P P180,000.00 17,851.24 21,600.00 39,451.24 162,148.76 9-5-76 19,993.39 19,457.85 39,451.24 142,155.37 9-5-77 22,392.60 17,058.64 39,451.24 119,762.77 9-5-78 25,079.71 14,371.53 39,451.24 94,683.06 9-5-79 28,089.28 11,361.96 39,4511.24 66,593.78 9-5-80 31,459.99 7,991.25 39,451.24 35,133.79 9-5-81 35,133.79 4,317.45 39,451.24 9-5-82 P180,000.00 ========= 1. Payment made was for the 1st amortization and none for the 2nd and 3rd amortizations due to force majeure and conditions beyond the control of the borrower. 2. The borrower requested for the restructuring of the loan and after the verification of the rural bank/SLA and confirmation by the CB representative, said loan is restructured effective September 6, 1979 for an additional of three years to the balance of term which is four years. Procedure Step 1 Compute the penalty due by multiplying the principal portion of the unpaid amortizations by 5% from the due date to effective date of restructuring. Penalty on the principal portion of 2nd amortization (P 1 ) 730 P 1 = P19,993.39 x .05 x = P1,999.34 365 Penalty on the second principal portion of 3rd amortization (P 2 ) 365 P 2 = P22,392.60 x .05 x =P 1,119.63 365 Total Penalty Due (P t ) P t = P 1 + P 2 = P1,999.34 + P1,119.63 = P3,118.97 Step 2 Compute the interest due by multiplying the outstanding loan balance by interest rate from date of last payment to effective date of restructuring. 730 Interest = P162,148.76 x 12% x = P38,915.70 365 Step 3 Compute total interest and penalty due by adding Step 1 and Step 2. Total Interest and Penalty Due (IPD) IPD = P t + I = P3,118.97 + P38,915.70 = P45,034.67 Step 4 Get the total amount of the loan to be restructured by adding 50% of the interest and penalty due to the outstanding loan. Loan to be restructured: = (P t + I) 50% + Balance of Principal = (IPD) 50% + P162,148.76 = (P42,034.67) 50% + P162,148.76 = P183,166.09 NEW AMORTIZATION SCHEDULE AMORTIZATION SCHEDULE Principal Interest Total Balance Due Date P P P P183,166.09 22,570.83 21,979.93 44,550.76 160,596.26 9-6-80 25,279.33 19,271.43 44,550.76 135,315.93 9-6-81 28,312.85 16,237.91 44,550.76 107,003.08 9-6-82 31,710.39 12,840.37 44,550.76 75,292.69 9-6-83 35,515.64 9,035.12 44,550.76 39,777.05 9-6-84 30,777.05 4,773.71 44,550.76 9-6-85 P183,166.09 ========== APPENDIX 46 GUIDELINES ON FOOD QUEDAN FINANCING PROGRAM FOR FOOD TERMINAL, INC. (FTI) DEPOSITS (Appendix to Subsec. 2356.6) Pursuant to Letters of Instructions No. 696, 704, 1024 and 1139, the Food Quedan Financing Program for food deposits at the Food Terminal, Inc. bonded warehouse is hereby adopted and issued for the information and guidance of all concerned: I. Scope Food commodities in storage at the bonded warehouse of the Food Terminal. Inc. II. Objectives of the Program 1. To augment the operating capital of food traders and encourage their active participation in the local procurement of the basic food commodities; cdlex 2. To increase the direct involvement of private commercial banks in agricultural credit in compliance with PD No. 717; 3. To establish and strengthen the integrity and acceptability of food quedans as collateral for loan availment; 4. To enhance further the stabilization of food supply and prices; 5. To support the food production program of the government. III. Legal bases 1. Letter of Instruction No. 704, dated June 9, 1978, establishing a Quedan Guarantee Fund and constituting the Quedan Guarantee Fund Board; 2. Letter of Instruction No. 1024, dated May 22, 1980, authorizing the Quedan Guarantee Fund Board created under Letter of Instruction No. 704 to include grains and other food commodities in its Quedan Financing Program. 3. Letter of Instruction No. 1139, dated May 25, 1981, directing the QGFB to implement the inclusion of other food commodities under the purview of the Quedan Financing Program; 4. Presidential Decree No. 4, dated September 26, 1972, as amended by PD Nos. 699, 1485 and 1770 creating the NFA and prescribing its functions, powers and authorities. IV. Terminology 1. Food trader (FT) a person/business entity in whose name the goods are deposited for storage at FTI's bonded warehouse as evidenced by a food quedan/chattel mortgage contract. 2. Lending bank (LB) any banking institution organized and existing under the laws of the Republic of the Philippines and who has agreed to participate in the Food Quedan Financing Program. 3. Food quedan a negotiable warehouse receipt by the terms of which the food deposit in the FTI bonded warehouse shall be delivered to the depositor upon his order, or to bearer or holder in due course for value of the said receipt. 4. Food deposits any goods/commodity received for storage in the bonded warehouse of the Food Terminal, Inc.,such as, but not limited to: onions, garlic, potatoes, processed meat, smoked fish, broilers, pork, beef, beef trimmings, boneless beef, briskets, veal hinds, lamb legs, pork fats, assorted meat, processed fruits, cheese curd, frozen fish and marine products, fruit concentrates, shelled peanuts and such other food commodities as may be jointly agreed upon by the Quedan Board and the Food Terminal, Inc. 5. Quedan Guarantee Fund Board simply known Quedan Board, a government corporation attached to the National Food Authority duly authorized to administer the Guarantee Fund for the quedan financing of food commodities pursuant to LOI Nos. 704, 1024 and 1139. 6. Fund the Quedan Guarantee Fund established under LOI No. 704, as amended by LOIs No. 1024 and 1139, to guarantee the existence of grains/food deposits covered by quedan/chattel mortgage up to 80% of the outstanding loan. 7. Food Terminal, Inc. simply known as FTI, a government corporation which, among others, operates a bonded warehouse for food commodities belonging to third parties. V. Statement of policies A. Purpose of loan To finance food businessmen in the procurement of food commodities and for other incidental expenses such as transporting, storage, processing and marketing. B. Eligibility requirements of loan applicants 1. Must be a depositor of the bonded warehouse of FTI; 2. Must be a holder in due course of a negotiable food quedan or the owner of food deposits covered under the program and subject of a chattel mortgage; and 3. Must be a depositor of locally produced commodities. C. Terms and conditions 1. Collateral Deed of pledge on the negotiable food quedan issued by FTI/chattel mortgage contract on food deposits. 2. Loan ceiling The loan ceiling shall be as prescribed by the Central Bank of the Philippines. 3. Loan value There shall be two levels of loan value computed on the basis of the ceiling prices set for specific commodities, if any, or the average market price of the food commodities for the various quarter as may be determined by the Quedan Board. a. 80% of the face value of the food quedan/food deposits covered by chattel mortgage contract for commodities with Grade A specifications. b. 50% of the face value of the food quedan/food deposits covered by chattel mortgage contract for commodities with Grade B specifications. 4. Types of terms of loan Loans may either be a straight loan or one year credit line made available in notes, both for a term not exceeding the number of days specified below for specified commodities: a. 60 days for onion YG, and potatoes b. 90 days for processed meat, smoked fish and Grade B broilers c. 120 days for frozen commodities: beef, pork, beef trimmings, boneless beef, briskets, veal hinds, lamb legs, pork fats, assorted meat, Grade A broilers, processed fruits/dried apples, dried mangoes, cheese curd, onion RC, frozen fish, and marine products. d. 180 days for fruit concentrates, garlic and shelled peanuts. Term of loan for other food commodities not included herein shall be determined by the Quedan Guarantee Fund Board. 5. Maximum lending bank rates Interest rate of ten per cent (10%) per annum inclusive of service charge. 6. Rediscount rate, value and maturity Promissory notes generated under this credit program may be rediscounted with CB up to 100% of the loan at the rate of three (3%) per cent per annum with maturity not exceeding the same number of days as the term of the original loan. 7. Quedan Guarantee Fund The Fund shall guarantee the existence of food deposits covered by quedan/chattel mortgage up to an amount equivalent to eighty percent (80%) of the outstanding loan, as provided for in the rules and regulations governing the guarantee coverage of food quedan. The OGFB shall collect from the LB a guarantee fee of one percent (1%) per annum based on the amount of loan which shall not be passed on to the borrower. 8. Purchase guaranty At the option of the lending bank, the National Food Authority shall undertake the purchase of food deposits equivalent to the outstanding loan covered by food quedan at the prevailing government support price upon the maturity of the loan. VI. Responsibilities of participating agencies A. Central Bank (CB) 1. To disseminate the terms and conditions of the program to eligible lending banks. 2. Within the bank's existing ceiling to extend rediscounting facilities to all eligible papers under the Food Quedan Program. B. Lending banks (LB) 1. To disseminate the terms of loan as well as requirements to its branch offices. 2. To evaluate, process and extend loans under this program. C. Food Terminal, Incorporated (FTI) 1. To periodically inspect and monitor bonded stocks per existing inventory reporting system. 2. To supervise control and monitor Negotiable Bonded Warehouse Receipts (NBWRs) issued to FTI depositors; LLpr 3. To conduct joint inspection of stocks with authorized representatives of the lending banks; 4. To ensure that stocks covered by the Quedan Financing Program are not allowed to be withdrawn unless the depositor has settled all his obligations with the lending bank. D. National Food Authority (NFA) To purchase the food stocks equivalent to the outstanding loan covered by quedan at the option of the lending bank upon maturity of the loan. E. Quedan Guarantee Fund Board (QGFB) 1. To administer the Food Quedan Guarantee Fund; 2. To execute a guarantee agreement with eligible LBs; 3. To pay legitimate claims by LBs against the Fund; 3. To pay legitimate claims by LBs against the Fund; and 4. To oversee the implementation of LOI 704 and its implementing rules and regulations. VII. Responsibility of participating borrowers 1. He should follow all the rules and regulations stated. 2. He is not allowed to move nor dispose of the food commodities covered by the program unless he has settled all his obligations with the bank concerned. 3. He should warrant that the goods covered under the program will be of good quality up to the time his loan matures. 4. In case he cannot meet his obligation in due time, he should inform the bank beforehand. 5. He should only use the money borrowed in the operation of his food business. APPENDIX 47 GUIDELINES ON THE USE OF FOOD TRUST RECEIPTS UNDER THE FOOD QUEDAN FINANCING PROGRAM (Appendix to Subsec. 2356.7) Pursuant to P.D. 115 dated January 29, 1973 and Circular No. 011 dated January 10, 1983 of the Quedan Guarantee Fund Board (QGFB),the following guidelines shall apply to the use of food trust receipts (FTR): A food businessman-borrower who secured a loan from a participating lending bank under the quedan financing program may, if the bank so agrees, execute a food trust agreement with said bank to enable him to mill/process/sell his stocks covered by pledged quedan/chattel mortgage, subject to the following conditions: a. Coverage the food trust agreement shall be on a staggered basis such that at any one time, the stocks to be withdrawn shall not exceed twenty percent (20%) of the total quantity covered by the pledged quedan/chattel mortgage; Provided, however ,that the lending bank may, in specific cases, allow a maximum of fifty percent (50%) stock withdrawal at any one time, subject to the submission of additional collateral and the approval off the FTR agreement by the QGFB; Provided, further, that subsequent withdrawals of stocks through food trust receipts shall be allowed only after payments have been made for the portion of loan corresponding to the stocks previously withdrawn. b. Co-Makers If the borrower is a third party depositor and not the franchised bonded warehouse operator himself, the lending bank shall in all cases require the franchised bonded warehouse operator in whose warehouse the stocks covered by the pledged quedans are deposited to be the borrower's co-maker. However, if the borrower is a chattel mortgagor, the lending bank shall require said borrower to have two (2) co-makers. c. Requirement for effectivity The food trust receipt agreement to be in full force and effect under the quedan financing program must substantially conform with the prescribed form and no further formality of execution or authentication shall be necessary for the validity of the same. d. Term The term of period of the food trust receipt agreement must not extend beyond the maturity date of the loan secured by pledged quedan/chattel mortgage. e. Insurance coverage The fire insurance for food deposits required of the warehouse operator pursuant to the rules and regulations of the NFA shall be considered as sufficient compliance with the insurance requirement under PD 115, otherwise known as the Trust Receipt Law. f. Requirement for guarantee coverage Within fifteen (15) calendar days from the date of execution of the FTR agreement, the lending bank shall submit a copy of the same to the QGFB or to the nearest office of the NFA either through personal delivery or registered mail; Provided ,that the date of acknowledgment by any authorized representative of the Board/NFA on the copy of the agreement submitted or the date of mailing as postmarked on the envelope/registry receipt shall be considered as the date of submission. Failure to submit the copy of the FTR agreement within said period shall result to the automatic revocation of the guarantee coverage under the program. g. Continuity of guarantee coverage and other privileges and incentives All credit transactions under the food quedan financing program shall, even after having been covered by the FTR agreement in accordance with the guidelines as hereinabove provided, continue to enjoy the same guarantee coverage and other attendant privileges and incentives provided for under LOI No. 704, as amended, and their implementing rules and regulations. APPENDIX 48 REVENUE REGULATIONS NO. 5-84 SUBJECT : Implementation of Executive Order No. 937 dated March 1, 1984 vesting in the Bureau of Internal Revenue the primary responsibility of Enforcing the Collection of National Internal Revenue Taxes through the Banking System. (Appendix to Subsec. 