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

July 30, 1982 MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES - 1982 BOOK IV Central Bank of the Philippines MANILA OFFICE OF THE GOVERNOR 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 rules and 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 subsection 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 section 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. 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 31, 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 IV NON-BANK FINANCIAL INTERMEDIARIES Manual Updated PAGES TO BE REMOVED PAGES TO BE INSERTED Table of Contents xi to xii xi to xii xv to xx xv to xx.a xxix to xxx xxix to xxxi Part I 5 to 7-a 5 to 7.a 11 to 12 11 to 12.a 17d to 18 17d to 18.a Part II 3 to 6 3 to 6 9 to 12.a 9 to 12.a 13 to 13.b 13d to 13.b 14.a 14.a 15 to 16 15 Part III 1 to 2 1 to 2.a 11 to 12 11 to 12 18.g 18.g Part IV 3 to 4 3 to 4 9 to 11 9 to 11 9 to 10 9 to 10 Appendices App. 15-1 to 15-7 App. 15-1 to 15-7 App. 16-1 to 16-5 App. 16-1 to 16-7 App. 23-1 to 23-2 App. 23-1 to 23-2.a App. 25-1 to 25-2 App. 25-1 to 25-2.a App. 26-3 App. 26-3 to 26-4 App. 30-1 to 30-4 Index I-3 to I-4 I-3 to I-4 I-7 to I-10 I-7 to I-10 I-13 to I-14 I-13 to I-14 BOOK IV TABLE OF CONTENTS PART ONE ORGANIZATION, MANAGEMENT AND ADMINISTRATION NON-BANKS WITH QUASI-BANKING FUNCTIONS (NBQBs) A. SCOPE OF AUTHORITY SECTION 4101Q Quasi-Banking Functions 4101Q.1 Financial intermediaries 4101Q.2 Subsidiaries and affiliates 4101Q.3 Guidelines on lender count SECTION 4102Q Preconditions to Exercise of Quasi-Banking Functions 4102Q.1 Minimum paid-in capital 4102Q.2 Citizenship requirements 4102Q.3 Managerial expertise SECTION 4103Q Documentary Requirements for Application SECTION 4104Q Central Bank Certificate of Authority SECTION 4105Q Licensing of an Investment House B. CAPITALIZATION SECTION 4106Q Minimum Capital SECTIONS 4107Q - 4110Q (Reserved) C. MERGER AND CONSOLIDATION SECTION 4111Q Merger of Two or More Non-Bank Quasi-Banks SECTIONS 4112Q - 4115Q (Reserved) D. NET WORTH TO RISK ASSETS RATIO SECTION 4116Q Minimum Ratio SECTION 4117Q Clarification of Terms and Phrases SECTION 4118Q Transitory Clause SECTION 4119Q Treatment of Equity Investment with Reciprocal Stockholdings SECTION 4120Q Sanctions on Net Worth Deficiency SECTIONS 4121Q - 4125Q (Reserved) E. STOCK, STOCKHOLDERS AND DIVIDENDS SECTION 4126Q (Reserved) SECTION 4127Q Equity Investments by Stockholders of NBQBs SECTIONS 4128Q - 4135Q (Reserved) SECTION 4136Q Dividends 4136Q.1 Definition of terms 4136Q.2 Accrued interest 4136Q.3 Amount available as dividends 4136Q.4 Reporting and verification 4136Q.5 Recording of dividends SECTIONS 4137Q - 4140Q (Reserved) F. DIRECTORS, OFFICERS AND EMPLOYEES SECTION 4141Q Definition and Qualifications of Directors SECTION 4142Q Definition and Qualifications of Officers SECTION 4143Q Disqualifications of Directors and Officers 4143Q.1 Disqualification procedures 4143Q.2 Prohibition against foreign officers/employees of financing companies SECTION 4144Q Bio-Data of Directors and Officers SECTION 4145Q (Reserved) SECTION 4146Q Interlocking Directorships and/or Officerships 4146Q.1 Interlocking directorships 4146Q.2 Interlocking directorships and officerships 4146Q.3 Interlocking officerships 4146Q.4 Representatives of Government 4146Q.5 Transitory provision SECTION 4147Q Management Agreements SECTION 4148Q Profit Sharing of Directors, officers and Employees SECTIONS 4149Q - 4150Q (Reserved) G. BRANCHES AND OTHER OFFICES SECTION 4151Q Establishment 4151Q.1 Branching in Metro Manila 4151Q.2 Evaluation guideposts 4151Q.3 Applications subject to capital build-up requirements 4151Q.4 Additional capital, if required 4151Q.5 Other requirements/factors to be considered 4151Q.6 Conditions precluding processing of applications 4151Q.7 Documentary requirements 4151Q.8 Filing of applications 4151Q.9 Period within which to submit complete requirements 4151Q.10 Prohibition against operating without SEC license SECTIONS 4152Q - 4155Q (Reserved) H. (RESERVED) SECTIONS 4156Q - 4160Q (Reserved) I. INTERNAL CONTROL SECTION 4161Q Recording of Transactions and Reporting Requirements 4161Q.1 Reports to be submitted 4161Q.2 Categories and signatories of reports 4161Q.3 Sanctions on unauthorized signatories 4161Q.4 Sanctions in case of wilful delay in the submission of reports SECTIONS 4162Q - 4165Q (Reserved) SECTION 4166Q Internal Control Systems 4166Q.1 Uniform system of accounts 4166Q.2 Sanctions SECTIONS 4167Q - 4170Q (Reserved) J. MISCELLANEOUS PROVISIONS SECTION 4171Q Publication Requirements SECTIONS 4172Q - 4198Q ( Reserved ) SECTION 4199Q General Provision on Sanctions NON-BANKS WITHOUT QUASI-BANKING FUNCTIONS A. SCOPE OF AUTHORITY SECTION 4101N Scope of Authority of Non-Stock Savings and Loan Associations 4101N.1 Form of organization 4101N.2 Organizational requirements SECTION 4102N Definition of Fund Managers SECTIONS 4103N - 4105N ( Reserved ) B. CAPITALIZATION SECTION 4106N Capital of NSSLAs SECTIONS 4107N - 4110N ( Reserved ) C. (RESERVED) SECTIONS 4111N - 4115N ( Reserved ) D. NET WORTH-TO-RISK ASSETS RATIO SECTION 4116N Capital-to-Risk Assets Ratio of NSSLAs SECTION 4117N Withdrawable Share Reserve SECTION 4118N Surplus Reserve for Ledger Discrepancies SECTION 4119N Reserve for Office Premises, Furniture, Fixtures, and Equipment SECTIONS 4120N - 4125N ( Reserved ) E. STOCK, STOCKHOLDERS, AND DIVIDENDS SECTION 4126N Limitations on Declaration of Dividends SECTIONS 4127N - 4140N ( Reserved ) F. DIRECTORS, OFFICERS, AND EMPLOYEES SECTION 4141N Definition and Qualifications of Directors of NSSLAs SECTION 4142N Definition and Qualifications of Officers of NSSLAs SECTION 4143N Disqualifications of Directors and Officers of NSSLAs and Financing Companies 4143N.1 Prohibitions against foreign officers/employees of Financing Companies SECTION 4144N Bio-Data/List of Directors and Officers of NSSLAs SECTION 4145N Compensation of Directors, Officers and Employees 4145N.1 Liability for loans contrary to law SECTIONS 4146N - 4147N ( Reserved ) SECTION 4148N Bonding of NSSLA Officers and Employees SECTIONS 4149N - 4150N ( Reserved ) G. (RESERVED) SECTIONS 4151N - 4155N ( Reserved ) H. BUSINESS DAYS AND HOURS SECTION 4156N Business Days and Hours of NSSLAs SECTIONS 4157N - 4160N ( Reserved ) I. INTERNAL CONTROL SECTION 4161N Reports and Other Information Required 4161N.1 Sanctions and procedures for filing and payment of fines 4161N.2 Categories of and signatories to reports SECTIONS 4162N - 4164N ( Reserved ) SECTION 4165N External Auditor for NSSLAs SECTION 4166N Uniform System of Accounts SECTIONS 4167N - 4170N ( Reserved ) J. MISCELLANEOUS PROVISIONS SECTION 4171N Publication Requirements SECTIONS 4172N - 4173N ( Reserved ) SECTION 4174N Business Name SECTIONS 4175N - 4198N ( Reserved ) SECTION 4199N General Provision on Sanctions PAWNSHOPS A. SCOPE OF AUTHORITY SECTION 4101P Scope of Authority of Pawnshops 4101P.1 Form of organization 4101P.2 Organizational requirements SECTION 4102P Definition of Terms SECTIONS 4103P - 4105P ( Reserved ) B. CAPITALIZATION SECTION 4106P Capital of Pawnshops SECTIONS 4107P - 4110P ( Reserved ) C. (RESERVED) SECTIONS 4111P - 4115P ( Reserved ) D. (RESERVED) SECTIONS 4116P - 4125P ( Reserved ) E. (RESERVED) SECTIONS 4126P - 4140P ( Reserved ) F. DIRECTORS, OFFICERS AND EMPLOYEES SECTIONS 4141P - 4147P ( Reserved ) SECTION 4148P Bonding of Officers and Employees SECTIONS 4149P - 4150P (Reserved) G. BRANCHES AND OTHER OFFICES SECTION 4151P Establishment of Branches 4151P.1 Definition of terms 4151P.2 Operations and functions 4151P.3 Basis for establishment 4151P.4 Capital requirement 4151P.5 Documentary requirements 4151P.6 Location 4151P.7 Date of opening for business 4151P.8 Transitory provision SECTIONS 4152P - 4155P ( Reserved ) H. BUSINESS DAYS AND HOURS SECTION 4156P Business Days and Hours SECTIONS 4157P - 4160P ( Reserved ) I. INTERNAL CONTROL SECTION 4161P Records and Reports 4161P.1 Financial Statements SECTION 4162P Disposition of Records SECTION 4163P Sanctions SECTIONS 4164P - 4170P ( Reserved ) J. MISCELLANEOUS PROVISIONS SECTION 4171P Articles of Incorporation SECTION 4172P Business Name SECTION 4173P Safekeeping of Pawns and Records and Insurance of Office Building SECTION 4174P Closing or Transfer of Business SECTION 4175P Separation of Pawnshop Business from Other Businesses SECTIONS 4176P - 4198P ( Reserved ) SECTION 4199P General Provision on Sanctions PART TWO DEPOSIT AND BORROWING OPERATIONS NON-BANKS WITH QUASI-BANKING FUNCTIONS (NBQBs) A-H (RESERVED) SECTIONS 4201Q - 4268Q ( Reserved ) I. BORROWINGS FROM THE CENTRAL BANK SECTION 4269Q Central Bank Liquidity Window 4269Q.1 Nature of liquidity window 4269Q.2 Conditions to access 4269Q.3 Terms of the credit 4269Q.4 Quota 4269Q.5 Rediscount ceilings 4269Q.6 (Renumbered SEC. 4276Q) SECTION 4270Q Basic Rules Governing CB Loans and Advances to NBQBs 4270Q.1 NBQBs qualified to avail of CB credit 4270Q.2 Credit accommodations available to NBQBs 4270Q.3 Papers required 4270Q.4 Eligibility of papers offered as collateral 4270Q.5 Loan values 4270Q.6 Rediscount rates/NBQB lending rates 4270Q.7 Maturity period 4270Q.8 Rediscount ceiling 4270Q.9 Repayments 4270Q.10 Default and other violations by the borrowing NBQBs 4270Q.11 Liquidated damages 4270Q.12 Additional loan/advance 4270Q.13 Authority to examine books and records of NBQBs 4270Q.14 Interest and penalty rates SECTIONS 4271Q - 4275Q ( Reserved ) SECTION 4276Q Repurchase Agreements with the Central Bank 4276Q.1 R/P window for inventory financing 4276Q.2 Regular repurchase agreements 4276Q.3 Reverse repurchase agreements 4276Q.4 Overnight repurchase facility SECTIONS 4277Q - 4280Q ( Reserved ) J. DEPOSIT SUBSTITUTE OPERATIONS (QUASI-BANKING FUNCTIONS) SECTION 4281Q Deposit Substitute Instruments 4281Q.1 Minimum features of deposit substitute instruments 4281Q.2 Prescribed forms 4281Q.3 Exemption from documentation requirements 4281Q.4 Prohibition against use of certain instruments as deposit substitutes 4281Q.5 Negotiation of promissory notes 4281Q.6 Call slips/tickets for 24-hour loans 4281Q.7 Substitution of underlying securities 4281Q.8 Regulation on additional stipulation 4281Q.9 Requirements to state nature of underlying securities 4281Q.10 Physical delivery of instruments and underlying securities SECTION 4282Q Payment ; Maturity ; Renewal ; Pretermination of Deposit Substitutes SECTION 4283Q Reserve Requirements 4283Q.1 Form and amount of reserves; deposits with Central Bank 4283Q.2 Accounts subject to reserves 4283Q.3 Exemptions 4283Q.4 Computation and valuation 4283Q.5 Reserve deficiencies; sanctions 4283Q.6 Matured and unclaimed deposit substitutes 4283Q.7 Book entry method for reserve securities SECTION 4284Q Minimum Trading Lot SECTION 4285Q Ceilings on Yield Rates ; Penalty for Pretermination SECTION 4286Q ( Reserved ) SECTION 4287Q Money Market Placements of Rural Banks 4287Q.1 Requirements for placement SECTION 4288Q ( Reserved ) SECTION 4289Q Issuance of Commercial Paper SECTION 4290Q Without-Recourse Transactions 4290Q.1 Prohibited practices K. OTHER BORROWINGS SECTION 4291Q Borrowings from the Government 4291Q.1 Definition of terms 4291Q.2 Liquidity floor 4291Q.3 Exempt transactions SECTION 4292Q Borrowings from Trust Departments or Managed Funds of Banks or Investment Houses SECTION 42930 Deleted by C . 1059 4293Q.1 Deleted by C. 1059 4293Q.2 Deleted by C. 1059 SECTION 4294Q Interbank Borrowings SECTION 4295Q ( Reserved ) SECTION 4296Q Underwriting by Investment Houses SECTION 4297Q Bond Issues of NBQBs 4297Q.1 Definition of terms 4297Q.2 Notice to Central Bank 4297Q.3 Minimum features 4297Q.4 Underwriting of bonds 4297Q.5 Minimum trading lot 4297Q.6 Inapplicability of certain regulations 4297Q.7 Reserve requirement SECTION 4298Q ( Reserved ) SECTION 4299Q General Provision on Sanctions NON-BANKS WITHOUT QUASI-BANKING FUNCTIONS A. (RESERVED) SECTIONS 4201N - 4211N ( Reserved ) B. SAVINGS DEPOSITS OF NSSLAs SECTION 4212N Definition SECTION 4213N Interest on Savings Deposits SECTION 4214N Reserves on Savings Deposits SECTION 4215N ( Reserved ) SECTION 4216N Deposit and Withdrawals SECTIONS 4217N - 4222N ( Reserved ) C. (RESERVED) SECTIONS 4223N - 4229N ( Reserved ) D. TIME DEPOSITS OF NSSLAs SECTION 4230N Definition SECTION 4231N Interest on Time Deposits SECTION 4232N Reserves on Time Deposits SECTION 4233N Minimum Size and Term of Time Deposits SECTION 4234N Withdrawal of Time Deposits SECTION 4235N Certificates of Time Deposits SECTIONS 4236N - 4238N ( Reserved ) E. GOVERNMENT DEPOSITS SECTIONS 4239N - 4241N ( Reserved ) F. INTEREST ON DEPOSITS SECTION 4242N ( Reserved ) SECTION 4243N Interest on Savings Deposits SECTION 4244N Interest on Time Deposits 4244N.1 Time of Payment 4244N.2 Treatment of matured time deposits 4244N.3 Pretermination SECTION 4245N ( Deleted ) SECTIONS 4246N - 4252N ( Reserved ) G. RESERVES AGAINST DEPOSIT LIABILITIES SECTION 4253N Reserve Fund SECTION 4254N Composition and Computation of Reserves SECTIONS 4255N - 4260N ( Reserved ) H. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS SECTION 4261N Opening and Operation of Deposit Accounts 4261N.1 Who may open deposit accounts 4261N.2 Identification of member-depositors 4261N.3 Number of deposit accounts 4261N.4 Signature card 4261N.5 Passbook and certificate of time deposit 4261N.6 Deposits in checks and other cash items 4261N.7 Checking accounts SECTION 4262N Acceptance of Deposits by Building and Loan Associations SECTIONS 4263N - 4268N ( Reserved ) I. (RESERVED) SECTIONS 4269N - 4280N ( Reserved ) J. (RESERVED) SECTIONS 4281N - 4290N ( Reserved ) K. OTHER BORROWINGS SECTION 4291N Borrowings from the Government SECTION 4292N ( Reserved ) SECTION 4293N Registration and Issuance of Commercial Papers SECTION 4294N Borrowings of Non-Stock Savings and Loan Associations SECTION 4295N Borrowings of Building and Loan Associations SECTIONS 4296N - 4298N (Reserved) SECTION 4299N General Provision on Sanctions PART THREE LOANS, INVESTMENTS AND SPECIAL FINANCING PROGRAMS NON-BANKS WITH QUASI-BANKING FUNCTIONS (NBQBs) A. LOANS IN GENERAL SECTION 4301Q Loans Limits 4301Q.1 Arm's-length transactions 4301Q.2 Exclusions from loan limit SECTION 4302Q Minimum Guidelines on Lending Operations SECTION 4303Q Interest, Yield, and Other Charges 4303Q.1 Purchase of receivables 4303Q.2 Loans 4303Q.3 Floating rate of interest 4303Q.4 Effect of prepayment 4303Q.5 Loan prepayment 4303Q.6 Escalation clause; when allowable SECTION 4304Q Past-Due Accounts SECTIONS 4306Q - 4310Q ( Reserved ) B. (RESERVED) SECTIONS 4311Q - 4318Q ( Reserved ) C. (RESERVED) SECTIONS 4319Q - 4325Q ( Reserved ) D. LOANS/CREDIT ACCOMMODATIONS TO DIRECTORS, OFFICERS, STOCKHOLDERS AND THEIR RELATED INTERESTS (DOSRI) SECTION 4326Q General Policies ; Definitions SECTION 4327Q Transactions Covered SECTION 4328Q Transactions not Covered SECTION 4329Q Direct/Indirect Borrowings SECTION 4330Q Individual Ceiling ; Single Borrower Limit SECTION 4331Q Aggregate Ceiling ; Ceiling on Unsecured Loans SECTION 4332Q Exclusions from Aggregate Ceiling SECTION 4333Q Credit Accommodations Under Officers' Fringe Benefit Plans SECTION 4334Q Procedural Requirements SECTION 4335Q Transitory Provisions SECTION 4336Q Sanctions for Violation of DOSRI Rules SECTION 4337Q Report Requirements SECTIONS 4338Q - 4340Q ( Reserved ) E. SPECIFIC TYPES/CLASSES OF LOANS SECTION 4341Q Peso Borrowings by Foreign Firms 4341Q.1 Sanctions SECTION 4342Q ( Reserved ) SECTION 4343Q Interbank Loans SECTIONS 4344Q - 4350Q ( Reserved ) F. SPECIAL FINANCING AND OTHER SPECIAL LENDING PROGRAMS SECTION 4351Q Loans under Industrial Guarantee Program SECTIONS 4352Q - 4358Q ( Reserved ) SECTION 4359Q Fourth CB-IBRD Rural Credit Project 4359Q.1 Definition of terms 4359Q.2 Participating institutions; eligibility requirements 4359Q.3 Other eligibility requirements 4359Q.4 Subloans extended by participating financial institutions; purposes 4359Q.5 Eligibility of borrowers 4359Q.6 Subloan limits 4359Q.7 Creditworthiness 4359Q.8 Maturity of subloans 4359Q.9 Loan repayment 4359Q.10 Grace period 4359Q.11 Interest rates 4359Q.12 Collateral 4359Q.13 Subloan application and processing 4359Q.14 Release of Subloan proceeds 4359Q.15 Penalty for non-payment 4359Q.16 Extension periods 4359Q.17 Subloans in litigation 4359Q.18 Procurement 4359Q.19 CB loans to participating financial institutions 4359Q.20 Auditing and reportorial requirements SECTIONS 4360Q - 4375Q ( Reserved ) G. EQUITY INVESTMENTS SECTION 4376Q Purpose ; Coverage SECTION 4377Q Investment in Non-Allied Undertakings SECTION 4378Q Underwriting Exempted SECTION 4379Q Treatment of Equity Investment with Reciprocal Stockholdings SECTION 4380Q Transitory Clause SECTIONS 4381Q - 4387Q ( Reserved ) H. OTHER LOAN OPERATIONS SECTION 4388Q Purchase of Commercial Papers SECTIONS 4389Q - 4392Q ( Reserved ) I. MISCELLANEOUS PROVISIONS SECTIONS 4393Q - 4398Q ( Reserved ) SECTION 4399Q General Provision on Sanctions NON-BANKS WITHOUT QUASI-BANKING FUNCTIONS A. LOANS IN GENERAL SECTION 4301N Authority ; Loan Limits ; Maturity of NSSLA Loans SECTION 4302N Loan Proceeds SECTION 4303N Interest and Other Charges 4303N.1 Application of Usury Law 4303N.2 Effective rates 4303N.3 Payment of loan before maturity 4303N.4 Fees and other charges of NSSLAs 4303N.5 Interest on loans secured by government securities 4303N.6 Interest in the absence of contract 4303N.7 Escalation clause; when valid SECTION 4304N Past Due Accounts 4304N.1 Write-off of loans as bad debts 4304N.2 Past due accounts of building and loan associations SECTION 4305N Truth in Lending Act Disclosure SECTION 4306N Basic Requirements in Granting Loans (NSSLAs) SECTION 4307N Loan Repayment SECTIONS 4308N - 4310N ( Reserved ) B. SECURED LOANS SECTION 4311N Kinds of Security for NSSLA Loans 4311N.1 Loans secured by government securities SECTIONS 4312N - 4318N ( Reserved ) C. (RESERVED) SECTIONS 4319N - 4325N ( Reserved ) D. LOANS/CREDIT ACCOMMODATIONS TO DIRECTORS, OFFICERS, STOCKHOLDERS AND RELATED INTERESTS (DOSRI) SECTION 4326N Direct/Indirect Borrowings ; Ceilings SECTION 4327N Records ; Reports SECTION 4328N Sanctions SECTIONS 4329N - 4340N ( Reserved ) E. SPECIFIC TYPES/CLASSES OF LOANS SECTION 4341N Peso Borrowings by Foreign Firms SECTIONS 4342N - 4350N ( Reserved ) F. (RESERVED) SECTIONS 4351N - 4365N ( Reserved ) G. (RESERVED) SECTIONS 4366N - 4380N ( Reserved ) H. OTHER OPERATIONS SECTION 4381N Fund Investments of NSSLAs SECTION 4382N Transactions of Security Dealers/Brokers SECTIONS 4383N - 4398N ( Reserved ) SECTION 4399N General Provision on Sanctions PAWNSHOPS A. LOANS IN GENERAL SECTION 4301P Loan Limits SECTION 4302P ( Reserved ) SECTION 4303P Interest, Fees and Other Charges 4303P.1 Service charge SECTION 4304P Past Due Accounts ; Renewal/Redemption of Pawns SECTIONS 4305P - 4310P ( Reserved ) B. SECURED LOANS SECTION 4311P Kinds of Security SECTION 4312P Prohibition Against Division of Pawn SECTION 4313P Pawn Ticket 4313P.1 Contents of pawn ticket 4313P.2 Sanctions SECTION 4314P Reminder to Pawner ; Notice to the Public SECTION 4315P Public Auction of Pawns SECTIONS 4316P - 4398P ( Reserved ) SECTION 4399P General Provision on Sanctions PART FOUR TRUST AND OTHER FIDUCIARY FUNCTIONS A. TRUST OPERATIONS SECTION 4401Q Authority to Perform Trust Functions SECTION 4402Q Scope of Trust Regulations 4402Q.1 Definitions SECTION 4403Q Pre-requisites for Engaging in Trust Business SECTION 4404Q Security for the Faithful Performance of Trust Duties SECTION 4405Q Non-Trust Agreements SECTION 4406Q Mergers and Consolidation SECTION 4407Q Responsibilities of Administration 4407Q.1 Board of directors 4407Q.2 Officers 4407Q.3 Committees, officer-in-charge SECTION 4408Q Transactions Requiring Prior Authority SECTION 4409Q Ceilings on Trust Loans ; Other Requirements SECTION 4410Q Disposition of Accounts ; Limitations on Loans and Investments SECTION 4411Q Separation of Accounts SECTION 4412Q Fees and Commissions SECTION 4413Q Required Surplus SECTION 4414Q Establishment of Common Trust Fund 4414Q.1 Trust plan 4414Q.2 Management of common trust funds 4414Q.3 Trustee as participant in common trust fund 4414Q.4 Exposure limit to single person/entity SECTION 4415Q Miscellaneous Provisions 4415Q.1 Reports required 4415Q.2 Audits 4415Q.3 Borrowings from trust departments or managed funds 4415Q.4 Trust fund loans to foreign firms SECTIONS 4416Q - 4420Q ( Reserved ) B. FUND MANAGEMENT SECTION 4421Q Scope of Regulations 4421Q.1 Definition SECTION 4422Q Responsibilities of Administration SECTION 4423Q Minimum Features of Management Contract SECTION 4424Q Authorized Investments ; Prohibitions 4424Q.1 Commingling of funds SECTION 4425Q Separation of Accounts ; Reports SECTION 4426Q Fees and Commissions for Fund/Portfolio Management Services SECTION 4427Q Security for Faithful Performance of Fund Management Duties SECTIONS 4428Q - 4430Q ( Reserved ) C. (RESERVED) SECTIONS 4431Q - 4498Q ( Reserved ) SECTION 4499Q General Provision on Sanctions PART FIVE FOREIGN EXCHANGE OPERATIONS NON-BANKS WITH QUASI-BANKING FUNCTIONS SECTION 4501Q Authority ; Coverage SECTION 4502Q Specific Foreign Exchange Activities SECTION 4503Q Separate Department SECTION 4504Q Applicability of Pertinent Central Bank Rules SECTION 4505Q Issuance of Guarantees for Overseas Projects 4505Q.1 Applications 4505Q.2 Additional documentary requirements 4505Q.3 Conditions PART SIX MISCELLANEOUS NON-BANKS WITH QUASI-BANKING FUNCTIONS (NBQBs) SECTION 4601Q Securities Dealership 4601Q.1 National Housing Authority (NHA) Bonds SECTIONS 4602Q - 4613Q ( Reserved ) SECTION 4614Q Prohibition Against Greater Percentage for Veto SECTIONS 4615Q - 4621Q ( Reserved ) SECTION 4622Q Promotional Campaigns 4622Q.1 Raffles, lotteries, contests 4622Q.2 Gifts, give-aways 4622Q.3 Sanctions SECTIONS 4623Q - 4627Q ( Reserved ) SECTION 4628Q Examination by the Central Bank SECTION 4629Q Applicability of EKB Rules on NBQBs SECTION 4630Q Guidelines to Govern the Exchange of Credit Information 4630Q.1 Participating institutions 4630Q.2 Procedures 4630Q.3 Available information 4630Q.4 Sources of information 4630Q.5 Costs SECTIONS 4631Q - 4698Q ( Reserved ) SECTION 4699Q General Provision on Sanctions NON-BANKS WITHOUT QUASI-BANKING FUNCTIONS SECTION 4601N Sale of Government Securities SECTIONS 4602N - 4613N ( Reserved ) SECTION 4614N Prohibition Against Greater Percentage for Veto SECTIONS 4615N - 4623N ( Reserved ) SECTION 4624N Reproduction and Use of Facsimiles of Government Securities SECTION 4625N Notice of Dissolution SECTION 4626N Confidential Information SECTION 4627N ( Reserved ) SECTION 4628N Examination by the Central Bank 4628N.1 Sanctions 4628N.2 Procedures in imposing the fine 4628N.3 Manner of payment or collection of fine 4628N.4 Appeal to the Monetary Board SECTION 4629N Applicability of Other Rules SECTION 4630N Basic Laws Governing Non-Bank Financial Intermediaries SECTIONS 4631N - 4698N ( Reserved ) SECTION 4699N General Provision on Sanctions PAWNSHOPS SECTIONS 4601P - 4627P ( Reserved ) SECTION 4628P Supervisory Powers of the Central Bank SECTION 4629P ( Reserved ) SECTION 4630P Basic Law Governing Pawnshops SECTION 4631P Complaints Against Pawnshops SECTIONS 4632P - 4698P ( Reserved ) SECTION 4699P General Provision on Sanctions 4699P.1 Administrative sanctions APPENDICES SUBJECT INDEX APPENDICES NO . SUBJECT MATTER 1 Guidelines to Evaluate Investment Houses 2 Determination of Amount of Additional Capital the Entity Must Put Up (Projection Base Latest Available Report) 3 CB External Report Categories for Non-Bank Financial Intermediaries 4 Format of Resolution for Signatories of Category A-1 Reports 5 Format of Resolution for Signatories of Category A-2 Reports 6 Format of Resolution for Signatories of Category B Reports 7 Minimum Internal Control Standards for Non-Bank Financial Intermediaries Engaged in Quasi-Banking Functions 8 Prescribed Format for Publication of Quarterly Consolidated Balance Sheet 8-a Instructions 9 Safeguards in Bonding of NSSLA Accountable Officers and Employees 10 List of Reports Required from Non-Bank Financial Intermediaries 10-a List of Reports Required from Non-Stock Savings and Loan Associations 10-b List of Reports Required from Building and Loan Associations 10-c Instructions on the Accomplishment of Reports Required of Non-Bank Financial Intermediaries 11 Certain Information Required from Banks and Non-Bank Financial Intermediaries 11-a Documents/Information on Organizational Structure and Operational Policies Required from Banks and Non-Bank Financial Intermediaries 12 Chart of Accounts and Description of Loan Registers of Pawnshops 13 Standardized Deposit Substitute Instruments 13-a Terms and Conditions of a Promissory Note 13-b Repurchase Agreement 13-c Terms and Conditions of Repurchase Agreement 13-d Certificate of Assignment with Recourse 13-e Terms and Conditions of Certificate of Assignment with Recourse 13-f Certificate of Assignment with Recourse 13-g Terms and Conditions of Certificate of Assignment with Recourse 13-h Certificate of Participation with Recourse 13-i Terms and Conditions of Certificate of Participation with Recourse 13-j Certificate of Participation with Recourse 13-k Terms and Conditions of Certificate of Participation with Recourse 14 Procedures for Demand Deposit with Central Bank of Non-Bank Financial Intermediaries Engaged in Quasi-Banking Functions 14-a Authority to Debit Slip 15 New Rules on Registration of Short-Term Commercial Papers 16 New Rules on the Registration of Long-Term Commercial Papers 17 SEC Basic Rules and Regulations to Implement the Provisions of Presidential Decree No. 129, otherwise known as "The Investment Houses Law" 18 Basic Rules and Regulations to Implement the Provisions of Republic Act No. 5980, Otherwise Known as an "Act Regulating the Organization and Operation of Financing Companies" 19 Abstract of "Truth in Lending Act" 20 Format-Disclosure Statement of Loan/Credit Transaction 21 Guidelines on Domestic Borrowings by Foreign Firms 21-a Suggested Debt-to-Equity Ratio 21-b Suggested Annual Build-up Program 22 Form for Interbank Loan Advice Transfer Ticket (White) 22-a Form for Interbank Loan Advice Transfer Ticket (Green) 22-b Form for Interbank Loan Repayment Transfer Ticket (Yellow) 22-c Form for Interbank Loan Repayment Transfer Ticket (Pink) 23 Rules and Regulations Governing the Availment by Accredited Banks and Non Bank Financial Intermediaries of Special Time Deposits/Deposit Substitutes Under the IGLF Program 23-a List of Potential Small Industries for IGLF Financing 24 Assignor's Undertaking in Favor of the Central Bank of the Philippines (IGLF) 25 Guidelines in Granting IGLF Loans to Medium-Scale Industries 26 Rules and Regulations Governing the Implementation of the Industrial Guarantee and Loan Fund Accreditation System 26-a Application for IGLF Accreditation 26-b Supplementary Guidelines on the IGLF Quedan Financing Scheme for Rice/Corn Mill Projects 27 Standard Pawn Ticket 27-a Terms and Conditions of Standard Pawn Ticket 28 Procedural Guidelines for the Reproduction and Use of Facsimiles of Government Securities 29 Procedures for Processing Complaints Against Pawnshops 30 Criteria/Guidelines to determine whether or not certain outstanding government securities are eligible as reserves. PART ONE Organization, Management and Administration NON-BANKS WITH QUASI-BANKING FUNCTIONS (NBQBs) A. SCOPE OF AUTHORITY SECTION 4101Q. Quasi-Banking Functions . "Quasi-banking Functions" consist of the following: a. Borrowing funds for the borrower's own account; b. Twenty or more lenders at any one time; c. Methods of borrowing; issuance, endorsement, or acceptance of debt instruments of any kind, other than deposits, such as: (1) acceptances; (2) promissory notes; (3) participations; (4) certificates of assignment or similar instruments with recourse; (5) trust certificates; (6) repurchase agreements; and (7) such other instruments as the Monetary Board may determine; and d. Purpose: (1) relending, or (2) purchasing receivables or other obligations. As used in the definition of "quasi-banking functions," the following terms and phrases shall be understood as follows: "Borrowing" shall refer to all forms of obtaining or raising funds through any of the methods and for any of the purpose provided in c and d above whether the borrower's liability thereby is treated as real or contingent. "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. "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. "Relending" shall refer to the extension of loans by an institution with antecedent borrowings transactions. Relending shall be presumed in the absence of express stipulation, when the institution is regularly engaged in lending. "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 4101Q.1 Financial intermediaries . " Financial intermediaries " shall mean persons or entities whose principal functions include the lending, investing or placement of funds or evidences of indebtedness or equity deposited with them, acquired by them, or otherwise coursed through them either for their own account or for the account of others. " Principal " shall mean: chief, main, most considerable or important, of first importance, leading, primary, foremost, dominant or preponderant; as distinguished from secondary or incidental. " Functions " shall mean actions, activities or operations of a person or entity by which his/its business or purpose is fulfilled or carried out. The business or purpose of a person or entity may be determined from the purpose clause in its Articles of Incorporation/Partnership, and from the nature of the business indicated in his/its application for registration of business filed with the appropriate government agency. To be considered a financial intermediary, a person or entity must perform any of the following functions on a regular and recurring, not on an isolated basis: a. Receive funds from one group of persons, irrespective of number, through traditional deposits, or issuance of debt or equity securities; and make available/lend these funds to another person or entity, any in the process acquire debt or equity securities; b. Use principally the funds received for acquiring various types of debt or equity securities; c. Borrow against, or lend on, or buy or sell debt or equity securities; d. Hold assets consisting principally of debt or equity securities such as promissory notes, bills of exchange, mortgages, stocks, bonds, and commercial papers; e. Realize regular income in the nature of, but need not be limited to interest, discounts, capital gains, underwriting fees, guarantees, fees commissions, and service fees, principally from transactions in debt or equity securities or by being an intermediary between suppliers and users of funds. Non-banking financial intermediaries shall include the following: (1) A person or entity licensed and/or registered with any government regulatory body as a non-bank financial intermediary, such as investment house, investment company, financing company, securities dealer/broker, lending investor, pawnshop, money broker, fund manager, cooperative, insurance company, non-stock savings and loan association, and building and loan association. (2) A person or entity which holds itself out as a non-banking financial intermediary, such as by the use of a business name, which includes the term "financing","finance","investment","lending" and/or any word/phrase of similar import which connotes financial intermediation, or an entity which advertises itself as a financial intermediary and is engaged in the function(s) where financial intermediation is implied. (3) A person or entity performing any of the functions enumerated in Items a to e of this Subsection. SUBSECTION 4101Q.2 " Subsidiaries and Affiliates " a. "Subsidiary" is a corporation more than fifty per cent (50%) of the outstanding voting stock of which is directly or indirectly owned, controlled, or held with power to vote by an NBQB. b. "Affiliate" is an entity linked directly or indirectly to an NBQB by means of: (1) Ownership, control or power to vote, of 10% or more of the outstanding voting stock of the entity, or vice-versa; (2) Interlocking directorship or officership; (3) Common stockholders owning 10% or more of the outstanding voting stock of each of the financial intermediary and the entity; (4) 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; (5) Permanent proxy or voting trust in favor of the financial intermediary constituting 10% or more of the outstanding voting stock of the entity, or vice-versa. SUBSECTION 4101Q.3 Guidelines on lender count The following guidelines shall govern lender count on borrowings or funds mobilized by non-bank financial intermediaries: a. For purposes of ascertaining the number of lenders/placers to determine whether or not a non-bank financial intermediary is engaged in quasi-banking functions, the names of payees on the face of teach debt instrument shall serve as the primary basis for counting the lenders/placers except when proof to the contrary is adduced such as the official receipts or documents other than the debt instrument itself. In such case the actual/real lenders/placers as appearing in such proof, shall be the basis for counting the number of lenders/placers. In a debt instrument issued to two (2) or more named payees under an "and/or" and "or" arrangement, the number of payees appearing on the instrument shall be the basis for counting the number of lenders/placers: Provided, however ,That a debt instrument issued in the name of a husband and wife followed by the word "spouses",whether under an "and","and/or" or "or" arrangement or in the name of a designated payee under an "in trust for" (ITF) arrangement, shall be counted as one borrowing/placement. b. Each debt instrument payable to bearer, shall be counted as one lender/placer, except when the non-bank financial intermediary can prove that there is only one owner for several debt instruments so payable. c. Two or more debt instruments issued to the same payee, irrespective of the date and amount shall be counted as one borrowing or placement. d. Debt instruments underwritten by investment houses or traded by securities dealers/brokers whether on a firm, standby or best efforts basis shall be counted on the basis of the number of purchasers thereof and shall not be treated as having been issued solely to the underwriter or trader: Provided, however ,That in case of unsold debt instruments in a firm commitment underwriting, the underwriter shall be counted as a lender. e. Each buyer, assignee, and/or indorsee shall be counted in determining the number of lenders/placers of funds mobilized through sale, assignment, and/or indorsement of securities, or receivables on a "without recourse" basis, whenever the terms and/or attendant documentation, practice, or circumstances indicate that the sale, assignment, and/or indorsement thereof legally obligates the non-bank financial intermediary to repurchase or reacquire the securities/receivables sold, assigned, indorsed or to pay the buyer, assignee, or indorsee at some subsequent time. f. Funds obtained by way of advances from stockholders, directors, or officers, regardless of nature, shall be considered borrowed funds or funds mobilized and such stockholders, directors or officers shall be counted in determining the number of lenders/placers. SECTION 4102Q. Preconditions to Exercise of Quasi-Banking Functions . Only a duly incorporated financial intermediary organized as a stock corporation may undertake or perform quasi-banking functions as defined in Section 4101Q: Provided ,That the following pre-conditions are complied with: SUBSECTION 4102Q.1 Minimum paid-in capital . The financial intermediary shall comply with the rules on minimum paid-in capital prescribed in Sec. 4106Q. SUBSECTION 4102Q.2 Citizenship requirements . At least a majority of the voting stock in an Investment House, and at least 60% of the voting stock in other NBQBs, shall be owned by citizens of the Philippines. In determining the percentage of foreign-owned voting stocks in an NBQB, the basis for the computation shall be the "Grandfather Rule",i.e.,the citizenship of each stockholder and, with respect to corporate owners of voting stock, the citizenship of the individual owners of voting stock in the corporation holding shares in the applicant NBQB shall be the basis of computing the percentage. At least a majority of the members of the board of directors shall be citizens of the Philippines. Where applicable, special requirements of special laws shall govern, such as R.A. No. 5980 on financing companies wherein at least two-thirds of the members of the board shall be Filipinos. SUBSECTION 4102Q.3 Managerial expertise . The managerial staff shall possess the integrity, experience and expertise which provide reasonable assurance that the NBQB is being conducted with financial prudence. The board members and managerial staff must be actually appointed or at least firmly designated before it can be granted a certificate of authority to engage in quasi-banking functions. SECTION 4103Q. Documentary Requirements for Application . Duly incorporated stock corporations possessing the foregoing qualifications 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. An indicative borrowing-investment program for one year, which should include, whenever applicable, planned distribution of portfolio as to (1) Underwriting; (2) Commercial paper market; (3) Stocks and bonds; (4) Government securities; (5) Receivable financing discounting and factoring; (6) Leasing; (7) Direct loans; and expected sources of funds to support investment program classified as to (a) Maturity: short, medium and long term; (b) Interest rates; (c) Domestic or foreign sources whether institutional or personal. SECTION 4104Q. Central Bank Certificate of Authority . The Central Bank shall issue a Certificate of Authority upon proof that the applicant has complied with the requirements of Secs. 4102Q and 4103Q and of pertinent laws and regulations. In the case of a merger or consolidation of two or more NBQBs, the authority shall continue to have full force and effect. For documentation purposes, in the case of a merger, the Certificate of Authority of the absorbing corporation shall be maintained; and with respect to consolidation, a new certificate shall be issued to the new corporation. The Certificate of Authority of the absorbed corporation in a merger and the Certificates of the consolidated corporations in a consolidation shall be surrendered to the appropriate department of the Central Bank. SECTION 4105Q. Licensing of an Investment House . Application for license as an investment house referred to the Central Bank of the Philippines by the Securities and Exchange Commission pursuant to Presidential Decree No. 129 shall be evaluated in accordance with the Guidelines to Evaluate Investment Houses prescribed in App.1. B. CAPITALIZATION SECTION 4106Q. Minimum Capital . A minimum paid-in capital of P50 million shall be required for a financial intermediary applying for authority to perform quasi-banking functions. In addition, the total of 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), shall not be less than P50 million for financial intermediaries applying for authority to perform quasi-banking functions. Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of the assets of the financial intermediary shall be excluded. The above-prescribed minimum capital requirement shall not apply to financial intermediaries authorized to perform quasi-banking functions prior to August 22, 1980. Any foreign equity shall be registered with and approved by the Board of Investments and the Management of External Debt and Investment Accounts Department (MEDIAD) of the Central Bank of the Philippines. Existing corporations already authorized to perform quasi-banking functions shall have until December 31, 1983 within which to meet the minimum capital required and shall submit a capital build-up program with semestral targets by December 31, 1980. A capital contribution under the capital build-up program shall not be funded by any loan or credit accommodation granted by the NBQB and shall not consist of money market placements nor be invested in money market instruments pending approval of the Articles of Incorporation. SECTIONS 4107Q-4110Q. (Reserved) . C. MERGER AND CONSOLIDATION SECTION 4111Q. Merger of Two or More Non-Bank Quasi-Banks . To meet minimum capital requirements, the merger or consolidation of NBQBs is encouraged, as well as that of NBQBs which are investment houses with banks, for the purpose of consolidating their resources to obtain authority to perform expanded commercial banking functions. Merger or consolidation of NBQBs and/or banks, including the terms and conditions thereof, shall comply with the provisions of applicable law and shall be subject to approval by the Central Bank, and merging/consolidating NBQBs and/or NBQBs and banks shall consult with the Central Bank in this connection before any merger/consolidation agreement is finalized. SECTIONS 4112Q-4115Q. (Reserved) . D. NET WORTH TO RISK ASSETS RATIO SECTION 4116Q. Minimum Ratio . The net worth (or combined capital accounts) of each NBQB shall not be less than an amount equal to ten per cent (10%) of its risk assets, which term is defined as total assets minus the following items: a. Cash on hand and in banks; b. 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: Provided ,That such evidences of indebtedness or obligations subject of repurchase or resale agreements may be deducted by both selling/borrowing and buying/lending financial intermediaries; c. NBQB premises, depreciated; d. Furniture, fixtures, and equipment, depreciated; e. Loans to the extent covered by hold-out on, or assignment of, deposit substitutes maintained in the lending NBQB; f. Loans or acceptances under domestic letters of credit to the extent covered by margin deposits as may be required by the NBQB; g. Loans to the extent covered by Industrial Guarantee and Loan Fund (IGLF) guarantee; h. Amounts due from foreign banks representing normal working balances in currencies eligible as part of the international reserve (and not maintained in the form of savings, time or fixed deposits),but not to exceed thirty per cent (30%) of outstanding regular sight letters of credit; i. Real estate mortgage loans and related financing insured by the Home Financing Commission to the extent of the amount of the insurance or the outstanding loan, whichever is lower; j. Loans to the extent secured by Central Bank Certificates of Indebtedness and other assets listed in item b above; and k. Lease contracts receivable to the extent covered by guaranty deposits (for financing companies only); l. Deferred income tax (Effective April 23, 1985);and m. Other items which the Monetary Board may from time to time declare as non-risk assets and authorize to be deducted from total assets. SECTION 4117Q. Clarification of Terms and Phrases . a. "Total assets" shall be the amount appearing in the balance sheet, excluding (1) all Trust Department accounts; (2) unutilized portions of letters of credit; and (3) all contingent accounts. b. "Networth" (or combined capital accounts) shall mean the total of the paid-in capital, paid-in surplus, 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 as a result of appreciation or an increase in the book value of assets of the NBQB, except in such cases as may be authorized by the Monetary Board. (Effective April 23, 1985) c. "Cash on hand and in banks" refers to total cash held and/or deposited in banking institutions by the NBQB consisting of both notes and coins in Philippine currency and, in accordance with Central Bank regulations, such foreign currencies acceptable as part of the international reserves. d. "Loans to the extent covered by hold-out on or assignment of deposit substitutes maintained in the lending NBQB" shall be considered as secured by hold-out on or assignment of deposit substitute only if such deposit substitute is covered by a hold-out agreement or deed of assignment signed by the investor-borrower in favor of the NBQB, and maintained in the lending NBQB. 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 deposit substitutes. Loans transferred to/carried by the NBQB's Trust Department which are secured by deposit substitute hold-out/assignment are not deductible items. e. "Loans or acceptance under domestic letters of credit to the extent covered by margin deposits as may be required by the NBQB" (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; and (2) margin deposits against loan or acceptance accounts which are fully liquidated shall not be deductible items. f. "NBQB premises, depreciated" refers to the cost of NBQB premises, including land owned by the NBQB, less the accumulated depreciation thereof. Property used as NBQB premises purchased by the NBQB in foreclosure or execution sale shall not be considered owned by the NBQB until title is consolidated in the NBQB. g. "Furniture, fixtures and equipment, depreciated" refers to the cost of furniture and fixtures, including equipment, owned by the NBQB, and used for its operations, less the accumulated depreciation thereon. h. "Deferred income tax" shall refer 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) SECTION 4118Q. Transitory Clause . In making the transition from the former capital-to-assets ratio to the current one based on net worth-to-risk assets, NBQBs may follow a gradual upward net worth-to-risk assets ratio adjustment program with not less than seven per cent (7%) by December 31, 1980, which rate shall be raised by at least one percentage (1%) point every six (6) months thereafter, so that the ten per cent (10%) minimum requirement shall have been met not later than December 31, 1981. cdlex SECTION 4119Q. Treatment of Equity Investment With Reciprocal Stockholdings . For purposes of computing the prescribed ratio of net worth (or combined capital accounts) to risk assets, equity investments of an NBQB in another NBQB shall be deducted from its net worth if the investee NBQB has a reciprocal equity investment in the investing NBQB, in which case the investment of the NBQB or the reciprocal investment of the other NBQB, whichever is lower, shall be deducted from the net worth of the NBQBs. SECTION 4120Q. Sanctions on Net Worth Deficiency . a. Any NBQB which is deficient in the capital requirement under Sec. 4116Q shall be liable to the following sanctions starting immediately on the day following the reporting period without need of notice: (1) in case of capital deficiency for five (5) or more times within a reporting period: (a) For the first offense a fine of P500.00. (b) For the second consecutive offense prohibition from extending new loans or making new investments, for a period of thirty (30) calendar days. (c) For the third consecutive offense extension of the penalty under the preceding paragraph for another thirty (30) calendar days. (d) For the fourth consecutive offense suspension of the Certificate of Authority to engage in quasi-banking functions for a period of thirty (30) calendar days. The suspension shall be automatically lifted if on the final reporting period of the period of suspension, the entity maintains the minimum capital required under Sec. 4116Q for every day of such reporting period. (2) In case of continuous capital deficiency: (a) For two (2) consecutive reporting periods suspension of the Certificate of Authority to engage in quasi-banking functions for a period of thirty (30) calendar days. (b) For every consecutive reporting period, the suspension shall extend for another thirty (30) calendar days. (c) The suspension shall be automatically lifted if on the final reporting period of the period of suspension, the entity maintains the minimum capital required under Sec. 4116Q for every day of such reporting period. (3) In all of the cases abovementioned, establishment of branches, agencies, extension offices, etc.,shall be suspended. b. Any NBQB shall pay the following fines: (1) The regulations embodied in Section 4161Q.4 shall be observed in the imposition of fines for wilful delay in the submission of reports. (Effective October 9, 1985) (2) For improperly accomplished report, P100 per business day for every business day the report is not corrected, counted as of the date the error is brought to its attention until the corrected report is submitted. c. For wilfully making false statements in the report or submitting a false report, the Certificate of Authority for quasi-banking functions shall be suspended/revoked. d. The Monetary Board may impose additional sanctions on the entity engaged in quasi-banking functions, by: (1) Relieving the chairman of the board of directors, the president, and the senior management officials of their duties and responsibilities in the entity. (2) Revoking the Certificate of Authority to engage in quasi-banking functions. (3) Such other sanctions as the Central Bank may deem necessary. "New loans and new investments" shall refer to any loan or investment involving disbursement of funds, except government securities. SECTIONS 4121Q-4125Q. (Reserved) . E. STOCK, STOCKHOLDERS AND DIVIDENDS SECTION 4126Q. (Reserved) . SECTION 4127Q. Equity Investments by Stockholders of NBQBs. Equity investments by stockholders of NBQBs, shall be governed by rules prescribed in Sec. 4376Q. SECTIONS 4128Q-4135Q. (Reserved) . SECTION 4136Q. Dividends . The following rules shall govern cash dividend declaration by NBQBs. SUBSECTION 4136Q.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 installment with an automatic acceleration clause shall be considered a bad debt within the contemplation of this 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. The outstanding debt, accrued interest and other pertinent fees and expenses thereon shall not be in excess of 70% of the appraised value of real estate, or 50% of the other personal properties offered as lien. c. "In process of collection" A debt due to an NBQB shall be considered in process of collection when it is the subject of continuing extrajudicial or judicial proceedings aimed towards its 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 NBQB 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 NBQB must be active in enforcing the judgment for the debt to continue to be considered in process or collection. SUBSECTION 4136Q.2 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 4136Q.3 Amount available as dividends . The net amount available for cash dividend declaration shall be the total of free retained earnings and profit-and-loss summary, 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. Interest and other income earned but not yet collected/received, net of reserve for uncollected interest on loans; and d. Deferred income tax as defined under item "h" of Section 4117Q. (Effective April 23, 1985) SUBSECTION 4136Q.3.e (Additional provision as provided by CBP Circular 1170 dated January 13, 1988) SUBSECTION 4136Q.4 Reporting and verification . Declaration of cash dividend shall be reported by the NBQB concerned to the appropriate supervising and examining department of the Central Bank within ten (10) business days from date of approval of the declaration by the NBQB's board of directors, in the prescribed form (CBP 7-26-25). Pending verification of above-mentioned report by the appropriate supervising and examining department of the Central Bank, the NBQB concerned shall not make any announcement or communication an the declaration of cash dividends nor shall any payment be made thereon. In any case, the declaration may be announced and the dividends paid, if, after thirty (30) business 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 NBQB concerned. NBQBs whose shares are listed with any domestic stock exchange may give notice of cash dividend declaration in accordance with pertinent rules of the Securities and Exchange Commission, 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. SUBSECTION 4136Q.5 Recording of dividends . The liability for cash dividends declared shall be taken up in the NBQB's book on the date of approval by the board of directors. SUBSECTION 4136Q.6 (Additional provision as provided by CBP Circular 1182 dated August 30, 1988) SECTIONS 4137Q-4140Q. (Reserved) . F. DIRECTORS, OFFICERS AND EMPLOYEES SECTION 4141Q. Definition and Qualifications of Directors . "Directors" shall refer to the incumbent directors of the non-bank financial intermediary authorized to perform quasi-banking functions duly holding their positions as such, in accordance with the corporate by-laws and pertinent provisions of law. However, for purposes of the rules on interlocking directorships, a husband and his wife shall be considered as one person. A director shall have the following minimum qualifications: a. He shall be at least twenty-six (26) years of age at the time of his election or appointment; and b. He shall be at least a college graduate or have at least five (5) years' creditable experience or training in financial management, financial market operations, or related activities, or in a field related to his position and responsibilities. SECTION 4142Q. Definition and Qualifications of Officers . "Officers" shall include the President, Vice President and others mentioned as officers of the non-bank financial intermediary authorized to perform quasi-banking functions, or those whose duties as such are defined in the by-laws, or are generally known to be the officers of the non-bank financial intermediary authorized to perform quasi-banking functions (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 financial intermediary: Provided ,That a 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, and are not purely recommendatory or advisory, shall likewise be considered as officers. An officer shall have the following minimum qualifications: a. He shall be at least twenty one (21) years of age at the time of his appointment or election; and b. He shall be at least a college graduate or have at least five (5) years creditable experience or training in financial management or related activities, or in a field related to his position and responsibilities. SECTION 4143Q. Disqualifications of Directors and Officers . Without prejudice to the specific provisions of law prescribing disqualifications for directors and officers, the following persons are disqualified from becoming directors and officers: a. Persons who have been convicted of a crime involving moral turpitude; b. Persons found by the Monetary Board to have wilfully failed or refused to comply with any law, regulation, order or instruction of the Monetary Board or 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 or regulated by the Central Bank; c. Persons removed by the Monetary Board pursuant to the provisions of Sections 34-A and 34-B of Republic Act No. 265, as amended, and other provisions of law or regulations; d. Persons who shall refuse to disclose the extent of their business interest to the appropriate department of the Central Bank when required, for the proper implementation of a provision of law, or of a circular, rule, regulation or policy of the Central Bank; e. Persons who have been dismissed for cause from any institution under the regulation or supervision of the Central Bank; f. Persons who have derogatory information in PC, NBI or NISA records or are not issued any clearance by said agencies. For purposes of this Section an information is considered derogatory if it involves violation of any law, rule or regulation of the Government or any of its instrumentalities, and it adversely affects one's integrity or ability to discharge the duties of a director or officer; g. Persons delinquent in the payment of their obligations: Provided ,That such delinquency shall operate as a disqualification as long as a delinquency persists. Delinquency, for purposes of this Sub-section, shall mean that an obligation of a person with an NBQB where he is a director or officer, or where he may be elected or appointed to said position, or at least two obligations with banks and with other NBQBs 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 an NBQB obtained by: (1) 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; (2) The spouse or child under parental authority of the director or officer; (3) Any person whose borrowings or loan proceeds were credited to the account of, or used for the benefit of, a director or officer; (4) A partnership of which a director or officer, or his spouse is a managing partner, or a general partner owning a controlling interest in the partnership; and (5) 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 Items g(1),g(2) and g(4) above. h. Except as may be authorized by the Monetary Board or the Governor, any person who is a spouse or relative within the first degree of consanguinity or affinity of any person holding the position of Chairman, President, Executive Vice-President, 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 financial intermediary; and any person who is the spouse or relative within the first degree of consanguinity or affinity of any person holding the position of Manager, Cashier, or Accountant of a branch, extension or agency office of a financial intermediary is disqualified from holding or being appointed to any of said positions in the same branch, extension or agency office. In any case, this disqualification shall not affect those holding said positions as of July 11, 1975 until the expiration of their respective terms of office: Provided ,That where no term of office was fixed or specified, or where the position is being held in a mere holdover capacity by reason of the non-election or non-qualification of the successor, or at the pleasure of the board of directors, such chairman or officer concerned shall vacate the position not later than 31 March 1981. The aforesaid qualifications and disqualifications for directors and officers shall be in addition to those already required by existing laws and other regulations. SUBSECTION 4143Q.1 Disqualification procedures a. Upon the establishment of any of the grounds for disqualification in Sec. 4143Q, the office of the disqualified director or officer shall immediately become vacant, except in case of delinquency in the payment of obligations wherein the director or officer concerned shall be given a grace period of thirty (30) days after such ground for disqualification has been established. b. All cases of disqualification shall immediately be reported to the Board of Directors of the institution concerned. If the ground for disqualification is delinquency in the payment of obligations, the report shall be made at the expiry of the thirty-day grace period mentioned in Item a above. The Board shall act on the report not later than the following Board meeting. Within seventy-two (72) hours thereafter, the corporate secretary shall report to the Governor of the Central Bank through the appropriate supervising and examining department the name of the director or officer involved, the ground for his disqualification and the action taken by the Board. c. When the ground for disqualification ceases to exist, the director or officer concerned shall be eligible to become director or officer of any institution regulated or supervised by the Central Bank only upon prior approval of the Governor of the Central Bank. SUBSECTION 4143Q.2 Prohibition against foreign officers/employees of FCs . Under Subsec. 4143N.1, no foreigners shall be allowed to become officers and/or employees of financing companies. SECTION 4144Q. Bio-Data of Directors and Officers . Directors and officers are required to submit bio-data sheets under Items "i" and "j" of Subsec. 4161.Q.1. SECTION 4145Q. (Reserved) . SECTION 4146Q. Interlocking Directorships and/or Officerships . In order to safeguard against the 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 4146Q.1 Interlocking directorships . While concurrent directorships may be the least prejudicial of the various relationships in this Sub-section, to the interest 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 NBQBs or between an NBQB and a bank. b. Without the need for prior approval of the Monetary Board, concurrent directorships between the following entities shall be allowed: (1) a bank not performing quasi-banking functions and an NBQB other than an investment house; and (2) 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. SUBSECTION 4146Q.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 NBQBs or an NBQB and a bank. b. Without the need for prior approval of the Monetary Board, concurrent directorship and officership in a bank with expanded commercial banking authority or a commercial bank and an NBQB, other than an investment house, in each of which majority interest is held by the bank shall be allowed. SUBSECTION 4146Q.3 Interlocking officerships . A concurrent officership in different financial intermediaries is considered the most serious relationship with respect to conflict of interest problems. Considering, in addition, the full time nature of officer positions, aside from the difficulties of serving two offices at the same time, and in order to ensure effective and efficient management, the following rules shall be observed: a. There shall be no concurrent officerships between NBQBs or between a bank and an NBQB, 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 NBQBs, other than investment houses, majority of the equities of which are owned by an expanded commercial bank or commercial bank; or (3) between banks or between a bank and an NBQB other than an investment house: Provided ,That at least twenty per cent (20%) of the equity of each of the banks and NBQBs 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. In any case, even where interlocking officership is allowed, it shall be subject to the following conditions: (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 entity in which the bank has equity investments; and (d) that where the positions involved are held on a full-time basis, adequate justification shall be submitted to the Monetary Board. (As amended by Sections 3 and 4 of CBP Circular No. 1115, dated September 16, 1986) SUBSECTION 4146Q.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 4146Q.5 Transitory provision . Incumbent directors and officers as of July 10, 1980 who are disqualified herein shall be allowed to serve until the end of their term of office or one year, whichever is shorter. SECTION 4147Q. Management Agreements . Subject to existing laws, all agreements, whereby the affairs or operations of an NBQB will be carried out by another corporation, person or group of persons, shall be subject to prior approval by the Central Bank. The agreements referred to in the preceding paragraph shall not be entered into for a period longer than five years. Existing agreements shall be allowed up to the termination date thereof: Provided, however , That any renewal or extension upon termination date shall be subject to approval by the Central Bank. LLjur SECTION 4148Q. Profit Sharing of Directors, Officers and Employees . The following rules shall govern the profit sharing of directors, officers, and employees of banks and NBQBs: a. 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. b. 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 excluded from net income in previous years' profit sharings, the deferred income tax reversed to expense shall be added back to net income to arrive at the basis for profit sharing in the year during which the reversal is made. (Effective April 23, 1985) Section 4148Q.b.6 (Additional provision as provided by CBP Circular 1170 dated January 13, 1988) c. 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. d. 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. SECTIONS 4149Q-4150Q. (Reserved) . G. BRANCHES AND OTHER OFFICES SECTION 4151Q. Establishment . Prior Central Bank authority shall be obtained before operating a branch, extension office or agency, including any arrangement whereby another person or entity is authorized to act as an agent for solicitation, issuance or servicing of deposit substitutes for the NBQB. Agency arrangements shall refer to all or any type of services to be performed by another party as an agent other than collection agency for loans payable in installments/amortization, and paying agency under a definite and specific period for purposes of redeeming long-term notes and/or bonds. SUBSECTION 4151Q.1 Branching in Metro Manila . Only one branch, agency, extension office, or unit outside of the head office shall be allowed to be established within the Metro Manila area. SUBSECTION 4151Q.2 Evaluation guideposts . The rate at which branches, agencies, extension offices, etc. are to be established shall depend upon the ability of the company to conduct operations from the head office, as well as corresponding/banking arrangements. SUBSECTION 4151Q.3 Applications subject to capital build-up requirements . Applications to establish a branch, an agency or an extension office by an NBQB whose paid-in capital is less than P20 million as of July 10, 1980 may be considered, provided that it has submitted and complied with its capital build-up program as of the date of application. SUBSECTION 4151Q.4 Additional capital, if required . An applicant NBQB may be required to put up additional capital in an amount to be determined by the Department of Financial Intermediaries (Non-Bank) (DFI-NB) of the Central Bank, based on criteria which consider expected growth of risk assets and capital accounts and for this purpose, the methods of computing such additional capital, as shown in App. 2, shall be used. SUBSECTION 4151Q.5 Other requirements/factors to be considered . Other requirements/factors to be considered are the applicant NBQB's general compliance with laws, rules, regulations, and policies of the Central Bank, such as: a. Capital adequacy and solvency; b. Profitability and capacity to absorb losses; and c. Reserve and liquidity position. SUBSECTION 4151Q.6 Conditions precluding processing of applications . The existence of any of the following conditions shall preclude/suspend the 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, stockholders, and their related interest; c. The net worth of the applicant is found to be deficient for five (5) or more times within a reporting period during the last six (6) months immediately preceding the date the application was received, in which case its privilege to establish NBQB offices shall be suspended for the next sixty (60) calendar days without prejudice to the re-submission 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 NBQB offices shall be suspended for the next twelve (12) months without prejudice to the re-submission of its application after said period; e. The applicant has incurred net deficiencies in reserves against deposit substitute liabilities 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) consecutive 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 NBQB offices shall be suspended for the next twelve (12) months, without prejudice to the re-submission of its application after said period. SUBSECTION 4151Q.7 Documentary requirements . All applications shall be supported by the following documents: a. Ability to conduct operations from the head office as not to be a cause for delayed submission of reports to the Central Bank and/or recording of transactions in the head office; b. Correspondent (banking) and audit arrangements between the branch and the head office to ensure effective and efficient cash/money transactions; c. Certified true copy of the board resolution authorizing the establishment of a branch; d. Services to be offered, as well as any extension offices, etc. to be opened; e. Days and hours to be observed; f. Areas to be served; g. Bio-data of the proposed branch manager and organizational chart; h. Business and/or economic justifications (including data) for the establishment of the branch; and i. Number of financial institutions in the area (banks, investment houses, finance companies and pawnshops). SUBSECTION 4151Q.8 Filing of applications . All NBQB applications for a certificate of authority to operate a branch, an extension office or an agency with QBF shall be filed with the Securities and Exchange Commission (SEC),which office shall refer the same to DFI-NB for comments and recommendations. A copy of the application filed with the SEC, with the pertinent documents, shall simultaneously be furnished DFI-NB for advance verification of the NBQB's compliance with the requirements under the provisions of Sec. 4151Q and Subsecs. 4151Q.1-4151Q.10. SUBSECTION 4151Q.9 Period within which to submit complete requirements . The applicant NBQB shall have one month from notice of the DFI-NB's receipt of the SEC referral within which to submit/complete the requirements under this section, after which the non-submission of complete documents shall cause the return of the application for NBQB's lack of interest to pursue the same. SUBSECTION 4151Q.10 Prohibition against operating without SEC license . No branch, extension office or agency shall start operations unless the appropriate SEC license, which likewise serves as authorization for the branch/extension office/agency to perform quasi-banking functions, has been issued. SECTIONS 4152Q-4155Q. (Reserved) . H. (SECS. 4156Q-4160Q RESERVED) I. INTERNAL CONTROL SECTION 4161Q. Recording of Transactions and Reporting Requirements . Deposit substitutes shall be recorded in the books at their respective principal amounts, and reported accordingly, regardless of whether the interest thereon has been paid in advance or not. SUBSECTION 4161Q.1 Reports to be submitted . The following reports shall be submitted by all NBQBs: a. Report on required and available reserves . Every NBQB shall make a weekly report to the Central Bank of its daily reserve position to be submitted not later than the close of the fourth (4th) business day following the reference week. This report shall be accomplished in the prescribed form together with the schedule of securities utilized as reserves against deposit substitutes. Any NBQB with chronic reserve deficiency shall submit, together with the report on required and available reserves, a certification under oath that it has not granted any new loan or made any new investment during the period covered by the suspension. b. Report on capital required and capital accounts . Every NBQB shall compute for every business day its capital required under Sec. 4116Q and capital accounts, and a report thereon shall be submitted to the appropriate department of the Central Bank not later than the close of the seventh (7th) business day following the 15th and end of each month. This report shall be prepared in the prescribed form and signed by a duly authorized officer of the entity. c. Report on credit accommodations to DOSRI . All NBQBs shall submit to the appropriate department of the Central Bank a monthly list of all existing credit accommodations to DOSRI in the prescribed form not later than fifteen (15) days from end of reference month. d. Report on equity investments in non-allied undertakings . NBQBs and their wholly or majority-owned subsidiaries shall report to the appropriate department of the Central Bank within thirty (30) days from July 10, 1980 their outstanding equity investments in enterprises non-allied to banks as of April 1, 1980 and thereafter, within fifteen (15) banking days from the end of every semester, their outstanding equity investments as of the end of the reference semester. e. Balance sheet and income statement . Within thirty (30) days following the end of each quarter, NBQBs shall submit to the appropriate department of the Central Bank in the prescribed forms, a Balance Sheet as of the end of each quarter accompanied by an Income Statement signed under oath by the Chief Accountant and verified by the President and a report of operations, signed by the President. NBQBs which are fund managers shall submit the consolidated balance sheet and the consolidated statement of income and expenses accomplished in the prescribed forms by the Chief Accountant for each type of fund management service, consolidating the accounts falling under each type of fund management services. f. Advance copy of balance sheet . An advance copy of the quarterly consolidated balance sheet required to be published shall be furnished to the appropriate department of the Central Bank not later than twenty (20) days after end of reference quarter or cut-off date. The published consolidated balance sheet must be signed under oath by the president or the officer duly authorized by the board of directors of the entity. (As amended by Section 2 of CBP Circular No. 1309 dated October 14, 1991) g. Past due receivables/loans and/or commercial papers/private securities and report on rolled-over/renewed loans . NBQBs shall report the end-of-month level of their past-due accounts and installments in arrears for less than the number indicated in Sec. 4304Q and for those using the accrual basis of accounting, the accrued interests thereon, subject to Sec. 4304Q. The reports on Past Due Receivables/Loans and/or Commercial Papers/Private Securities and Rolled-Over Loans and/or Commercial Papers (Above P100,000) shall be prepared in accordance with the prescribed forms and submitted within fifteen (15) calendar days from end of every reference quarter. h. Report on underwriting activities . All investment houses shall submit to the Central Bank a Report on Underwriting Activities in accordance with the prescribed form within thirty (30) days following the end of each calendar quarter. i. Annual reports . NBQBs shall submit the following annual reports: (1) Information sheet and bio-data of directors/officers . These reports shall be submitted annually within thirty (30) days after the end of each calendar year or within fifteen (15) days following the creation or filling-up of a vacancy in the Board of Directors, sub-bodies of the Board, or the managerial staff of NBQBs in which case, the corporate secretary shall make the pertinent written report to the appropriate department of the Central Bank, together with the bio-data of the newly elected members of the Board, or newly appointed members of the sub-body of the Board or the managerial staff. In order to establish a common reference base, all incumbent directors and officers as of June 30, 1981 and those to be elected/appointed thereafter shall submit their updated biographical data in accordance with the revised form. The biographical data shall be updated annually and submitted within 30 days after the end of calendar year. In the case of changes in educational attainment and experience in financial management and related fields, 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 (2) Annual report of management to stockholders and audited financial statements . NBQBs shall submit to the appropriate department of the Central Bank at least three (3) copies of: (a) Annual report of management to stockholders covering results of operations for the year. (b) Audited financial statements for the year prepared by the external auditor. (3) One-year borrowing-investment program . A one-year borrowing-investment program shall be submitted annually not later than the first (1st) working day in March of the ensuing years. This shall include: (a) Investment areas indicating industry direction of the corporation engaged in quasi-banking, indicating as a minimum the following: (i) money market operations; (ii) investments in stocks and bonds; (iii) investments in government securities; (iv) receivable financing; (v) leasing activities; and (vi) direct loaning operations Likewise to be disclosed are the other preferred areas of investment, e.g. real estate, condominium, and those related to the government programs and other projects which may be determined by the Central Bank. For investment houses with quasi-banking functions, the proposed underwriting program, as well as the previous year activities, shall also be submitted identifying debt and equity issued. (b) Borrowing operations to support investment program indicating among others: (i) Maturity short-term: less than a year medium-term: one (1) year to five (5) years long-term: more than five (5) years (ii) Interest rate per annum for the above three types of borrowings (more indicatory than fixed). Individual or institutional source of funds; whether domestic or foreign, governmental or private, financial or non-financial. (c) Preference shall be given to fund usage and mobilization at terms beyond one (1) year. j. Other reports . NBQBs shall also submit other reports, such as: (1) Report on investors aggrupation . All NBQBs shall submit their corporate secretary's certification under oath of a list of stockholders and/or groups of stockholders, as specified in Sec. 4376Q.c exceeding the limits prescribed under Sec. 4376Q.a for purposes of exemption under Sec. 4376Q.e. Failure to submit such a list or submission of an incomplete or inaccurate list shall subject the stockholders omitted or inaccurately submitted to the limitations of Sec. 4376Q.a. (2) Amendments to articles of incorporation/by-laws . Any changes or amendments in the Articles of Incorporation, By-Laws or material documents required to be submitted to Central Bank, shall be reported by submitting copies of the amended Articles of Incorporation, By-Laws or material documents to the appropriate department of the Central Bank within fifteen (15) days following the approval of such changes by the proper authorities. (3) Organizational structure . All NBQBs shall submit to the appropriate department of the Central Bank the following documents/information available in their respective firms and any subsequent changes/issuances on such documents/information, which shall be submitted within fifteen (15) days from such changes/issuances: (a) Chart of the firm's organizational structure or any substitute therefor; (b) Name of departments/units/offices with their respective functions and responsibilities; (c) Designations of positions in each department/ unit/office with the respective duties and responsibilities; (d) Manual of Instructions or the like embodying the operating policies/procedures of each department/ unit/office, covering such areas as: (i) Signing/delegated authority; (ii) Procedure/flow of paper work; and (iii) Other matters. (e) Memoranda-Circulars or the like issued covering organizational and operation policies; (f) Sample copies of each of the forms/reports used by each office/unit/department other than those submitted to the Central Bank, and (g) Such other documents/information which may be required from time to time by the department. (4) Documentary requirement on directors/officers . A bio-data sheet in the prescribed form accomplished under oath shall be submitted by the directors and officers reflecting data on relatives within second degree of consanguinity and affinity who are holding officer positions in same entity/branch/extension office. (a) Directors and/or major individual stockholders owning 10% or more of the outstanding voting securities . (i) Statement of financial condition as of latest date under oath or certified by an independent CPA. Appropriate disclosures shall be made when necessary, specifically on encumbered assets and names of creditors; (ii) Income tax return for the preceding year; (iii) Tax clearance for business purposes; (iv) Information on integrity, credit standing and business experience from banking institutions in Manila/locality where firm operates and in places of residences or birth; and (v) Affidavit of two (2) persons of good standing other than the present employer or relatives within the third degree of affinity or consanguinity. For stockholders, information on credit standing is sufficient. (b) Directors/Officers .Clearances from the Criminal Investigation Services of the Philippine Constabulary, the National Intelligence and Security Authority, and such other relevant investigating agency as might be determined by the appropriate supervising department. Additionally, a certification under oath by each director/officer to the effect that he/she is not disqualified under Sec. 4143Q. These shall be continuing requirements for any new director/officer elected/appointed for the first time in subject entity, unless such information are on file with the Central Bank for not more than five (5) years. (c) Non-resident foreign directors shall be exempted from the documentary requirements enumerated above, except for the following: (1) Bio-data sheet in the prescribed form accomplished under oath; (2) Clearance from the National Bureau of Investigation (NBI) or the Ministry of Foreign Affairs; and (3) Certification under oath that the foreign director is not disqualified under Sec. 4143Q of this Manual. ( Effective March 28, 1984 ) k. Provincial reports . For firms located in the provinces, reports may be filed thru the Central Bank Regional and Extension Offices. l. Loan exposure reports in credit information exchange system . 