2602.2) All officials concerned of the Central Bank of the Philippines, Bureau of Treasury, Bureau of Internal Revenue and Accredited Banks. SECTION 1. Scope . Pursuant to the provisions of E.O. 937, dated March 1, 1984, these regulations are promulgated to prescribe the rules, guidelines and procedures to effectively implement the utilization of the banking system in receiving and accounting for internal revenue tax payments. SECTION 2. Criteria for the selection of banks and the conditions under which they may be accredited or authorized to collect internal revenue taxes . In general, all commercial and specialized government banks (DBP, Land Bank, Amanah Bank) may be accredited or authorized to collect internal revenue taxes, provided they qualify under the criteria and the conditions stated hereunder. Thrift banks, private development and/or rural banks may be authorized to collect internal revenue taxes only in places where there are no commercial, and specialized government banks serving in such places. However, those thrift banks, private development banks and stock savings and loan associations which were previously authorized to collect internal revenue taxes and have not committed any infractions of CB Circulars 844 and 904 and other pertinent issuances, may apply for accreditation under these regulations. The Bureau of Internal Revenue shall accredit or authorize any bank to collect internal revenue taxes under the following conditions: 1. The Bank shall file an application for accreditation. Banks applying for accreditation as authorized bank for the collection of internal revenue taxes may file their applications with the Collection Office of the Bureau of internal Revenue or through the Revenue Regional Director of the regional offices of the Bureau. 2. The application shall be in writing and shall contain the following information: a. Kind of bank, capitalization, and list of officers and members of the Board of Directors. b. List of addresses of the Head Office/Branches Extension Offices/Agencies which the bank wish to include in the accreditation. The Office/Branch/Extension Office/Agency that can put up a tellering booth where space can be provided for by revenue offices, or which Head Office/Branch/Extension Office/Agency can provide office space in their respective offices for which internal revenue officers may hold office free of charge shall be indicated in the list. c. Sample specimen of the signature of the bank officials authorized to requisition Confirmation Receipts from the Bureau of Internal Revenue. d. Sample specimen signature of the bank officials authorized to sign collection reports (BIR Forms 12.55 to 12.58). e. The names of bank officials duly authorized to deal with the officials and employees of the Bureau of Internal Revenue on problem relevant to its collection of internal revenue taxes. 3. The bank, shall, upon approval of its application, executes an agreement with the Bureau of Internal Revenue in the prescribed format attached as Annex "A" and which forms an integral part hereof. SECTION 3. Records to be kept by Banks . Accredited Banks shall keep and maintain the following records which shall be made available for inspection and audit by duly authorized BIR officers and agents: A. COLLECTING BANK OFFICES (head office/branch/agencies/extension offices) A "Special Cash Book" which shall indicate the following: a. Date of collection b. Inclusive serial numbers of CRs issued c. Report name and control number (BIR Form No. 12.56/BIR Form No. 12.50) d. Amount of collection (Due the Central Bank BIR Collections) e. Amount of dishonored checks f. Date report was submitted to BIR B. BANK HEAD OFFICES In addition to the "Special Cash Book" required above, head offices of accredited banks shall keep and maintain a "Record of Consolidated Collections and Remittances" showing the following: a. Date of collection b. Name/location of Collecting Offices (including H.O) c. BIR Form 12.56 Control Number d. Inclusive CR Numbers e. Amount Due the Central Bank (amount indicated in Form 12.56) f. Amount reported per BIR Form No. 12.55 g. Difference between 12.56 and 12.55 h. Date of CB-Debit Advice (regular collection) i. Amount of CB-Debit Advice (Regular collection) j. Date of CB-Debit Advice other than remittance of collection k. Amount of CB-Debit Advice other than remittance of collection. l. BIR Form 12.50 Control Number m. Amount of Returned/Dishonored Checks (amount indicated in Form 12.58) n. Date of CB-Credit Advice on adjustments o. Amount of CB-Credit Advice on adjustments SECTION 4. Refund . Banks shall not refund to any taxpayer amounts collected for which a confirmation receipt has been issued. Over-payment and/or erroneous payment of internal revenue taxes shall be determined and refunded by the Commissioner of Internal Revenue in accordance with existing laws, rules and regulations. SECTION 5. Responsibilities of offices involved in the collection of national internal revenue taxes thru the banking system . Pursuant to Executive Order No. 937, Series of 1984, the Central Bank of the Philippines, the Bureau of Internal Revenue and the Bureau of the Treasury shall assume the responsibilities indicated hereunder to insure the effectiveness of the collection system. A. The Central Bank of the Philippines shall Act as a clearing house for accredited banks, the Bureau of the Treasury and the Bureau of Internal Revenue in the implementation of the collection of internal revenue taxes through the banking system. As such it shall: 1. accept remittances of any accredited bank by debiting its demand deposit account upon proper advice of said bank, and credit the Special Account of the Treasurer of the Philippines-BIR Collections. In no case shall amounts earmarked by accredited banks for remittance of tax collections be used for any other purpose; 2. debit the demand deposit account of an accredited bank for the amount of its admitted collections or adjustments upon advise of the Commissioner of Internal Revenue and credit the Special Account of the Treasurer of the Philippines-BIR Collections; 3. debit the demand deposit account of an accredited bank for penalties, surcharges and interest due on delayed remittance of tax collections upon advice by the Commissioner. Penalties, surcharges and interest so debited shall be properly identified and segregated from other BIR Collections when credited to the Special Account of the Treasurer; 4. debit or credit the demand deposit account of accredited banks for adjustments of remittances also upon advise by the Commissioner and correspondingly debit or credit the Special Account of the Treasurer of the Philippines-BIR Collections; 5. furnish the Bureau of Internal Revenue and the Bureau of the Treasury with copies of the debit/credit advice the day following the debit/credit to the accredited bank's demand deposit accounts; 6. send the debit/credit advice to the affected accredited bank the day following the debit/credit to the bank's demand deposit account where the debit or credit was made upon the advise of the Commissioner. B. The Bureau of Internal Revenue shall 1. furnish CB and BIR with a list of accredited banks including their respective code numbers; 2. provide confirmation receipts for the use of accredited banks; printing costs of confirmation receipts and payment orders shall be assumed by the BIR upon full utilization of the present stock of these forms including those that have been ordered as of June 30, 1984; 3. account for and monitor tax collections and remittances of accredited banks; 4. furnish BIR with monthly reports of collection and remittances as recorded in the books of BIR, the statement of monthly collections shall be classified by revenue source in accordance with the CFS Classification; 5. communicate to accredited banks their delayed or unremitted collections, delayed or erroneous reports, penalties, surcharges and interest due, and discrepancies discovered including the resulting adjustments made; 6. furnish the BIR with copies of communications to banks on adjustments, delayed remittances, penalties, surcharges and interest imposed; LLphil 7. advise the Central Bank thru its Accounting Department to debit the accredited bank's demand deposit account for the amounts of unremitted collections, adjustments, penalties, surcharges and interests; 8. advise CB to debit or credit the Demand Deposit Account of the accredited bank with any necessary adjustments such as erroneous or double reporting of remittance on internal revenue collections and correspondingly debit or credit the account of the Treasurer of the Philippines for the same amounts; 9. furnish Bureau of the Treasury with advices to CB on adjustments to the demand deposit accounts of accredited banks which shall affect the account of the Treasurer of the Philippines-BIR Collections such as those mentioned in No. 8 above; 10. institute civil and criminal actions when warranted against accredited banks and/or their officials for infraction of the agreement between BIR and the accredited bank and the attendant rules and regulations; 11. take action on the Bank's property assigned to the BIR in case of default in the remittance of internal-revenue tax collections if the bank's demand deposit account is not sufficient to satisfy the unremitted collections, accrued penalties, interests and surcharges; and 12. suspend the authority of accredited banks to collect internal revenue taxes, for cause. C. The Bureau of the Treasury shall 1. agree to the automatic credit of its Special Account-BIR Collections with CB for remittances of tax collections by accredited banks and automatic debits of the same account for adjustments such as double remittances by accredited banks and the like as advised by the BIR; 2. record in a Special Account in the General Fund the amount of penalties, surcharges and interests collected from accredited banks for violations of the rules and regulations issued on collection of internal revenue taxes; 3. advice BIR of discrepancies with their records on the following statements and communications furnished them by the BIR: a) statements of collection and remittances; and b) copies of communication to accredited banks on delayed or unremitted tax collection, penalties, surcharges and interests imposed, and any adjustments affecting its Special Account-BIR Collections. SECTION 6. Disposition of Penalties Collected . Penalties including surcharges and interest shall accrue to a Special Account in the General Fund for the use of the Bureau of Internal Revenue in furtherance of its Collection functions. SECTION 7. Transitory Provisions . All banks presently authorized to collect internal revenue taxes may continue to do so up to June 30, 1984, after which they shall automatically cease to collect internal revenue taxes unless accredited thereafter. Likewise, all these banks shall submit an inventory of all CRs in their possession as of May 31, 1984 and a final inventory as of June 30, 1984. These inventories of Confirmation Receipts shall be submitted to the BIR, Collection Office on June 15, 1984 and July 10, 1984 respectively. SECTION 8. Repealing Clause . All provisions of existing issuances which are inconsistent herewith are hereby revoked. SECTION 9. Effectivity . These regulations shall take effect upon approval. (SGD.) CESAR E. A. VIRATA Minister of Finance RECOMMENDING APPROVAL: (SGD.) RUBEN B. ANCHETA Acting Commissioner Date Approved: AGREEMENT The BUREAU OF INTERNAL REVENUE, known hereinafter as the BIR, represented by Acting Commissioner Ruben B. Ancheta, Commissioner of Internal Revenue, National Office Building, Diliman, Quezon City and ________________ represented by ___________________, President, known hereinafter as the Bank, after having been accredited and authorized to receive and collect internal revenue taxes, do hereby agree as the following: The Bank shall (1) acknowledge receipt of internal revenue tax payments by issuing confirmation receipts; in no case shall the Bank accept payment without the payment order duly issued by the BIR; (2) book all such collections and credit same to the Special Account "Due to Central Bank Bureau of Internal Revenue"; (3) accomplish and submit collection reports as required by the rules and regulations hereto attached as Annex "A" and shoulder the cost of report forms prescribed therein; (4) authorize the Central Bank of the Philippines, Manila, thru its Accounting Department, to debit its demand deposit accounts maintained therein for the total daily collection which is due for remittance on the 11th calendar day after the date of collection, such amount debited shall be credited to the "Special Account BIR Collections" of the Treasurer of the Philippines; and agree in case of non-remittance, for the BIR to advise the Central Bank to debit the amount of unremitted collections including penalties, surcharge and interests against the bank's demand deposit accounts; (5) maintain adequate balance in their demand deposit account for their daily remittance of tax collections; and inform central Bank that such balance is earmarked for the remittance of tax collections; (6) keep and maintain records solely for internal revenue collections specified in the regulations which shall be made available for inspection and audit by duly authorized BIR officers and agents; (7) account for all confirmation receipts requisitioned and in case of loss, to submit to the BIR a sworn statement of the fact of loss together with the proof of publication thereof in three (3) newspapers of general circulation for three (3) consecutive weeks; the costs of such publication shall be for the account of the bank; and in the event the lost receipts will surface, the bank will be held responsible to the extent that the government is prejudiced; (8) pay a fine of P100.00 for every day of delay in the submission of each required report the submission of inaccurate or incomplete report; likewise, a 24% surcharge on late remittance of and/or unremitted collections plus 1/10 of 1% interest per day thereon as provided for under paragraph 4 of this Agreement except if the delay of failure to remit on time is due to fortuitous events; (9) transmit returned or dishonored checks to the BIR the amounts of which shall be deducted from the gross collections on the day such checks were received; (10) abide with the rules and regulations promulgated by the BIR in connection with this authority and those that may be promulgated thereafter; (11) construct tellering booths within the BIR premises whenever possible at the Bank's expense; (12) educate and inform the bank's officers and employees charged with tax collection functions on the terms of this Agreement and the rules and regulations relative to the collection of internal revenue taxes; and be responsible pecuniarily for any misdemeanor of its officers and employees committed in connection with this function; (13) communicate to the BIR any changes in the information stated in the application; and (14) assign to the BIR so much of its right to property, real and personal, in case of default in the remittance of internal revenue collections, if the bank's demand deposit accounts are not sufficient to satisfy the unremitted collections, penalties, interests and surcharges; The BIR shall (1) provide confirmation receipts for the use of the Bank; (2) reconcile the amount collected with that remitted; (3) request the Central Bank thru its Accounting Department to debit the amount of unremitted collections plus penalties, surcharges and interests against the Bank's demand deposit accounts. cdpr (4) advise CB to debit of credit the demand deposit accounts of the accredited bank with any necessary adjustments such as erroneous or double reporting of remittance of internal revenue collections and correspondingly debit or credit the account of the Treasurer of the Philippines for the same amounts; (5) institute civil and criminal actions arising from the delayed submission or non-submission of reports and non-remittance of collections; (6) take action on the Bank's property assigned to the BIR in case of default in the remittance of internal revenue collections, if the bank's Demand Deposit Accounts are not sufficient to satisfy the unremitted collections, penalties, interests and surcharges; and (7) suspend the authority to collect internal revenue taxes or terminate this Agreement in case of violations thereof and of the rules and regulations pertinent thereto and for any of the grounds provided in the Civil Code. The parties recognize that this Agreement does not extinguish other liabilities under existing laws and that payment of interest, penalties or surcharges on account of delayed remittance of tax collections or acquiescence of BIR on any infraction of these regulations, the Agreement or any other pertinent law or regulation shall not be construed as a waiver of any civil, criminal or administrative liability. This Agreement is effective for a period of one (1) year from the date hereof, renewable annually unless sooner terminated by either party. IN WITNESS WHEREOF, we sign this Agreement this ________ day of ____________, 1984 at ____________. By: (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue __________ By: ____________________________ President ACKNOWLEDGEMENT REPUBLIC OF THE PHILIPPINES) CITY OF ____________________) S.S. In the Municipality/City of __________, on the ________ day of ________, 1984, personally appeared before me, _________________, who represents that he is the president of the corporation described and named in the foregoing instrument of Agreement, and that he was duly authorized by the board of directors to execute said instrument, known to me to be the same person who executed said instrument on behalf of the corporation named therein, and he acknowledged to me that the same is the free act and deed of said corporation. The Residence Certificate of said __________ and the Residence Certificate of the ____________ Corporation were exhibited to me, and the same being No. A _______________ issued at __________ on ________, 19 _____, and No. C- __________, issued at __________ on _______, 19 ____. IN WITNESS WHEREOF, I have hereunto set my hand and seal this ________ day of __________, 1984. NOTARY PUBLIC Until December 31, 19 ___ Doc. No. ________ Page No. ________ Book No. ________ Series of 19 ______ REPUBLIC OF THE PHILIPPINES) City of _____________________) S.S. In the Municipality/City of ___________, on the day of ________, 1984, personally appeared before me, Ruben B. Ancheta, Acting Commissioner on Internal Revenue, who is the same person named in the foregoing Agreement, known to me to be the same person who executed said instrument on behalf of the Bureau of Internal Revenue and acknowledged to me that the same is his free act and deed. The Residence Certificate of said Acting Commissioner of Internal Revenue was exhibited to me, and the same being No. ____________ issued at ______________ on ________, 1984. IN WITNESS WHEREOF, I have hereunto set my hand and seal this _______ day of _______, 1984. NOTARY PUBLIC Until December 31, 19 ____ Doc. No. _______ Page No. _______ Book No. _______ Series of 19 _____ ANNEX A RULES & REGULATIONS OF THE COLLECTION OF INTERNAL REVENUE TAXES THROUGH THE BANKING SYSTEM I. Regulation and Collection of Confirmation Receipt (CR) Booklets The Head Office of Accredited Banks shall 1. Regulation Confirmation Receipt booklets for the use of all its collecting offices (including head office, branches, agencies, extension offices) from the Accountable Forms Division of the Bureau of Internal Revenue (BIR) using BIR Form 12.59. The requisition shall first be presented to the Collection Office for approval. 2. Distribute these Confirmation Receipt booklets to all its collecting offices according to pre-determined needs. 3. Submit to the BIR a monthly report on BIR Form 12.50 on its requisitions of CB booklets and the distribution of the same to all its collecting offices within three days after the end of each month. 4. Insure that all its collecting offices are amply provided with CR booklets at all times, so that collection of taxes will not be impaired because of lack of confirmation receipts. 5. Report to the BIR Collection Office immediately upon discovery losses of Confirmation Receipts and publish the fact of loss in the manner required under No. 7 of the Banks commitments in the Agreement. II. Collection and Distribution of Internal Revenue Payments Banks accredited to accept payment of Internal revenue taxes shall 1. acknowledge receipt of internal revenue tax payments by issuing Confirmation Receipts. In no case shall a bank accept internal tax payments without the presentation of a duly issued Payment Order by the BIR. 2. install a "Special Cash Book" exclusively for Internal Revenue collection where their daily collections shall be recorded. 3. The Collecting Office (Branch/Extension Office/Agency) shall a) report by telephone, telex or other means to its Head Office, at the end of each day, total collections for the day and the inclusive serial numbers of CRs issued, to be used as basis for the preparation by their respective Head Office of Consolidated Report on Daily Collection of Internal Revenue Taxes (formerly RC Form No. 88-001 now BIR Form No. 12.00) b) accomplish the Abstract of Daily Collections of Internal Revenue Taxes (formerly RC Form No. 82-002, now BIR Form No. 12.56) and submit the same duly supported and c) report and transmit immediately to their respective Head Offices returned/dishonored checks which shall be the basis in the preparation of the report on dishonored checks (formerly RC Form No. 82-064 now BIR Form No. 12.58) 4. The Head Office of the Collecting Bank shall a) consolidate its report of collection with those of the branches/extension offices, agencies and submit to the BIR Receiving Unit, CB complex, the Consolidated Report of Daily Collection of Internal Revenue Taxes (formerly RC Form No. 82-001 now BIR Form No. 12.58) within three (3) days following the date of collection. The consolidated report of Daily Collections of Internal Revenue Taxes shall list all its authorized collecting offices to insure that every such office is included in the report, whether or not it has received tax payments for that date. b) submit directly to the Revenue Accounting Division, BIR, Diliman, Quezon City, all returned or dishonored checks the day following receipt of such checks. Prepare the Report on Returned/Dishonored Checks (formerly RC Form No. 82-004 now BIR Form 12.58) in time for acknowledgement of receipt by the Revenue Accounting Division of BIR of the returned/dishonored checks on the report itself. c) consolidate the Abstract of Daily Collection of Internal Revenue Taxes (formerly RC Form No. 82-002 now BIR Form No. 12.58) with these receive from branches/extension offices/agencies in the Consolidated Abstract of Collection of Internal Revenue Taxes (formerly RC Form No. 82-003 now BIR Form No. 12.57).Copies of the consolidated abstract shall be attached to the corresponding copy of the Authority To Debit Demand Deposit Account (BIR Form 12.57A).The original copies of BIR Forms 12.57 and 12.57A shall be submitted to the Accounting Department, Central Bank of the Philippines, Manila, on the eleventh (11th) Calendar day following the date of collection. Simultaneously the remaining copies of both forms, with the supporting POs and CRs shall be submitted to the Offices indicated in the forms. d) report on BIR Form 12.57 total gross collection for the day without deducting the following: 1. the amount of dishonored checks, as the same shall be reflected as a deduction from the collections of the day, in the Authority issued by Accredited Banks on BIR Form No. 12.57A. Such deduction shall be allowed only when BIR has acknowledged receipt of dishonored checks as required in (b) above. 2. any adjustment on the amount reported in BIR Forms 12.55, 12.56 and 12.57 as the same shall be credited to or debited against their Demand Deposit Account upon the advice by the BIR after proper verification of the pertinent reports. e) submit only one supplementary report on BIR Forms No. 1255 or 12.57 (formerly RC Form No. 82-001 and 82-003) for each date of collection for reports of branches or extension offices received by Head Office after the corresponding Consolidated Report for any date of actual collection has been submitted. The word "SUPPLEMENTAL" shall be indicated in bold letters to wit: April 15, 1984 = SUPPLEMENTAL Date of Collection The reason or reasons for the delay in the submission of the report shall likewise be stated in the supplemental report for the purpose of determining appropriate action on the matter. f) inform the Bureau if there is no collection on any given date by stating in the next subsequent report of collection that no tax payments were received on such specified date/s g) provide control numbers to all collection reports (BIR Form 12.55 to 12.56) prior to submission to the BIR. III. Bank Collecting Offices, including the Head Office shall 1. record daily in its "Special Cash Book" the total daily collection using as basis BIR Form No. 12.56, as required in Sec. 5A of Revenue Regulations No. ________; 2. record daily or as necessary in its "Special Cash Book" the total amount of dishonored checks; 3. foot the "Special Cash Book" monthly. The Bank Head Offices shall 1. record daily in its "Record of Consolidated Collections and Remittances" as required in Sec. 5B of Revenue Regulations No. ________ a) its total daily collection and that of each of its collecting offices as reported in BIR Form 12.56; b) the total amount of collection of each of its collecting offices, as reported in BIR Form 12.55; c) the total amount of its dishonored checks and that of each of its collecting offices; d) the total amount debited by the Central Bank against its Demand Deposit account as evidenced by CB-Debit Advice; e) the total amount credited by the Central Bank to its Demand Deposit Account as evidenced by CB-Credit Advice. 2. Duplicate the actions of the discrepancies between 12.56 and 12.55 with a footnote. 3. foot the pertinent columns of "Record of Consolidated Collections and Remittances" daily. 4. indicate on the last page of the daily record, right below the total of 12.56, the control number of BIR Form 12.57 where subject collection was reported and the date when such report was submitted to the BIR and the Central Bank. 5. add the daily totals of the pertinent columns of the "Record of Consolidated Collections and Remittances" at the end of each month. 6. indicate the totals arrived at on the second line immediately after the date when the last 12.57 report was submitted to the BIR. 7. double rule the totals indicated in No. 6 above. cdlex Consolidated Report on Daily Collections of Internal Revenue Taxes INSTRUCTIONS 1. Pre-print the name/location and bank code of each collecting office, arranged by address/location in accordance with the List of Revenue Regional Offices and their areas of jurisdiction furnished by the BIR. 2. Provide sub-totals for collections made for each Revenue Region. 3. Use one report for each date of collection. However, each report may consist of more than (1) page. 4. Accomplish in four (4) copies for distribution as follows: Ori. BIR Unit, CB Complex ) Revenue Accounting Division Copy Dupl. BIR Unit, CB Complex Collection Offices Copy Tripl. Bureau of Treasury, CB Complex Quad. ABB's File Copy (Head Office) 5. The total Collection for the Day and the Accumulated Total for the Month shall be reported at GROSS AMOUNT. 