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 borrowing, 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." Accordingly, a quarterly report shall be submitted (App. 10) showing exposure in the form of loans, commercial papers/receivables and bonds purchased/sold (excluding government securities purchased outright),lease contracts receivable, equity investments 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 first report shall be as of March 31, 1981 and thereafter as of the end of every quarter and shall be submitted on or before ten (10) banking days following the end of each quarter to the appropriate supervising and examining department. 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. A schedule of total assets and net worth of borrowers, issuers, lessees and accountees reported in Schedules I to VII of the quarterly report on loan exposure shall be accomplished in prescribed form (CBP 7-26-24-Annex A) and shall be submitted on or before ten (10) banking days following the end of each quarter to the Department of Loans and Credit. Reports as of 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/business day following the reference month. The total assets and net worth required to be reported need not be reported again if the audited financial statements of the individual or company concerned are the same as the last report. 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 as prescribed in 4161Q.1(l) shall pay a fine in accordance with the following schedule: Commercial, Thrift Banks Specialized and NBFIs Government without Banks and Quasi-banking NBQBs 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 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 account with the Central Bank or where the deposit accounts 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. All reports duly accomplished must be post-marked or received on or before the 10th banking/business day following the end of the reference month or quarter in the Department of Loans and Credit, 6th floor, Multi-Storey Bldg., Central Bank, A. Mabini St., Malate, Metro Manila, or in any of the Regional Offices of the Central Bank. m. Consolidated financial statements of financial intermediaries and their allied undertakings/subsidiaries/affiliates . The following guidelines shall govern the consolidation of financial statements of financial intermediaries and their allied undertakings/subsidiaries/affiliates. 1. Definitions The following definitions of terms are hereby adopted: a. 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. b. 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. c. 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. d. 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. e. Affiliates refer to an entity linked directly or indirectly to a financial intermediary by means of (1) ownership, control or power to vote, of 10% or more of the outstanding voting stocks of the entity, or vice-versa; (2) interlocking directorship or officership; (3) common stockholders owning 10% or more of the outstanding voting stocks of each of the financial intermediary and the entity; (4) 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 (5) permanent proxy or voting trust in favor of the financial intermediary constituting 10% or more of the outstanding voting stock of the entity, or vice-versa. f. 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. g. 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. 2. Consolidation Requirements a. 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. b. 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. c. Financial statements of all domestic and foreign subsidiaries shall be consolidated with those of the investing financial intermediary (domestic parent),except (1) subsidiaries about to be disposed of; (2) subsidiaries where control is being exercised on a temporary basis; (3) subsidiaries whose financial statements bear a closing date different from that of the investing financial intermediary's financial statements and/or (a) the difference in closing dates exceeds three months or more; (b) the closing dates of all the statements are not expressly indicated; (c) the necessity of the difference to closing date is not explained; and (d) changes in accounting periods of the affiliate/constituent companies are not disclosed, together with their financial statements. (4) 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 (5) foreign subsidiaries located in places where (a) there are foreign exchange restrictions; (b) the rates of exchange fluctuate widely; (c) there are unfavorable legislations in force; and (d) the foreign government concerned is undergoing a process of change. 3. Consolidation Procedures a. Consolidation of the financial statements shall involve the following procedures: (1) 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." (2) The following are eliminated in consolidation; (a) All intercompany transactions; for instance, rental income of a subsidiary from its premises should be netted against rent expenses incurred by the investing financial intermediary for occupying said premises; (b) 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. (c) All asset accounts of the investing financial intermediary, which represent ownership of investments in subsidiaries against the capital accounts of the consolidated subsidiaries. (3) All income and expense accounts shall be closed to the capital accounts of each subsidiary. (4) All the remaining assets and liabilities of the subsidiaries shall be transferred to appropriate accounts of the investing financial intermediary. (5) 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. (6) Other generally accepted consolidation principles/ procedures not inconsistent herewith may be adopted. (7) Consolidating adjustments and eliminations shall appear only on working papers and shall not be recorded in the books of the individual entities concerned. b. 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: (1) "Excess of Cost Over For excess of cost of equity Book Value of Equity investments over its book Investments" value (2) "Excess of Book For the excess of book value Value Over Cost of equity investments over of Equity Investments" its costs 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 of Condition. c. 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 g 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: a. An appropriate list/schedule of the allied undertakings/subsidiaries/affiliates showing the following information: (1) Name and nature of business; (2) Original cost of the investment; outstanding balance, book value and difference, if any, and accounting treatment of the difference; (3) Percentage of ownership/equity investment; (4) Differences in reporting dates from that of the reporting financial intermediary; (5) Whether or not their financial statements have been consolidated; and (6) Reasons for not consolidating in the case of the unconsolidated entities. b. 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. c. Any information on: (1) Exposure to exceptional risks of operating in other countries, including the risk of foreign currency exchange rate fluctuations. (2) The extent to which there are statutory or contractual restrictions on the distribution of the accumulated retained income of the group. 5. 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 a report form as prescribed. The strict implementation of these guidelines or full compliance therewith, subject to penalties/sanctions, shall be effective 1 January 1983. (Additional provisions as provided by Section 1 of CBP Circular 1309 dated October 14, 1991) 4161Q.2 Categories and signatories of reports . For purposes of designating the signatories of reports, 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 enumerated in App. 3. Category A-1 reports shall be signed by the NBQB's president or the senior executive vice-president/equivalent position for specific types of NBQB 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 in a format as prescribed in App. 4. Category A-2 reports of head offices of NBQB shall be signed by the NBQB's president or the senior executive vice-president/equivalent position for specific types of NBQBs. Offices/units (such as branch) reports in this category shall be signed by their respective managers/officers in-charge. Likewise, the signing authority in this category shall be contained in a resolution approved by the board of directors in the format prescribed in App. 5. Category B reports are those required to be submitted to the Central Bank and are not included in Categories A-1 and A-2. They shall be signed by officers or their alternates, who shall be duly designated by the board of directors. A copy of the board resolution, with format as prescribed in App. 6, covering the initial designation and subsequent change(s) in signatories and alternates, shall be submitted to the appropriate department of the Central Bank within three (3) days from the date of resolution. (As amended by CBP Circular 1216 dated December 20, 1989) SUBSECTION 4161Q.3 Sanctions on Unauthorized Signatories . 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 sanction/penalties shall be imposed on the erring institution for late reporting or failure to submit the required papers, as the case may be. SUBSECTION 4161Q.4 Sanctions in case of wilful delay in the submission of reports . a. Definition of terms . For purposes of this sub-section, the following definitions shall apply: 1) "Report" shall refer to all written reports or statements required of an NBQB to be submitted to the Central Bank periodically or within a specific period. 2) "Wilful delay in the submission of reports" shall refer to the failure of an NBQB to submit on time the report defined in Item a(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. b. Fines for wilful delay in the submission of reports 1) Amount of fine Any NBQB which shall wilfully 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 business day of default for the first five business days of default. P75 per business day of default for the next five successive days of default. P100 per business day of default for the succeeding business 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 NBQB is situated, delay or default shall start to run on the day following the next working day. 2) Manner of filing The submission of the reports shall be effected by filing them personally or through delivery service with the SES Department IV or with the Central Bank Regional Offices, or by sending them by registered mail or special delivery unless otherwise specified in the circular or memorandum of the Monetary Board. For the purpose of establishing delay or default, the date of acknowledgment by the SES Department IV/Central Bank Regional Offices appearing on the copies of such reports filed or submitted, or the date of mailing postmarked on the envelope or registry receipt, as the case may be, shall be considered as the date of filing. 3) Manner of payment or collection of fines NBQBs shall, within thirty (30) calendar days from receipt of the statement of account from the Central Bank, pay the fines imposed thereon for wilful delay on the submission of reports. For NBQBs 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 NBQB concerned: Provided, that if the balance of the entity's account is insufficient to cover the fines due, such fines shall be paid not later than the following business day. For the purpose of this subsection, 'business day" means a day on which the Central Bank head office and the head office of the NBQB are open for business. 4) Other penalties The foregoing penalties shall not preclude the application of, or be without prejudice to, the other administrative sanctions, as well as to the filing of criminal case as provided for in other provisions of law, and as may be warranted by the offense. 5) Appeal to the Monetary Board Any aggrieved NBQB may appeal to the Monetary Board from a ruling of the SES Department IV imposing a fine. (Effective October 9, 1985) (As amended by CBP Circular 1206 dated July 17, 1989) SECTIONS 4162Q-4165Q. (Reserved) . SECTION 4166Q. Internal Control Systems . The minimum internal control standards established in App. 7 shall guide all NBQBs. The following records/data shall be compiled and made available for the inspection of Central Bank examiners: a. Records showing compliance with independent balancing procedures. These records should indicate the accounts and the periodic balancing procedures performed. b. Statement of actual duties of persons assigned to handle cash and securities. c. All internal control audit reports or their equivalent. d. Information/data on the direct and/or indirect equity holdings and/or transactions with any firm, partnership or corporation organized for profit, of all the institution's directors, officers, and major stockholders, as defined under Secs. 4141Q and 4142Q. SUBSECTION 4166Q.1 Uniform system of accounts . All NBQBs shall pattern their chart of accounts and recording systems after the Uniform Systems of Accounts prescribed for strict adoption and implementation. SUBSECTION 4166Q.2 Sanctions . The following penalties/sanctions, whenever applicable, shall be imposed upon any NBQB 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 Sections 34 and 34-B of Republic Act No. 265, as amended; b. Suspension or revocation of the authority to engage in quasi-banking function; and c. Such other penalties/sanctions authorized by law. SECTIONS 4167Q-4170Q. (Reserved) . J. MISCELLANEOUS PROVISIONS SECTION 4171Q. Publication Requirements . All NBQBs shall cause the publication of their quarterly consolidated balance sheets dated March 31, June 30, September 30, and December 31 of every year, or on such other dates as the Central Bank may require, within thirty (30) days following the end of such period, in any newspaper of general circulation in the country in accordance with the prescribed format and instructions found in App. 8. (Effective November 4, 1985) (As amended by Section 3 of CBP Circular 1309 dated October 14, 1991) SECTIONS 4172Q-4198Q. (Reserved) . SECTION 4199Q. General Provision on Sanctions . Any violation of the provisions of this Part shall be subject to the sanctions prescribed under Sections 34 and 34-B of Republic Act No. 265, as amended. NON-BANKS WITHOUT QUASI-BANKING FUNCTIONS A. SCOPE OF AUTHORITY SECTION 4101N. Scope of Authority of Non-Stock Savings and Loan Associations (NSSLAs) . A "Non-Stock Savings and Loan Association",hereinafter called the "Association",shall include any corporation engaged in the business of accumulating the savings of its members and using such accumulations for loans and/or investments in the securities of productive enterprises or in securities of the Government, or any of its political subdivisions, instrumentalities or corporations: Provided ,That they shall be primarily engaged in servicing the needs of households by providing personal finance and long-term financing for home building and development. SUBSECTION 4101N.1 Form of organization . a. Non-stock savings and loan associations organized under Republic Act No. 3779, as amended, shall issue a certificate of membership to every qualified member and shall maintain a registry of its members. b. A non-stock savings and loan association shall confine its membership to a well-defined group of persons, and shall not transact business with the general public. It shall accept deposits from and grant loans to, its members only. SUBSECTION 4101N.2 Organizational requirements a. Prior approval by the Monetary Board of articles of incorporation and by-laws or amendments thereto .The articles of incorporation and by-laws of a proposed non-stock savings and loan association, or any amendment thereto, shall not be registered with the Securities and Exchange Commission unless accompanied by a certificate of approval from the Monetary Board. b. Application for approval . The articles of incorporation and by-laws of a proposed non-stock savings and loan association, both accomplished in the prescribed forms, shall be submitted to the Monetary Board through the appropriate supervising and examining department of the Central Bank together with a covering application for the approval thereof, signed by a majority of the members of the Board of Directors of the Association and verified by one of them. The same procedure shall be observed in case of amendments of the articles of incorporation and by-laws of the Association. c. Grounds for disapproval of application . The application of a proposed non-stock savings and loan association shall not be approved if upon examination and/or investigation made by the appropriate supervising and examining department of the Central Bank it is found that: (1) The Association is to be formed for any business other than the legitimate savings and loan business; (2) The Association's financial program is unsound; (3) Any of the directors or principal officers of the Association does not possess the integrity or competence to manage a savings and loan association; or (4) There exist other reasons which the Monetary Board may consider as sufficient ground for such disapproval. d. Certificate of authority to operate ; revocation or suspension thereof .All non-stock savings and loan associations, prior to transacting business, shall procure a certificate of authority to transact business from the Monetary Board. After due notice, the Monetary Board may revoke, or suspend for such period as it determines, the certificate of authority of any Association, the solvency of which is imperiled by losses or irregularities, or of any Association which wilfully violates any provision of Republic Act. No. 3779, as amended, these rules or any pertinent law or regulation. e. Filing fees . A non-stock savings and loan association shall pay to the appropriate supervising and examining department of the Central Bank a filing fee of five pesos (P5.00) for each application for the approval of proposed articles of incorporation and by-laws. f. Entrance fees .No entrance fees of any kind may be charged by any non-stock savings and loan association without first securing the approval of the Monetary Board. In no case shall the total amount of such fees exceed one per cent (1%) of the amount deposited, contributed, or otherwise paid in by the particular member. SECTION 4102N. Definition of Fund Managers .The term "Fund Managers" refers to juridical and natural persons engaged in all forms of administration of property, or money and its equivalent, for the benefit of the owner or a third person. This concept is functional rather than institutional. It shall not be limited to the technical or legalistic definitions nor shall it be constricted by hairline distinctions between administration and agency, consultancy and services. It may include, but need not be limited to (a) administrators or executors of estates, trusts, life insurance, (b) guardianship, (c) custodianship, (d) transfer agency, (e) managing agents, (f) escrow agency, and (g) such other activities or services which the Monetary Board may, from time to time, determine. SECTIONS 4103N-4105N. (Reserved) . B. CAPITALIZATION SECTION 4106N. Capital of NSSLAs . Members who have contributed fifty pesos (P50.00) or more to the capital of a non-stock savings and loan association may increase their capital contribution or open savings or time deposit accounts. Partial withdrawal from the amount paid by a member as capital contribution, during his membership, may be allowed unless the by-laws of the Association provide otherwise, and subject to such rules and regulations as the Monetary Board may prescribe in the matter of such withdrawal of capital contributions. However, in no case, shall such partial withdrawal diminish the member's capital contribution to less than P50.00. Member-depositors of non-stock savings and loan associations may participate in the profits of the Association on the basis of their capital contributions on the date dividends are declared. SECTIONS 4107N-4110N. (Reserved) . C. (RESERVED) SECTIONS 4111N-4115N. (Reserved) . D. NET WORTH TO RISE ASSETS RATIO SECTION 4116N. Capital to Risk Assets Ratio of NSSLAs . The combined capital accounts of each non-stock savings and loan association shall not be less than an amount equal to ten per cent (10%) of its risk assets which is defined as its total assets minus the following assets: a. Cash on hand; b. Amount due from the Central Bank; c. 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; d. Loans to the extent covered by holdout on, or assignment of, deposits maintained in the lending association and held in the Philippines; e. Office premises, depreciated; f. Furniture, fixtures and equipment, depreciated; g. Balances maintained with the Philippine National Bank or any of its branches arising from checks drawn on banks located in places not serviced by the Central Bank Clearing Offices; h. Real estate mortgage loans insured by the Home Financing Commission, to the extent of the amount of the insurance; and i. Other non-risk items as the Monetary Board may, from time to time, authorize to be deducted from total assets. The Monetary Board shall prescribe the manner of determining the total assets of such Association for the purpose of this Section, but contingent accounts shall not be defined as being included among total assets. Whenever the capital accounts of an Association are deficient with respect to the requirement of the preceding paragraph, the Monetary Board, after considering a report of the appropriate supervising and examining department of the Central Bank on the state of solvency of the Association concerned, shall limit or prohibit the distribution of net profits and shall require that part or all of net profits be used to increase the capital accounts of the Association until the minimum requirement has been met. The Monetary Board may, after considering the aforesaid report of the appropriate supervising and examining department of the Central Bank, and if the amount of the deficiency justifies it, restrict or prohibit the making of new investments of any sort by the Association with the exception of purchases of the evidence of indebtedness included under Subsec. 4116N(c) until the minimum required capital ratio has been restored. SECTION 4117N. Withdrawable Share Reserve . Every non-stock savings and loan association shall create a withdrawable share reserve which shall consist of three per centum (3%) of the aggregate capital contributions of the members. The withdrawable share reserve shall be set up from the profits of the non-stock savings and loan association, and no non-stock savings and loan association shall pay any dividends or distribute any profits to its members if the withdrawable share reserve is less than, or if by such payment or distribution would be reduced below, the amount specified in this Section. An amount corresponding to the withdrawable share reserve shall be set up by the non-stock savings and loan association, or such amount invested in bonds or evidences of indebtedness of the Republic of the Philippines or of its subdivisions, agencies or instrumentalities, the servicing and repayment of which are fully guaranteed by the Republic of the Philippines, and which are supported by the Central Bank. For a uniform interpretation of the provisions of this Section, the following shall serve as guidelines: a. The withdrawable share reserve shall be set up from the profits of the Association and shall be funded in the form of cash deposited as a separate account and/or an investment allowed under this Section; b. Should there be an increase in the capital contribution, the said reserve shall be correspondingly adjusted at the end of each month from undivided profits, if any; and c. The reserve shall be adjusted first before the Association shall declare and pay out dividends at any time of the year. SECTION 4118N. Surplus Reserve for Ledger Discrepancies . Whenever a non-stock savings and loan association has a discrepancy between its general ledger accounts and their respective subsidiary ledgers, the board of directors of the Association shall 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 available for distribution as dividends or for any other purpose unless and until the discrepancy is accounted for. The board of directors shall also direct the employee responsible for the discrepancy to account for said discrepancy: Provided ,That the failure of the employee to do so shall constitute as ground for his dismissal if the discrepancy is of serious or recurring nature. Non-stock savings and loan associations shall report such discrepancies to the appropriate supervising and examining department of the Central Bank within fifteen (15) days from discovery. SECTION 4119N. Reserve for Office Premises, Furniture, Fixtures and Equipment . Every non-stock savings and loan association shall set aside five per cent (5%) of its yearly net profits until it amounts to at least five per cent (5%) of total assets as a reserve for a building fund to cover the cost of construction or acquisition of office premises, and of the purchase of office furniture, fixtures and equipment. A non-stock savings and loan association which, as determined by its board of directors, has adequate office premises, furniture, fixtures and equipment necessary for the conduct of its business need not set up the reserve: Provided , That this fact should be certified to by its board of directors in a resolution to be submitted to the appropriate supervising and examining department of the Central Bank for verification and approval: Provided, however ,That in case a reserve had been set up, the non-stock savings and loan association so exempted may, at its option, revert the same to free surplus. SECTIONS 4120N-4125N. (Reserved) . E. STOCK, STOCKHOLDERS AND DIVIDENDS SECTIONS 4126N. Limitations on Declaration of Dividends . a. Level of withdrawable share reserve . No non-stock savings and loan association shall pay any dividends or distribute any profits to its members if the withdrawable share reserve required under Sec. 4117N is less than, or if by such payment or distribution would be reduced below, the amount specified in said Section. The reserve shall be adjusted first before the Association shall declare and pay out dividends at any time of the year. b. Discrepancies between general ledger and subsidiary ledger accounts . The surplus reserves set up as required under Section 4118N shall not be reverted for distribution as dividends unless and until the discrepancy between the general ledger accounts and their respective subsidiary ledgers for which the surplus reserve has been set up ceases to exist. SECTIONS 4127N-4140N. (Reserved) . F. DIRECTORS, OFFICERS AND EMPLOYEES SECTION 4141N. Definition and Qualifications of Directors of NSSLAs . Directors shall include: (1) those who are named as such in the articles of incorporations, (2) those duly elected in subsequent meetings of the association's members, and (3) those elected to fill vacancies in the board of directors. No person shall be eligible as director of a non-stock savings and loan association unless he is a member of good standing of such non-stock association. In addition, such person shall have the qualifications and none of the disqualifications as provided in pertinent laws and Central Bank rules. A director shall have the following minimum qualifications a. He shall be at least 21 years of age at the time of his election/appointment; and b. He shall be at least a high school graduate or shall have at least one year experience in a field related to his position/responsibilities, or have undergone any Central Bank training in banking operations. These qualifications shall not apply to directors of the association serving as such as of August 11, 1975 nor to persons who have previously served as directors and officers of non-stock associations or banks. SECTION 4142N. Definition and Qualifications of Officers of NSSLAs . Officers shall include the President, Vice-President, General Manager, Corporate Secretary, Treasurer and others mentioned as officers of the association, or whose duties as such are defined in the By-Laws. The minimum qualifications for directors prescribed in Sec. 4141N are also applicable to officers. SECTION 4143N. Disqualifications of Directors and Officers of NSSLAs and Financing Companies . The following persons are disqualified from becoming directors of an NSSLA. a. Persons who have been convicted judicially or administratively of an offense involving moral turpitude, or judicially declared insolvent, spendthrift, or incapacitated to contract; b. Persons found by the Monetary Board to have wilfully failed or refused to comply with any 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; c. Directors who have been absent for whatever reason for more than 50% of the regular meetings of the board for a two-year period reckoned from the date of the election of the director concerned, Provided ,That the disqualification apply for purposes of the immediately succeeding election; d. Persons who are delinquent in the payment of their obligations, and this disqualification shall operate as long as the delinquency persists. "Delinquency" shall mean that an obligation with a NSSLA where he is a director or officer, or where he may be elected or appointed as such, or at least two obligations with banks and other NBQBs under different credit lines or loan contracts, are past due for at least three (3) months. Persons disqualified to become directors are also disqualified to become officers except persons disqualified as directors due to absenteeism. Except as may be authorized by the Monetary Board or the Governor, any individual who is the spouse or a relative within the second degree of consanguinity or affinity of any person holding the position of President, Executive Vice-President, General Manager, Treasurer, Chief Cashier or Chief Accountant is disqualified from holding or being elected/appointed to any of said positions in the same association. In any case, this disqualification shall not affect those already serving in any of the said positions as of August 11, 1975; Provided, however ,That this exception shall apply only for as long as the director/officer continues to serve uninterruptedly as such. The foregoing qualifications and disqualifications for directors and officers shall be in addition to those already required/prescribed by R.A. No. 3779, as amended, and other existing applicable laws and regulations. SUBSECTION 4143N.1 Prohibitions against foreign officers/employees of financing companies 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 financing companies. 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 prescribed application form may be secured from the Ministry of Justice. SECTION 4144N. Bio-Data/List of Directors and Officers of NSSLAs . All associations shall submit to the DRBSLA a bio-data of all their incumbent directors or officers defined above, in the prescribed form. Any subsequent change in the composition of the board of directors or officers, together with the biodata of the new directors or officers, shall be reported within thirty (30) days to the Monetary Board through the DRBSLA. (As amended by Section 1 of CBP Circular 1218, effective December 26, 1989) 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. cdlex SECTION 4145N. Compensation of Directors, Officers and Employees . No director, officer or employee of a non-stock savings and loan association shall receive from such Association, and no Association shall pay to any director, officer, or employee of such Association, any commission, emolument, gratuity or reward based on the volume or number of loans made, or based on the interest or fees collected thereon. Nothing in this Section, however, prohibits or limits any of the following: a. Receipt or payment of salaries of directors, officers and employees; b. Receipt or payment of bonuses to directors, officers or employees if such bonuses are based on the profits and not on the volume or number of loans made or on the interest or fees collected thereon. SUBSECTION 4145N.1 Liability for loans contrary to law . No non-stock association shall make or purchase any loan or investment not authorized or permitted under these regulations or Republic Act No. 3779, as amended, and any director, officer or employee who, on behalf of any such Association, knowingly makes or purchases any such loan or investment or who knowingly consents thereto shall be personally liable to the Association for the full amount of any such loan or investment. SECTIONS 4146N-4147N. (Reserved) . SECTION 4148N. Bonding of NSSLA Officers and Employees . All officers and employees of a non-stock savings and loan association who have access to money, or negotiable securities 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 or gross negligence. The bond of the cashier, assistant cashier, treasurer, tellers, and other employees of the Association having money accountability, shall be equivalent to, or not less than, their average daily cash accountability. The bonds must be issued by a reputable bonding company approved by the Central Bank. A cash bond may also be allowed provided such bond is deposited in a bank. The average daily cash 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 and other cash items shall not be included in the computation of the average daily cash accountability: Provided , That proper and adequate safeguards, as prescribed by the appropriate supervising and examining department of the Central Bank and embodied in App. 9 are adopted by the association. If collections are made thru the treasurer, cashier, or paymaster of the firm or office in which the Association operates and such collections are paid by checks issued by the firm or office and payable to the Association, such checks shall not be included in the computation of the average cash daily accountability of the officer concerned: Provided, however ,That in no case shall the bond of such accountable officer be less than one thousand pesos (P1,000.00). No non-stock savings and loan association shall act or sign as co-maker of the bonds for accountable officers/employees thereof. SECTIONS 4149N-4150N. (Reserved) . G. (RESERVED) SECTIONS 4151N-4155N. (Reserved) . H. BUSINESS DAYS AND HOURS SECTION 4156N. Business Days and Hours of NSSLAs . Non-stock savings and loan associations may, with the prior approval of the appropriate supervising and examining department of the Central Bank, adopt such business days and hours as may be convenient for them: Provided ,That in the case of an Association operating in a government office or private firm, its business hours shall have the prior approval of the head of the office or of the firm where such Association operates. NSSLAs shall not transact business on legal holidays, but special public holidays proclaimed for local governments shall be regular working days. All non-stock savings and loan associations shall be open for business during business hours and days except when extraordinary instances caused by unforeseen, unavoidable event directly affect the Association's ability to open for business. All non-stock savings and loan associations shall post conspicuously at all times in their places of business their schedule of regular business hours and days. SECTIONS 4157N-4160N. (Reserved) . I. INTERNAL CONTROL SECTION 4161N. Reports and Other Information Required . The following rules shall govern the submission of reports and other information: a. All non-bank financial intermediaries shall submit to the appropriate supervising and examining department the reports called for in the prescribed forms as indicated in App. 10. General and specific instructions for accomplishing some of the reports as prescribed in App. 10-c shall be followed. (Effective December 26, 1989) Note: Amendments of Section 4161N.a as provided by the following CBP/BSP Circulars: 1) Section 2 of CBP Circular 1218, effective December 26, 1989; 2) Section 5 of CBP Circular 1309 dated October 14, 1991 and; 3) BSP Circular 80 dated June 26, 1995 b. Pension, retirement, provident and other employee welfare funds which are self-managed/operated by a board of trustee shall be exempted from the reportorial requirements specified in Item "a" above. c. All NBFIs shall submit to the respective supervising and examining department of the Central Bank the information required in Apps. 11 and 11-a. Changes in any of the required information submitted after the initial submission, shall be reported to the Central Bank department concerned within fifteen (15) days from such change/issuance. d. All non stock savings and loan associations and building and loan associations shall report on the following matters to the Central Bank through the appropriate supervising and examining department: (1) Crimes whether consummated, frustrated 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 P1,000 or more in the case of non-stock savings and loan associations. Crimes involving bank personnel, even if the amount involved is less than 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. (2) 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 P5,000 or more, in the case of non-stock savings and loan associations. (3) The following guidelines shall be observed in the preparation and submission of the report: (a) 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 the prescribed format, 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 (1),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. (b) 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 not later than fifteen (15) days from termination of investigation. (c) Proof of submission of the report within the 48-hour deadline shall be determined by the date of postmark, if the report was sent by registered 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. 