6. Adjustments and supplements to previously submitted Consolidated Report on Daily Collections of Internal Revenue Taxes (BIR Form 12.55) shall be reported separately indicating in bold letters the word "SUPPLEMENTAL" or "ADJUSTMENT" to wit: April 15, 1984 SUPPLEMENTAL April 15, 1984 SUPPLEMENT Date of Collection April 15, 1984 ADJUSTMENT Date of Collection 7. The amount of Dishonored Checks shall be reported in the Report on Returned and Dishonored Checks (BIR Form 12.58) and should not be deducted from this report. 8. Indicate the words NO COLLECTION opposite the same/location of Branch/Extension Office without collection for the day. 9. Submit this report whether or not collections are received for the day. cdlex 10. Deliver in the BIR Unit, CB Complex on the next working day following the date of collection. Abstract of Daily Collections of Internal Revenue Taxes INSTRUCTIONS 1. Use one report for each date. 2. List CRs in numerical order. 3. Accomplish in five (5) copies for distribution as follows: Orig. BIR Unit, CB Complex (w/ Orig. POs and Duplicate CRs) RUSH Copy Dupl. For pick-up by RDO-BIR from AAB (w/ Tripl. CRs) Fiscal Operation (Rev. Accounting Div. Copy) Tripl. For pick-up by RDO-BIR from AAR (w/ Quad. CRs) Reconciliation Officer Copy Quad. BIR Unit, CB Complex (w/o supporting documents) Collection Office File Quint. Accredited Bank (Head Office) File Copy Sixtup. Accredited Bank's Collecting Office File Copy 4. The total Collection for the Day and the Accumulated Total for the Month shall be reported at GROSS AMOUNT. 5. Adjustments and supplements to previously submitted Abstract of Daily Collections of Internal Revenue Taxes (BIR Form 12.56) shall be reported separately indicating in bold letters the word "SUPPLEMENTAL" or "ADJUSTMENT" to wit: April 15, 1984 SUPPLEMENT Date of Collection April 15, 1984 ADJUSTMENT Date of Collection 6. Adjustments of Dishonored Checks shall be reported in the Report on Dishonored Checks (BIR Form 12.58) and should not be deducted for his report. 7. Submit this report whether there are collections or no collection for the day. 8. Deliver this report to the BIR Unit, CB Complex within ten (10) days from date of collection. Consolidated Report on Daily Collections of Internal Revenue Taxes INSTRUCTIONS 1. Pre-print the name/location and bank code of each collecting office, arranged by address/location in accordance with the List of Revenue Regional Offices and their areas of jurisdiction furnished by the BIR. 2. Provide sub-totals for collections made for each revenue region. 3. Use one report for each date of collection. However, each report may consist of more than (1) page. 4. Accomplish in six (6) copies for distribution as follows: Ori. CB Acctg. Dept. (w/ original Authorization (BIR Form 12.57A) but w/o supporting documents) Dupl. BIR Unit, CB Complex (w/ dupl. Authorization (BIR Form 12.57A) but w/o supporting documents Revenue Accounting Division Copy Tripl. BIR Unit, CB Complex (w/ tripl. Authorization (BIR Form 12.57A) but w/o supporting documents) BIR Copy Quad. BIR Unit, CB Complex (w/quad. Authorization (BIR Form 12.57A) but w/o supporting documents) Collection Office Copy Quint. BIR Unit, CB Complex (w/ quint. Authorization (BIR Form 12.57A) w/ Original BIR Form 12.56 & Original supporting POs & Duplicate CRs RISSI Cor. Sextup. Accredited Unit File Copy 5. The total Collection for the Day and the Accumulated Total for the Month shall be reported at GROSS AMOUNT. 6. Adjustments and supplements to previously submitted Consolidated Abstract of Collections of Internal Revenue Taxes (BIR Form 12.57) shall be reported separately indicating in bold letters the word "SUPPLEMENTAL" or "ADJUSTMENT" to wit: April 15, 1984 SUPPLEMENT Date of Collection April 15, 1984 ADJUSTMENT Date of Collection 7. The amount of Dishonored Checks shall be reported in the Report on Returned and Dishonored Checks (BIR Form 12.58) and should not be deducted from this report. 8. Indicate the words NO COLLECTION opposite the name/location of Branch/Extension Office without collection for the day. 9. Attach all pages of the pertinent copies of this report to the copy of the Authority in Debit the Demand Deposit Account of the Day (BIR Form 12.57A). cdlex 10. Submit this report whether there are collections or no collection for the day. 11. Deliver to the BIR Unit, CB Complex BIR FORM NO. 12.57A Address Date Prepared: Report Control No. ATTORNEY TO DEBIT DEMAND DEPOSIT ACCOUNT The Accounting Department Central Bank of the Philippines In accordance with Revenue Regulations No. _________ dated ________________ and our Agreement with the BIR dated _____________ please debit our Demand Deposit Account for the amount of __________ representing the net amount of internal revenue tax payment received by this bank, after deducting the amount of returned/dishonored checks and compared below: Gross amount of collection per BIR Form 12.57 dated _______ consisting of ___________ pages....................................................... Less: Amount of Dishonored checks duly acknowledged by the BIR per attached Report on Returned/Dishonored Checks dated __________ ....._______________ Net Amount of collection for the day (Amount to be debited against our Demand Deposit Account) ....... Name & Signature of Authorized Bank Official Designation INSTRUCTIONS 1. Use one (1) Authorization for each date of collection. 2. Accomplish in six (6) copies for distribution as follows: Original (w/Original Form 12.57 & Duplicate From 12.58) CB Accounting Department Duplicate (w/ Duplicate Form 12.57 & Original Form 12.58) BIR Unit, CB Complex, Revenue Accounting Copy Triplicate (w/ Triplicate Forms 12.57 & 12.58) BIR Unit, CB Complex, BIR Copy Quadruplicate (w/ quintuplicate Forms 12.57 & 12.58) BIR Unit, CB Complex, RISSI Copy Sixtuplicate (w/ sixtuplicate Forms 12.57 & 12.58) Accredited Bank File Copy 3. Deliver to the BIR Unit, CB Complex on the eleventh (11th) day following the date of collection. 4. Deductions for the amount or Dishonored/Returned Checks shall not be considered by the Central BIR: (CB) if not properly supported duly by the corresponding Report on Dishonored/Returned Checks BIR Form 12.58) duly acknowledged by the BIR. 5. Only the amount of Returned/Dishonored Checks duly acknowledged by the BIR per CB Form 12.58 shall be deducted from the total duly collection in this authority. 6. This authorization shall always be attached to the corresponding Consolidation Abstract of Collections of Internal Revenue Taxes BIR Form (2.57).Likewise, the corresponding Report on Returned/Dishonored Checks shall be attached to this authority. Report on Returned/Dishonored Checks INSTRUCTIONS 1. Accomplish in six copies. 2. Present all copies to the BIR Revenue Accounting Division with the Returned/Dishonored Checks for acknowledgement of receipt of such checks not later than the following working day after bank received the same. 3. Submit copies as follows. cdlex Orig (acknowledged by the BIR & BIR Receiving Unit, CB Complex attached to duplicate Forms BIR Revenue Accounting Division 12.57A & 12 57) Dupl. (acknowledged by the BIR & attached to original Forms 12.57A & 12.57) CB Accounting Department Tripl. (acknowledged by the BIR & attached to triplicate BIR Unit, CB Complex Forms 12.57A& 12.57) BIR Copy Quad. (acknowledged by the BIR & attached to quad. Forms BIR Receiving Unit, CB Complex 12.57A & 12.57) BIR Collection office Quint. (acknowledged by the BIR & attached to quint. Forms BIR Receiving Unit, CB Complex 12.57A & 12.57) RISSI Copy Sixpl. (acknowledged by the BIR & attached to sixpl. Forms Accredited Bank File Copy 12.57A & 12.57) BIR FORM NO. 12.59 Name of Accredited Bank ____________________ Address Date The Commissioner of Internal Revenue Diliman, Quezon City S i r : May we request for __________ booklets of Confirmation Receipts. Our stock on hand, as of even date, is ____________ booklets with Serial No. ____________. Attached is our latest Statement of Confirmation Receipts Requisition and Issuances as of ____________________. We have authorized ________________, whose signature appears below, to receive and deliver of our aforementioned requisition. Very truly yours, Name & Signature of Authorized Personnel Signature of Authorized Representatives: Designation Date To : The Chief, Accountable Forms Division This requisition is approved for ________ pads of Confirmation Receipts. THEMISTOCLES R. MONTALBAN Asst. Revenue Service Chief Collection Date Received from the Chief, Accountable Forms Division, Bureau of Internal Revenue __________ booklets of Confirmation Receipts with Serial Nos. from _______________ to _________________. Bank's Authorized Representative NOTE: To be accomplished in quadruplicate. Monthly Report on Requisition and Distribution of CBs REVENUE REGULATIONS NO. 1-85 SUBJECT : Amendment of the penalties stipulated in the Agreement prescribed in Revenue Regulations 5-84. TO : All officials Concerned of the Bureau of the. Treasury, Bureau of Internal Revenue and Accredited Banks. Paragraph 8 of the banks' obligation in the Agreement prescribed in Revenue Regulations No. 5-84 which took effect on May 29, 1984 is hereby amended to read as follows: (8) pay a fine of P100.00 for every day of delay in the submission of each required report or the submission of inaccurate or incomplete report; likewise, a 25% surcharge on late remittance of and/or unremitted collections to be annualized which when added to the interest rate of 1/10 of 1% interest rate per day thereon as provided for under paragraph 4 of this Agreement shall not be less than the prevailing inter bank borrowing rate plus 5% ,except if the delay or failure to remit on time is due to fortuitous events. cdlex This Amendment shall take effect immediately. (SGD.) CESAR E.A. VIRATA Minister of Finance RECOMMENDING APPROVAL: (SGD.) RUBEN B. ANCHETA Acting Commissioner TAN-A5239-J1139-A-D VESTING THE BIR THE AUTHORITY TO COLLECT TAXES THROUGH THE BANKING SYSTEM SUBJECT : Implementation of Executive Order No. 937 dated March 1, 1984 vesting in the Bureau of Internal Revenue the primary responsibility of Enforcing the Collection of National Internal Revenue Taxes through the Banking System. TO : All Officials Concerned of the Central Bank of the Philippines, Bureau of Treasury, Bureau of Internal Revenue and Accredited Banks. SECTION 1. Scope . Pursuant to the provisions of E.O. 937, dated March 1, 1984, these regulations are promulgated to prescribe the rules, guidelines and procedures to effectively implement the utilization of the banking system in receiving and accounting for internal tax payment. cdlex SECTION 2. Criteria for the selection of banks and the conditions under which they may be accredited or authorized to collect internal revenue taxes . In general, all commercial and specialized government banks (DBP, Land Bank, Amanah Bank) may be accredited or authorized to collect internal revenue taxes, provided they qualify under the criteria and the conditions stated hereunder. Thrift banks, private development and/or rural banks may be authorized to collect internal revenue taxes only in places where there are no commercial, and specialized government banks serving in such places. However, those thrift banks, private development banks and stock savings and loan associations which were previously authorized to collect internal revenue taxes and have not committed any infractions of CB Circular 844 and 904 and other pertinent issuances, may apply for accreditation under these regulations. The Bureau of Internal Revenue shall accredit or authorize any bank to collect internal revenue, taxes under the following conditions: 1. The bank shall file an application for accreditation. Banks applying for accreditation as authorized bank for the collection of internal revenue taxes may file their applications with the Collection Office of the Bureau of Internal Revenue or through the Revenue Regional Director of the Regional offices of the Bureau. 2. The application shall be in writing and shall contain the following information: a. Kind of bank, capitalization, and list of officers and members of the Board of Directors. b. List of addresses of the Head Office/Branches/Extension Offices/Agencies which the bank wish to include in the accreditation. The Office/Branch/Extension Office/Agency that can put up a tellering booth where space can be provided for by revenue offices, or which Head Office/Branch/Extension Office/Agency can provide office space in their respective offices for which internal revenue officers may hold office, free of charge, shall be indicated in the List. c. Sample specimen of the signature of the bank officials authorized to requisition Confirmation Receipts from the Bureau of Internal Revenue. d. Samples specimen signature of the bank officials authorized to sign collection reports (BIR Forms 12.55 to 12.58). e. The names of bank officials duly authorized to deal with the officials and employees of the Bureau of Internal Revenue on problems relevant to its collection of internal revenue taxes. 3. The bank, shall, upon approval of its application, execute an agreement with the Bureau of Internal Revenue in the prescribed format attached as Annex "A" and which forms an integral part hereof. SECTION 3. Records to be kept by Banks . Accredited Banks shall keep and maintain the following records which shall be made available for inspection and audit by duly authorized BIR officers and agents: A. COLLECTING BANK OFFICES (head office/branches/agencies/extension offices) A "Special Cask Book" which shall indicate the following: a. Date of collection b. Inclusive serial numbers of CRs issued c. Report name and control number (BIR Form No. 12.56/BIR Form No. 12.50) d. Amount of collection (Due the Central Bank Collections) e. Amount of dishonored checks f. Date report was submitted to BIR B. BANK HEAD OFFICES In addition to the "Special Cash Book" required above, head offices of accredited banks shall keep and maintain a "Record of Consolidated Collections and Remittances" showing the following: a. Date of collection b. Name/Location of Collecting Offices (including H.O.) c. BIR Form 12.56 Control Number d. Inclusive CR Numbers e. Amount Due the Central Bank (amount indicated Form 12.56) f. Amount reported per BIR Form No. 12.55 g. Difference between 12.56 and 12.55 h. Date of CB-Debit Advice (regular collection) i. Amount of CB-Debit Advice (regular collection) j. Date of CB-Debit Advice other than Remittance of Collections k. Amount of CB-Debit Advice other than Remittance of Collections l. BIR Form 12.50 Control Number m. Amount of Returned/Dishonored Checks (amount indicated in 12.58) n. Date of CB-Credit Advice adjustments o. Amount of CB-Credit Advice on adjustments SECTION 4. Refund . Banks shall not refund to any taxpayer amounts collected for which a confirmation receipt has been issued. Overpayment and/or erroneous payment of internal revenue taxes shall be determined and refunded by the Commissioner of Internal Revenue in accordance with existing laws, rules and regulations. SECTION 5. Responsibilities of offices involved in the collection of national internal revenue taxes thru the banking system . Pursuant to Executive Order No. 937, Series of 1984, the Central Bank of the Philippines, the Bureau of Internal Revenue and the Bureau of Treasury shall assume the responsibilities indicated hereunder to insure the effectiveness of the collection system. A. The Central Bank of the Philippines shall Act as a clearing house to accredited banks, the Bureau of the Treasury and the Bureau of Internal Revenue in the implementation of the collection of internal revenue taxes through the banking system. As such it shall: 1. Accept remittances of any accredited bank by debiting its demand deposit account upon proper advice of said bank, and credit the Special Account of the Treasurer of the Philippines BIR Collections. In no case shall amounts earmarked by accredited banks for remittance of tax collections be used for any other purpose; 2. debit the demand deposit account of an accredited bank for the amount of its unremitted collections or adjustments and credit the Special Account of the Treasurer of the Philippines-BIR Collections, upon advise of the Commissioner of Internal Revenue; 3. debit the demand deposit account of an accredited bank for penalties, surcharges and interest due on delayed remittance of tax collections upon advise by the Commissioner. Penalties, surcharges and interest so debited shall be properly identified and segregated from other BIR Collections when credited to the Special Account of the Treasurer; 4. debit or credit the demand deposit account of accredited banks for adjustments of remittances also upon advise by the Commissioner and correspondingly debit or credit the Special Account of the Treasurer of the Philippines-BIR Collections; 5. furnish the Bureau of Internal Revenue and the Bureau of the Treasury with copies of the debit/credit advice the day following the debit/credit to the accredited banks' demand deposit account; 6. send the debit/credit advice to the affected accredited bank the day following the debit/credit to the bank's demand deposit account where the debit or credit was made upon the advice of the Commissioner. cdlex B. The Bureau of Internal Revenue shall 1. furnish CB and BIR with a list of accredited banks, including their respective code numbers; 2. provide confirmation receipts for the use of accredited banks; printing costs of confirmation receipts and payment orders shall be assumed by the BIR upon full utilization of the present stock of these forms including those that have been ordered as of June 30, 1984; 3. account for and monitor tax collections and remittances of accredited banks; 4. furnish BIR with monthly reports of collection and remittances as recorded in the books of BIR, the statement of monthly collections shall be classified by revenue source in accordance with the CFS Classification; 5. communicate to accredited banks their delayed or unremitted collections, delayed or erroneous reports, penalties, surcharged and interest due, and discrepancies discovered including the resulting adjustments made; 6. furnish the BIR with copies of communications to banks on adjustments, delayed remittances, penalties, surcharges and interest imposed; LLphil 7. advise the Central Bank thru its Accounting Department to debit the accredited bank's demand deposit account for the amounts of unremitted collections, adjustments, penalties, surcharges and interests; 8. advise CB to debit or credit the Demand Deposit Account of the accredited bank with any necessary adjustments such as erroneous or double reporting of remittance on internal revenue collections and correspondingly debit or credit the account of the Treasurer of the Philippines for the same amounts; 9. furnish Bureau of the Treasury with advices to CB on adjustments to the demand deposit accounts of accredited banks which shall affect the account of the Treasurer of the Philippines-BIR Collections such as those mentioned in No. 8 above; 10. institute civil and criminal actions when warranted against accredited banks and/or their officials for infraction of the agreement between BIR and the accredited bank and the attendant rules and regulations; 11. take action on the Bank's property assigned to the BIR in case of default in the remittance of internal revenue tax collections if the bank's demand deposit account is not sufficient to satisfy the unremitted collections, accrued penalties, interests and surcharges; and 12. suspend the authority of accredited banks to collect internal revenue taxes, for cause. C. The Bureau of the Treasury shall 1. agree to the automatic credit of its Special Account, BIR Collections with CB for remittances of tax collections by accredited banks and automatic debits of the same account for adjustments such as double remittance by accredited banks and the like as advised by the BIR; 2. record in a Special Account in the General Fund the amount of penalties, surcharges and interest collected from accredited banks for violations of the rules and regulations issued on collection of internal revenue taxes; 3. advise BIR of discrepancies with their records on the following statements and communications furnished them by the BIR; a) statement of collection and remittances; and b) copies of communication to accredited banks on delayed or unremitted tax collection, penalties, surcharges and interests imposed, and any adjustments affecting its Special Account-BIR Collections. SECTION 6. Disposition of Penalties Collected . Penalties including surcharges and interest shall accrue to a Special Account in the general fund for the use of the Bureau of Internal Revenue in furtherance of its Collection functions. SECTION 7. Transitory Provisions . All banks presently authorized to collect internal revenue taxes may continue to do so up to June 30, 1984, after which they shall automatically cease to collect internal revenue taxes unless accredited thereafter. Likewise, all those banks shall submit an inventory of all CRs in their possession as of May 31, 1984 and a final inventory as of June 30, 1984. These inventories of Confirmation Receipts shall be submitted to the BIR, Collection Office on June 15, 1984 and July 10, 1984 respectively. SECTION 8. Repealing Clause . All provisions of existing issuances which are inconsistent herewith are hereby revoked. SECTION 9. Effectivity . These regulations shall take effect upon approval. (SGD.) CESAR E.A. VIRATA Minister of Finance RECOMMENDING APPROVAL: (SGD.) RUBEN B. ANCHETA Acting Commissioner Date Approved: May 29, 1984 LIST OF RESERVE ELIGIBLE AND NON-ELIGIBLE SECURITIES (Appendix to Sec. 2254.b(2)) A. Government securities ELIGIBLE as reserves I. Direct obligations of the Government of the Republic of the Philippines eligible as reserve against peso deposit liabilities and deposit substitute liabilities: 1.1 2% PWED Bonds Loan of 1976/86 232nd Series 1.2. 4% PWED Bonds all outstanding series 2.1. 4% NPC Bonds (8th to 50th Series except 29th S which bear 6% obligation assumed by the National Government) 3.1. 4% Treasury Bonds 30th; 57th; 59th 71st; 73rd 93rd S 3.2 Treasury Bonds with less than 4% per annum interest considered eligible by reason of expressed CB limited support to original purchaser: 2% T/Bond L of 1973/2003 1st Series (1st Rel. & 2nd Rel.) 3% T/Bond L of 1978/2008 55th Series (1st Rel.) 3% T/Bond L of 1979/2009 55th Series (2nd Rel.) 3-% T/Bond L of 1974/1999 6th Series (1st and 2nd Rel.) 3-% T/Bond L of 1978/2003 54th Series (1st, 2nd & 3rd Rel.) 4.1 4% Treasury Notes L of 1980/1995 115th Series 4.2. Treasury Notes carrying less than 4% per annum interest considered eligible by reason of CB-support given and pursuant to MBR 2224 dated December 3, 1982 authorizing the replacement of reserve securities earning less than 4% by reserve eligible T/Bonds earning a standard rate of 4% per annum; 2% T/Notes L of 1975%85 63rd Series, 64th Series, 66th & 67th Series cdlex 5.1 PREMYO SAVINGS BONDS (Regular Series) Subject to percentage phase out. 6.1 PREMYO SAVINGS BONDS (Biglang Bahay Series) likewise subject to percentage phase-out. 7.1 Bonds made specifically eligible to its holders only: 4% Treasury Capital Bonds DBP only 4% Capital Treasury Bonds PNB only II. Bonds and other evidences of indebtedness bearing interest rate of four (4%) per cent per annum, issued by government-owned or controlled corporations, political subdivisions and instrumentalities likewise eligible as reserves against peso deposit liabilities and deposit substitute liabilities . 1.1.4% NAWASA Bonds ,1st to 9th & 13th Series III. The following government securities (including CBCIs 8th and 9th Series) bearing more than four (4%) per cent per annum interest, whether Central Bank supported or not, if BEING USED BY BANKS/NBQBs as reserve against deposit substitute liabilities as of January 17, 1977 shall continue to be eligible as such; provided, that whenever said securities shall have matured, they shall be replaced by securities carrying the features/conditions enumerated under Circular No. 638, dated November 8, 1978, as amended: 6% PWED Bonds Al 6% PWED Bonds All outstanding issues 6% NPC Bonds do 7% NPC Bonds do 8-% NPC Bonds 13th 22nd Series 7% NPC Capital Bonds 7th 9th 7% MWSS Capital Bonds All outstanding issues 6% NIA Bonds do 4-% Treasury Bonds do 4-7/10% Treasury Bonds 7th Series 5% Treasury Bonds 9th Series 6% Treasury Bonds 8th Series 7% Treasury Bonds All outstanding issues, except 15th Series 10- Treasury Bonds All outstanding issues 9% Treasury Notes 60th and 65th Series 10-% Treasury Notes 101st Series (1st & 2nd Rel.) 10-% Treasury Notes 56th and 61st Series 11-% Treasury Notes 59th Series 6% NAWASA Bonds 11th, 12th and 1st Series 10% EPZA Bonds 9th 11th Series 10-% EPZA Bonds 3rd 8th Series B. The following government securities are NOT ELIGIBLE whatsoever for reserve purposes: Negotiable Land Certificate (NLC) Cultural Center of the Philippines (CCP) Bonds Philippine Charity Sweepstakes Office (PCSO) Bonds Public Estate Authority (PEA) Bonds National Development Company (NDC) Bonds National Housing Authority (NHA) Bonds National Food Authority (NFA) Bonds NHMFC Bahayan Certificates Light Rail Transit Authority (LRTA) Notes CBCIs (Auctioned/discounted) 24th 29th Series CBCIs (Negotiated) A to D-1 Series and 5th to 7th Series (18 months) CBCIs 10-% Special Series 1st-32nd Series Central Bank Bills (Negotiated/discounted) Treasury Bills (Negotiated/discounted) Treasury Notes and Treasury Bonds bearing less than four (4%) per cent per annum, but not given CB support as follows: Treasury Bonds 2% T/Bond L of 1973/2003 4th Series 2-% T/Bond L of 1974/1986 7-A & 7-B Series 3% T/Bond L of 1976/2001 26th, 27th, 31st-24th, 46th & 47th Series 3% T/Bond L of 1977/2002 49th Series 2-% T/Bond L of 1974/1999 6th Series 3rd & 4th Release 3-% T/Bond L of 1977/2002 6th Series 5th Release 3-% T/Bond L of 1975/2000 21st Series 1st Release 3-% T/Bond L of 1977/2002 21st Series 2nd Release 3-% T/Bond L of 1977/2002 51st Series 1st & 2nd Release 3-% T/Bond L of 1978/2003 54th Series 1st & 34d Release 3-% T/Bond L of 1980/2005 58th Series 3-% T/Bond L of 1973/2003 2nd Series Treasury Notes 2% T/Notes L of 1976/1991 79th Series 3% T/Notes L of 1982/1997 128th Series 3% T/Notes L of 1981/1986 120th Series & 125th Series 3-1/2% T/Notes L of 1982/1997 Special Series 1st-24th Release ( Effective July 8, 1985 ). cdlex RULES AND REGULATIONS ON THE COLLECTION OF INTERNAL REVENUE TAXES THROUGH THE BANKING SYSTEM Requisition and Distribution of Confirmation Receipt of (CR) Booklets The Head Office of Accredited Banks shall 1. Requisition Confirmation Receipt booklets for the use of all its collecting offices (including head office, branches, agencies, extension offices) from the Accountable Forms Division of the Bureau of Internal Revenue (BIR) using BIR Form 12.59. The requisition shall first be presented to the Collection Office for approval. 2. Distribute these Confirmation Receipt booklets to all its collecting offices offices according to predetermined needs. 3. Submit to the BIR a monthly report on BIR Form 12.50 on its requisition of CR booklets and the distribution of the same to all its collecting offices within three days after the end of each month. 3. Submit to the BIR a monthly report on BIR Form 12.50 on its requisition of CR booklets and the distribution of the same to all its collecting offices within three days after the end of each month. 4. Insure that all its collecting offices are amply provided with CR booklets at all times, so that collection of taxes will not be impaired because of lack of confirmation receipts. 5. Report to the BIR Collection Office immediately upon discovery losses of Confirmation Receipts and publish the fact of loss in the manner required under No. 7 of the Bank's commitments in the Agreement. Collection and Reporting of Internal Revenue Payments Banks accredited to accept payment of internal revenue taxes shall 1. acknowledge receipt of internal revenue tax payments by issuing Confirmation Receipts. In no case shall a bank accept internal tax payments without the presentation of a duly issued Payment Order by the BIR. 2. install a "Special Cash Book" exclusively for Internal Revenue collections where their daily collections shall be recorded. 