2 of CBP Circular 1216 dated December 20, 1989) e. All investment houses, investment companies and financing companies, whether in quasi-banking or not, shall submit a quarterly report on exposure in the form of loans, commercial papers and other credit transactions, under the provisions of 4161Q.1(L). SUBSECTION 4161N.1 Sanctions and procedures for filing and payment of fines . Failure to submit the above reports on or before the specified dates shall subject the person responsible or entity concerned to the penalties provided by law. For wilful delay in the submission of reports, the following rules shall apply to NSSLAs: a. Definition of terms .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 the submission of reports" shall refer to the failure of any banking institution to submit on time the report defined in item (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. b. Fines for wilful delay in the submission of reports .Any institution which shall wilfully delay the submission of reports within the periods prescribed for each particular report, shall pay a fine in accordance with the following schedule: (1) Per banking day of P10 default for the first 5 banking days of default 2) Per banking day of 20 default for the next 5 successive banking days of default 3) Per banking day of 30 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. (As amended by Section 1 of CBP Circular 1206 dated July 17, 1989) c. Manner of filing . The submission of the reports shall be effected by filing them personally with the appropriate departments of the Central Bank or with the Central Bank Regional Offices, or by sending them by registered mail or special delivery, unless otherwise specified in the circular or memorandum of the Monetary Board or the Central Bank. In the first case, the date of acknowledgement by the respective departments of the Central Bank appearing on the copies of such reports 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. d. Manner of payment or collection of fines . (1) NSSLAs 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. (2) For NSSLAs which maintain demand deposit accounts 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 (and NSSLAs) concerned: Provided , That if the balance of the 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 rule "banking day" means a day on which the Central Bank head office and the head office of the bank (and NSSLAs) are open for business. (3) Failure to settle the full amount of the fines within the period or on the day prescribed herein shall make a NSSLA, its directors and officers liable to the sanctions imposed under Sec. 4199N. e. Appeal to the Monetary Board .NSSLAs may appeal to the Monetary Board from a ruling of the appropriate department imposing a fine. f. Other penalties .The foregoing penalties shall not preclude the application of, or shall be without prejudice to, other administrative sanctions as well as to the filing of criminal case as provided for in the other provisions of the law, as may be warranted by the nature of the offense. SUBSECTION 4161N.2 Categories of and signatories to reports . The rules under Subsec. 4161Q.2 shall also apply to non-banks without quasi-banking functions. SECTIONS 4162N-4164N. (Reserved) . SECTION 4165N. External Auditor for NSSLAs . All non-stock savings and loan associations, except those with total resources of Five Hundred Thousand Pesos (P500,000) or less, shall engage the services of an independent certified public accountant to audit their books of accounts at least once a year, or as often as necessary. SECTION 4166N. Uniform System of Accounts . All non-bank financial intermediaries (investment houses, investment companies, finance companies, securities dealers/brokers, lending investors, pawnshops, provident/pension/retirement fund managers, building and loan associations, and non-stock savings and loan associations) are required to pattern their charts of accounts and recording systems after the Uniform Systems of Accounts prescribed for their respective institutional grouping including reportorial and publication requirements. Credit, legal, accounting, and other forms to be used by non-stock savings and loan associations as well as the accounting system and classification of accounts, shall be prescribed by the Monetary Board. The voucher system of accounting and the prescribed chart of accounts shall be adopted for use by non-stock savings and loan associations. SECTIONS 4167N-4170N. (Reserved) . J. MISCELLANEOUS PROVISIONS SECTION 4171N. Publication Requirements . Every non-stock savings and loan association shall, within sixty (60) days after the close of its fiscal year, furnish the Monetary Board and mail to each of its members, a copy of its financial statement certified by the external auditor provided for in Sec. 4165N showing, in such form and detail as the Monetary Board shall require, the amount and character of the assets and liabilities of the Association at the end of the preceding fiscal year. Any non-stock savings and loan association may, in lieu of mailing, publish such financial statement in any newspaper of general circulation in the city or town in which its principal office is located. The Monetary Board may, in addition to the foregoing, require the publication of such other information as it shall deem necessary for the protection of the members of these associations. (As amended by Section 3 of Circular 1218, effective December 26, 1989) SECTIONS 4172N-4173N. (Reserved) . SECTION 4174N. Business Name . Non-stock savings and loan associations organized or operating under Republic Act No. 3779, as amended, and licensed by the Central Bank shall include in their names the term "Savings and Loan Association". Such Associations shall display in a conspicuous place at their business offices a sign including, among other things, the following words: "Authorized by the Central Bank of the Philippines". No person, association, partnership or corporation shall do business or hold itself out as doing business as a non-stock savings and loan association, or shall use the term "Savings and Loan Association" or any other title or name tending to give the public the impression that it is engaged in the operations and activities of a savings and loan association unless so authorized under Republic Act No. 3779, as amended, and these regulations. The use by an Association of any other name or title or combination of names and titles or any other deviation from the requirements of this Section shall not be authorized except upon prior approval of the Monetary Board. No non-stock savings and loan association shall issue, publish or cause or permit to be issued or published, any advertisement that it is doing or permitted to do business which is prohibited by law to an association. No non-stock savings and loan association shall advertise or represent itself to its members or to the public as a bank, or as a trust company. SECTIONS 4175N-4198N. (Reserved) . SECTION 4199N. General Provision on Sanctions . Any violation of this Part shall be subject to the sanctions provided in Secs. 34 and 34-B of R.A. No. 265, as amended, whenever applicable. LLphil Footnotes * for NSSLAs with total resources of P500,000.00 or more * for BLAs with total resources of P500,000.00 or more PART TWO Deposit and Borrowing Operations NON-BANKS WITH QUASI-BANKING FUNCTIONS (NBQBs) A. H. (RESERVED) SECTIONS 4201Q-4268Q. ( Reserved ) I. BORROWINGS FROM THE CENTRAL BANK SECTION 4269Q. Lender-of-Last-Resort Facility . In order to promote the medium-and long-term operations of NBQBs and to maintain conditions of competition, the Central Bank may, at its discretion, extend credit accommodations to such financial intermediaries, subject to the following guidelines on the grant of special credit accommodations to banks and non-bank financial intermediaries performing quasi-banking functions: LLcd SUBSECTION 4269Q.1 Nature of special credit accommodations . The Central Bank, as lender of last resort, may extend loans, advances, re-discounts 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 4269Q.2 Conditions to access . (a) 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 (b) the loan portfolio arrearages of the bank or non-bank financial intermediary performing quasi-banking functions must not exceed one and 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 4269Q.3 Terms of the 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. The interest/penalty rates assessable NBQBs on their availments under the lender-of-last-resort facility shall be as provided under Subsec. 4270Q.14. (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 4269Q.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 4269Q.5 Rediscount ceilings . The rediscount ceilings of non-bank financial intermediaries authorized to perform quasi-banking functions shall be 100 percent (100%) of their net worth as of the quarter immediately preceding the date of application for Central Bank refinancing. SUBSECTION 4269Q.6 Repurchase with Central Bank on Central Bank Certificates of Indebtedness and Other Government Securities . Investment houses and other NBQBs are allowed to enter into repurchase agreements with the Central Bank on their holdings of CBCIs and other government securities. a. Regular repurchase agreements may be effected with the Central Bank subject to the following terms and conditions: (1) Rate : The highest rates obtained through the "go-around" method for specified maturities. (2) Term : The term shall be for a period not exceeding 15 days. (3) Security : Only obligations of the National Government and of its instrumentalities and subdivisions, which are fully guaranteed by the Government, with a remaining maturity of not more than 10 years and which are freely negotiable and regularly serviced, shall be eligible as underlying instruments for repurchase agreements subject to the following collateral requirements: Maturing in less than 90 days 100% Maturing in less than 180 days 105% Maturing in less than 360 days 110% Maturing in less than 720 days 115% Maturing in less than 10 days 120% (4) Delivery : Delivery of the underlying instruments shall be made to the Central Bank not later than 3:00 P.M. of the date of sale. The proceeds of the repurchase agreement shall be subject to the agrarian credit requirements as prescribed under existing regulations. b. Reverse repurchase agreements may be effected with the Central Bank, subject to the following terms and conditions: (1) Rate . The lowest rates obtained through the "go-around" method. (2) Term . The term shall be for a period not exceeding 10 calendar days. (3) Security . The collateral shall consist of obligations of the National Government in the CB portfolio valued at 100%. (4) Delivery . No delivery of the collateral shall be made but a custody receipt shall be issued instead. (5) Reservation . Prepayment may be made by the CB at its option any time before maturity. SECTION 4270Q. Basic Rules Governing Central Bank Loans and Advances to NBQBs . Non-bank financial intermediaries authorized to perform quasi-banking functions (NBQBs), specifically investment houses, investment companies, and financing companies, may apply for loans and advances with the Central Bank of the Philippines, subject to the following rules: SUBSECTION 4270Q.1 NBQBs qualified to avail of Central Bank credit . Qualifications for availment by NBQBs of the privilege of access to the credit facilities of the Central Bank shall be as follows: a. The NBQB must be operating in accordance with pertinent laws and existing rules and regulations governing NBQBs; b. The minimum paid-in capital of the NBQB shall be P20 million at the time of application for credit facility. In case its paid-in capital is below the required minimum, it must have a duly approved capital build-up program, as provided for under Sec. 4106Q. Financial intermediaries authorized to perform quasi-banking functions after August 22, 1980 shall have a minimum paid-in capital of P50 million as required under said Sec. 4106Q; c. Loans to directors, officers, stockholders and their related interest (DOSRI) of the NBQB shall not exceed the prescribed aggregate or individual ceiling and the ceiling on non-secured loans, and such loans shall be in current status; d. The loan portfolio arrearages of the NBQB must not exceed one and a half times the average arrearages for NBQBs as of the end of the quarter preceding the application for availments; e. It has no net deficiency in reserves against deposit substitute liabilities for the past four (4) consecutive weeks based on the latest required reports; f. The combined capital accounts of an NBQB have not been deficient continuously for a period of thirty (30) days on the basis of the required reports of the Central Bank; g. Required reports are being submitted to the Central Bank on or before their respective deadlines. SUBSECTION 4270Q.2 Credit Accommodations Available to NBQBs . NBQBs may avail of loans of advances to provide liquidity in times of need against papers eligible under Sections 87 and 88 of R.A. No. 265, as amended. (Effective November 29, 1985) SUBSECTION 4270Q.3 Papers required . To avail of the Central Bank's credit facility, the NBQB shall file the corresponding application indicating, among others, and submitting the following: a. Amount applied for; b. Term of the loan or advance; c. Purpose(s) of the loan or advance; d. Credit instruments, duly endorsed, together with the corresponding schedule of amortization offered as collateral for loan or advance from the Central Bank; e. Deed of Assignment covering the payments, installments or amortizations offered as security for the loan or advance, as well as the mortgage contracts of the respective borrowers; f. Copy of the latest financial statements/reports (statements of condition, income and expenses and report of required and available reserves against deposit substitute liabilities); g. Resolution of the bank's Board of Directors authorizing the application for credit accommodation and designating the officer(s) to act for the applicant NBQB; h. Certification of the authorized official(s) of the applicant NBQB to the effect that the payments, installments or amortizations to be pledged or assigned to the Central Bank are in no case currently in arrears and that they are related to credit operations which in every case are adequately secured by first mortgages and other collateral authorized under existing laws, rules, and regulations. SUBSECTION 4270Q.4 Eligibility of papers offered as collateral . Credit instruments offered as collateral shall be subject to the eligibility requirements provided for under Section 8-A of R.A. No. 265, as amended, and under Sec. 4269Q, specifically to the following a. The payments, installments or amortizations of borrowers to be pledged or assigned shall be those falling due over a period not exceeding three (3) years from the date of loan application, which are not in arrears and are adequately secured by real estate or chattel mortgages arising from transactions related to high priority projects, as follows: (1) Industrial projects involving the production of export and/or essential import substitute products; (2) Agri-business enterprises and related processing industries; (3) Transport services pertaining to the distribution of goods and produce; (4) Small-and medium-labor intensive industries; (5) Construction of low-cost houses, with aggregate value not exceeding P200,000.00 for each unit and renovation of houses/apartments, provided the maximum amount shall not exceed P100,000.00; b. Proceeds of the loan or advance under Items (1) to (4) of Subsec. 4270Q.4 above shall be utilized for any of the following purposes: (1) Acquisition of machinery and equipment; (2) Construction of plant and facilities; (3) Working capital requirements; (4) Financing of export shipments. c. In case the credit facility applied for is intended to meet the NBQB's temporary liquidity needs, any paper irrespective of maturity which is eligible under Sec. 87 or Sec. 88 of R.A. 265, as amended, shall be acceptable as collateral. SUBSECTION 4270Q.5 Loan Values . The loan values of the papers offered as security for the loan or advance shall be as follows: Collateral Loan Value Papers, irrespective of 80% of the amount still maturity which are eligible due and outstanding on under Section 87 or Section such papers. (Effective 88 of R.A. No. 265, as November 29, 1985) amended (for loans and advances intended to provide liquidity in times of need). SUBSECTION 4270Q.6 Rediscount Rates/NBQB Lending Rates . The rediscount rates to be assessed on loans and advances shall be based on the following: Eligible Papers CB Rediscount Rare P.A. Papers, irrespective of The rate shall be as provided maturity, securing special for under Subsection 4270Q.14 credit accommodations (Effective November 29, 1985) intended to provide liquidity in times of need. SUBSECTION 4270Q.7 Maturity Period . The maturities of loans and advances to NBQBs shall be: Eligible Papers Maturity Period Any paper, irrespective of Not exceeding 90 days maturity, eligible under (Effective November 29, Section 87 or Section 88 of 1985) of R.A. No. 265, as amended, securing loans and advances to provide liquidity in times of need. SUBSECTION 4270Q.8 Rediscount ceiling . The ceiling on all loans or advance to NBQBs against pledge or assignments of payments, installments or amortizations shall be 100% of their net worth, net of valuation reserves, as of the end of the quarter immediately preceding the date of application for availment. In case of special credit accommodations to meet liquidity needs, availments of the NBQB shall not exceed 10% of its net worth, net of valuation reserves, as of the end of the quarter preceding the date of application. The NBQB may avail of an additional 5% of its net worth, net of valuation reserves as of the end of the quarter preceding the date of application also for the same purpose. Availments under this special credit facility shall fall within the basic rediscount ceiling of the NBQB. SUBSECTION 4270Q.9 Repayments . The equivalent loan value of the assigned payments, installments or amortizations due during the month, plus accrued interest, shall be automatically debited against the demand deposit account of the borrowing NBQB with the Central Bank not later than the tenth (10th) day of the month following. Similarly, the demand deposit account of the NBQB shall be automatically debited for the amount due, including accrued interest upon maturity of the collateral(s) and/or its special credit accommodations to provide liquidity. Collections received by NBQB before due date of the assigned payments, installments, or amortizations and/or maturity of the collaterals for loans or advances to provide liquidity shall be remitted immediately to the Department of Loans and Credit, Central Bank, to be applied in partial/full payment of its outstanding obligations with the Central Bank. Failure to effect this remittance shall subject the NBQB to the sanctions/penalties provided under existing regulations for banks. SUBSECTION 4270Q.10 Default and other violations by the borrowing NBQBs . A borrowing NBQB becomes in default upon expiration of the maturity period of its promissory note with the Central Bank without being fully liquidated. In case of default or failure to comply with the requirements of Subsec. 4270Q.9, the demand deposit account with the Central Bank of the borrowing NBQB shall be debited for the amount in default, plus accrued interest and liquidated damages. The interest/penalty rates assessable NBQBs for overdrawings on their demand deposit accounts with the Central Bank, shall be as prescribed under Subsec. 4270Q.14. SUBSECTION 4270Q.11 Liquidated damages . In case of default, liquidated damages of fine percent (5%) per annum shall be charged on such amount in default over and above the rediscount rate at which such loan was originally secured from the Central Bank. SUBSECTION 4270Q.12 Additional loan/advance . No additional loan or advance shall be made to any applicant NBQB if an existing loan or advance is delinquent or if it fails to effect the corresponding remittance to the Central Bank of the collections referred to in Subsec. 4270Q.9 above. SUBSECTION 4270Q.13 Authority to examine books and records of NBQBs . The Department of Loans and Credit of the Central Bank of the Philippines shall be allowed to examine the books and records of the borrowing NBQB pertaining to the account(s) offered as security for loans and advances from the Central Bank. SUBSECTION 4270Q.14 Interest and penalty rates . The interest/penalty rates that shall be assessed NBQBs on their emergency loans, availments under the lender-of-last-resort facility, and overdrawings in their respective demand deposit accounts with the Central Bank shall be in accordance with the following: a. Graduated rates of interest on special/emergency loans, as follows: Interest Rate Amount of Loan 24% per annum Not over P150 million 26% per annum Over P150 million but not over P200 million 28% per annum Over P200 million but not over P250 million 30% per annum Over P250 million but not over P300 million 32% per annum Over P300 million plus 2% per annum for each roll-over after each 60-day period: Provided ,That the aggregate of the interest rate and additional rate on roll-overs shall not exceed 36% per annum; aisadc b. 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 reference rate, plus an additional rate of not less than two (2) percentage points ( Effective December 24, 1982 ) c. 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. SECTIONS 4271Q-4275Q. ( Reserved ) SECTION 4276Q. Repurchase Agreements with the Central Bank . Investment houses and other NBQBs are allowed to enter into repurchase agreements with the Central Bank on their holdings of CBCIs and other government securities. SUBSECTION 4276Q.1 R/P window for inventory financing . Accredited government securities dealers shall be given access to a special dealership R/P window exclusively for inventory financing. Availments from the above window through repurchase agreements shall be subject to the following terms and conditions: a. Rate . The average yield rate of the 91-day Treasury Bills for the last 3 auctions. b. Term . The term shall be for a period not exceeding 30 days. Missing pages SUBSECTION 4281Q.3 Exemption from documentation requirements . 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 under Sec. 4281Q and Subsecs. 4281Q.1 and 4281Q.2: Provided , That the exemption from the documentation requirement prescribed therein shall not be construed or interpreted as exemption of said borrowings from the other rules on borrowings by NBQBs and from other Central Bank regulations on deposit substitutes. SUBSECTION 4281Q.4 Prohibition against use of certain instruments as deposit substitutes . 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. This prohibition shall not apply to the acceptance or negotiation of bills of exchange in connection with trade transactions. SUBSECTION 4281Q.5 Negotiation of promissory notes . Negotiable promissory notes acquired by NBQBs 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. 4281Q.1. If these notes do not contain the features in said subsection, their negotiation shall be covered by any of the appropriate deposit substitute instruments mentioned in Sec. 4281Q. SUBSECTION 4281Q.6 Call slips/tickets for 24-hour loans . Call slips or tickets may be used to evidence call loan transactions of not more than twenty-four (24) hours' maturity or to cover reserve deficiencies. In all other cases, call loan transactions shall be evidenced by a promissory note containing the minimum features prescribed in Subsec. 4281Q.1. SUBSECTION 4281Q.7 Substitution of underlying securities . Any agreement allowing the issuer/maker to substitute the underlying securities shall further provide that the actual substitution shall be with the prior written consent of the payee. SUBSECTION 4281Q.8 Regulation on additional stipulation . Stipulations between the maker/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. SUBSECTION 4281Q.9 Requirement to state nature of underlying securities . In the case of repurchase agreements and certificates of assignment/participation with recourse, the stipulation shall clearly state either (a) that the underlying securities are being delivered to the buyer or assignee as collaterals, or (b) that the ownership thereof is being transferred to the buyer or assignee. SUBSECTION 4281Q.10 Physical delivery of instruments and underlying securities . Securities, warehouse receipts, quedans, and other documents of title which are the subject of quasi-banking functions 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, and 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 NBQB and the lender/purchaser or by the custodian bank. The principal borrowing instrument without underlying securities, warehouses receipts, quedans, or other documents of title shall likewise be physically delivered to the lender/purchaser. SECTION 4282Q. Payment ; Maturity ; Renewal ; Pretermination of Deposit Substitutes . 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/issuer of the instrument shall not be limited to the outstanding balance of said account. b. The minimum maturity of any single deposit substitute transaction shall be fifteen (15) days. Interbank borrowings shall not be subject to the limitations in this section. c. Funds borrowed by banks or NBQBs from trust departments or managed funds of banks or investment houses are not considered as interbank borrowings and, therefore, are subject to the minimum 15-day maturity period. d. Automatic renewal upon maturity of the instrument may be effected only under terms and conditions previously stipulated by the parties. SECTION 4283Q. Reserve Requirements . All NBQBs shall maintain a twenty-three percent (23%) reserve against deposit substitute liabilities, as defined in Section 100-A of Republic Act No. 265, as amended, with original maturities of seven hundred thirty (730) days or less, and a six percent (6%) reserve against such deposit substitute liabilities with original maturities of more than seven hundred thirty (730) days, regardless of remaining maturities, except short-term borrowings from banks and NBQBs, as defined in Sec. 4343Q, 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 nor 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 September 30, 1985 ) Note: Amendments of Section 4283Q, as provided by the following CBP Circulars: 1) Section 5, CBP Circular No. 1104, dated May 26, 1986; 2) Section 6, CBP Circular No. 1112, dated August 4, 1986; 3) Section 6, CBP Circular No. 1122, dated November 28, 1986; 4) Section 3, CBP Circular No. 1119, dated October 10, 1986; 5) Section 7, CBP Circular No. 1190, dated November 10, 1988; 6) Section 6, CBP Circular No. 1204, dated June 23, 1989 (Amended, June 30, 1989);7) Section 6, CBP Circular No. 1207, dated August 4, 1989; 8) Sections 11 and 12 of CBP Circular No. 1209, dated September 1, 1989; 9) Sections 11 and 12 of CBP Circular No. 1233, dated March 21, 1990; 10) Section 9, CBP Circular No. 1261, dated November 9, 1990; 11) Section 6, CBP Circular No. 1269, dated December 26, 1990, and; 12) Section 5, CBP Circular No. 1395, dated July 5, 1993. Effective January 1, 1982, the reserve requirement on deposit substitute liabilities, with original maturities of more than seven hundred thirty (730) days, shall be one percent (1%) and shall be increased at the rate of one percentage point every semester thereafter until the five percent (5%) requirement have been reached. ( Effective December 29, 1982 ) SUBSECTION 4283Q.1 Form and amount of reserves deposits with Central Bank . The composition of the reserve requirement shall be (1) at least ten percent (10%) in the form of deposit balances with the Central Bank; (2) a maximum of seventy-five percent (75%) in the form of government securities; and (3) the balance in the form of demand deposit accounts with banks which are not restricted as to withdrawal or use for current operations but not with financial institutions which have been closed and are under the receivership of the Central Bank or under liquidation. For purposes of this subsection, government securities eligible as reserves against deposit substitute liabilities of NBQBs shall be limited to bonds or other evidences of indebtedness representing direct obligations of the government of the Republic of the Philippines having the following minimum features/conditions: (1) The securities must bear an interest rate of not more than four percent (4%) per annum, must be non-negotiable, and shall carry Central Bank support; and (2) The instrument must expressly state in its face the amount, maturity date, and interest rate of the obligation. 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. Premyo Savings Bonds (Regular and Biglang Bahay Series) continue to be eligible as reserves of NBQBs against deposit substitute liabilities in accordance with the following schedule: ( Effective January 13, 1984 ) Per Cent of Reserve Required Requirement Ceiling on Gov't Securities 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. Only the buying/lending NBQB in a resale agreement covering eligible government securities may use such securities as reserves against deposit substitute liabilities. Conversely, the selling/borrowing NBQB in a repurchase agreement covering eligible government securities may not use such securities as reserves against deposit substitute liabilities. NBQBs shall hold at least one percentage (1%) point of their required reserves in the form of deposit balances with the Central Bank and/or demand deposit account balances with banks which are not restricted as to withdrawal or use for current operations and shall raise this ratio at the rate of one percentage (1%) point every month thereafter, until at least the minimum requirement provided in the first paragraph of this subsection shall have been reached. Deposits maintained with the Central Bank by NBQBs as part of their reserve requirement shall be paid interest at four percent (4%) per annum based on the average daily balance of said deposits to be credited quarterly. Procedures for demand deposits of NBQBs with the Central Bank, as provided in App. 14, shall be followed. ( Effective June 1, 1984 ) The criteria/guidelines to determine whether or not certain outstanding government securities are eligible for purposes of compliance with Central Bank reserve requirements are set forth in Appendix 30. SUBSECTION 4283Q.2 Accounts subject to reserves . NBQBs shall continue to hold matured and unclaimed deposit substitutes as deposit substitutes subject to reserves. Funds borrowed by NBQBs from trust departments or managed funds of banks or investment houses are not considered interbank borrowings and are subject to the reserve requirements on deposit substitutes. SUBSECTION 4283Q.3 Exemptions . Certificates of assignment issued with recourse by non-bank financial intermediaries with quasi-banking functions under the IGLF Program are not covered by the reserve requirements, the relationship established between the Central Bank and the institutions being that of principal and agent. SUBSECTION 4283Q.4 Computation and valuation . Each NBQB shall calculate its reserve position daily, on the basis of its reserves and its deposit substitute liabilities against which said reserves are required to be maintained, as of the close of business for the day. For the purpose of computing its reserve position, the principal office in the Philippines and all branches and agencies located therein shall be treated as a single unit. Securities held as reserves shall be valued at cost of acquisition, and the NBQB 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 Subsec. 4283Q.1: Provided, further , That the NBQB notifies the Central Bank of any such changes not later than the reporting day following the change, as provided in Subsec. 4161Q.1. 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. SUBSECTION 4283Q.5 Reserve deficiencies ; sanctions . a. Whenever the reserve position of any NBQB computed in the manner specified in Subsec. 4283Q.4 is below the required minimum, the NBQB concerned shall pay the Central Bank one-tenth of one percent (1/10 of 1%) per day on the amount of the deficiency: Provided, however ,That the NBQB shall be permitted to offset any reserve deficiency occurring on one or more days of the reporting week 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 the case of abuse, the NBQB shall automatically lose the privilege of offsetting reserve deficiency in the aforesaid manner for the succeeding four consecutive weeks and until such time that the non-bank financial intermediary concerned maintains its daily reserve position at the required minimum for at least one week after the penalty period of four 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. b. In cases where the NBQB chronically has reserve deficiency in deposit substitute liabilities, the Monetary Board may (1) limit or prohibit the making of new loans or investments by the NBQB concerned; (2) require that all or part of the net profit of the NBQB concerned be assigned to surplus; or (3) impose such other sanctions, as it may deem necessary, for the succeeding four consecutive weeks. The Board of Directors of such NBQB shall be notified of such chronic reserve deficiency and the penalties therefor, and shall be required to immediately correct the reserve position of the NBQB. Penalties herein specified shall be lifted by the appropriate department of the Central Bank after the NBQB shall have maintained a daily reserve position at the required minimum for at least one week after the penalty period of four weeks. As used in this subsection, the following terms shall have the following meanings: "Chronic reserve deficiency shall mean having net reserve deficiency for four consecutive weeks. "New loan" and "new investment" shall refer to any loan and any investment involving disbursement of funds. c. Fines on legal reserve deficiencies on deposit substitute liabilities shall be paid by the NBQB within fifteen days from receipt of the assessment: Provided ,That where the NBQB fails to settle the unpaid fines within fifteen days from receipt of the assessment, the Monetary Board may limit or prohibit the making of new loans or investment by the NBQB. SUBSECTION 4283Q.6 Matured and unclaimed deposit substitutes . Matured and unclaimed deposit substitutes shall continue to be subject to reserves. SUBSECTION 4283Q.7 Book entry method for reserve securities . All purchases of Treasury Bonds, Treasury Notes, and PW & ED Bonds for legal reserve purposes shall already be serviced under the book-entry procedure. All transactions on book-entry securities shall be entered in the bank's/non-bank's securities accounts and evidenced by debit and/or credit advices. No physical certificates shall be issued for any purpose, and transactions between banks/non-banks on book-entry securities shall not be recognized. Interest and redemption payments on book-entry securities shall be made by the Securities Servicing Department of the Central Bank on interest payment dates and at maturity through automatic credit to the bank's/non-bank's demand deposit account with the Central Bank. ( Effective May 30, 1983 ) Documentation of outright sales transactions with the Central Bank on such securities shall be in accordance with the following procedures: 1. Banks and NBQBs shall accomplish the Confirmation of Sale in the prescribed form (sample attached) in quadruplicate and signed by two (2) authorized signatories of the institution. 2. The accomplished COS form shall be forwarded to the Securities Servicing Department not later than 2:30 p.m. of value date for certification. An SSD authorized officer shall certify to the existence of the securities in the Securities Account of the bank/NBQB concerned by appending his signature on all copies. 3. The bank or NBQB shall submit the original document not later than 3:00 p.m. of the same day to the Central Bank Treasury, as basis for payment of the proceeds either by credit advice or by check. The CB Treasury shall not pay the seller without the verified complete documents. ( Effective June 10, 1983 ) SECTION 4284Q. Minimum Trading Lot . The minimum size of any single-deposit substitute transaction by any NBQB shall be Fifty Thousand Pesos (P50,000.00),irrespective of maturity. In connection with the minimum trading lot rule above-stated, no NBQB shall issue deposit-substitute instruments in the name of two or more persons or accounts. However, the following shall be considered as one person or account: (1) husband and wife, followed by the word "spouses" and (2) "in trust for" (ITF) arrangements. (As amended by Section 2, CBP Circular No. 1341, dated May 25, 1992) Funds borrowed by banks or NBQBs from trust departments or managed funds of banks or investment houses are not considered as interbank borrowings and, therefore, are subject to the minimum trading lot rule. LexLib SECTION 4285Q. Ceilings on Yield Rates ; Penalty for Pretermination . a. Deposit substitutes of NBQBs shall not be subject to yield ceilings or to any interest rate ceiling. b. A matured and an unclaimed deposit substitute 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. 