3. The Collecting Office (Branch/Extension Office/Agency) shall a) report by telephone, telex or other means to its Head Office, at the end of each day, total collections for the day and the inclusive serial numbers of CRs issued, to be used as basis for the preparation by their respective Head Office of Consolidated Report on Daily Collections of Internal Revenue Taxes (formerly RC Form No. 82-001 now BIR Form No. 12.55) b) accomplish the Abstract of Daily Collections of Internal Revenue Taxes (formerly RC Form No. 82-002, now BIR Form No. 12.56) and submit the same duly supported with copies of Payment Orders (PC) and Confirmation Receipts (CRs) within ten (10) days from date of collection to the offices indicated in the form. The abstract of daily collections of Internal Revenue Taxes shall show in numerical sequence the serial numbers of CRs issued, including those which were cancelled or missing. All CRs in a booklet must be accounted for as issued, cancelled or missing. All copies of CRs issued and cancelled, shall be attached to this report, not in a separate report. c) report and transmit immediately to their respective Head Offices returned/dishonored checks which shall be the basis in the preparation of the report on dishonored checks (formerly RC Form No. 82-004 nor BIR Form No. 12.58). aisadc 4. The Head Office of the Collecting Bank shall a) consolidate its report of collection with those of the branches/extension offices/agencies and submit to the BIR Receiving Unit, CB complex, the Consolidated Report of Daily Collection of Internal Revenue Taxes (formerly RC Form No. 82-001 now BIR Form No. 12.55) within (3) days following the date of collection. The consolidated report of Daily Collections of Internal Revenue Taxes shall list all its authorized collecting offices to insure that every such office is included in the report, whether or not it has received tax payments for that date. b) submit directly to the Revenue Accounting Division, BIR, Diliman, Quezon City, all returned or dishonored checks the day following receipt of such checks. Prepare the Report on Returned/Dishonored Checks (formerly RC From No. 82-004 now BIR Form No. 12.58) in time for acknowledgement of receipt by the Revenue Accounting Division of BIR of the returned/dishonored checks on the report itself. c) consolidate the Abstract of Daily Collection of Internal Revenue Taxes (formerly RC Form No. 82-002 now BIR Form No. 12.56) with those received from branches/extension offices/agencies in the Consolidate Abstract of Collection of Internal Revenue Taxes (formerly RC Form No. 82-003 now BIR Form No. 12.57).Copies of the consolidated abstract shall be attached to the corresponding copy of the Authority to Debit Demand Deposit Account (BIR Form 12.57A).The original copies of BIR Forms 12.57 and 12.57A shall be submitted to the Accounting Department, Central Bank of the Philippines, Manila, on the eleventh (11th) Calendar day following the date of collection. Simultaneously the remaining copies of both forms, with the supporting POs and CRs shall be submitted to the Office indicated in the forms. d) report on BIR Form 12.57 total gross collection for the day without deducting the following: 1. the amount of dishonored checks, as the same shall be reflected as a deduction from the collections of the day, in the Authority issued by Accredited Banks on BIR Form No. 12.57A. Such deduction shall be allowed only when BIR has acknowledged receipt of dishonored checks as required in (b) above. 2. any adjustment on the amount reported in BIR Forms 12.55, 12.56 and 12.57 as the same shall be credited to or debited against their Demand Deposit Account upon the advice by the BIR after proper verification of the pertinent reports. e) submit only one supplementary report on BIR Forms No. 12.55 or 12.57 (formerly RC Form No. 82-001 and 82.003) for each date of collection for reports of branches or extension offices received by Head Office after the corresponding Consolidated Report for any date of actual collection has been submitted. The word "SUPPLEMENTAL" shall be indicated in bold letters to wit: April 15, 1984 SUPPLEMENTAL Date of Collection The reason or reasons for the delay in the submission of the report shall likewise be stated in the supplemental report for the purpose of determining appropriate action on the matter. f) inform the Bureau if there is no collection on any given date by stating in the next subsequent report of collection that no tax payments were received on such specified date/s. g) provide control numbers of all collection reports (BIR Form 12.55 to 12.60) prior to submission to the BIR. III. Recording and Maintenance of "Special Cash Book-BIR" and "Record of Consolidate Collections and Remittances" Bank Collecting Offices, including the Head Office shall 1. record daily in its ''Special Cash Book" the total daily collection using as basis BIR Form No. 12.56, as required in Sec. 3A of Revenue Regulations No. ______; 2. record daily or as necessary in its "Special Cash Book" the total amount of dishonored checks; 3. foot the "Special Cash Book" monthly. The Bank Head Office shall 1. record daily in its "Record of Consolidated Collections and Remittances" as required in Sec. 38 of Revenue Regulations No. _____ a) its total daily collection and that of each of its collecting offices as reported in BIR Form 12.56; b) the total amount of collection of each of its collecting offices, as reported in BIR Form 12.55; c) the total amount of its dishonored checks and that of each of its collecting offices; d.) the total amount debited by the Central Bank against its Demand Deposit Account as evidenced by CB-Debit Advice; e) the total amount credited by the Central Bank to its Demand Deposit Account as evidenced by CB-Credit Advice. 2. indicate the cause of the discrepancies between 12.56 and 12.55 with a footnote. 3. foot the pertinent columns of "Record of Consolidated Collections and Remittances" daily. 4. indicate on the last page of the daily record, right below the total of 12.56, the control number of BIR Form 12.57 where subject collection was reported and the date when such report was submitted to the BIR and the Central Bank. 5. add the daily totals of the pertinent columns of the "Record of Consolidated Collections and Remittances" at the end of each month. 6. indicate the totals arrived at on the second line immediately after the date when the last 12.57 report was submitted to the BIR. 7. double rule the totals indicated in No. 6 above. AGREEMENT The BUREAU OF INTERNAL REVENUE, known hereinafter as the BIR, represented by Acting Commissioner Ruben B. Ancheta, Commissioner of Internal Revenue, National Office Building, Diliman Quezon City and __________________r represented by _____________, President, known hereinafter as the Bank, after having been accredited and authorized to receive and collect internal revenue taxes, do hereby agree on the following: The bank shall (1) acknowledge receipt of internal revenue tax payments by issuing confirmation receipts; in no case shall the Bank accept payment without the payment order duly issued by the BIR; (2) book all such collections and credit same to the Special Account" Due to Central Bank Bureau of Internal Revenue"; (3) accomplish and submit collection reports as required by the rules and regulations hereto attached as Annex "A" and shoulder the cost of report forms prescribed therein; (4) authorize the Central Bank of the Philippines, Manila, thru its Accounting Department, to debit its demand deposit accounts maintained therein for the total daily collection which is due for remittance on the 11th calendar day after the date of collection, such amount debited shall be credited to the "Special Account BIR Collections" of the Treasurer of the Philippines; and agree in case of non-remittance for the BIR to advise the Central Bank to debit the amount of unremitted collections including penalties, surcharge and interests against the bank's demand deposit accounts; (5) maintain adequate balance in their demand deposit account for their daily remittance of tax collections; and inform Central Bank that such balance is earmarked for the remittance of tax collections; (6) keep and maintain record solely for internal revenue collections specified in the regulations which shall be made available for inspection and audit by duly authorized BIR officers and agents; (7) account for all confirmation receipts requisitioned and in case of loss, to submit to the BIR sworn statement of the fact of loss together with the proof of publication thereof in three (3) newspapers of general circulation for (3) consecutive weeks; the costs of such publication shall be for the account of the bank; and in the event the lost receipts will surface, the bank will be held responsible to the extent that the government is prejudiced; (8) pay a fine of P100.00 for every day of delay in the submission of each required report or the submission of inaccurate or incomplete report; likewise, a 24% surcharge on late remittance of and/or unremitted collections plus 1/10 of 1% interest per day thereon as provided for under paragraph 4 of this Agreement except if the delay or failure to remit on time is due to fortuitous events; (9) transmit returned or dishonored checks to the BIR the amounts of which shall be deducted from the gross collections on the day such checks were received; (10) abide with the rules and regulations promulgated by the BIR in connection with this authority and those that may be promulgated thereafter, (11) construct tellering booths within the BIR premises whenever possible at the Bank's expense; (12) educate and inform the bank's officers and employees charged with tax collection functions on the terms of this Agreement and the rules and regulations relative to the collection of internal revenue taxes; and be responsible pecuniarily for any misdemeanor of its officers and employees committed in connection with this function; (13) communicate to the BIR any changes in the information stated in the application; and (14) assign to the BIR so much of its rights to property, real and personal, in case of default in the remittance of internal revenue collections, if the bank's demand deposit accounts are not sufficient to satisfy the unremitted collections, penalties, interests and surcharges; The BIR shall (1) provide confirmation receipts for the use of the Bank; (2) reconcile the amount collected with that remitted; (3) request the Central Bank thru its Accounting Department to debit the amount of unremitted collections plus penalties surcharges and interests against the banks demand deposit accounts; (4) advise CB to debit or credit the demand deposit accounts of the accredited bank with any necessary adjustments such as erroneous or double reporting of remittance of internal revenue collections and correspondingly debit or credit the account of the Treasurer of the Philippines for the same amounts; (5) institute civil and criminal actions arising from the delayed submission or non-submission of reports and non-remittance of collections; (6) take action on the Bank's property assigned to the BIR in case of default in the remittance of internal revenue collections, if the bank's Demand Deposit Accounts are not sufficient to satisfy the unremitted collections, penalties, interests and surcharges; and (7) suspend the authority to collect internal revenue taxes or terminate this Agreement in case of violations thereof and of the rules and regulations pertinent thereto and for any of the grounds provided in the Civil Code. The parties recognizes that this Agreement does not extinguish other liabilities under existing laws and that payment of interest, penalties or surcharges on account of delayed remittance of tax collections or acquiescence of BIR on any infraction of these regulations, the Agreement or any other pertinent law or regulation shall not be construed as a waiver of any civil, criminal or administrative liability. cdll This Agreement is effective for a period of one (1) year from the date hereof, renewable annually unless sooner terminated by either party. IN WITNESS WHEREOF, we sign this Agreement this _______ day of __________, 1984 at __________________ (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue By: President ACKNOWLEDGEMENT REPUBLIC OF THE PHILIPPINES) CITY OF ____________________) S.S. In the Municipality/City of __________, on the _____ day of ________, 1984, personally appeared before me, ____________, who represents that he is the president of the corporation described and named in the foregoing instrument of Agreement, and that he was duly authorized by the board of directors to execute said instrument, known to me to be the same person who executed said instrument on behalf of the corporation named therein, and he acknowledged to me that the same is the free act and deed of said corporation. The Residence Certificate of said ___________ and the Residence Certificate of the ______________ Corporation were exhibited to me, and the same being No. A __________ issued at _____________ on _______, 19 ____, and No. C- ________, issued at on _______, 19___. _______. IN WITNESS WHEREOF, I have hereunto set my hand and seal this _______ day of ___________, 1984. ___________. NOTARY PUBLIC Until December 31, 19___ Doc. No. _______ Page No. _______ Book No. _______ Series of 19_____ REPUBLIC OF THE PHILIPPINES) CITY OF ____________________) S.S. In the Municipality/City of _________, on the _____ day of _____, 1984, personally appeared before me, Ruben B. Ancheta, Acting Commissioner of Internal Revenue, who is the same person named in the foregoing Agreement, known to me to the same person who executed said instrument on behalf of the Bureau of Internal Revenue and acknowledged to me that the same is his free act and deed. The Residence Certificate of said Acting Commissioner of Internal Revenue was exhibited to me, and the same being No. ________ issued at _________ on ____________, 1984. IN WITNESS WHEREOF, I have hereunto set my hand and seal this _________ day of ___________, 1984. NOTARY PUBLIC Until December 31, 19___ Doc. No. ________ Page No. ________ Book No. ________ Series of 19_____ BOOK II SUBJECT INDEX (Reference are to Sections/Subsections/Appendices) Abuse in Offset Privilege for Reserve Deficiencies ,2256 Advertisements ,2607 Affidavit on transfers of stock format, 2131.4; App.1 Agrarian Reform Credit allocation for, 2341.3 alternative investment to, 2341.5 beneficiaries; bases for determining, 2341.2 beneficiaries/credit, definitions, 2341.1 computation of loanable funds, 2341.4 eligible borrowers, 2341.2 interest and other charges, 2341.8 loanable funds, defined, 2341.4 marketing credits under Grains Quedan Financing Program eligible as, 2341.3 report requirements, 2341.9 Agricultural Credit in General computation of loanable funds, 2341.4 definition, 2341.2 eligible borrowers, 2341.1 interest and other charges, 2341.8 report requirements, 2341.9 required allocation for, 2341.3 securities acceptable for, 2341.7 syndicated type of, 2341.6 Allied Undertakings authority, scope of, 2376 investment in equities of, 2378 financial intermediaries performing quasi-banking functions, 2378.1 non-financial, 2379 investments in equities of, 2379.1 Allowance for Uncollected Interest on Loans ,2302.6 Armored Cars ,2604.4 Assets acquired in settlement of loans, 2394 appreciation/increase in book value, 2606.2 risk assets, 2116.2 total assets, 2116.2 Audit, Operations and Management ,2165 contents of reports, 2165.3 coverage, 2165.2 exemption from, 2165.5 of trust operations, 2415.3 procedural guidelines, 2165.4 Who may conduct, 2165.1 Bad Debts definition; specific cases of, 2136.1 Bakahang Barangay (Cow-Calf) Program ,2362 Banking Days and Hours ,2156 emergencies, 2156.5 existing authorizations and notifications, 2156.4 hours beyond minimum, 2156.1 reports on changes of, 2156.2 schedules, posting of, 2156.3 Banking Offices capital requirements, 2151.3 citizenship requirement, 2151.2 Conditions precluding acceptance of application for establishment of, 2151.5 conditions precluding processing of application for establishment of, 2151.6 date of Opening, 2151.8 definition of "branches/offices and agencies" for SSLAs, 2151.9 establishment of; prior MB approval, 2151 extension offices; reportorial requirements, 2151.11 lease expenses prior to authorization of branch, 2151.10 money shops, 2152 priority in processing applications for establishment of, 2151.7 savings agencies, 2153 Bank Money Orders (BMO) agreement with PNB, App. 40 sale of PNB BMO, 2604.2 Bank Premises appreciation/increase in book value, 2606.2 ceilings on total investments, 2606.3 depreciated, definition, 2116.2 expansion of, 2606.1 lease expenses prior to authorization of branch, 2151.10 sub-lease of, 2606.4 Bank Protection ,2167 Bills of Exchange Drawn in Good Faith against Actually Existing Values definition, 2301.2; 2328 Barangay Savings Movement rules on solicitation, 2215.2 Bio-Data of directors and officers, 2144 Board of Directors place of meetings, 2171 voting on certain corporate transactions, 2172 Bonding officers and employees, 2201.3 safeguard for SSLAs, 2148; App. 2 Bonds investment in, 2390 DBP Progress, 2601.2 Borrowings in General commercial papers, issuance of (See Commercial Papers ) deposits (See Deposits ) deposit substitutes (See Quasi-banking functions ) direct/indirect by DOSRI (See Loans ) from banks (See Interbank Loans ) from the government (See Government Deposits ) from trust departments or managed funds of banks or investment houses, 2292 lender of last resort facility of the CB, 2274 mortgage/chattel mortgage certificates, issue of, 2295 rediscounts ( See Rediscounting ) Booking of Deposits/Withdrawals ,2263 Branches definition. 2151.9 Business Name ,2174 Call by Depositors for Repayment of Deposits and Reduction in Reserve Deposit ,2259 Capital acquisition of stock, by foreigners, 2126.3 As security for loans, prohibition, 2311.3 build-up program for TBs, 2106.2 ceilings on stockholdings in TBs, 2131 stockholdings in excess of, 2131.1 transfers/acquisitions within a family group, 2131.2 convertibility of preferred stock to common stock, 2126.2 government counterpart; prohibition, 2106.3 merger/consolidation to meet minimum, 2111 minimum, 2106 determination of minimum capital, 2106.1 for banking offices, 2151.3 registration of transfers and other arrangements involving voting stocks, 2126.1 shares of stock of thrift banks in general, 2126 Capital Accounts basic ratio, 2116 definitions, 2116.2 exceptions, 2116.1 reports, 2116.3 sanctions, 2116.4 Cash Dispensers ,2604.3 Cash on Hand definition/computation, 2116.2 Categories of Banks ,2146.5 Categories of Reports ,2161.1 Ceilings on investments in allied undertakings, 2378 to 2379.1 in bank premises/equipment, 2606.2 in a single/all enterprises, 2381 in venture capital corporations, 2384.1 loans to DOSRI aggregate, 2331 individual, 2330 unsecured, 2330 loans to single borrower, 2301 contingent liabilities included in ceiling, 2301.4 determination of total loans, 2301.3 exceptions to, 2301 exclusions from, 2301.1 maturities of real estate loans by SMBs and PDBs, 2311.2 rediscounting, 2269.1 unsecured loans, 2319.3 values of loans secured by junior mortgage, 2311 for home building and subdivision development, 2312 for acquisition of instrument, machinery, etc. for agricultural/industrial production, 2312 secured by government securities, 2303.2 voting equity in TBs, 2131 Central Bank Certificate of Indebtedness, 2601.1 DALL Fund (Bakahang Barangay),2355 IBRD Program, 2359 Charges finance/non-finance, 2305.2 service fees on loans. 2303.6 Checks unauthorized encashment/deposit, 2265 Chronic Reserve Deficiency ,2256.1; 2283.3 Citizenship establishment of banking offices, 2151.2 Clean Loans (See Unsecured Loans ) Clean Note Policy ,2612; Apps. 42, 43 and 44 Clearing cut-off time, definition, 2263.2 general guidelines on; procedures, 2603.1 inter-regional clearing in Visayas and Mindanao, 2603.2 items for, 2603.1.c; 2603.2.a operations, 2603 settlement of balances, 2603.2.b technical overdrawings due to force-posting of Checks, 2204.1 Collaterals (See Secured Loans ) Commercial Papers long-term, registration, 2293.2 miscellaneous requirements, 2293.3 short-term, issuance/registration, 2293.1 Commercial or Business Paper actually Owned by the Person Negotiating the Same as exception to DOSRI rules, 2328 as exception to single borrower's limit, 2301.2 Common Trust Fund limit to single person/entity, 2414.4 management of, 2414.2 the plan, 2414.1 trustee as participant in, 2414.3 Compensating Deposits prohibition, 2302.1 Consolidation (See Merger ) Conversion of Preferred Shares to Common ,2126.2 Cooperative Finance System ,2357 Corporate Farming Program eligibility under agrarian reform credit, 2341.3 Cottage Industry Guarantee and Loans Fund ,2358 Cotton Supervised Credit Financing Program ,2360 Credit Information Exchange System, 2611, 2161.5 priority classification, App. 26 report on exposures to individuals/companies/groups aggregating P1/20 million and above, 2161.9 supervised (See Supervised Credit ) Creditor defined, 2305.2 Crimes/Losses reports on, 2161.4 Crop Insurance for Supervised Credit ,2345.2 Current Accounts (See Demand Deposits ) DBP Progress Bonds PDBs as sales and service agencies for, 2610.2 subject to reserves, 2255 Debts bad, 2136.1(a) in process of collection, 2136.1(c) well-secured, 2136.1(b) Definitions abuse in offset privilege for reserve deficiencies, 2256; 2283.2 affiliate, 2161.14.a(4) agrarian reform beneficiaries, 2341.1.d agrarian reform credit, 2341.1.b agricultural credit in general, 2341.1.c agricultural inputs, 2352.2.a allowance for uncollected interest on loans account, 2302.6 assigned capital, 2346.4.e bad debts, 2136.1 bank premises, depreciated, 2116.2 banking days, 2610.b banking hours, 2167.b(2) banking office, 2167.b(1) bills of exchange drawn in good faith against actually existing values, 2301.2; 2328 blue chip/high grade shares of stock, 2273.3 book value of paid-in capital, 2326.1.e call reports, 2161.11(2) capital accounts, 2116.2.c capital gap, 2106.2 cash on hand, 2116.2.d cash price or delivered price, 2305.2.c chronic reserve deficiency, 2256.1; 2283.3 clearing cut-off time, 2263.2 commercial paper, 2293 commercial or business paper actually owned by the person negotiating the same, 2301.2; 2328 common trust fund, 2402.1.d compensating deposit, 2302.1 consolidated financial statements, 2161.14.a(1) creditor, 2305.2 debt, 2346.4.b delinquency in payment of obligations, 2143 direct verification, 2166.10 directors, 2141.1; 2146.6; 2326.1a consolidated financial statements, 2161.14 a(1) creditor, 2305.2 debt, 2346.4.b delinquency in payment of obligations, 2143 direct verification, 2166.10 directors, 2141.1; 2146.6; 2326.1.1 dormant accounts, 2166.12 down payment, 2305.2.c dual control, 2166.6 due from CB, 2116.5 equity, 2346.4d equity investments, 2161.14.a(2) equity method, 2161.14.a(6) examination, 2161.2.a(3) export-oriented firms, 2346.4.f family group, 2131.b finance group, 2131.b finance charge, 2305.2(h) financial allied undertakings, 2161.14.a(2);2377 financial manager, 2421.1 foreign firm, 2346.4.a furniture, fixture and equipment, depreciated, 2116.2.i fund or money from the Government and government entities, 2239.2 gift or giveaway, 2261.2 government and government entities, 2239 government-owned or controlled corporation, 2239.2 government securities, 2254; 2283.1; 2287.1.b; 2303.3 gross demand deposits, 2255 in process of collection, 2136.1.c in trust for arrangements, 2284 independent balancing, 2166.2 investment authority, 2402.1.c issue, 2293.1 (1) joint custody, 2166.4 liabilities, 2301.2.a loans and advances, 2304.7; 2327 loanable funds, 2341.1.a; 2341.4 money borrowed, 2301.2.b; 2327 money market placements, 2287.1.a net worth, 2116.2 non-finance charge, 2305.2.f non-financial allied undertakings, 2379 non-traditional products, 2346.4.g NOW-accounts, 2223 obligations, 2143.a.5 officers, 2142.1; 2146.6; 2326.1.b outstanding deposits, 2326.1.d overbanked, 2151.4.b past due accounts, 2304 persistent violations, 2287.1.c person, 2305.2.b peso borrowings, 2346.4.c quasi-banking functions, 2281 readily marketable non-perishable staples, 2301.2 refusal to permit examination, 2161.2.a(4) regular banking hours, 2263.2.a report, 2161.2.a(1) risk assets, 2116.2.a service area, 2151.4.b simple annual rate, 2305.2.i stockholders, 2326.1.c subsidiary, 2161.14.a(3) supervised credit, 2345.1.a teller's station or window, 2167.b(3) to be held in trust, 2601.1 total assets, 2116.2b total loan portfolio, 2326.1.f trade-in, 2305.2 trust account, 2402.1.b trust operations or trust business, 2402.1.a unimpaired capital and surplus, 2301.2 venture capital corporations, 2384.1 well-secured, 2136.1.b wilful delay in submission of reports, 2161.2.a(2) writing off, 2304.7 Delinquency in Payment of Obligations ,2143 Demand Deposits authority to accept/create, 2201 bonding of officers/employees handling, 2201.3 checks without sufficient funds, 2205 drawings against uncollected deposits, 2204.2 encashment of checks payable to commissioner/collector of customs, 2265 gross demand deposit, defined, 2255 interest on, 2202 of bank officers/employees, 2206 premium contributions from SSS as, 2255 reserve against, 2203 temporary overdrawings, 2204.1 Deposits as security for loans, 2116.2 barangay savings movement, 2215.2 booking of, 2263 call for payment resulting in reduction of reserves, 2259 compensating/derivative, 2302.1 demand (See Demand Deposits ) disclosure of effective interest rates on, 2248 dormant, 2166.11; 2166.12; 2217 government (See Government Deposits ) in checks and other cash items, 2263.4 interest (See Interest ) minors as depositors (See Tipid Movement ) NOW Accounts (See Now Accounts ) of farmer-borrowers under Supervised Credit Program, 2218 of lessees (See Savings Deposits ) of officers and employees of thrift banks, 2206 savings (See Rental Deposits ) schemes to attract (See Promotional Schemes ) SEC prescribed format for certification of certain deposits, 2262.2 servicing outside bank premises, 2215 substitutes (See Quasi-banking Functions ) time (See Time Deposits ) unclaimed balances, 2264 Pick-up services, 2266 Directors bio-data, 2144 ceilings on loans to, 2330; 2331 definition, 2141.1; 2146.6 delinquency in payment of obligations, 2143 direct/indirect loans to (See Loans ) disqualifications effect of possession of 2143.1 persons disqualified, 2143 interlock, 2146.1 interlock and officerships, 2146.2, 2384.5 meeting of (See Board of Directors ) list, for submission, 2161.8 obligations of, defined, 2143 qualifications of, 2141.1 voting requirements, 2172 Dividends amounts available as, 2136.2 fractional shares of stock, 2136.7 uncollected interest as, 2136.3 recording of, 2136.6 reporting/verification, 2136.5 SSLAs build-up program as pre-requisite for declaration by, 2136.4 limit, declaration by, 2136.4 Dormant Accounts definition of, 2166.12 internal control procedures for, 2166.11 service and maintenance fees on, 2217 DOSRI Loans (See Loans) Due from CB definition, 2116.2.e computation, 2161.6 Emergencies definition, 2156.5 Employees bonding of, 2201.3 current accounts of, prohibition, 2206 financing plans for, 2337 Equity Investments disqualification from making, 2383 in allied undertakings, 2378 venture capital corporations, 2384; 2384.2 limitations/ceilings on, 2381 Examination defined, 2161.2(3) fines for refusal to permit, 2161.2(c) refusal to permit, 2161.2(4) Extension Offices (See Banking Offices) Family Group determination of, 2131b) transfers and acquisition of shares within group, 2131.2 Fees assessment of, 2608 CBCIs excluded from computation of, 2608 on dormant accounts, 2217 on loans to beneficiaries of agrarian reform, 2303.6 Finance Charge , defined, 2305.2(h) Financial Audit ,2165 Fines collection of, 2610.1 for refusal to permit examination, 2161.2(c) for reserve deficiencies, 2256 for wilful delay in the submission of reports, 2161.2 unpaid, manner of settlement, 2256.2 Floating Interest Rates ,2303.4 Foreign Technical Personnel employment of, 2143 Fringe Benefit Programs limits, 2337.2 mechanics, 2337.1 scope, 2337 Fund Management authorized investments, 2424 fees and commissions for, 2426 financial manager, defined, 2421.1 minimum features of contract, 2423 prohibitions, 2424.1 responsibilities of administration, 2422 security for faithful performance of duties, 2427 separation of accounts; reports, 2425 Furniture, Fixture and Equipment depreciated, 2116.2 Giveaways distribution guidelines, 2261.2 Government Deposits application of authority, filing, 2239.5 authority to service, 2239 authorized banks, 2239.1 definition of terms, 2239.2 exempt transactions, 2239.4 liquidity floor, 2239.3 Government Securities as alternative investment to agrarian reform credit, 2341.5 as alternative investment to investment deposit ratio, 2393.3 as reserves, 2254; 2283.1 CBCIs, 2601.1 definitions, 2283.1.a; 2287.1.a DBP Progress Bonds, 2601.2 Premyo Savings Bonds, 2601.3 reproduction and use of facsimiles, 2609.1 rules on buying/selling in open market, 2389 sale under Service Agency Agreement, 2601 special R/P window for inventory financing, 2276.1 Food Quedan Financing Program ,2356 Industrial Guarantee and Loan Fund ,2351 Insurance on Collaterals ,2311.2 Interbank Loans ,2343 Interest on deposits disclosure of effective rates. 