1) Any deposit substitute terminated within the first half of its maturity period shall be paid an interest or yield rate equivalent to twenty-five per cent (25%) of the interest stipulated in the contract; 2) Any deposit substitute terminated within the second half of its maturity period shall be paid an interest or yield rate equivalent to fifty per cent (50%) of the interest stipulated in the contract; and 3) The provisions of this paragraph "b" shall not apply in the case of deposit substitute with maturities of more than 730 days which are preterminated more than 730 days after date of placement: Provided, however ,That if the interest or yield is paid in advance, the corresponding rebate shall be charged against the principal of the deposit substitute. SECTION 4286Q. ( Reserved ) SECTION 4287Q. Money Market Placements of Rural Banks . All NBQBs shall not accept money market placements of rural banks unless the latter present a certification under oath stating (a) that they do not have over-due special time deposits; (b) that they have no past-due obligations 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. As used in this section, the following terms shall have the following meanings: "Money market placements" shall include investments in debt instruments, including purchases of receivables with recourse to the lending institution, except purchases of government securities on an outright basis. "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. SUBSECTION 4287Q.1 Requirements for placement . Placements accepted which are otherwise not covered by the above prohibition must comply with the following conditions: a. That total money market placements of a rural bank, 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. The 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. SECTION 4288Q. ( Reserved ) SECTION 4289Q. Issuance of Commercial Paper . All financial intermediaries authorized to engage in quasi-banking functions and issuing or intending to issue commercial papers shall comply with the applicable provisions of the SEC rules on the registration of commercial papers appended hereto as Appendices 15 and 16. 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 4290Q. Without-Recourse Transactions . Borrowing by commercial, industrial and other non-financial companies, through the means listed in Sec. 4101Q for the limited purpose of financing their own needs or the needs of their agents or dealers, shall not constitute quasi-banking functions. The mere buying and selling without recourse of instruments mentioned in Sec. 4101Q shall not constitute quasi-banking functions: Provided, however ,That the institution selling, without recourse, shall indicate or stamp in conspicuous print on the instrument/s, as well as on the confirmation of sale, the phrase "without recourse",or "sans recourse" and the following statement: "(Name of non-bank) assumes no liability for the payment, directly or indirectly, of this instrument," Provided, further ,That in the absence of the phrase "without recourse",or "sans recourse" and the above-required accompanying statement, the instrument so issued, endorsed or accepted, shall automatically be considered as falling within the purview of the rules on quasi-banking. SUBSECTION 4290Q.1 Prohibited practices . The following regulations shall govern without recourse transactions of financial intermediaries: a. Any of the following practices or practices similar and/or tantamount thereto in connection with or 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 Item "b" below: (1) Issuance of postdated checks of the financial intermediary, whether for its own account or as an agent of the debt instrument issuer, 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. b. Any financial intermediary, as well as directors/officers/employees thereof, which engages in any or similar practices referred to in Item "a" above, shall be subject to the sanctions provided in Sec. 4299Q. Any investment house violating the provisions of this subsection shall be subject to the sanctions provided in Sections 12 and 16 of P.D. No. 129, as amended. K. OTHER BORROWINGS SECTION 4291Q. Borrowings from the Government . No non-bank financial intermediary, whether or not performing quasi-banking functions, shall 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. (Additional provisions as provided by CBP Circular No. 1153, dated September 3, 1987) (As amended by Sections 1 and 2 of CBP Circular No. 1242, dated June 20, 1990) SUBSECTION 4291Q.1 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, corporations 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 controlled corporations as above defined, and shall comprise "revenue funds", "trust funds and "depository 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. xxx xxx xxx "Depository 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 depositary of all government moneys in depositary banks. SUBSECTION 4291Q.2 Liquidity floor . Unless otherwise provided by the Monetary Board, deposits and/or borrowings from the Government and government entities by authorized banks, including those which are government-owned or controlled, shall not be subject to a liquidity floor: Provided ,That if government deposits and/or borrowings held by a bank, net of deposits and/or borrowings of the government agency, exceed fifty percent (50%) of the bank's total deposits and/or borrowings, the amount in excess thereof shall be subject to a thirty percent (30%) liquidity floor. ( Effective December 22, 1982 ) (As amended by CBP Circular No. 1386, dated March 3, 1993) SUBSECTION 4291Q.3 Exempt transactions . Compliance with the provisions of Sec. 4291Q and Subsec. 4291Q.2 is not required with respect to the following deposits and/or borrowings: a. Deposits of, and/or borrowings from PNB, DBP, LBP, and PAB; (As amended by Sec. 6 of CBP Circular 1190, dated November 10, 1988) b. Deposits of the National Food Authority (NFA) with banks incident to the credit lines extended by them to NFA in connection with the financing of its rice program; c. Marginal deposits on importations; d. Proceeds of DBP bonds sold by DBP- accredited sales and service agencies for the bond marketing operations of DBP; e. Funds received by private development banks as collecting agents of DBP pursuant to Monetary Board Resolution No. 1223 dated June 30, 1972; f. Collections representing premium contributions to the Social Security System: Provided ,That funds thus collected shall be remitted to the System within thirty (30) days from receipt thereof: Provided, further ,That such premium contributions shall not earn interest while in the custody of the banks nor shall any service charge be collected thereon; g. National Internal Revenue taxes, Customs and tariff duties, and export-premium duties collected by authorized agent banks; h. Deposits and/or borrowings from the Central Bank for purposes of relending in connection with CB-administered funds; i. Proceeds of rediscounting, repurchase agreements, and other credit facilities with the Central Bank; and j. Any other form of deposits and/or borrowings specifically authorized by law or exempted by the Monetary Board. SECTION 4292Q. 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 are not considered as interbank borrowings and, therefore, are subject to the: a. reserve requirement on deposit substitutes; b. minimum 15-day maturity period; c. minimum trading lot rule; and d. 20% final withholding tax on deposit substitutes. SECTION 4293Q. Deleted by Circular 1059 SUBSECTION 4293Q.1 Deleted by Circular 1059 SUBSECTION 4293Q.2 Deleted by Circular 1059 SECTION 4294Q. Interbank Borrowings . The regulations on interbank loan transactions prescribed in Sec. 4343Q shall also apply to interbank borrowings. SECTION 4295Q. ( Reserved ) SECTION 4296Q. Underwriting by Investment Houses . Underwriting commitments and fees of investment houses shall be subject to the basic rules issued by the Securities and Exchange Commission to implement the provisions of Presidential Decree No. 129, as amended, otherwise known as "The Investment Houses Law" (App. 17). SECTION 4297Q. Bond Issues of NBQBs . The following guidelines shall govern the bond issues of NBQBs. SUBSECTION 4297Q.1 Definition of terms . For purposes of the guidelines on bond issues of NBQBs, certain terms shall be defined as follows: a. "Government securities" shall refer to the evidences of indebtedness of the Republic of the Philippines or its instrumentalities, or of the Central Bank, and must be freely negotiable and regularly serviced. b. "Net book value" shall refer to the acquisition cost of property or accounts, plus additions and improvements thereon, less valuation reserves, if any. c. "Current market value" shall refer to the value of the property as established by a duly licensed and independent appraiser. SUBSECTION 4297Q.2 Notice to Central Bank . Within three (3) days from approval by SEC of its bond issue, an NBQB shall notify the appropriate department of the Central Bank of the approval attaching documents required by the SEC for the creation and registration of the bond issue. SUBSECTION 4297Q.3 Minimum features . Subject to Presidential Decree No. 678 and its implementing rules and regulations and for purposes of these guidelines, bond issues by NBQBs shall have the following minimum features: a. Form ; issue price ; denomination . The bonds shall be fully registered as to principal and interest. The issuer must maintain a bond registry duly approved by SEC for recording initial and subsequent transfers, the names of transferees, date of transfer, purchase price, and serial numbers of bonds transferred. Bonds may be issued at face value, at a discount, or at premium. Minimum denomination shall be P20,000.00. b. Term . The minimum maturity of the bonds shall be four (4) years. No optional redemption before the fourth year shall be allowed. c. Interest ; manner ; form of payment . The bonds shall not be subject to interest rate ceilings prescribed by the Monetary Board or Act No. 2655, as amended. Interest paid in advance shall not exceed the interest for one (1) year: Provided ,That interest shall not be paid in kind. d. Trust indenture ; collaterals ; sinking fund . A trust indenture shall be executed between the issuer and a qualified trust corporation as trustee, which shall neither be an affiliate nor a subsidiary of the issuer. The following shall be deemed as eligible collateral and shall be maintained at respective values indicated in relation to the face value of the bond issue: (1) Government Securities, Aggregate Current including Central Bank Market Value of Certificate of Indebtedness 100% (CBCIs) (2) High-grade Private Aggregate Current Securities listed in the Market Value of big board of stock 150% exchanges (3) Real Estate Net Book Value of 100% (4) Unmatured Receivables Net Book Value of Acquired with Recourse; 150% Lease Contracts Receivable (5) Unmatured Receivables Net Book Value of Acquired without Recourse 200% Government securities including CBCIs, private securities, certificates of title and documents evidencing receivables offered as security shall be physically delivered to the indenture trustee. The issuer may, at his option, provide for the retirement at maturity of the bond issue through a sinking fund to be deposited with and managed by the indenture trustee. e. Provision on the face of the certificate . A provision on the face of the bond certificate shall refer to the trust indenture and shall state the name of the indenture trustee. SUBSECTION 4297Q.4 Underwriting of bonds . Bond issues may be underwritten by entities including those which are affiliates or subsidiaries of the issuer. The investment of affiliates or subsidiaries in said bond issue shall be subject to: (a) individual and aggregate ceilings of 10% and 30%,respectively, of the bond issue; and (b) the condition that the investing affiliate or subsidiary does not have any outstanding loan from the issuer or that it shall not incur any indebtedness from the issuer during the period that the investment remains outstanding. SUBSECTION 4297Q.5 Minimum trading lot . Notwithstanding the provisions of existing regulations to the contrary, bonds issued under these guidelines shall be subject to a minimum trading lot of twenty thousand pesos (P20,000.00). SUBSECTION 4297Q.6 Inapplicability of certain regulations . Secs. 4284Q and 4290Q shall not apply to bonds issued under these guidelines. SUBSECTION 4297Q.7 Reserve requirement . Bonds issued by NBQBs under these guidelines including outstanding amounts on December 18, 1981 shall be subject to the same reserve requirement applicable to deposit substitutes of similar maturity. cdti SECTION 4298Q. ( Reserved ) SECTION 4299Q. General Provision on Sanctions . Any violation of the provisions of this Part shall be subject to the sanctions prescribed under Sections 34 and 34-B of Republic Act No. 265, as amended. NON-BANKS WITHOUT QUASI-BANKING FUNCTIONS A. (RESERVED) SECTIONS 4201N-4211N. ( Reserved ) B. SAVINGS DEPOSITS OF NSSLAs SECTION 4212N. Definition . Savings deposits are deposits evidenced by a passbook consisting of funds deposited to the credit of one or more individuals or corporations with respect to which the depositor may withdraw at any time, unless prior notice in writing of an intended withdrawal is required by the non-stock savings and loan association. SECTION 4213N. Interest on Savings Deposits . Savings deposits shall not be subject to any interest rate ceiling. SECTION 4214N. Reserves on Savings Deposits . Every NSSLAs shall maintain a reserve fund to meet withdrawals. The composition of the fund shall be as prescribed. The rules in Secs. 4253N and 4254N shall govern reserve fund and the computation of reserves. SECTION 4215N. ( Reserved ) SECTION 4216N. Deposits and Withdrawals . Savings deposits with non-stock savings and loan associations may be opened with a minimum deposit of P1.00. Withdrawals from a savings deposit shall be made through the presentation to the non-stock savings and loan association of a duly accomplished withdrawal slip together with the depositor's passbook. An association shall reserve the right to require the depositor to give prior written notice of withdrawal of not more than thirty (30) days. An association may limit the number of withdrawals that a depositor may make: Provided ,That the number of withdrawals allowed shall not be less than three (3) times a month. A service charge of twenty-five centavos (P0.25) may be charged by the association for every withdrawal made in excess of the maximum number allowed in any one month SECTIONS 4217N-4222N. ( Reserved ) C. (RESERVED) SECTIONS 4223N-4229N. ( Reserved ) D. TIME DEPOSITS OF NSSLAs SECTION 4230N. Definition . Time deposits are deposits evidenced by a negotiable or non-negotiable instrument which provides on its face that the amount of such deposit is payable on a fixed date or at the expiration of a certain specified time. SECTION 4231N. Interest on Time Deposits . Time deposits shall not be subject to any interest rate ceiling. SECTION 4232N. Reserves on Time Deposits . Every non-stock savings and loan association shall maintain a reserve fund to meet withdrawals against its time deposits equivalent to eight percent (8%) of such deposit liabilities. SECTION 4233N. Minimum Size and Term of Time Deposits a. Term No time deposit shall be accepted for a term of less than thirty (30) days. b. Minimum Size Non-stock savings and loan associations shall not require a minimum amount of time deposit greater than P1,000.00. SECTION 4234N. Withdrawal of Time Deposits . The withdrawal of a time deposit can be made only by presentation of the certificate of time deposit on the day of or after its maturity. SECTION 4235N. Certificates of Time Deposits . Certificates of time deposit shall be governed by rules prescribed under Subsec. 4261N.5. SECTIONS 4236N-4238N. ( Reserved ) E. GOVERNMENT DEPOSITS (See K. OTHER BORROWINGS) SECTIONS 4239N-4241N. ( Reserved ) F. INTEREST ON DEPOSITS SECTION 4242N. ( Reserved ) SECTION 4243N. Interest on Savings Deposits . Savings deposits of NSSLAs shall not be subject to any interest rate ceiling. SECTION 4244N. Interest on Time Deposits . Time deposits shall not be subject to any interest rate ceiling. SUBSECTION 4244N.1 Time of payment . Interest on time deposits 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 (1) year. SUBSECTION 4244N.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 an interest from maturity to the date of actual withdrawal or renewal at a rate applicable to savings deposits. SUBSECTION 4244N.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 4245N. Payment of Interest in Kind . NSSLAs shall not pay interest in kind on deposits. SECTIONS 4246N-4252N. ( Reserved ) G. RESERVES AGAINST DEPOSIT LIABILITIES SECTION 4253N. Reserve Fund . Every non-stock savings and loan association shall maintain a reserve fund to meet withdrawals against deposit liabilities equivalent to eight per cent (8%) of its savings and time deposit liabilities. SECTION 4254N. Composition and Computation of Reserves . The composition of the reserve fund shall be:(a) at least ten per cent (10%) in the form of cash on hand and/or cash in banks, and (b) the remaining ninety per cent (90%), in the form of evidences of indebtedness or obligations of the government, its political subdivisions or instrumentalities. For the purpose of computing the reserve fund, the value of government securities shall be the cost of acquisition. The association may keep physical possession of such government securities, but shall supply the Central Bank of the Philippines with the following information: (a) Name of issuer (b) Serial number (c) Denominations (d) Cost of acquisition (e) Maturity dates Premyo Savings Bonds (Regular and Biglang Bahay Series) shall continue to be eligible as reserves of non-stock savings and loan associations against deposit liabilities in accordance with the following schedule: ( Effective January 13, 1984 ) Per Cent of Reserve Required Requirement Ceiling on Government Securities 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. SECTIONS 4255N-4260N. ( Reserved ) H. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS SECTION 4261N. Opening and Operation of Deposit Accounts . The following are basic provisions on the opening and operation of deposit accounts of non-stock savings and loan associations. SUBSECTION 4261N.1 Who may open deposit accounts . Only members may open deposit accounts with non-stock savings and loan associations. A natural person, although lacking capacity to contract, may nevertheless open a savings or time deposit account for himself, provided he has sufficient discretion. However, he cannot withdraw therefrom, except through, or with the assistance of a guardian authorized to act for him. Parents may deposit for their minor children, and guardians for their wards. Notwithstanding the provisions of the preceding paragraphs, the cashier, bookkeeper and their assistants, and other employees of an association whose duties entail the handling of cash or checks are prohibited from opening deposit accounts with the head office/branch of the association in which they are assigned as such. SUBSECTION 4261N.2 Identification of member-depositors . A non-stock savings and loan association shall be responsible for the proper identification of its members-depositors. SUBSECTION 4261N.3 Number of deposit accounts . A member-depositor may open and have more than one savings deposit in his own name in the same capacity, and he may open and have various deposits in different capacities such as guardian, agent, or trustee for others. SUBSECTION 4261N.4 Signature card . A signature card bearing at least three (3) specimen signatures of each member-depositor shall be required upon opening of a deposit account. SUBSECTION 4261N.5 Passbook and certificate of time deposit . A savings deposit passbook, signed by the receiving teller and an authorized officer, shall be issued to a member depositor showing, among other things, his name and address, account number, date, amount of deposit, interest credits and balance. In the case of a time deposit, a certificate of time deposit signed by two authorized officers, shall be issued to the member-depositor containing, among other things, his name, amount of the deposit, date when the deposit was made, its due date and interest rate. Non-stock savings and loan associations shall pre-number their savings deposit passbooks and shall submit the serial numbers of their printed certificates of time deposits to the appropriate supervising and examining department of the Central Bank. (As amended by Section 4 of CBP Circular 1218 dated December 26, 1989) SUBSECTION 4261N.6 Deposits in checks and other cash items . Checks and other cash items may be accepted for deposit by non-stock savings and loan associations provided that withdrawals from such deposits shall not be made until the check or other cash item is collected. SUBSECTION 4261N.7 Checking accounts . No non-stock savings and loan association shall have or carry upon its books for any person any demand, commercial or checking account, or any credit to be withdrawn upon the presentation of any negotiable check or draft. SECTION 4262N. Acceptance of Deposits by Building and Loan Associations . Building and loan associations may accept deposits from their own members/stockholders. SECTIONS 4263N-4268N. ( Reserved ) I. (RESERVED) SECTIONS 4269N-4280N. ( Reserved ) J. (RESERVED) SECTIONS 4281N-4290N. ( Reserved ) K. OTHER BORROWINGS SECTION 4291N. Borrowings from the Government . No non-bank financial intermediary, whether or not performing quasi-banking functions, shall borrow funds through the issuance or sale of its acceptances, notes or other evidences of debt, from the Government and government entities. Borrowings from the Government shall be governed by rules prescribed under Sec. 4291Q. SECTION 4292N. ( Reserved ) SECTION 4293N. Registration and Issuance of Commercial Papers . All non-bank financial intermediaries which have outstanding commercial paper issues or are issuing or intending to issue commercial papers shall comply with the Rules on Registration of Commercial Papers of the Securities and Exchange Commission as approved by the Monetary Board (App. 15). When the issuance of commercial papers amounts to the performance of quasi-banking functions, the issuer shall first obtain a certificate of authority from the Central Bank. Non-bank financial intermediaries which have outstanding issues of, or are issuing or intending to issue, commercial papers with maturities of 366 days or more and bonds shall also comply with the Rules on Registration of Long-Term Commercial Papers and Bonds promulgated by the Securities and Exchange Commission and approved by the Monetary Board (App. 16). When the issuance of said commercial papers and bonds amounts to the performance of quasi-banking functions, the issuer shall first obtain a certificate of authority from the Central Bank. SECTION 4294N. Borrowings of NSSLAs . A non-stock savings and loan association may borrow money or incur such obligation up to not more than twenty per centum (20%) of the total assets of the association, from any public lending institution, such as the Development Bank of the Philippines, the Philippine National Bank, the Government Service Insurance System, the Social Security System and from private banking institutions, and such private lending institutions as may be approved by the Monetary Board: Provided ,That the proceeds of such loan shall be used exclusively to meet the normal credit requirements of its members: Provided, further ,That no part of the proceeds shall be used for the creation or acquisition of any fixed or capital assets or for operational expenses. The Monetary Board may, in meritorious cases, raise the ceiling on the borrowing capacity of a non-stock savings and loan association to not more than thirty per centum (30%) of its total assets. Non-stock savings and loan associations organized by employees of an entity or a corporation may borrow funds from said entity or corporation, but not vice-versa. SECTION 4295N. Borrowings of BLAs . The borrowing authority of building and loan associations under Section 48 of Republic Act 337, as amended, is broad enough to permit them to borrow from the stockholders thereof, as well as from other persons, subject to the restrictions prescribed therein (such as the borrowings being consistent with the objectives of the association). SECTIONS 4296N-4298N. ( Reserved ) SECTION 4299N. General Provision on Sanctions . Any violation of the provisions of this Part shall be subject to the sanctions under Sections 34 and 34-B of Republic Act No. 265, as amended, whenever applicable. * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas PART THREE Loans, Investments and Special Financing Programs NON BANKS WITH QUASI-BANKING FUNCTIONS (NBQBs) A. LOANS IN GENERAL SECTION 4301Q. Loan Limits The total liabilities of any person, company, corporation or firm, excluding the government and its instrumentalities or agencies, to an NBQB for money borrowed, excluding (a) loans secured by obligations of the Central Bank or of the Philippine government, (b) loans fully guaranteed by the Government as to the payment of principal and interest, (c) loans to the extent covered by hold-out on, or assignment of, deposit substitutes maintained in the lending NBQB and held in the Philippines, (d) loans and acceptances under a letter of credit to the extent covered by margin deposits, and (e) other loans or credit which the Monetary Board may, from time to time, specify as exclusions, shall at no time exceed fifteen per cent (15%) of the combined capital accounts, net of unbooked valuation reserves of the NBQBs. (As amended by Section 27 of CBP Circular 1057, Effective April 23, 1985) LexLib The total liabilities of any borrower may amount to a further fifteen per cent (15%) of the combined capital accounts of such NBQB, provided the additional liabilities are adequately secured by real estate mortgage, assignment or pledge of readily marketable bonds and other high-grade debt securities, except those issued by the lending entity. For purposes of this section, the term "liabilities shall mean the direct liability of the maker or acceptor of paper discounted with, or sold to, such NBQB and the liability of the indorser drawer or guarantor who obtains a loan from, or discounts paper with or sells papers under his guaranty to such NBQB and shall include, in the case of liabilities of a co-partnership or association, the liabilities of the several members thereof and shall include, in the case of liabilities of a corporation, all liabilities of all subsidiaries thereof in which such corporation owns or controls a majority interest; Provided ,that even if the parent corporation, co-partnership or association has no liability to the NBQB, the Monetary Board may prescribe the combination of the liabilities of subsidiary corporations or members of the co-partnership or association under certain circumstances, including, but need not be limited to, any of the following situations: (1) the parent corporation, co-partnership or association guarantees the repayment of the liabilities; (2 ) the liabilities were incurred for the accommodation of the parent corporation or another subsidiary or of the co-partnership or association; or (3) the subsidiaries, though separate entities, operate merely as departments or divisions of a single entity. (As amended by Section 2, CBP Circular No. 1146, dated May 27, 1987) Existing liabilities of any person, company, corporation or firm, which as of November 20, 1985, exceed the ceiling prescribed in this section shall be allowed up to maturity in accordance with their respective contracts; Provided ,however, that the liabilities maturing before three (3) years from November 20, 1985 may be renewed or extended to the same borrower to the extent of ninety per cent (90%) thereof. The terms of the subsequent renewals or extensions of the liabilities to the extent of ninety per cent (90%) thereof to reduce the same within the prescribed ceiling prescribed should not extend beyond three (3) years from November 20, 1985; Provided, further ,that once reduced within the prescribed ceiling, such liabilities shall not thereafter be increased beyond the ceiling. ( Effective November 20, 1985 ) SUBSECTION 4301Q.1 Arm's length transactions . An NBQB 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. Transactions with such corporations whose terms are more favorable than those of other similar transactions and which are outstanding as of January 2, 1976 shall have up to termination of the terms of the transactions within which to comply with the limitation under this section, and any renewal or extension thereof shall be subject to such limitation. SUBSECTION 4301Q.2 Exclusions from Loan Limit . In addition to those enumerated in Sec. 4301Q, the total liabilities of a commercial paper issuer for commercial papers held by a non-bank financial intermediary authorized to engage in quasi-banking functions as selling agent or a firm underwriter shall not be counted in determining compliance with the loan limit to a single borrower within a period of one hundred eighty (180) days from the acquisition of the commercial paper by a non-bank financial intermediary authorized to engage in quasi-banking functions; Provided ,That in no case shall such liabilities exceed five per cent (5%) of the net worth of the selling agent beyond the normal applicable single borrower limit. ( Effective April 29, 1985 ). SUBSECTION 4301Q.3 (Additional provision as provided by CBP Circular No. 1295 dated 1991) SECTION 4302Q. Minimum Guidelines on Lending Operations . a. Requirement of lending policies . Non-bank financial intermediaries with quasi-banking functions shall have well-defined lending policies which shall ensure that lending shall be upon terms which are in the best interest of the institution and in accordance with existing policy, rules, and regulations of the Monetary Board. Such policies shall be in writing to form part of the institution's permanent records and shall be made available for inspection by the Central Bank. b. Lending operations : definition . Lending operations refer to any type of credit accommodations, purchase of receivables and commercial papers, including purchase of commercial papers in the secondary market. c. Credit worthiness of borrowers . Before extending credit in any form, the financial institution must exercise proper caution to ascertain that the debtors, co-makers, indorsers, sureties and/or guarantors are capable of fulfilling their commitments. For this purpose, credit investigations must be conducted, and appropriate statements of assets and liabilities and of income and expenditures shall be required of credit applicants. d. Amounts, purpose and period of loan . Loans/Credit accommodations shall be granted only in amounts and for periods necessary for the completion of the operations to be financed, and for purposes which are attuned to government economic policies. e. Documentation of loans . All loans/credit extensions shall be supported by evidences of indebtedness and/or loan agreements which shall contain, among others, a statement of the purpose of the loan and a program of repayment of the obligation. f. Credit files . Adequate credit files of borrowers shall be maintained, which shall contain documents such as credit investigation reports, balance sheets, statements of assets and liabilities, income and expense statements, income tax returns, bank and trade checkings, and other documents/papers showing information which form the bases for the credit extension. g. Periodic review . A periodic review of the loan portfolio and the credit standing of borrowers shall be made. SECTION 4303Q. Interest, Yield, and Other Charges . The following rules shall govern the rates of interest on loans and yields on purchases of instruments by NBQBs: SUBSECTION 4303Q.1 Purchase of receivables . The rate of yield, including commissions, premiums, fees, and other charges from the purchase of receivables and other obligations, regardless of maturity that may be charged or received by NBQBs, shall not be subject to any regulatory ceiling. Receivables and other obligations shall include claims collectible in money of any amount and maturity from domestic and foreign sources. The Monetary Board shall determine in doubtful cases whether a particular claim is included within said phrase. SUBSECTION 4303Q.2 Loans . The rate of interest, including commissions, premiums, fees, and other charges on loan transactions, regardless of maturity and whether secured or unsecured, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended. SUBSECTION 4303Q.3 Floating rate of interest . The rate of interest on a floating rate loan during each interest period shall be stated on the basis of a reference rate plus a margin, as may be agreed upon by the parties. Reference rates for various interest periods shall be determined and announced by the Central Bank every week and shall be based on the weighted average of the interest rates paid during the immediately preceding week by the ten (10) commercial banks with the highest levels of outstanding deposit substitutes on promissory notes issued by such banks, with maturities corresponding to the interest periods for which such reference rates are being determined. The commercial banks, to be included for purposes of computing the reference rates, shall be reviewed and determined at the beginning of every calendar semester on the basis of the levels of their outstanding deposit substitutes as of May 31 or November 30, as the case may be. The rate of interest on floating rate loans, existing and outstanding as of April 2, 1982, shall continue to be determined on the basis of the reference rate obtained from the weighted average of the interest rates paid by the five banks with the largest volume of business transacted during the immediately preceding thirty (30) days, on time deposits with maturities of more than seven hundred thirty such banks, with maturities corresponding to the interest periods for which such reference rates are being determined. The commercial banks to be included for purposes of computing the reference rates shall be reviewed and determined at the beginning of every calendar semester on the basis of the levels of their outstanding deposit substitutes as of May 31 or November 30, as the case may be. The rate of interest on floating rate loans, existing and outstanding as of April 2, 1982 shall continue to be determined on the basis of the reference rate obtained from the weighted average of the interest rates paid by the five banks with the largest volume of business transacted during the immediately preceding thirty (30) days, on time deposits with maturities of more than seven hundred thirty (730) days, which shall be announced by the Central Bank every month for as long as such loans are existing and outstanding: Provided, however ,That the parties to such existing floating rate loan agreements are not precluded from amending or modifying their loan agreements by adopting a floating rate of interest determined on the basis of the reference rate mentioned in the next preceding paragraph. d. Where the loan agreement provides for a floating interest rate, the interest period, which shall be such period of time for which the rate of interest is fixed, shall be such period as may be agreed upon by the parties. SUBSECTION 4303Q.5 Definitions of terms a. For purposes of Subsecs. 4303Q.1 and 4303Q.3 "effective rate" shall mean the price paid for the use of money expressed as a percentage on an annual basis of the amount actually received. In case the principal is amortized, the rate shall be computed on the basis of the outstanding balance. The computation assumes that interest is paid at maturity, or at the end of one year, if the maturity of the loan exceeds one year. Lending institutions may require the repayment of loans by amortization provided interest is computed on the basis of diminishing balance. If there is no agreement on the rebate of interest in the event of prepayment of the loan, the creditor is not under any legal obligation to return the interest corresponding to the period from date of prepayment to the stipulated maturity date of the loan. Any prepayment made by the debtor should not, therefore, affect the computation of the effective rate stipulated in the loan contract. b. "Receivables and other obligations" shall include claims collectible in money of any amount and maturity from domestic and foreign sources. The Monetary Board shall determine in doubtful cases whether a particular claim is included within said phrase. SUBSECTION 4303Q.6 Loans under Usury Law . Except as provided for in this Section, loans or renewals thereof shall continue to be governed by the Usury Law, as amended. SUBSECTION 4303Q.7 Interbank interest/yield rate Interest/yield rates for interbank loan transactions among banks, between banks and non-bank financial intermediaries performing quasi-banking functions and among NBQBs shall not be subject to any ceiling. Note: Amendments of Subsec. 4303Q.7 as provided by the following CBP Circulars: 1) Section 6, CBP Circular No. 1147, dated June 19, 1987; 2) Section 2, CBP Circular No. 1155, dated September 4, 1987. SUBSECTION 4303Q.8 Charges . The maximum rates under Subsecs. 4303Q.1 and 4303Q.3 include commissions, premiums, notarial fees, and other similar charges. They do not include registration fees, mortgage redemption insurance, documentary and science taxes and such other expenses independently determinable and which do not accrue to the lending entity, its affiliates/subsidiaries, and their personnel. Notarial fees are not included in the maximum rates if: a) they are paid to a Notary Public who is not employed with the lending entity, its affiliates/subsidiaries; and b) the lending entity/its affiliates/subsidiaries and their personnel do not share in the notarial fees. SUBSECTION 4303Q.9 Exemptions . The following transactions which are peculiar to financing companies with quasi-banking functions which involve the financing of consumer durable goods and capital goods shall be governed by R.A. 5980 and the Basic Rules and Regulations to Implement the Provisions of R.A. 5980, as amended, hereto attached as App. 18. a. Financing of receivables and other evidences of indebtedness through discounting, factoring, purchase or assignment; and b. Leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property. All other transactions of financing companies performing quasi-banking functions, such as the following: (1) Purchase of government securities for money market operations; (2) Purchase of commercial papers or private securities to accommodate temporary liquidity or for money market purposes; and (3) Purchase of government securities and private securities under resale agreements, certificates of assignment, and certificates of participation with recourse shall be governed by the other provisions of this Section and all deposit substitutes shall be governed by Sec. 4285Q. SUBSECTION 4303Q.10 Loan prepayment . The borrower of an NBQB shall not be prohibited from prepaying a loan. A stipulation requiring the consent of the lending NBQB to such prepayment shall be contrary to this provision. In the absence of any stipulation as to penalty, in case of prepayment in the loan contract, such prepayment shall not be subject to penalty. However, the parties may stipulate that prepayment shall be subject to penalty provided that the penalty is not excessive or unconscionable . SUBSECTION 4303Q.11 Escalation clause ; when allowable . Section 2 of Presidential Decree No. 1684 dated March 17, 1980, amended Act No. 2655 (The Usury Law) by adding a new section to read as follows: "SECTION 7-a. Parties to an agreement pertaining to a loan or forbearance of money, goods or credits may stipulate that the rate of interest agreed upon may be increased in the event that the applicable maximum rate of interest is increased by the Monetary Board: Provided ,That such stipulation shall be valid only if there is also a stipulation in the agreement that the rate of interest agreed upon shall be reduced in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board: Provided , further ,That the adjustment in the rate of interest agreed upon shall take effect on or after the effectivity of the increase or decrease in the maximum rate of interest." SECTION 4304Q. Past Due Accounts . Past due accounts of a financial intermediary shall, as a general rule, refer to all accounts in its loan portfolio, all receivable components of trading accounts securities, and other receivables, as defined in the Manual of Accounts for non-bank financial intermediaries, which are not paid at maturity. SUBSECTION 4304Q.1 Loans by type ; when past due . The following shall be considered as past due: a. A loan or receivable payable on demand not paid upon written demand as required in Subsec. 4304Q.2 or within one (1) year from date of grant or renewal, whichever comes earlier; b. A customer's liability import bill (sight) outstanding after thirty (30) days from date of original entry; c. Bill purchased and other negotiable instruments not paid at maturity, or dishonored upon presentment for acceptance or payment whichever comes earlier: Provided, however ,That out-of-town checks lodged under ''Bills Purchased (Domestic Bills Purchased Clean)" shall be considered past due thirty (30) days from purchase; d. A temporary overdraft when such overdrawing or any charge or item lodged under TOD is not cleared within fifteen (15) days from date of grant;(As deleted by Section 2, CBP Circular No. 1147, dated June 19, 1987) e. The total outstanding balance of a loan or receivable payable in installments, in accordance with the following schedule: Mode of Payment Installment in Arrears Monthly 10 or more Quarterly 4 or more Semestrally 3 or more Annually 2 or more (As amended by Section 4, CBP Circular No. 1147, dated June 19, 1987) f. Any due and unpaid loan installment or portion thereof, from the time the obligor defaults for the purpose of determining delinquency in the payment of obligations as defined in Sec. 4143Q(g);and g. All items in litigation as defined in the Manual of Accounts for non-bank financial intermediaries.(As amended by Section 5, CBP Circular No. 1147, dated June 19, 1987) SUBSECTION 4304Q.2 Unpaid demand loan . NBQBs shall in case of non-payment of a demand loan, make a written demand within six (6) months following the grant of such loan. The demand shall indicate a period of payment which shall not be later than six (6) months from date of said demand. SUBSECTION 4304Q.3 Non-accrual of interest . No interest income shall be accrued on past due accounts. Interest on past due accounts shall be taken up as income only when actual payments thereon are received. SUBSECTION 4304Q.4 Renewal ; extension of maturity . Except as may be authorized by existing regulations on renewal, no loan shall be renewed or its maturity date extended unless the corresponding accrued interest receivable shall have been paid. SUBSECTION 4304Q.5 Allowance for doubtful accounts . A full 100% reserve should be established on loss accounts and 50% on doubtful accounts. Setting up reserves for other accounts is not precluded. SECTION 4305Q. Truth in Lending Act (TLA) Disclosure . 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 the following information: a. The cash price or delivered price of the property or service to be acquired; b. The amounts if any, to be credited as down payment and/or trade-in; c. The differences between the amounts set forth under clauses (a) and (b); d. 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; e. The total amount to be financed; f. The finance charges expressed in terms of pesos and centavos; and g. The percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. The contract covering the credit transaction, or any other document to be acknowledged and signed by the debtor, shall indicate the above seven items of information. In addition, the contract or document shall specify additional charges, if any, which will be collected in case certain stipulations in the contract are not met by the debtor. In case the seven items of information mentioned in this Section are not disclosed in the contract covering the credit transaction, said items, to the extent applicable, shall be disclosed in another document in a form to be prescribed by the Monetary Board, to be signed by the debtor and appended to the main contract. SUBSECTION 4305Q.1 Definition of terms a. "Creditor" (who shall furnish the information) means any person engaged in the business of extending credit (including any person who as a regular business practice makes loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent),who requires as an incident to the extension of credit, the payment of a Finance charge. The term creditor shall include, but shall not be limited to, banks and banking institutions, insurance and bonding companies, savings and loan associations, credit unions, financing companies, installment houses, real estate dealers, lending investors, pawnshops, and any other person or entity engaged in the business of extending credit, who requires as an incident to the extension of credit, the payment of a finance charge. b. "Person" means any individual, corporation, partnership, association, or other organized group of persons, or the legal successor or representative of the foregoing, and includes the Philippine Government or any agency thereof, or any other government, or any of its political subdivisions, or any agency of the foregoing. c. "Cash price or delivered price" (in case of trade transactions) is the amount of money which would constitute full payment upon delivery of the property (except money) or service purchased at the creditor's place of business. In the case of financial transactions, cash price represents the amount of money received by the debtor upon consummation of the credit transaction, net of finance charges collected at the time the credit is extended (if any). d. "Down payment" represents the amount paid by the debtor at the time of the transaction in partial payment for the property or service purchased. e. "Trade-in" represents the value of an asset, agreed upon by the creditor and debtor, given at the time of the transaction in partial payment for the property or service purchased. f. "Non-finance charges" correspond to the amounts advanced by the creditor for items normally associated with the ownership of the property or of the availment of the service purchased which are not incident to the extension of credit. For example, in the case of the purchase of an automobile on credit, the creditor may advance the insurance premium as well as the registration fee for the account of the debtor. g. "Amount to be financed'' consists of the cash price plus non-finance charges less the amount of the down payment and value of the trade in. h. "Finance charge" represents the amount to be paid by the debtor incident to the extension of credit such as interest or discounts, collection fees, credit investigation fees, attorney's fees, and other service charges. The total finance charge represents the difference between (i) the aggregate consideration (down payment plus installments) on the part of the debtor, and (ii) the sum of the cash price and non-finance charges. i. "Simple annual rate" is the uniform percentage which represents the ratio, on an annual basis, between the finance charges and the amount to be financed. SUBSECTION 4305Q.2 Determination of simple annual rate . In the case of a single payment upon maturity, the simple annual rate in per cent is determined by the following method: (finance charge) (12) R = x x 100% (amount to be (maturity period in financed) months) In the case of the normal installment type of credit of at least one year in duration, where installment payments of equal amount are made in regular time periods spaced not more than one year apart, the simple annual rate (r),in per cent, is computed by the following method: (number of pay- (finance charge ) ments in a year) R = 2x x x 100% (amount to be financed) (total number of payments plus one) In cases where the credit matures in less than one year (e.g.,installment payments are required every month for six months ),the same formula will apply except that: the number of payments in a year would refer to the number of installment periods, as defined in the credit contract, as if the credit matures in one year. For example, the number of payments a year would be twelve for this purpose in cases where six monthly installment payments are called for in the credit transaction. 1 In cases where credit terms provide for premium or penalty charges depending on, say, the timeliness of the debtor's payments, the annual rate to be disclosed in writing shall be the rate for regular payments, i.e.,the premium and penalty need not be taken into account in the determination of the annual rate. Such premium or penalty charges shall, however, be indicated in the credit contract. SUBSECTION 4305Q.3 Credit transactions covered . The above regulations shall apply to all creditors engaged in the following types of credit transactions: a. Any loans, mortgages, deeds or trust, advances and discounts; b. Any conditional sales contract, any contract to sell, or sale or contract of sale of property or services, either for present or future delivery, under which part or all of the price is payable subsequent to the making of such sale or contract; c. Any rental-purchase contract; d. Any contract or arrangement for the hire, bailment, or leasing of property. e. Any option, demand, lien, pledge, or other claim against, or for delivery of, property or money; f. Any purchase, or other acquisition of, or any credit upon the security of, any obligation or claim arising out of any of the foregoing; and g. Any transaction or series of transactions having a similar purpose or effect. SUBSECTION 4305Q.4 T ransactions not covered . Considering that the specific purpose of the law is the full disclosure of the true cost of credit, the following categories of credit transactions are outside the scope of the above regulations: a. Credit transactions which do not involve the payment of any finance charge by the debtor; and b. Credit transactions in which the debtor is the one specifying a definite and fixed set of credit terms such as bank deposits, insurance contracts, sale of bonds, etc. SUBSECTION 4305Q.5 Records subject to examination . Every creditor shall keep in his office or place of business copies of contracts covering all credit transactions entered into by him which involve the extension of credit to another and the payment of finance charges therefor. Such copies shall be available for inspection or examination by the respective directors of the appropriate supervising and examining departments of the Central Bank of the Philippines or their duly authorized deputies. SUBSECTION 4305Q.6 Posting of Truth in Lending Act Abstract . An abstract of R.A. No. 3765 otherwise known as the "Truth in Lending Act" (App. 19) shall be reproduced in a format which is 60 cm. wide and 75 cm. long, and posted on a conspicuous place in the creditor's place(s) of business. SUBSECTION 4305Q.7 Prescribed disclosure format . A "Disclosure Statement on Loan/Credit Transaction" (App. 20) is hereby prescribed for use by NBQBs and creditors other than banks, building and loan associations, and non-stock savings and loan associations. A copy of such disclosure statement, shall be furnished every borrower. SUBSECTION 4305Q.8 Submission of information sheets and other reports . Every creditor other than banks, building and loan associations and NSSLAs, shall accomplish and file an information sheet with the DFI-NB, within 30 days from start of operations for new firms. NBFIs which have filed information sheets with the DFI-NB need not file the same. SUBSECTION 4305Q.9 Sanctions a. Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Section or any regulation issued hereafter 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. Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction. In any action under this Sub-section in which any person is entitled to a recovery, the creditor shall be liable for reasonable attorney's fees and court courts as determined by the court. b. Except as specified in Item "a" above, nothing contained in this rule shall affect the validity or enforceability of any contract or transaction; c. Any person who wilfully violates any provision of this Section or regulation issued hereafter shall be fined by not less than P1,000 nor more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both. d. No punishment or penalty provided by this Section shall apply to the Philippine Government or any agency or any political subdivision thereof. SECTION 4306Q-4310Q. ( Reserved ) B. (RESERVED) SECTION 4311Q-4318Q. ( Reserved ) C. (RESERVED) SECTION 4319Q-4325Q. ( Reserved ) D. LOANS/CREDIT ACCOMMODATIONS TO DIRECTORS, OFFICERS, STOCKHOLDERS AND THEIR RELATED INTERESTS (DOSRI) SECTION 4326Q. General Policy ; Definitions . The following regulations shall govern loans and other credit accommodations, both direct and indirect, by an NBQB to its directors, officers, stockholders and their related interests (DOSRI). Dealings of an NBQB with any of its directors, officers or stockholders and their related interests should be in the regular course of business and upon terms not less favorable to the NBQB than those offered to others. For purposes of this Section, the following definitions shall apply: a. "Stockholder" shall refer to any stockholder of record in the books of the NBQB, acting personally, or through an attorney-in-fact, executor, administrator or guardian of a minor, incompetent and/or deceased stockholder or through a trustee designated by one or more stockholders pursuant to a voting trust agreement, whose stockholdings in the lending NBQB, individually and/or together with his spouse or relative within the first degree of consanguinity or affinity or relative by legal adoption; a partnership in which the stockholder or his spouse or any of his relatives mentioned above is a general partner; and a co-owner with the stockholder or the stockholder's spouse or relative mentioned above of a property, amount to ten per cent (10%) or more of the total subscribed capital stock of the NBQB. b. "Outstanding loans to and placements with the NBQB" shall refer to loans to and deposit substitutes of the NBQB which are not subject of an assignment or hold-out agreement. c. "Book value of the paid-in capital contribution" shall mean the proportional amount of the NBQB's total capital accounts (net of such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank) as the corresponding paid-in capital contribution of each director, officer or stockholder concerned bears to the total paid-in capital of the NBQB: Provided ,That, as a basis for determining the individual ceiling referred to in Sec. 4330Q, corresponding book value of the shares of stock of such director, officer or stockholder which are the subject of pledge, assignment or any other encumbrance shall be deducted therefrom. d. "Secured loan, borrowing, or credit accommodation" shall refer to any loan, discount, credit or advance, or portion thereof referred to in Sec. 4327Q which is secured by real estate mortgage; chattel mortgage on tangible assets; standby letters of credit issued by foreign banks; assignment of or hold-out on deposit substitutes issued by the lending entity; cash margin deposits; lease contracts receivable to the extent covered by guaranty deposits; or assignment or pledge of government securities or readily marketable bonds and other high-grade debt securities except those issued by the lending entity. For investment houses with quasi-banking functions, a secured loan, borrowing or credit accommodation shall likewise include: (1) customer's liability under import bills outstanding for not more than thirty (30) days from date of original entry; (2) sales contract receivable arising out of sale of real property on credit wherein title to the property is retained by the NBQB. e. "Unsecured loan, borrowing or credit accommodation" shall refer to any loan, discount, credit or advance, or portion thereof referred to in Sec. 4327Q which is not secured in accordance with paragraph "d" above. SECTION 4327Q. Transactions Covered . The terms "loan "borrow","money borrowed" and "credit accommodations" as used herein have reference to transactions which involve the grant, renewal, extension or increase of any loan, discount, credit or advance in any form whatsoever, and shall include: a. Outstanding availments under an established credit line; b. Drawings against an existing letter of credit; c. The acquisition by discount, purchase, exchange or otherwise of any note, draft, bill of exchange or other evidence of indebtedness upon which a director, officer or stockholder may be liable as a maker, drawer, acceptor, indorser, guarantor, or surety; d. Any advance of unearned salary or other unearned compensation for periods in excess of thirty (30) days; e. Loans or other credit accommodations granted by another financial intermediary to such director, officer or stockholder from funds of the NBQB invested in the other institution's trust or other department when there is a clear relationship between the transactions; f. The increase of an existing indebtedness, as well as additional availments under a credit line or additional drawings against a letter of credit; g. The sale of assets, such as shares of stock, on credit; h. Leasing transactions under Republic Act No. 5980; and i. Any other transaction as a result of which a director, officer or stockholder becomes obligated or may become obligated to the lending NBQB, directly or indirectly, by any means whatsoever to pay money or its equivalent. SECTION 4328Q. Transactions not Covered . The terms "loan","borrow","money borrowed or "credit accommodation" as used herein shall not refer to the following transactions: cdpr a. Advances against accrued compensation, or for the purpose of providing payment of authorized travel, legitimate expenses or other transactions for the account of the NBQB or for utilization of maternity and other leave credits; b. The increase in the amount of outstanding credit accommodation as a result of additional charges or advances made by the NBQB to protect its interests such as taxes, insurance, etc.; c. The discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same, including but not limited to the acquisition of export bills from any of its directors, officers, stockholders (including foreign bank stockholders) and their related interests which are drawn in accordance with the terms and conditions of the covering letters of credit: Provided ,That the transaction shall automatically be subject to the ceilings as herein provided once the director, officer or stockholder and/or their related interest who is a party to the transaction becomes directly liable to the NBQB; d. Transactions with a foreign bank or other financial institution which has stockholdings in the NBQB where the foreign bank or other financial institution acts as guarantor through the issuance of letters of credit, guarantee letters or assignment of a deposit in a currency eligible as part of our international reserves and held in a bank in the Philippines to secure credit accommodations granted to another person or entity: Provided ,That the foreign bank stockholder shall automatically be subject to the ceilings as herein provided in the event that its contingent liability as guarantor becomes a real liability; and e. Deposits of an NBQB with a bank whether domestic or foreign which has stockholdings in the NBQB. SECTION 4329Q. Direct/Indirect Borrowings . For purposes of this Section, a credit accommodation shall be considered a direct or indirect borrowing in accordance with the following criteria: a. Direct borrowing. If the director, officer or stockholder of the lending NBQB is a party to any of the transactions enumerated in Sec. 4327Q for himself or as the representative or agent of others, or if he acts as a guarantor, indorser or surety for loans from the NBQB or if the loans or credit accommodation to another party is secured by a property interest or right of the director, officer or stockholder. b. Indirect borrowing. If in any of the transactions in Sec. 4327Q the borrower, guarantor, indorser, or surety is a: (1) Spouse or relative within the first degree of consanguinity or affinity, or relative by legal adoption of a director, officer or stockholder of the NBQB; (2) Partnership of which a director, officer, or stockholder or his spouse or relative within the first degree of consanguinity or affinity, or relative by legal adoption, is a general partner; (3) Co-owner with the director, officer, stockholder or his spouse or relative within the first degree of consanguinity or affinity, or relative by legal adoption of the property or interest or right mortgaged, pledged or assigned to secure the loans or credit accommodations, except when the mortgage, pledge or assignment covers only said co-owner's undivided interest; (4) Corporation, association, or firm of which a director or officer of the NBQB, or his spouse is also a director or officer of such corporation, association or firm, except (i) where the securities of such corporation, association or firm are listed and traded in the big board or commercial and industrial board of domestic stock exchange and less than fifty per cent (50%) of the voting stock thereof is owned by any one person or by persons related to each other within the third degree of consanguinity or affinity; or (ii) where the director, officer or stockholder of the lending NBQB sits as a representative of the NBQB in the board of directors of such corporation: Provided ,That the NBQB representative shall not have any equity interest in the borrower corporation except for the minimum shares required by law, rules and regulations, or by the by-laws of the corporation, to qualify a person as director of the corporation: Provided, finally ,That the borrowing corporation under (i) or (ii) is not among those mentioned in Items b(5) and b(6) of this Section; (5) Corporation, association or firm of which any or a group of directors, officers, stockholders of the lending NBQB and/or their spouses or relatives within the first degree of consanguinity or affinity, or relative by legal adoption, hold/own more than twenty per cent (20%) of the subscribed capital of such corporation, or of the equity of such association or firm; (6) Corporation, association or firm wholly or majority-owned or controlled by any or a group of related entities mentioned in Items (2),(4) and (5) of this Section; Other cases of direct/indirect borrowing shall be resolved on a case-to-case basis. It shall be the responsibility of the NBQB concerned to ascertain whether the borrower, guarantor, representative, indorser or surety is related to persons mentioned in Item b(1) of this Section or connected with any of the directors, officers or stockholders of the NBQB in any of the capacities mentioned in Items b(2),b(3),b(4),b(5) and b(6) of this Section. SECTION 4330Q. Individual Ceiling ; Single-Borrower Limit . The total outstanding direct credit accommodations to each of the NBQB's directors, officers or stockholders, excluding those granted under officers' fringe benefit plans, shall not exceed, at any time, an amount equivalent to his outstanding loans to, and placement with, the NBQB and book value of his paid-in capital contribution in the lending NBQB: Provided ,That unsecured credit accommodations to each of the NBQB's directors, officers or stockholders shall not exceed thirty per cent (30%) of his total credit accommodations. Notwithstanding the provisions of this Section, credit accommodations of an NBQB to any one of its directors, officers, stockholders or their related interests shall not exceed the single-borrower limit prescribed for NBQBs. SECTION 4331Q. Aggregate Ceiling ; Ceiling on Unsecured loans . Except with prior approval of the Monetary Board, the total outstanding borrowings of directors, officers, or stockholders, whether direct or indirect, shall not exceed one hundred per cent (100%) of combined capital accounts, net of deferred income tax as defined under item 'h' of Section 4117Q, and such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank. For the purpose of determining compliance with the ceiling on unsecured loans, NBQBs shall be allowed to average their ceiling on unsecured loans and their outstanding unsecured loans every quarter. (Effective April 23, 1985) In evaluating requests for extension of loans in excess of the aggregate ceiling, the Central Bank shall consider the credit standing of the borrower, viability of the projects financed by such loans in relation to national objectives, collateral or security, and other pertinent considerations. SECTION 4332Q. Exclusions from Aggregate Ceiling . The following credit accommodations shall be excluded in determining compliance with the aggregate ceiling: a. Credit accommodations to the extent covered by hold-out on, or assignment of, deposit substitutes, or covered by cash margin deposits or secured by evidence of indebtedness of the Republic of the Philippines or of the Central Bank, or by other evidences of indebtedness or obligations, the servicing and repayment of which are fully guaranteed by the Republic of the Philippines; b. Credit accommodations to a corporate stockholder which meets all the following conditions: (1) The corporation is a non-financial institution; (2) Its shares are listed and traded in the big board or commercial and industrial board of domestic stock exchanges; (3) Its stockholdings in the lending NBQB do not exceed thirty per cent (30%) of the voting stock of the NBQB; and (4) No person or group of persons related within the first degree of consanguinity or affinity holds/owns more than twenty per cent (20%) of the subscribed capital of the corporation. c. Credit accommodations granted under officers fringe benefit plans. SECTION 4333Q. Credit Accommodations Under Officers' Fringe Benefit Plans . The aggregate outstanding liabilities to an NBQB of its officers, extended under officers' fringe benefit plans for the purpose of house, car, and appliance financing, and meeting educational, medical, hospital, and other similar expenses, shall not exceed thirty per cent (30%) of the combined capital accounts of the lending entity; Provided , That NBQBs shall submit, for record purposes, copies of their officers fringe benefit plans to the appropriate department of the Central Bank. SECTION 4334Q. Procedural Requirements . The following provisions shall apply if a director or officer is a party, directly or indirectly, to, or acts as the representative or agent of, others in any of the transactions under Sec. 4327Q. a. Approval of the board of directors ; when to obtain . Except with the prior written approval of the majority of the directors, excluding the director concerned, no loan or other credit accommodation shall be granted nor any of the transactions under Section 4327Q be entered into. b. Approval by the board ; how manifested . The approval, as required in Item "a" above, shall be manifested in a resolution passed by the board of directors duly assembled during a regular or special meeting for the purpose and made of record. c. Majority of the directors ; computation of . The computation of the majority of the directors, excluding the director concerned, shall be based on the total number of directors of the NBQB, as provided in its articles of incorporation and by-laws. d. Contents of the resolution . The resolution of the board of directors shall contain the following information: (1) Name of the director or officer concerned and his relationship as regards the credit accommodation, such as principal, indorser, spouse of borrower, etc.; (2) Nature of the loan or other credit accommodation, purpose, amount, credit basis for such loan or credit accommodation, security and appraisal thereof, maturity, interest rate, schedule of repayment, and other terms of the loan or credit accommodation; (3) Date of the resolution; (4) Names of the directors who were present and who participated in the deliberations of the meeting; (5) Names in print and signatures of the directors approving the resolution, provided that the corporate secretary may sign, under a power-of-attorney, in behalf of a director who was present in the board meeting and who approved such resolution, in instances where such signature is necessary, to indicate that such resolution was approved by a majority of the directors; (6) Such other information as may be required by the appropriate department of the Central Bank. e. Transmittal of copy of board of directors' approval ; contents thereof . A copy of the written approval of the board of directors, as herein required, shall be submitted to the appropriate department of the Central Bank within 20 business days from the date of approval. The copy may be a duplicate of the original, or a reproduction copy showing clearly the signatures of the approving directors; Provided ,That if a reproduction copy is to be submitted, it shall contain, on its face or reverse side, a signed certification by the Secretary that it is a reproduction of the original written approval. prcd SECTION 4335Q. Transitory Provisions . Credit accommodations not previously covered by the ceilings, as prescribed and which are now covered by and exceed the ceilings under these rules, shall be allowed up to maturity in accordance with their respective contracts; Provided, however ,That such credit accommodations maturing within three (3) years from July 1, 1980 may be renewed or extended to the same borrower, to the extent of 90% thereof. The term of subsequent renewals or extensions of such credit accommodations up to 90% thereof shall not be beyond July 1, 1983; Provided, further ,That once reduced within the prescribed ceilings, such credit accommodations shall not thereafter be increased beyond such ceilings. SECTION 4336Q. Sanctions for Violation of DOSRI Rules . No NBQB shall grant, renew or extend any credit accommodation to its directors, officers, stockholders, and related interests of its directors, officers, and stockholders, whenever its combined capital accounts is deficient relative to risk assets held under Sec. 4116Q, or whenever its paid-in capital is deficient relative to the required minimum capitalization. Neither shall it grant, renew or extend any credit accommodation to any; of its directors, officers, stockholders, and related interests of its directors, officers, and stockholders, who have past due credit accommodations or arrearages of thirty (30) days or more with such non-bank financial intermediary. SECTION 4337Q. Report Requirements . The rules on reporting requirements in Sec. 4161Q pertaining to DOSRI loans shall be observed. SECTION 4338Q-4340Q. ( Reserved ) E. SPECIFIC TYPES/CLASSES OF LOANS SECTION 4341Q. Peso Borrowings by Foreign Firms . The Monetary Board constituted a permanent Inter-Agency Committee composed of representatives from the Central Bank, the Board of Investments, the National Economic and Development Authority and the Ministry of Finance, to administer and implement the following policies, rules and regulations under which foreign companies in the Philippines may avail themselves of peso borrowings: a. The Committee shall implement this Section under the guiding principle that foreign companies operating in the Philippines are expected to bring in adequate capital and that peso borrowing for capital requirements should be maintained at reasonable levels. b. No NBQB shall grant to or maintain outstanding peso loans of, a foreign firm except upon presentation of a valid certification by the Committee that the applicant foreign firm meets the Guidelines (App. 21).NBQB shall incorporate in their loan agreements with foreign firms covering loans with maturities beyond the validity date of the certification, a stipulation that the borrower shall renew the certification and that the failure of the borrower to obtain a renewed certification within thirty (30) days after the expiry date thereof shall make the outstanding balance of the loan due and demandable. Foreign firms with peso loans maturing beyond the expiry dates of their certification shall file with the Committee the necessary application for the renewal of such certifications, at least thirty (30) days before the expiry dates thereof. c. The certification shall be issued primarily on the basis of evidence that the applicant foreign firm meets the debt-to-equity ratio prescribed by the Inter-Agency Committee in accordance with the economic activity of the firm. d. Foreign firms availing themselves of foreign currency borrowings shall comply with pertinent Central Bank regulations. e. The provisions of this Section and the implementing Guidelines shall not apply to foreign banks and foreign-owned non-bank financial intermediaries with respect to their peso borrowings. The Monetary Board, upon recommendation of the Inter-Agency Committee, may exempt other foreign firms from the requirements of this Section and the Guidelines in meritorious cases. f. For purposes of this Section, foreign firms are hereby defined to include (a) single proprietorships owned by non-Filipino citizens, (b) partnerships, more than forty per cent (40%) of whose total capital is owned by non-Filipino citizens, and (c) corporations, more than forty per cent (40%) of whose total subscribed capital stock is owned by non-Filipino citizens. g. 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 existing rules. 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. SUBSECTION 4341Q.1 Sanctions a. Any wilful violation of the provisions of Sec. 4341Q shall subject the person or persons responsible for such violation to the penalties provided for by Section 34 of R.A. 265, as amended. If the violation is committed by an NBQB, the directors and/or officers responsible therefor shall be subject further to the administrative sanctions provided for under Section 34-B of the same Act. b. The wilful making of a false statement or any material misrepresentation in the application for certification or in the supporting documents shall be sufficient ground for the disapproval of the application or the revocation of the certification if the same has been issued, without prejudice to the institution of criminal action against the person responsible therefor as may be warranted under the circumstance. Such false statement or material misrepresentation shall also constitute as a sufficient ground for the denial of subsequent applications for certification filed by the foreign firm concerned; and c. Any violation of the terms and conditions of the certification issued by the Inter-Agency Committee shall constitute a sufficient ground for the revocation of the certification and for the denial of subsequent applications for certification filed by the foreign firm concerned. SECTION 4342Q. (Reserved) SECTION 4343Q. Interbank Loans . The following regulations shall govern interbank loans transactions of commercial banks, thrift banks and NBQBs: a. All interbank loan transactions shall be submitted to the Central Bank Accounting Department by means of interbank loan advice or repayment transfer tickets from 9:00 am. to 12:00 noon of the succeeding banking day, for value the prior banking day. For this purpose, interbank loan transactions shall include, among others, (a) call loan transactions, (b) borrowings evidenced by deposit substitute instruments, and (c) purchases of receivables with recourse, and shall exclude funds borrowed by banks and non-bank financial intermediaries performing quasi-banking functions from trust departments of banks or investment houses in the latter's capacity as fund managers.(As amended by Section 6, CBP Circular No. 1119, dated October 10, 1986) b. The Central Bank Accounting Department shall not accept or give due course to interbank loan transfer tickets unless the following are complied with: 1. (a) For Granting of Loans "Interbank loan advice transfer ticket" forms shall be used. The form to be accomplished by the lending bank/NBQB, whose account shall be debited by the Central Bank, shall be white in color and the form to be accomplished by the borrowing bank/NBQB, whose account shall be credited by the Central Bank, shall be green in color. (b) For Repayment of Loans "Interbank loan repayment transfer ticket" forms shall be used. The form to be accomplished by the borrowing bank/NBQB making the payment and whose account shall be debited by the Central Bank, shall be yellow in color and the form to be accomplished by the lending bank/NBQB receiving the payment and whose account shall be credited by the Central Bank, shall be pink in color. 2. Transfer tickets (prescribed forms attached as App. 22) shall have a standard size of 4 3/4" x 8 1/2" and shall contain the following minimum data or information: (a) Date of grant (white and green tickets),or date of repayment (yellow and pink tickets) of loan; (b) The rate of interest or yield, including service charges, if any, shall be shown on the lending tickets (white and green).The actual computation of the said interest must be shown on the repayment tickets (yellow and pink);and (c) Repayment tickets (yellow and pink) shall make reference to the date of the corresponding tickets recording grant of the loan . 3. Transfer tickets shall be signed or authenticated by officers, whose names and specimen signatures are in the bank's/NBQB's list or book of Authorized Specimen Signatures, a copy of which shall be submitted to the Central Bank Accounting Department. 4. The bank/NBQB whose account with the Central Bank is to be credited shall be responsible for making the necessary advice to the Central Bank of the transaction whether it be a grant or repayment of a loan, i.e., the loan advice tickets (white and green) shall be submitted to the Central Bank by the borrowing bank/NBQB, while the loan repayment tickets (yellow and pink) shall be submitted to the Central Bank by the lending bank/NBQB. c. Both banks/NBQBs shall immediately pass the corresponding entries in their books and, upon receipt of a copy of the transfer ticket duly stamped "RECEIVED" by the Central Bank, the borrowing bank/NBQB shall attach the same to the corresponding ticket debiting its Due from Central Bank account in its books and, in the case of the lending bank/NBQB, to the same ticket passed in its books on the day payment is made. d. All interbank loans shall be recorded by the borrowing bank/NBQB as "Bills Payable Interbank Loans" and shall be subject to required reserve requirements. (As amended by Section 13, CBP Circular No. 1002, dated April 25, 1984) e. All banks/NBQBs shall reconcile their demand deposit accounts with the Central Bank against Monthly Statements of Accounts to be furnished them by the Central Bank Accounting Department. Five copies of the reconciliation statement shall be submitted within ten (10) banking days from receipt of the Statement of Accounts from the Central Bank the original and three copies to the Central Bank Accounting Department and one copy to the appropriate supervising department. f. Interest and yield rates for interbank loan transactions among banks, between banks and NBQBs and among NBQBs, shall not be subject to any ceiling, effective July 1, 1981. g. The prescribed "Authority to Debit Slip" shall be used by NBQBs in the transfer of their excess funds which are not otherwise lent out in the interbank loan market from their Central Bank reserve accounts to their operating accounts in their depository commercial banks. prLL The "Authority to Debit Slip" shall have a standard size of 4-" x 8-" and shall be orange in color. It shall contain the minimum data or information as required and shall be accomplished and submitted to the Central Bank Accounting Department in duplicate after having been duly signed and/or authenticated by authorized officers of the NBQB. h. Funds borrowed by NBQBs from trust departments or managed funds of banks or investment houses in the latter's a capacity as fund managers are not considered as interbank borrowings. SECTION 4344Q-4350Q. ( Reserved ) F. SPECIAL FINANCING AND OTHER SPECIAL LENDING PROGRAMS SECTION 4351Q. Loans Under Industrial Guarantee Program . Duly accredited NBQBs may avail of funds under the Industrial Guarantee and Loan Fund (IGLF) in accordance with the applicable rules and regulations of the Central Bank hereto attached as Apps. 23 to 26-a. SECTION 4352Q-4358Q. ( Reserved ) SECTION 4359Q. Fourth CB-IBRD Rural Credit Project . Loan funds for financing the expansion of the medium and long-term activities of rural banks, stock savings and loan associations, private development banks, and non-bank financial intermediaries, will be made available utilizing the funds from a Fourth Central Bank Credit Line with the International Bank for Reconstruction and Development (IBRD). The following rules and regulations shall govern this credit program to be carried out through the lending facilities of rural banks, stock savings and loan associations, private development banks and non-bank financial intermediaries under the supervision of the Central Bank, for agricultural and industrial development. SUBSECTION 4359Q.1 Definition of terms . The following terms shall have the following meanings: a. CB the Central Bank of the Philippines; b. Financing Institution a Rural Bank (RB),a Stock Savings and Loan Association (SSLA),Private Development Bank (PDB) or Non-Bank Financial Intermediary (NBFI) selected by CB to participate in this credit program in accordance with Subsec. 4359Q.2. c. Loan the Loan extended by CB to a Financing Institution; d. Subloan the Loan extended by a Financing Institution to a Borrower; e. Borrower the recipient of a Subloan from a Financing Institution; f. STD a Special Time Deposit of CB for financing of Loans to a Financing Institution; and g. IBRD the International Bank for Reconstruction and Development. SUBSECTION 4359Q.2 Participating Institutions ; eligibility requirements . CB shall select the financing institutions through the Department of Rural Banks and Savings and Loan Associations, taking into account the following: a. Period of operation A financing institution must have been in operation for not less than one (1) year prior to making an application for a loan. b. Liquidity position ; arrearages (1) A financing institution must have sufficient working capital to meet its obligations to creditors and depositors, taking into account local conditions and past performances; and sufficient legal reserves against deposit liabilities. (2) Past due loans of financing institutions shall not exceed twenty-five percent (25%) in relation to total loan portfolio, or such other ratio as may be prescribed by CB with the prior approval of IBRD. If the accumulated arrears of principal and interest, in excess of 90 days, on medium and long-term loans made by Financing Institution shall exceed twenty percent (20%) of the sum of all amounts falling due on such accounts from the beginning of the immediately preceding twelve-month period, such financing institution shall not be eligible to participate or continue to participate in this credit program (as a financing institution) until it shall have improved its collections to reach such level; Provided, however , that such past due ratio may be increased to 30% on a case-to-case basis, at the discretion of the Central Bank. If any financing institution shall exceed the applicable level of arrears mentioned in sub-item "b",it shall cease to participate in the credit program and CB shall not extend to it any further loans until its collection performance shall have improved and reached such level. The financing institution shall submit to CB evidence that it qualifies or continues to qualify under Sub-item (2). c. Investment position (1) Soundness of loan investments as to viability of projects sufficiency of collateral, capacity to pay and character of borrowers; and (2) In the case of a rural bank, adherence to the objectives of the rural bank as to purpose of loans, actual credit requirements and eligibility of borrowers. d. Credit standing (1) Its established credit reputation; and (2) Character, capacity, competence and integrity of its officers. e. Net worth (1) Results of operation; and (2) Ratio of unimpaired capital and surplus to risk assets. f. Management competence to handle the program (1) Qualifications, training and experience of members of the board of directors and its principal officers, as prescribed by the Monetary Board; and (2) Adherence to laws, decrees and general orders and instructions of CB, by its board of directors and its principal officers. g. Compliance Compliance with circulars and memoranda embodying or implementing pertinent and applicable laws, decrees, general orders, rules and regulations. SUBSECTION 4359Q.3 Other eligibility requirements Wherever there are established in any law, decree, general order, rule, regulations, or other directive in force, standards or criteria by way of ratios, percentages or otherwise, in relation to the factors enumerated in Subsec. 4359Q.2 such standards or criteria shall be deemed applicable for the purpose of conducting an evaluation of creditworthiness under said Subsec. 4359Q.2. For Non-Bank Financial Intermediaries (NBFI),the following requirements shall apply: a. Wherever there are established in any law, decree, general order, rule, regulations, or other directive in force, standards or criteria by way of ratios, percentages, or otherwise, in relation to the factors enumerated in Subsec. 4359Q.2; such standards or criteria shall be deemed applicable for the purpose of conducting an evaluation of creditworthiness under said Subsection; Provided, however ,that subloans granted under this project shall not be subject to the following: (1) The minimum trading lot required for a single deposit substitute transaction; (2) The reserve requirement against deposit substitutes; and (3) The twenty percent (20%) tax on yield on deposit substitutes. b. Only subloans for which the project site is outside Metro Manila shall be eligible for support under the project. SUBSECTION 4359Q.4 Subloans extended by participating financial institutions ; purposes . Only viable subprojects where the potential for increased production, employment or value added is clearly established, or where there is potential for satisfying domestic demand or exportation of the excesses over domestic consumption, will be eligible for financing. Investments eligible to be financed under subloans shall include: a. Farm Mechanization (1) Tractors, including implements and associated equipment not exceeding 68 HP. For sugarcane production in areas where sugarcane is grown extensively and cultivated throughout the year, the preceding limit may be increased to a maximum of 90 HP; (2) Power tillers, including attachments; (3) Portable threshers not exceeding 13 tons per day; (4) Private irrigation facilities including pumps; (5) Machinery and equipment for the development of abaca, coffee, cacao, citrus and ipil-ipil including facilities for processing and marketing, such as: storage, transport, stripping and baling press. (6) Chain saws b. Transportation (1) Light trucks not exceeding 5,000 kgs. GVW; and (2) Trucks, primarily for the transport of agricultural produce, not exceeding 25 tons GVW; Provided, however ,That the financing of such vehicles shall be limited to areas outside of Metro Manila, and to not more than three vehicles per borrower. c. Fisheries development (1) Fishing boats of up to 40 gross tons capacity, including gear and equipment and initial working capital; and (2) Fishponds and fishpens, and initial working capital. d. Small-scale livestock development . Facilities and initial working capital for the following subprojects: poultry, swine, backyard cattle breeding/fattening, and draft animals and implements. LLpr e. Plantation crop development . Development and rehabilitation plantation of: abaca, coffee, citrus, ipil-ipil and others, such as rubber, mango, etc. f. Cottage and agro-industries . Manufacturing facilities including initial working capital, but excluding cost of land, for the following subprojects; Provided, however ,That the total subprojects investment, of which the subloan shall constitute a part, shall not exceed P1,000,000.00, but shall not be less than P10,000.00, including initial working capital, but excluding the cost of land: (1) Ricemills; (2) Farm implements and manufacturing; (3) Woodworking; (4) Concrete products; and (5) Handicrafts. g. Other projects as may be approved by CB . The CB shall determine the feasibility of financing other categories and include them under this program without prior approval of the World Bank; Provided ,That the credit requirement does not exceed P1,000,000.00, as required under Subsec. 4359Q.6 (a) of these rules and regulations. SUBSECTION 4359Q.5 Eligibility of borrowers . The following are eligible to borrow under the program: a. A person, partnership or corporation owning or cultivating not more than 50 hectares of arable land devoted to agricultural production; Provided, however , That borrowers cultivating more than 50 hectares may borrow from RBs/SLAs/PDBs/NBFIs at the discretion of the Central Bank for the purpose of financing the acquisition of tractors. b. A person, partnership or corporation engaging or intending to engage in a cottage or agro-industry or eligible transportation enterprise with a pre-project capital investment of not more than P500,000.00, excluding land; Provided, however ,That for NBFI, the eligibility is extended to a person, partnership or corporation engaging or intending to engage in a cottage or agro-industry or eligible transportation enterprise with a pre-project capital investment of not more than P4,000,000.00, excluding land; c. A person, partnership or corporation engaging or intending to engage in the development of a poultry, swine or cattle breeding/fattening enterprise; d. A person, partnership or corporation engaging or intending to engage in the development of plantation crops or other agricultural enterprise as set out in Subsec. 4359.Q.4. e. A person, partnership or corporation engaging or intending to engage in fishpond/fishpen development or coastal fishing having a pre-project capital investment, excluding land, of not more than P500,000.00, Provided , however ,That for NBFI, the eligibility is extended to a person, partnership or corporation engaging or intending to engage in fishpond/fishpen development or coastal fishing having a pre-project capital investment excluding land, of not more than P4,000,000.00; f. Agricultural cooperatives constituted only of members who qualify under the preceding items. SUBSECTION 4359Q.6 Subloan limits a. For interests of continued attention to small enterprises, the maximum loan that may be extended under the project shall not exceed P1,000,000.00. Loans in excess of such amount may be waived by the Bank in specific areas of economic merit, i.e.,employment effect; Provided , That such waiver shall be based on the submission by the Central Bank to the World Bank of an evaluation of the individual proposal in question. b. The amount of the subloan shall depend upon the cost of the development plan to be financed, the actual need of the borrower, the collateral offered, the borrowers repayment capacity including the proceeds of the project to be financed by the proposed subloan and other factors bearing on the borrower's creditworthiness, and it shall in no case exceed ninety percent (90%) of the total project cost, Provided, however ,That small farmers and small fishermen who cannot put up the 10% equity may be extended a subloan of up to 95% of the total project cost. The balance of total project cost may be contributed by the borrower in the form of: (1) cash; (2) material to be appraised at reasonable replacement cost; (3) labor of the borrower or other unpaid labor, to be valued at the locally-prevailing rate. c. The amount of the subloan shall not exceed seventy percent (70%) of the appraised value of the immovable property offered as security if titled, and shall not exceed fifty percent (50%) of such value, if the property is untitled. The appraised value shall be reasonably determined by the financing institution. d. The amount of the subloan secured by a chattel mortgage or pledge shall not exceed fifty percent (50%) of the appraised value of the object offered as security; and where such object is new, fifty percent (50%) of the price in the bill of sale. e. The amount of subloan guaranteed by the "Agricultural Guarantee Fund" for agrarian reform beneficiaries and small fishing boat operators, shall be within the extent if it is not secured otherwise under Items "c" and "d" above. SUBSECTION 4359Q.7 Creditworthiness . Each financing institution shall decide on the creditworthiness of the borrowers applying to it for subloans. SUBSECTION 4359Q.8 Maturity of subloans . Subloan maturities shall be based on the economic life span of the major object to be financed and the projected cash flow to be derived from the project, and in each case shall not exceed the terms as hereinbelow indicated: a. Farm implements with four-wheel tractors and power tillers as prime movers; (1) With prime mover the loan term applicable to the prime mover; (2) Without prime mover four (4) years; (3) With prime mover purchased at an earlier date four (4) years or the remaining term of any loan received for its purpose of financing the said loan term of the prime mover whichever is greater. b. Other farm implements four (4) years; c. Light machineries up to 20 HP four (4) years; d. Heavy machineries over 20 HP seven (7) years; e. Light/heavy trucks four (4) years; f. Irrigation pumps and engines five (5) years; g. Complete development of an irrigation system ten (10) years; h. Piggery project seven (7) years with appropriate grace period; i. Poultry project seven (7) years with appropriate grace period; j. Cattle breeding/fattening project ten (10) years with appropriate grace period; k. Complete development of fishpond ten (10) years with appropriate grace period; l. Fishpen financing three (3) years; m. Fishing boats up to 40 gross tons ten (10) years; n. Fishing gear and equipment: (i) With fishing boat ten (10) years; and (ii) Without fishing boat seven (7) years; o. Ricemill ten (10) years with appropriate grace period; p. Manufacture of farm implements ten (10) years with appropriate grace period; q. Woodworking five (5) years with appropriate grace period; r. Manufacture of concrete products five (5) years with appropriate grace period; s. Handicraft five (5) years with appropriate grace period; t. Permanent working capital five (5) years with appropriate grace period; u. Other cottage and agro-industries ten (10) years with appropriate grace period to be decided by CB; v. Development of plantation crops up to fifteen (15) years with appropriate grace period; w. Plantation crop, processing and marketing facilities: (1) Storage facilities up to ten (10) years; (2) Transportation up to four (4) years; (3) Stripping machine up to three (3) years; and (4) Baling Press up to ten (10) years. x. Other items to be determined by CB. SUBSECTION 4359Q.9 Loan repayment . Repayments shall be scheduled in approximately equal installment of principal and interest, annually, semi-annually, or of a shorter period, except in cases where deferred payment plans have been granted, so arranged as to fall due on the approximate periods of highest borrower's income or when the principal income of the borrower is normally available. However, financing institutions shall encourage borrowers to make deposits for amortization of subloans on an agreed interval in order to assure payment as they become due. SUBSECTION 4359Q.10 Grace period . Subloans may include a grace period not exceeding three (3) years for fixed assets and twelve (12) months for permanent working capital depending on the cash flow pattern of the project or at such other terms as may be determined by the Central Bank. For rubber, the grace period may be extended to a period not exceeding seven (7) years. Such deferred payments shall only apply to the principal of the subloan and the total repayment period prescribed in Subsec. 4359Q.8 shall not be extended an account of such grace period. SUBSECTION 4359Q.11 Interest rates . Subloans shall accrue interest at the rate of fourteen percent (14%) per annum on the principal amount standing from time to time or such higher rate as may be prescribed by the Monetary card except for agrarian reform beneficiaries who shall be charged twelve percent (12%) per annum, and an additional fee to be charged separately in accordance with CB regulations. Such interest shall not be collected in advance. cdta SUBSECTION 4359Q.12 Collateral a. Subloans may be secured by a first mortgage on titled or untitled immovable property and/or chattel mortgage on movable property. In cases of livestock and fisheries development, the production stock may be mortgaged. Subloans for agrarian reform beneficiaries and small fishing boat operators may be secured with a guarantee by the "Agricultural Guarantee Fund" to the extent of the unsecured portion. b. Government bonds and other securities issued by its agencies and instrumentalities guaranteed by the Republic of the Philippines may be accepted as collateral. c. The financing institution shall require the presentation of the yearly real estate tax receipts and insurance premium receipts, as they fall due, and shall forward them to the loan officer concerned; and d. The financing institution may advance the property tax due on real estate and the insurance premium on the objects offered as collateral, such advances to be charged to the account of the borrower subject to prior notice. Such advances shall not be financed out of the proceeds of the loans. SUBSECTION 4359Q.13 Subloan applications and processing a. Application for subloans shall be in the form prescribed by CB and, except as CB shall otherwise agree, shall be filed with the financing institution nearest either the residence of the borrower or the site of the subproject to be financed to ensure effective supervision and control. b. Financing institutions employing a supervised credit technician may process subloan applications in lieu of processing by a CB agricultural credit supervisor or loan evaluator of CB loan team, Provided : however ,That each corresponding loan application shall be subject to the final approval of the CB loan officer; and c. Notwithstanding "a" and "b" above, financing institutions who have developed sufficient capability to appraise subloan applications may be granted full authority by CB to process, approve and thereafter supervise subloans falling within the limitations of the granted authority. The approval under the granted authority shall be final and the corresponding checks covering loans to such financing institutions shall be issued after the submission of the required supporting documents to the CB loan team: Provided, however ,That based on post audit, the authority to approve subloan applications may be revoked by CB if the required standard of appraisal work is not maintained and the financing institutions fail to improve the quality of appraisal within a reasonable period prescribed by CB. d. NBFIs may process subloan applications in lieu of processing by a CB agricultural credit supervisor or loan evaluator of CB loan team. The approval of NBFI on subloan applications under the granted authority shall be final and the corresponding checks covering loans to such financing institutions shall be issued after the submission of the required supporting documents to the CB loan team; Provided, however ,That based on post audit the authority to approve subloan applications may be revoked by CB if the required standard of appraisal work is not maintained and the NBFIs fail to improve the quality of appraisal within a reasonable period prescribes by CB. SUBSECTION 4359Q.14 Release of subloan proceeds Upon receipt of loan proceeds from CB, the financing institution shall deposit the same in a special account with its depository bank or disburse forthwith to the borrower/dealer/contractor/supplier. Failure to disburse loan proceeds within thirty (30) days of receipt shall subject the financing institution to a penalty of fourteen percent (14%) per annum until the same is disbursed or returned to CB. SUBSECTION 4359Q.15 Penalty for non-payment . A penal rate of interest of five percent (5%) per annum or such higher rate as may be prescribed by the Monetary Board shall accrue over and above the interest rate specified in Subsec. 4359Q.11 on any part of the principal of any subloan amortization not paid at its due date. SUBSECTION 4359Q.16 Extension periods . In cases of default on the service of subloans arising from fortuitous events or force majeure ,or in other cases clearly justified in the opinion of the CB, the financing institution may grant the borrower a reasonable extension period subject to the approval of the CB. In such cases, CB may, at its entire discretion, grant the financing institution the same extension period on the corresponding loan. SUBSECTION 4359Q.17 Subloans in litigation . In case of a suit for collection of the unpaid balance of a subloan, there shall be collected from the borrower, in addition to the interest and penal interest on the subloan imposed under Subsecs. 4359Q.11 and 4359Q.15, an attorney's fee equivalent to ten percent (10%) of the unpaid balance, and costs of the suit. SUBSECTION 4359Q.18 Procurement . Procurement of agricultural machinery and equipment shall be limited to dealers, accredited by the Central Bank and the Agricultural Machinery Distributors and Manufacturers Accreditation Committee (AMDAC), who agree to provide the necessary training in the proper operation, care and upkeep of the machinery and equipment purchased, and who shall have immediately available spare parts and technical men and service shops at strategic places to repair and replenish the agricultural machinery and equipment sold by them and who are able to comply with CB and AMDAC requirements on participating dealers. The financing institution shall ensure that procurement be effected prudently and that the prices paid by the borrowers for agricultural machinery and equipment shall not exceed the maximum prices determined by the CB's Department of Rural Banks and Savings and Loan Associations in coordination with AMDAC. SUBSECTION 4359Q.19 CB loans to participating financial institutions a. Accreditation . Each financing institution shall apply for accreditation with CB for purposes of obtaining loans: Provided ,That, in the case of NBFI, their initial accreditation, with the exception of the Private Development Corporation of the Philippines, shall require prior approval of the IBRD. The application shall be supported by the following documents: (1) Board resolution authorizing the financing institution to participate in the credit program obtaining loans from CB and making subloans; (2) Evidence of the powers and specimen signatures of the officers duly authorized to represent the financing institution in all matters related to loans; (3) Latest audited statement of financial condition, income and expenses; and (4) Latest annual report (for NBFI only). b. Consortium of financing institutions . In order to cushion the impact of price increases in machinery, equipment and construction materials and to pave the way for the absorption of higher subloans as envisioned under this program, two or more financing institutions preferably situated within the same region may be allowed to undertake the financing of a single project, in an amount not to exceed fifteen percent (15%) of the total combined net worth off such participating financing institutions, Provided , That the contribution to the subloan by each participating financing institution shall not exceed fifteen percent (15%) of its own net worth. Under this arrangement, the "CONSORTIUM" shall designate a lead or "Managing" financing institution which shall administer such loans in the same manner as CB:IBRD loans are normally administered, and in accordance with existing rules and regulations prescribed by the Central Bank. Privileges and responsibilities assigned in the rules and regulations to financing institutions shall be, in the event of financing by a "CONSORTIUM", deemed as assigned to members of the said "CONSORTIUM", or the lead financing institution of the "CONSORTIUM". c. Purpose of loan . The CB shall extend loans to financing institutions to finance subloans to be extended by them to borrowers in accordance with these rules. d. Loan limit . Not less than ten percent (10%) of each subproject total costs shall be financed by the financing institution out of its own resources, except that rural banks which have been in operation for less than three years and have a net worth not exceeding P500,000.00 (or such lower amounts as may be determined by CB from time to time) or where the subloan recipient is a small beneficiary, may contribute less than ten percent but not less than five percent (5%) of such amount out of their own resources. e. Maturity . The schedule of repayments of each loan shall approximately correspond to the schedule of repayments of the subloans to be financed by such Loan: f. Interest Rates . Loan shall accrue interest at a rate not less than nine percent (9%) per annum on the principal amount of the loan outstanding from time to time except for loans covering subloans for agrarian reform beneficiaries, which shall accrue interest at seven percent (7%) per annum. Such interest shall not be collected in advance. g. Credit risk . The financing institution is fully liable for the service of any loan, whether or not the subloan financed by the corresponding loan is timely serviced or not. h. Documentation . The financing institution shall execute and deliver to CB a promissory note in respect, and in the amount, of each loan extended to it. i. Security . As security for each loan, the financing institution shall endorse in favor of CB, the promissory notes received from the corresponding borrower referred to in Subsec. 4359Q.5 covering the total amount of the subloan to be financed. j. Processing of loan applications (1) Applications for subloans together with the loan application shall be submitted to the loan officer of the Department of Rural Banks and Savings and Loan Associations covering the particular area, for final approval or disapproval, with the exception of those financing institutions duly authorized to approve subloan applications by CB which shall submit their approved subloans to the loan officer for the preparation of covering checks. (2) All loan applications from NBFI shall be submitted to the Manila Loan Team of the Department of Rural Banks and Savings and Loan Associations for appropriate actions as prescribed in the immediately preceding paragraph. (3) In order to be processed, loan applications must be presented in the prescribed form and supported by documentary evidence and other requirements that CB shall determine from time to time and set forth in appropriate instructions. k. Release of loan proceeds . CB checks covering loan proceeds to financing institutions shall be released by the Loan Officer after submission of all required documents to perfect documentation of the loan and the subloan. l. Prepayment of loans . The financing institution shall, to the extent any subloan shall be prepaid, prepay the corresponding amount of the loan obtained on account of such subloan within ten days from receipt of such prepayment. m. Penal provisions . A penal rate of interest of five percent (5%) per annum shall accrue over and above the interest rate specified in Item "f" of this subsection on any part of the principal of any loan not paid within 15 days from its maturity. cdti n. Loans in litigation . In case of suit for collection of the unpaid balance of a loan, there shall be collected from the financing institutions in default, in addition to the interest and penal interest on the loan imposed under Items "f" and "m" of this subsection, an attorney's fee equivalent to ten percent (10%) of the unpaid balance, which shall in no case be less than one hundred pesos (P100.00),and costs of the suit. SUBSECTION 4359Q.20 Auditing and reportorial requirements a. Subloan documents of financing institutions shall be subject to audit by designated staff of CB for compliance with these rules. b. CB shall audit or caused to be audited, at least once a year, the accounts of the financing institutions. All relevant documents shall be made available to the CB's representatives or its designated auditors. c. The financing institutions shall furnish to CB all reports and other information that the CB may deem necessary regarding this credit program. SECTION 4360Q-4375Q. ( Reserved ) G. EQUITY INVESTMENTS SECTION 4376Q. Purpose ; Coverage . In order to minimize excessive concentration of control through stockholdings in related financial intermediaries engaged in quasi-banking functions and within the financial system as a whole the following rules shall govern equity investments by NBQBs, their stockholders, their wholly or majority-owned subsidiaries and/or their minority-owned affiliates in which their stockholdings exceed forty per cent (40%) of the voting stock and/or their holding companies, as well as by foreign aggrupations in other financial intermediaries authorized to perform quasi-banking functions: a. Subject to existing laws, investors specified in paragraph c of this Section shall not own more than forty per cent (40%) of the voting stock of a financial intermediary authorized to perform quasi-banking functions, nor own more than thirty per cent (30%) of the voting stock in a second investment in another financial intermediary authorized to perform quasi-banking functions. These two investments may not be in the same category or type of financial intermediary, such as investment houses or commercial banks. b. An investment in any financial intermediary authorized to perform quasi-banking functions of such percentage as would not enable the investor to elect a director of the board by virtue of its own shareholdings, shall not be subject to the restrictions of the preceding paragraph. c. For purposes of this Section, the investments of each of the following investors and/or any combination of investors shall be considered as one: (1) Any NBQB, including its wholly or majority-owned subsidiaries, and/or its minority-owned affiliates in which its shareholdings exceed forty per cent (40%) of the voting stock and/or its holding companies, and any of its stockholders within the coverage of subparagraph (3);and/or (2) Any foreign financial intermediary, with or without local branches, including its wholly or majority-owned subsidiaries and/or its minority-owned affiliates in which its shareholdings exceed forty per cent (40%) of the voting stock and/or its holding companies; and/or (3)(a) Any individual stockholder, and/or stockholders related to each other within the third degree of consanguinity or affinity, and/or corporations wholly or majority owned by such individuals, or (b) any corporate stockholder together with its wholly or majority owned subsidiary and/or minority-owned affiliate in which its shareholdings exceed forty per cent (40%) of the voting stock and/or its holding company, provided the stockholders specified in (a) or (b) of this sub-paragraph own more than twenty per cent (20%) of the voting stock of a financial intermediary authorized to perform quasi-banking functions, even if such financial intermediary may have no direct investment in the other financial intermediary in which said stockholders have investments. d. Investments in the equity of financial intermediaries without quasi-banking functions shall not be covered by the provisions of this Section. e. Investments duly recorded in the stock and transfer books of financial intermediaries as of February 3, 1975 which exceed the limitations of paragraph 1 of this Section may be retained but shall not be increased percentage-wise, and whenever reduced, shall not thereafter be increased beyond the limitations herein established. Equity transactions between or among the investors defined in sub-section c of this Section may be construed as neither a decrease nor an increase, but a retention, of the original equity interest. * shall have one (1) year within which to comply with the ceiling prescribed herein. ( Effective April 11, 1983 ) SECTION 4377Q. Investment in Non-Allied Undertakings . In order to avoid undue concentration of economic power, the total equity investments of banks, NBQBs, and their subsidiaries in a single non-allied enterprise or industry shall, in any case, remain a minority in that enterprise, except as may be otherwise approved by the President. SECTION 4378Q. Underwriting Exempted . The limitations on equity investments under Sec. 4376Q and 4377Q shall not apply to inventories of equity securities arising out of firm underwriting commitments of investment houses; Provided ,That such equity holding shall be disposed of within two (2) years from acquisition by the investment house. SECTION 4379Q. Treatment of Equity Investment With Reciprocal Stockholdings . For purposes of computing the prescribed ratio of net worth to risk assets, equity investments of NBQB in another NBQB shall be computed according to computation provided in Sec. 4119Q. SECTION 4380Q. Transitory Clause . Equity investments as of April 1, 1980, which exceed the limitation under Sec. 4377Q, may be retained but shall not be increased percentage-wise, and whenever reduced, shall not thereafter be increased beyond the prescribed limitation. SECTION 4381Q-4387Q. ( Reserved ) H. OTHER LOAN OPERATIONS SECTION 4388Q. Purchase of Commercial Paper . Before purchasing registered commercial paper, financial intermediaries authorized to engage in quasi-banking functions shall: (a) Require the issuing entity to submit a duly certified true copy of its Certificate of Registration and Authority to Issue Commercial Paper; and (b) Ascertain that the registration number and expiry date indicated in the commercial paper are the same as those in the Certificate of Registration submitted. Any violation or failure to comply with the provisions of this Section shall subject the erring financial intermediary to suspension or revocation of its authority to engage in quasi-banking functions. ( Effective April 29, 1985 ) SECTION 4389Q. Purchase Discounts, Fees, Service, and Other Charges of Finance Companies . The purchase discounts, fees, service, and other charges of financing companies on assignments of credit, purchases of installment, papers, accounts receivable, and other evidences of indebtedness, factoring of accounts receivable, or other evidences of indebtedness, or leasing transactions shall not be subject to any ceiling. ( Effective September 24, 1982 ) SECTION 4390Q-4392Q. ( Reserved ) I. MISCELLANEOUS PROVISIONS SECTION 4393Q-4398Q. ( Reserved ) SECTION 4399Q. General Provision on Sanctions . Unless otherwise provided for, any violation of the provisions of this Part shall be subject to the sanctions prescribed in Sections 34 and 34-B of Republic Act No. 265, as amended. NON-BANKS WITHOUT QUASI-BANKING FUNCTION A. LOANS IN GENERAL SECTION 4301N. Authority ; Loan Limits ; Maturity of NSSLA Loans . The board of directors of a non-stock savings and loan association shall prescribe its own rules and regulations governing credit operations of the association within the framework of the terms and conditions embodied in this Section. a. Loan limit to a single borrower . A non-stock savings and loan association may grant loans not exceeding the amount deposited and/or contributed by the member-borrower plus his four (4) month's salary or other regular income in the case of a permanent employee or wage earner, or seventy per cent (70%) of the fair market value of any property acceptable as collateral on first mortgage that he may put up by way of security: Provided , That the direct indebtedness to a non-stock savings and loan association of any member-borrower for money borrowed, with the exception of money borrowed against obligations of the Central Bank or of the Philippine Government, or borrowed with the full guarantee of the Philippine Government of payment of principal and interest, shall at no time exceed fifteen per cent (15%) of the unimpaired capital and surplus of the Association. For purposes of this Section regular income of persons who are self-employed shall be their average monthly income during the 12-month period immediately preceding the date of loan application. b. Limitations on lending authority . A non-stock savings and loan association shall not commit itself to make any loans for amounts in excess of the total of the following amounts: (1) Amount of cash available for loan purposes; (2) Amount of cash which can be readily realized upon the sale or redemption of permissible investments made by the association; and (3) Amount of credit available for loan purposes from government or private financing institutions. c. Maximum loan maturity . No loans granted by a non-stock savings and loan association shall have a maturity date of more than five (5) years except loan on the security of unencumbered real estate for the purpose of home building and home development which may be granted with maturities not exceeding twenty (20) years and medium or long-term loans to finance agricultural projects, subject to regulations prescribed by the Monetary Board: Provided, however ,That extensions or renewals of loans other than real estate loan may be allowed in accordance with the provisions of Sec. 4304N. LibLex d. Deposits made by associations. Non-stock savings and loan associations may maintain deposits with banks: Provided ,That the amount of such deposits shall be subject to the loan limit to a single borrower as prescribed herein or by other special laws or regulations. SECTION 4302N. Loan Proceeds . Non-stock savings and loan associations shall in no case require member-borrowers to deposit a portion of the loan proceeds whether in the form of savings or time deposits. Where, subsequent to the release of the loan proceeds, member borrowers open deposit accounts or make additional deposits to their existing accounts, no part of such new deposits shall be covered by a stipulation prohibiting or limiting withdrawal while new portion of their loans are outstanding: Provided, however ,That this prohibition shall not apply in cases of loans secured by a hold-out on deposits to the extent of the unencumbered amount of the deposit existing at the time of the filing of the above-mentioned loan application. SECTION 4303N. Interest and Other Charges . The following rules shall govern the rates of interest and other charges on loans granted by non bank financial intermediaries without quasi banking functions, or by non-stock savings and loan associations. SUBSECTION 4303N.1 Application of Usury Law Non stock savings and loan associations shall be allowed to charge on loans and forbearance of money such interest rates as may be allowed under the Usury Law (Act No. 2655), as amended. SUBSECTION 4303N.2 Effective rates . The ceilings on interest rates and charges on loans prescribed for banks and NBQBs under Sec. 4303Q shall also apply to loans granted by non-bank financial intermediaries without quasi-banking functions, and by non-stock savings and loan associations. For purposes of this Subsection, effective rate shall mean the price paid for the use of money expressed as a percentage, on an annual basis, of the amount actually received. In case the principal is amortized, the rate shall be computed on the basis of the outstanding balance. The computation assumes that interest is paid at maturity, or at the end of one year, if the maturity of the loan exceeds one year. The ceilings on interest rates and charges above prescribed shall apply to loans or forbearances of money, goods or credits granted by, or to dues on shares of stocks of, building and loan associations. SUBSECTION 4303N.3 Payment of loan before maturity . Should the member-borrower elect to pay the outstanding balance of his loan before maturity, the NSSLA may charge interest corresponding to the unused term of the loan, subject to a prior agreement to that effect between a non-stock savings and loan association and its member-borrowers. SUBSECTION 4303N.4 Fees and other charges of NSSLAs . Service fees and other charges may be collected by NSSLAs in accordance with rates prescribed for banks and NBQBs in Subsec. 4303Q.8. SUBSECTION 4303N.5 Interest on loans secured by government securities . Pursuant to Sec. 2 of Act. 2655, as amended, the Monetary Board prescribed that a loan or renewal thereof or forbearance of money, goods or credits secured in whole or in part by government securities shall not earn a higher rate of interest or greater sum or value, including commissions, premiums, fines and penalties, than twelve per centum (12%) per annum. For purposes of the immediately preceding paragraph, government securities shall include only the following: (a) Securities issued by the national government; (b) Securities issued by the Central Bank; and (c) Securities issued by other government entities, including government-owned and controlled corporations, the servicing and repayment of which are fully guaranteed by the Republic of the Philippines. SUBSECTION 4303N.6 Interest in the absence of contract . In the absence of express contract, the rate of interest for the loan or forbearance of any money, goods or credit and the rate allowed in judgment, shall be twelve per cent (12%) per annum. SUBSECTION 4303N.7 Escalation clause ; when valid Section 2 of P.D. No. 1684 dated March 17, 1980 amended Act No. 2655 (The Usury Law) by adding a new section (Section 7-a) to cover acceleration/deceleration of interest. SECTION 4304N. Past Due Accounts . The following rules shall govern the extension or renewal of loans, accrual of interest and write offs. a. Extension/Renewals of loans of NSSLAs . Extension of the period of payment of loans may be allowed under the following circumstances: (1) For productive loans, the extension shall not exceed one-half of the original period: Provided ,That thirty per cent (30%) of the loan shall have been paid. A second extension shall not exceed one-half of the period of the first extension. (2) For consumer loans, the extension shall not exceed one-half of the original period: Provided ,That fifty per cent (50%) of the loan shall have been paid. (3) For loans for medical purposes, the extension may be for the same duration as the original period: Provided , That thirty per cent (30%) of the loan shall have been paid. Loans payable in periodical installments may be renewed for the full amount of the loan: Provided , That at least fifty per cent (50%) of the loan shall have been paid. b. Accrued interest on past due loans of NSSLAs . Non-stock savings and loan associations shall not accrue interest income on loans which are already past due or on loan installments which are in arrears, regardless of whether the loans are secured or unsecured. Interest on past due loans or loan installments in arrears shall be taken up as income only when actual payments thereon are received. For this purpose, loans shall be considered past due in accordance with the provisions of Subsec. 4304Q.1. SUBSECTION 4304N.1 Write-off of loans as bad debts . To maximize the protection of members of non-stock savings and loan associations against misfeasance and malfeasance of the directors and officers thereof, the Monetary Board adopted the following regulations on writing off of loans by non-stock savings and loan associations: (As amended by Section 5 of CBP Circular 1218, dated December 26, 1989) a. The term loans as used in Section 4(c) of Republic Act No. 3779, as amended, shall include all types of credit accommodations granted to, and advances made by the association for the account of the borrower/debtors, including interest thereon recorded in the books; b. Writing-off of loans by an association shall be made not often than twice a year by its board of directors; c. Notice/application for write-off of loans shall be submitted, in the prescribed form, to the Department of Rural Banks and Savings and Loan Associations at least thirty days prior to the intended date of write-off: Provided , That no such loans with an aggregate outstanding amount of P15,000 or more, as certified in said notice/application, shall be written off without the prior approval of: (1) The Monetary Board, in case of loans to directors and officers of the association, direct or indirect; or (2) The head of the Department of Rural Banks and Savings and Loan Associations subject to confirmation by the Monetary Board, in the case of loans other than those mentioned in the next preceding paragraph (1). SUBSECTION 4304N.2 Past due accounts of building and loan associations a. Loans granted by a building and loan association shall be considered past due if unpaid at maturity: Provided ,That in the case of loans payable in installments, only the loan installment which is due and unpaid shall be considered past due. The foregoing does not preclude the association's board of directors from exercising its option under Section 52 of R.A. No. 337, as amended, to enforce collection on the whole loan after the borrowing stockholder shall have been in arrears for three (3) months in the payment of his dues on stock or in the interest or premium or installments of premium on any loan: Provided ,That the loan declared due and demandable by the board of directors shall be considered past due thirty (30) days after notice to the borrower. b. No interest income shall be accrued on past due accounts. Interest on past due accounts shall be taken up as income only when actual payments thereon are received. SECTION 4305N. Truth in Lending Act Disclosure . Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, certain information as provided in Sec. 4305Q. SECTION 4306N. Basic Requirements in Granting Loans (NSSLAs) a. Application . A member-borrower desiring a loan must submit an application stating the purpose of the loan and such other information as may be required by the association. The loan application and other required information shall form part of the credit information file of the member-borrower in the association. b. Credit investigation . No loan shall be approved unless prior investigation has been made to determine the credit standing of the applicant and/or the fair market value of the property offered as security and the report thereon shall be made part of the loan application: Provided, however ,That this requirement may be waived by an association in the case of a permanent employee or wage earner who is borrowing an amount not exceeding his deposit plus his four (4) months salary. c. Credit information file/collateral file A non stock savings and loan association shall be required to maintain as far as practicable, a credit information file which must contain, among other things, the member-borrower's application and financial record. Other information relative to the member-borrower, where applicable, shall also be maintained which must contain, among other things, the collateral and other documents pertinent to the loan. d. Loan approvals . Loans shall be approved by the association's board of directors or if approved by a body or officer/s duly authorized by the board, such loans must be confirmed by the board of directors. e. Loan agreements . For each loan granted by a non stock savings and loan association, a promissory note must be executed by the member borrower in favor of the association expressing such particulars as the amount of the loan, date granted, due date, interest rate and other similar information. f. Inscription of lien . In case of mortgage loans, no release against an approved loan shall be made before the inscription of the mortgage. SECTION 4307N. Loan Repayment . In the case of a member-borrower who is a permanent employee or wage earner, the treasurer, cashier or paymaster of the firm employing him shall be authorized pursuant to R.A. No. 3779, as amended, to make deductions from his salary, wage or income in accordance with the terms of his loan, and to remit such deductions to the association. Fees collectible on this service are prescribed in Subsec. 4303N.4. SECTIONS 4308N-4310N. (Reserved) B. SECURED LOANS SECTION 4311N. Kinds of Security for NSSLA Loans . Loans by a non-stock savings and loan association may be secured by any or all of the following: a. Mortgages on registered real estate; b. Chattel mortgages on harvested or stored crops of non-perishable character; cdll c. Chattel mortgages on livestock, tools, equipment or machinery, supplies or materials, merchandise and such other property which may have been purchased or acquired out of the proceeds of the loan; d. Assignment of quedans which gives the right of disposal of readily marketable products; e. Time and/or savings deposits; f. Pledge of bonds, stock and other securities of the government or government-owned or controlled corporations and other bonds, stocks or securities which are non-speculative in nature; g. Land Transfer Certificates issued by the Government to tenant farmers, under Presidential Decree No. 27 to the extent of sixty per cent (60%) of the value of the farm holdings: Provided , That a certification shall be first secured from the offices of the Register of Deeds to the effect that the Land Transfer Certificate being presented is valid; and h. Other securities as may be approved by the Monetary Board. SUBSECTION 4311N.1 Loans secured by government securities . These loans shall not earn a higher rate of interest, including commissions, premiums, fines and penalties, than 12% per annum. Government securities shall include only those enumerated in Subsec. 4303N.5. SECTIONS 4312N-4318N. ( Reserved ) C. (RESERVED) SECTIONS 4319N-4325N. ( Reserved ) D. LOANS/CREDIT ACCOMMODATIONS TO DIRECTORS, OFFICERS, STOCKHOLDERS AND RELATED INTERESTS (DOSRI) SECTION 4326N. Direct/Indirect Borrowings ; Ceilings . No association shall directly or indirectly make any loans to any director or officer of such association, either for himself, or as agent or as partner of another, except with the written approval of the majority of the directors of the association, excluding the director concerned: Provided , That the aggregate loans to such directors and officers shall not exceed twenty per centum (20%) of the total paid-up capital of the association. SECTION 4327N. Records ; Reports . In all cases of accommodations granted to directors and officers under Section 4326N the written approval of the majority of the directors of the association, excluding the director concerned, shall be entered upon the records of the association and a copy of such entry shall be transmitted forthwith to the appropriate supervising and examining department of the Central Bank. (As amended by Section 6 of CBP Circular 1218, dated December 26, 1989) SECTION 4328N. Sanctions . The office of any director or officer of an association who violates the provisions of these rules on accommodations granted to directors and officers shall immediately become vacant and said director or officer shall be punished by imprisonment of not less than one year nor more than ten years and by a fine of not less than one thousand pesos (P1,000.00) nor more than ten thousand pesos (P10,000.00). SECTIONS 4329N-4340N. ( Reserved ) E. SPECIFIC TYPES/CLASSES OF LOANS SECTION 4341N. Peso Borrowings by Foreign Firms Foreign companies in the Philippines may avail themselves of peso borrowings under rules prescribed in Sec. 4341Q. SECTIONS 4342N-4350N. ( Reserved ) F.-G. (RESERVED) SECTIONS 4351-4380N. ( Reserved ) H. OTHER OPERATIONS SECTION 4381N. Fund Investments of Non-Stock Savings and Loan Associations . A non-stock savings and loan association may invest its funds in any or all of the following: (a) In bonds, securities, and other obligations issued by the Government of the Philippines, or any of its political subdivisions, instrumentalities or corporations including government-owned or controlled corporations, subject to such rules and regulations as the Monetary Board may provide, in an aggregate amount not exceeding at any one time ten per cent (10%) of the total assets of such association; (b) In real property, in an aggregate amount not exceeding at any one time five per cent (5%) of the total assets of such association; (c) In furniture, fixtures, furnishings, equipment, and leasehold improvements for its offices, in an amount not exceeding at any one time ten per cent (10%),of the aggregate paid-up capital of such association; (d) In sound non-speculative enterprises in an aggregate amount not exceeding at any one time ten per cent (10%) of the paid-up capital and surplus of such association. Provided , however , That in this case, prior approval of the appropriate supervising and examining department of the Central Bank shall be obtained. SECTION 4382N. Transactions of Security Dealers/Brokers . The following rules shall govern switching transactions by authorized security dealers/brokers in Central Bank-approved Philippine securities listed in stock exchanges: a. Cash dividends and proceeds of sale of stock dividends accruing on foreign cash investments in Philippine securities registered pursuant to the rules on registration and repatriation of foreign investments may be reinvested in other Philippine securities listed in the stock exchanges and registered under the provisions of said rules on the registration and repatriation of foreign investments. b. Pending the re-investment/repatriation of peso cash dividends/proceeds of sale of stock dividends, the same shall, at the option of the foreign investor, be lodged with the selling authorized security dealer or in a "suspense account" (not a deposit account) with any authorized agent bank. c. A monthly report on a prescribed form, indicating every entry in the said peso account of each investor, shall be accomplished and submitted to the Foreign Exchange Department, Central Bank, not later than five days after the end of every month by the authorized agent bank/authorized security dealer concerned. SECTIONS 4383N-4398N. ( Reserved ) SECTION 4399N. General Provision on Sanctions . Any violation of the provisions of this Part shall be subject to the sanctions prescribed in Sections 34 and 34-B of Republic Act No. 265, as amended, whenever applicable. (MISSING PAGES 25-26) limits of the municipality or city where the pawnshop conducts its business. The auction shall be conducted under the control and direction of a duly licensed auctioneer. In cities and municipalities where there in no duly licensed auctioneer, the public auction may be conducted by a Notary Public of the city or province where the pawnshop has its place of business. SECTIONS 4316P-4398P. ( Reserved ) SECTION 4399P. General Provision on Sanctions . Any violation of the provisions of this Part on pawnshops shall be subject to the sanctions prescribed in Sec. 18 of Presidential Decree No. 114. Footnotes 1. This can be determined by dividing twelve, the number of months in a year, by the number or fraction of months between instatement payments. PART FOUR Trust and Other Fiduciary Functions NON-BANKS WITH QUASI-BANKING FUNCTIONS (NBQBs) A. TRUST FUNCTIONS SECTION 4401Q. Authority to Perform Trust Functions . In addition to the powers granted to corporations in general, investment houses are authorized to act as trustee of a trust fund or trust property, subject to the provisions of the General Banking Act. * SECTION 4402Q. Scope of Trust Regulations . These regulations shall govern the trust operations of trust companies, banks and investment houses. LLphil SUBSECTION 44020.1 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 4403Q. 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. 4404Q hereof. c. In the case of a bank or investment house, the applicant must also show that: 1) It has complied with the minimum 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 4404Q. Security for the Faithful Performance of Trust Duties . The deposit as security for the faithful performance of trust duties required under Sec. 4403Q 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: Required trust Volume of trust assets deposit with the (In million pesos) Central bank P35.500 and below P250,000 35.501 but not over P71.000 500,000 71.001 but not over P106.500 750,000 106.501 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 4405Q. 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 of 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 4406Q. Mergers and Consolidation . In mergers and consolidation 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. 4403Q. SECTION 4407Q. Responsibilities of Administration . The following rules shall govern the duties and responsibilities of directors and officers in the administration of trusts. SUBSECTION 4407Q.1 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. LLjur 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 4407Q.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 4407Q.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. SECTION 4408Q. 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 interests 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 interests; or of its employees; and c. Sell, transfer, assign, or lend money or property from one trust account to another trust account. d. Commingle trust funds for the purpose of complying with the prescribed minimum denomination or principal amount of a duly registered commercial paper. ( Effective April 29, 1985 ) 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 subsections (a) and (b) of this Section. SECTION 4409Q. Ceilings on Trust 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 4410Q. Disposition of Accounts; Limitations on Loans and Investments . Assets received in trust or on deposit for the use, benefit or behoof 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, or 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 (3) years secured by a lien on the animals, in an amount not exceeding fifty percent (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 such bonds and notes shall have been outstanding for at least three (3) years prior to their purchase by the trustee: Provided, further ,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 account of all first mortgage obligations outstanding. No such bonds or notes, or obligations cured 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 praised 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 4411Q. 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 trustee. Each account shall have a record separate from all other accounts and shall be adequately identified. SECTION 4412Q. 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. SECTION 4413Q. Required Surplus . Every trustee corporation, before the declaration of dividends shall carry to surplus at least ten percent (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 4414Q. 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 accordance with express authority embodied in the instrument 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. 4414Q.1. SUBSECTION 4414Q.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 any 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 4414Q.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 4414Q.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 4414Q.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 4415Q. Miscellaneous Provisions . The following rules and regulations shall also be observed by trust companies, banks and investment houses relative to their trust operations. SUBSECTION 4415Q.1 Reports required a) To Trustor or other parties in interest . 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 apprise the party concerned of the significant developments in the administration of the account during the period covered. b) 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 4415Q.2 Audits . The trust operations shall be included in the annual operations/management and financial audit required under existing Central Bank regulations. SUBSECTION 4415Q.3 Borrowings from trust departments or managed funds . Funds borrowed from trust departments or managed funds are subject to rules prescribed in Sec. 4292Q. SUBSECTION 4415Q.4 Trust fund loans to foreign firms . 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 subject to the rules governing loans granted to foreign firms prescribed in Sec. 4341Q. SECTIONS 4416Q-4420Q. (Reserved) B. FUND MANAGEMENT SECTION 4421Q. Scope of Regulations . The following rules shall govern the management of funds by banks and by non-bank financial intermediaries performing quasi-banking functions. SUBSECTION 4421Q.1 Definition . For purposes of this section, "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. cdtech SECTION 4422Q. 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. MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES (Book IV) Insert No. 82-1 (Page Part IV-8 of Book IV) As of July 31, 1982 Paragraph b of Subsec. 4415Q.1 Reports required ,is amended to read as follows: "b) To Central Bank .Effective the semester ended June 30, 1982, non-bank financial intermediaries engaged in trust and/or fund management operations shall submit to the appropriate supervising and examining department a Report on Trust/Fund Management Operations (as an attachment to CBP 7-26-02) and a Report on Status of Outstanding Loans to Directors, Officers, Stockholders and their Related Interests (as an attachment to CBP 7-26-02)." SECTION 4423Q. 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 4424Q. Authorized Investments ; Prohibitions . 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 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 owner. 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 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. cdta For purposes of this section, 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 or a group of such directors, officers, employees, and/or their spouses or relatives within the first degree of consanguinity or affinity holds or owns 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 the financial manager is also an officer or director 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 4424Q.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 have specifically agreed in writing to such commingling. ( Effective April 29, 1985 ) SECTION 4425Q. 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. SECTION 4426Q. 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 of 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 4427Q. 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 pesos) with the Central Bank P35.500 and below P250,000 35.501 but not over P71.000 500,000 71.001 but not over P106.500 750,000 106.501 but not over P142.000 1,000,000 A deposit of P250,000.00 shall be required on each P35.5 million, or fractional part thereof, or 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 December 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 4428Q-4498Q. (Reserved) SECTION 4499Q. General Provision on Sanctions . Any violation of the provisions of this-Part shall be subject to the sanctions in Sections 34 and 34-B of Republic Act No. 265, as amended, and/or Sections 12 and 16 of P.D. No. 129, as amended, as the case may be, without prejudice to other sanctions as may be provided by law. cdti * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas Footnotes * Sec. 7(14) of P.D. 129, as amended. PART FIVE Foreign Exchange Operations NON-BANKS WITH QUASI-BANKING FUNCTIONS (NBQBs) SECTION 4501Q. Authority ; Coverage . With the prior approval of the Monetary Board, and subject to the provisions of Article III, Chapter IV of Republic Act No. 265, as amended, and Section 7(13) of Presidential Decree No. 129, as amended, an investment house may engage in foreign exchange operations which shall be limited to the servicing of project or program requirements of the following enterprises: aisadc a. Central Bank certified export-oriented firms; b. Board of Investments registered export-oriented firms; and c. Construction or service firms with overseas contracts approved by the Philippine Overseas Construction Board/Ministry of Labor. SECTION 4502Q. Specific Foreign Exchange Activities .The specific foreign exchange operations which investment houses may undertake in connection with the preceding Section are: a. Arranging or contracting of foreign loans for the account of the client firm, or contracting of foreign loans for the account of the investment house for re-lending to the client firm, subject to pertinent Central Bank rules and regulations; b. Providing import- and export- related services to said firms such as letters of credit and other acceptable modes of payment, and the discounting of export drafts: Provided ,That the total amount of foreign exchange transactions investment houses may deal in shall not exceed the amount of the financing arranged or provided by the investment house which involves the importation and exportation of related goods and services: Provided, further ,That the amount of letters of credit outstanding of an investment house shall not exceed, at any given time, twice its net worth; except as may otherwise be specifically authorized by the Monetary Board; c. Holding foreign currency balances with foreign correspondents in connection with export-related services but in no case for speculative purposes; d. Entering into forward foreign exchange contracts with the Central Bank in connection with the foregoing activities; and/or e. Such other related foreign exchange activities as may be approved by the Monetary Board. SECTION 4503Q. Separate Department . Any investment house that may be authorized to engage in foreign exchange operations shall set up a separate department/unit to handle such operations. SECTION 4504Q. Applicability of Pertinent Central Bank Rules . The foreign exchange operations of investment house are subject to all applicable Central Bank rules and regulations on foreign exchange operations including modifications thereof considering the special nature of investment house operations, and the sanctions in connection therewith. SECTION 4505Q. Issuance of Guarantees for Overseas Projects . In accordance with existing laws and policies, as set forth in P.D. No. 1167 dated June 27, 1977, as amended, and R.A. 265, as amended, the following implementing rules shall govern the issuance of guarantees for overseas projects of Philippine contractors: SUBSECTION 4505Q.1 Applications . Applications to issue guarantees or counter-guarantees either in the form of standby letters of credit, letters of guarantee or other forms of guarantees to cover bid, performance and advance payment bonds for overseas construction projects by Philippine contractors, are to be submitted to the Central Bank thru the Management of External Debt and Investment Accounts Department (MEDIAD), accompanied by the following basic documents: a. Articles of Partnership/Incorporation of applicant-firm duly registered with the Securities and Exchange Commission; b. Certificate of Registration with the Philippine Overseas Construction Board (POCB); * c. Latest yearly rating by the POCB of applicant-firm shoving the ceiling for overseas work to be undertaken by said firm during the particular year, and its field of specialization. Applications of firms not yet rated by the POCB or which will result in the rating being exceeded or in the other areas of construction shall also be accompanied by a letter-advice from the POCB approving the project. SUBSECTION 4505Q.2 Additional documentary requirements . The following additional requirements shall be submitted: a. For Bid Bonds Data on Overseas Project to be Tendered (Form 1) b. For Advance Payment and/or Performance Bonds (1) Submission by applicant-firm to the Central Bank, thru MEDIAD, of a signed copy of the pertinent construction contract, as well as the standby letter of credit opened or letter of guarantee issued for its account; (2) Data on Overseas Project (Form 2); (3) Projected Statement of Operations (Form 3); (4) Projected Overall Cash Flow Statement (Form 4);and (5) Projected Foreign Exchange Receipts and Disbursements Statement (Form 5). SUBSECTION 4505Q.3 Conditions . Guarantees/standby letters of credit to cover performance and/or advance payment bonds shall be made subject to the following conditions: a. Drawings against the approved guarantee/letter of credit, if any, shall be supported by a certification or proofs of payment/s made by the beneficiary of said guarantee/letter of credit to the main contractors and/or project-owner, which shall be reported by applicant-firm and the remitting bank to the Central Bank, thru the Foreign Exchange Department (FED), within five (5) days from the date of remittance/-drawing; b. Cancellation of the standby letter of credit or letter of guaranty, or non-availment of the authority granted to issue the guarantee/letter of credit within 30 days in the case of bid bonds, and within 60 days in the case of performance and advance payment bonds from date of receipt of said authority, shall likewise be reported to the Central Bank, thru the Management of External Debt and Investment Accounts Department (MEDIAD); c. The foreign exchange earnings, net of operating financial requirements, generated by the project shall be inwardly-remitted and sold for pesos to the local banking system not later than thirty (30) days following the end of every calendar quarter; d. Semi-annual Statement of Foreign Exchange Receipts and Disbursement relative to the project covered by the Central Bank-authorized guarantee shall be submitted by applicant-firm to the Central Bank, thru MEDIAD, duly certified by an independent CPA, together with proofs of sales of that portion of the foreign exchange earnings of applicant-firm required to be surrendered to the local banking system pursuant to (c) above; e. The regulations of the Ministry of Labor relative to the inward-remittance of the basic salaries of Filipinos recruited for employment or stationed abroad shall be strictly complied with. prcd Subsec. 4505Q.4 and Subsec. 4505Q.5 (Additional provisions as provided by CBP Circular No. 1123, dated December 5, 1986) Footnotes * Required under Section 7 of P.D. No. 1167. PART SIX Miscellaneous NON-BANKS WITH QUASI-BANKING FUNCTIONS (NBQBs) SECTION 4601Q. Securities Dealership . A NBQB may be accredited as a government security dealer and can have access to the Central Bank open market operations under the following rules: LLjur a. The Central Bank shall engage in open market operations in accordance with the principles stated in Sec. 96 of R.A. No. 265, as amended, in order to achieve the objectives of the national monetary policy. b. Purchases and sales in the open market shall be made only through accredited government securities dealers. The Central Bank may buy and sell for its own account: (1) Evidences of indebtedness issued directly by the Government or its political subdivisions; and (2) Evidences of indebtedness issued by government instrumentalities and fully guaranteed by the Government. The above evidences of indebtedness must be freely negotiable and regularly serviced. c. Accreditation shall take the form of an agreement by and between the Central Bank and the Government security dealer, whereby in consideration of certain privileges to be granted by the Central Bank, such as inventory financing, the latter shall perform marketing and monitoring responsibilities. d. Outright purchases and sales of CBCIs and other government securities shall be effected only on the basis of the lowest price offered or the highest price bid. e. R/P accommodations shall be limited to banks and non-bank accredited government securities dealers and shall be made for terms not exceeding 30 days at a rate that shall be fixed at of 1% above prevailing market rates: (1) The amount of the R/P shall in no case exceed 50% of the face amount of the inventory to be financed; (2) Collateral to be lodged with the Central Bank must have a value of not less than 100% of the accommodation applied for; (3) The repurchase agreement may be paid at any time before maturity at the option of the dealer; (4) In the event the securities covered by the repurchase agreement are not repurchased by the dealer, they may be sold in the open market or transferred to the CB Portfolio or the Securities Stabilization Fund; and (5) Should an accredited dealer become no longer qualified as such, its outstanding repurchase agreement shall immediately become due and payable. If settlement of the amount due is not made within three (3) days from the date of its disqualification, the CB shall proceed to collect said amount in accordance with Item (4) above. f. In order to qualify for an R/P availment, a duly accredited dealer must have: (1) Posted daily quotations for the last three (3) weeks on the particular type of government securities for which financing is being applied for; (2) Traded on the said government securities in an amount equivalent to 50% of its inventory as of the date of its application, during the last preceding three (3) weeks; and (3) No record of default or delay in the settlement of any repurchase agreement. g. Reverse repurchase agreements covering the sale of portions of the security holdings of the CB Portfolio may be made for terms not exceeding sixty (60) days at a rate that shall be fixed at of 1% below prevailing market rates. h. Swaps of CBCIs and other government securities of different maturities shall be made only after taking into account appropriate price adjustments. The rules on repurchase agreements with the Central Bank on CBCIs and other government securities are prescribed in Subsec. 4269Q.6. SUBSECTION 4601Q.1 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 Years 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. SECTIONS 4602Q-4613Q. (Reserved) SECTION 4614Q. Prohibition Against Greater Percentage for Veto . To ensure the full and effective implementation of citizenship requirements imposed by existing applicable laws on financial institutions and to prevent circumvention of such an objective by means of provisions in articles of incorporation, by-laws or similar documentation, the following guidelines shall apply: a. Where at least a majority of the equity is reserved by law to be held by Filipino citizens and foreign stockholders are occupying or will occupy a substantial minority position, no NBQB will be permitted to provide in its articles of incorporation, by-laws or similar documentation a provision that certain corporate transactions would require a voting concurrence of greater than 70% of the subscribed capital stock entitled to vote for banks, investment houses, finance companies and such other corporations similarly subject to regulation by the Central Bank. b. The 70% ceiling on the voting concurrence requirement shall extend to all levels of corporate decisions: (a) stockholders, (b) board of directors, as well as (c) sub-committees of the board (which for this purpose refer to such bodies the voting members of which are composed exclusively of members of the board of directors and whose decisions are binding on the board as a whole without the need for further confirmation).For the board of directors, or sub-committees of the board, the 70% ceiling on the voting concurrence may refer to the entire membership rather than the quorum present. c. The foregoing policy shall be