2248 maximum rates on demand deposits, 2242 on savings deposits and NOW accounts, 2243 on time deposits, 2244 provident fund contributions, exemption, 2247 tax collections over P40 million, on loans, 2303 Interlocks categories of banks, 2146.5 declaration of policy, 2146 of directors, 2146.1 of directors and officers, 2146.2 of officers, 2146.3 representatives of Government, 2146.4 Internal Control minimum standards, in general, 2166 for dormant/inactive account, 2166.11; 2166.12 Investments in allied undertakings, 2377 in bank premises/equipment, 2606.2 in bonds and other debt instruments, 2390 in domestic banks by foreigners, 2126.3 in equity, 2376 in a single enterprise/all enterprises, 2384.1 in venture capital corporations, 2384.1 of managed funds, 2424 of trust funds, 2410 Investment-Deposit Ratio ,2393 clarifications, 2393.4 compliance with, 2393.2 government securities as eligible investments, 2393.3 grace period, 2393.8 regional groupings for, 2393.6 sanctions, 2393.5 Joint Custody definition and procedures, 2166.4 Lease expenses incurred prior to authorization of branch, 2151.10 sub-lease of bank premises, 2606.4 Letters of Credit domestic 2347 Liabilities definition, 2301.2 Liquidity Floor amount of, 2239.3 exemption from 2239.4 sanctions, 2239.6 Livestock Financing guidelines, 2352 Loans accrual of interest earned on, 2303.5 assets acquired in settlement of loans, 2394 bad debts (See Debts ) ceilings aggregate (DOSRI),2331 determination of total loans, 2301.3 exclusions from, 2301.1 individual (DOSRI),2330 single borrower, 2301 on unsecured loans, exclusions, 2331; 2332 charges (See Charges ) demand loans, when due, 2304.2 directors/officers/stockholders (DOSRI) availment of credit facility with CB, 2335 applicability to credit card operations, 2328.1 direct/indirect borrowings, 2329 general policy, 2326 procedural requirements, 2333 reportorial requirements, 2334 sanctions, 2336 transactions covered, 2327 transactions not covered, 2328 interbank, 2343 interest (See Interest ) for agricultural inputs guidelines, 2342.2 for home building and subdivision development, 2312 for housing, transportation, household and personal needs of officers/employees, 2337 for machinery, instrument, etc.,2312 past due accounts (See Past Due Accounts ) peso borrowings of foreign firms, 2346 suggested debit-equity ratio, app. 29 suggested capital build-up program, App. 30 in process of collection, 2136.1 renewals/extensions, 2304.4 restructuring or refinancing, 2304.6 secured (See Secured Loans ) to rural banks, 2342 unsecured (See Unsecured Loans ) writing off, 2304.7 definition, 2304.7.a frequency of, 2304.7.c Loan Proceeds compensating deposits, prohibition on, 2302.1 prohibited use, 2302.2 Lotteries guidelines on holding of, 226.1 Maisagana Program guidelines on rediscounts, 2273.4 special credit program, 2273.7 Management Audit ( See Audit, Operations and Management ) management contracts, 2175 Margin Deposits as deduction from risk assets, 2116.2 Masagana 99 and Masaganang Maisan ,2352 Mergers to meet minimum capital, 2111 Money Borrowed defined, 2301.2 Money Market Placements of Rural Banks certification requirement, 2287 government securities, defined, 2287.1.a money market placements, defined, 2287.1.a persistent violations, defined, 2287.1.c placements not covered, conditions required, 2287.2; 2287.4 sanctions, 2287.5 transition period, 2287.3 Money Shops establishment of, 2152 factors to be considered in establishment, 2152.1 loans by, 2349 operational guidelines, 2152.2 Mortgage and Chattel Mortgage Certificates, 2295 Negotiable certificates of Time Deposit, 2235 minimum features, 2235.1 insurance coverage, 2235.2 other requirements, 2235.3 reserve requirements, 2236 Net Worth (See Capital Accounts ) Non-Finance Charge defined, 2305.2.f NOW Account authority, 2223 clearing, 2228 features, 2227 interest, 2224 reserve; 2225 rules in servicing, 2226 Notes and Coins ( See Currency Notes and Coins ) Officers bio-data, submission of, 2144 bonding of accountable officers, 2201.3 ceilings on loans to, 2330, 2331 definition, 2142.1; 2146.6 delinquency in payment of obligations, 2143 direct/indirect loans (See Loans ) disqualification, 2143 effect of possession, 2143.1 persons disqualified to become 2143.1 interlocking directorships and officerships, 2146.2. 2384.5 interlocking officerships, 2146.3 Operations Audit ( See Audit, Operations and Management ) Open Market Operations ,2389 government securities dealers, 2389.1 Purchase & sale of government securities ,2389; 2601 regular repurchase agreement, 2389.2 reverse repurchase agreement, 2389.3 overnight repurchase facilities, 2389.4 Overbanked Service Area , definition, 2151.4 Parcellary Plans on Crop Loans ,2396 Past Due Accounts accounts considered as, 2304.1 accrual of interest income, 2304.3 demand loans, 2304.2 renewals or extensions, 2304.4 reporting requirements, 2304.5 restructuring or refinancing of loans, 2304.6 writing-off, 2304.7 PDBs as DBP Collection Agencies, 2604 . 1 Peso Borrowings by Foreign Firms ,2346 PNB Money Orders SSLAs as consignee of, 2604.2 Preferred Stock conversion into common stock, 2126.2 features, 2126.2.c kinds of, 2126 purchase out of loan proceeds, prohibition 2302.2 Premyo Savings Bond ,2601.3 Profit Sharing Programs ,2147 Promotional Schemes gifts/giveaways, 2261.2 raffles and lotteries, 2261.1 Provident Fund Contributions exemption from interest rate ceilings, 2247 Pukyutang Barangay Program ,2364 Quasi-Banking Functions acceptances, bills of exchange and trust certificates; use of, 2281.1 authority to perform, 2101 call slips/tickets for 24-hour loans, 2281.5 deposit substitute instruments, 2281 maturity, matured and unclaimed deposit substitute, 2282 minimum features, 2281.3 minimum trading lot, 2284 negotiation of promissory notes, 2281.2 other rules and regulations, 2281.7 prescribed form by CB, 2281.4 preterminated deposit substitute, 2285.3 purchase of receivables and other obligations, 2388 physical delivery of securities, 2281.6 reverse, 2283 yields/interest rate, 2285 time and payment, 2285.2 Raffles ,2261.1 Ratios debt-to-equity for borrowing foreign firms, App. 29 investing-deposit, 2393 net worth to risk assets, 2116 Rediscounting availment, qualifications required for, 2270.1 basic terms and conditions ceilings, 2269.1 eligibility of papers, 2269.2 loan values, 2271.1 maturities, 2269.3 rediscount rates and maximum bank lending rates, 2274.2 lender-of-last-resort facility conditions to access, 2274.2 purpose of facility, 2274.1 quota, 2274.4 terms of credit, 2274.3 loans to long-term lending institutions, 2271.1 recording and reporting requirements, 2278 repurchase agreements with CB, 2276 R/P window for special inventory financing, 2276.1 specific papers, 2273 agrarian reform credit, 2273.1 Masagana 99 and Masaganang Maisan, 2273.1 secured by pledges of blue chip/high grade shares of stock, 2273.3 papers pertaining to the Maisagana Program, 2273.4 papers from domestic sales of raw/frozen tuna, 2273.6 promissory notes of overseas contract workers, 2273.5 Reference Rate ,2303.4 Refinancing of loans, when allowed, 2304.6 Refusal to Permit examination definition, 2161.2 Rental Deposits ,2219 Reports agrarian/agricultural credit, 2341.9 bank protection, 2167; App. 13 capitalization requirements, 2116.3 categories and signatories, 2161.1 Central Bank offices were submitted, 2161.10 changes in banking days/hours, 2156.2 computation of "Due from CB" account, 2161.6 consolidation of financial statement, 2161.14 credit transactions of creditors, 2305.4 crimes and losses, 2161.4 definitions, 2161.2(1) directory of banks, 2161.3 extension offices, 2151.11 fines for delay in submission, 2161.2 investment-deposit ratio, 2393.7 loans aggregating P1/P20 million and above, 2161.9 loans to DOSRI, 2334 manner/deadlines for submission, 2161.1 organizational structure and operational policies, 2161.3 past due accounts, 2304.5 published statement of conditions, 2161.2 real estate transactions with DOSRI, 2161.5 reconciliation of head office and branch transactions, 2161.7 required and available reserves, 2257; 2161.13 stockholders'/board of directors' resolutions, 2161.13 taxes, 2602.2 Tipid movement, 2215.1 Trust & fund management operations, app. 3-10 Repurchase Agreements regular repurchase agreement with CB, 2389.2 reverse repurchase agreement with CB, 2389.3 by financial intermediaries with CB, 2276 R/P window for inventory financing, 2276.1 Overnight repurchase facility, 2389.4 Reserves accounts subject; amounts required, 2253 against deposit substitute, 2283 composition of, 2254; 2283.1 computation of 2255 deficiency in abuse in offset privilege, 2256; 2283.2 chronic deficiency; penalties, 2256.1; 2283.3 unpaid fines, 2256.2 CB deposit as, 2254.1 fines for deficiencies, 2256 reduction of reserve due to call by depositors for repayment of deposits, 2259 Risk Assets ,2116.2 Sanctions capital deficiency, 2106.2 failure/refusal to adopt Uniform System of Accounts, 2161 non-compliance with Truth-in-Lending Act and implementing regulations, 2305.8 refusal-to permit examination, 2161.2 submission of reports with authorized signatures, 2161.1 violation of maximum lending rates, 2303 violation of registration requirements of commercial papers, 2293 violation of regulations on clean/secured loan, 2319.6; 2311 violation of regulations on government deposits, 2239.6 violation of yield/interest rates on D/S, 2285.4 violation of regulations on promotional schemes, 2261 wilful delay in submission of reports, 2161.2 in general, 2199; 2299; 2399; 2499; 2699 Savings Agencies establishment of, 2153 factors to be considered, 2163.1 operational guidelines, 2153.2 other requirements, 2153.3 Savings Deposits barangay savings movement, 2215.1 dormant accounts, 2217 interest, 2213 minor as depositors (See Tipid Movement ) of farmer-borrowers under the supervised credit program, 2218 of lessees, rental deposits, 2219 prohibition regarding withdrawals/deposits, 2216 reserve, 2214 service outside bank premises, 2215 Second Rural Development Settlement Project ,2363 Secured Loans by assets acquired with loan proceeds, 2341.7 by bonds, 2311 by Certificate of Land Transfer, 2341.7 by collaterals such as, standing crops, livestock or work animal, 2341.7 by hold-out on or assignment of deposit, 2116.2 by insured improvement on real property, 2311 by junior mortgage on real estate, 2311 by machinery and equipment, 2312.b by mortgages on real estate, 2311; 2312; 2341.7 by one acceptable co-maker, 2341.7 by pledges of jewelry and precious stones, 2311 term of, 2311.2 by time deposits, 2313 Special Financing Program Bakahang Barangay (cow-calf) Program, 2362 Central Bank-DALL Fund (Bakahang Barangay),2355 Cooperative Finance System, 2357 Cottage Industry Guarantee and Loan Fund, 2358 Cotton Supervised Credit Financing Program, 2360 Fourth Central Bank IBRD Loans, 2359 Food Quedan Financing Program, 2356 Industrial Guarantee and Loan Fund (IGLF) Program, 2351 Livestock Financing and Loans for Agricul- * reconciliation of revenue collections, 2602.7 wilful delay in reporting/remittance, 2602.8 Thrift Banking Authority other banking services, 2101.1 scope of, 2101 Time Deposits interest, 2231; 2244 time of payment, 2244.1 pretermination, 2244.3 treatment of matured deposits, 2244.2 minimum size, 2233 reserves (See Reserves ) special time deposits, 2234 term, 2233 Tipid Movement , solicitation of deposits, 2215.1 Trust audit requirement, 2415.3 authority to perform trust functions, 2401 ceilings on loans, 2409 common trust fund (See Common Trust Fund ) fees and commissions, 2412 investment of funds, 2410 limitations on loans and investments, 2410 mergers and consolidations, 2406 non-trust agreements, 2405 pre-requisites for engaging in, 2403 reports to CB, 2415.2 reports to trustor, beneficiary, 2415.1 required surplus, 2413 responsibilities of administration, 2407 security for faithful performance of trust duties, 2404 separation of accounts, 2411 Truth in Lending Act cash price/delivered price, defined, 2305.2.c creditor, defined, 2305.2.a disclosure requirement, 2305.1 downpayment, defined, 2305.2.d finance charge, defined, 2305.2(h) inspection of contracts covering credit transactions, 2305.4 non-finance charge, defined, 2305.2(f) offices authorized to enforce rules, 2305.7 penal provisions, 2305.8 person, defined, 2305.2.b posters, 2305.6 reports to CB, 2305.5 scope of requirement, 2305.3 simple annual rate, defined, 2305.2.i trade in, defined, 2305.2.e Unclaimed Balances ,2264 Uniform System of Accounts ,2161(c) Unimpaired Capital and Surplus defined, 2301.2 Unsecured Loans against personal security, 2319 general guidelines, 2319.1 proof of financial capacity of borrower, 2319.2 amounts and terms of; renewals, 2319.3 signatories, 2319.4 collateral requirement, 2319.5 Usury Law applicability, 2303 escalation clauses, when allowed, 2303.2 Venture Capital Corporations business name of, 2384.3 conditions for, 2384.1 directors and/or officers, interlock, 2384.5 investments by VCCs, 2384.2 investments in, 2384 reportorial requirements, 2384.4 sanctions, 2384.6 * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas .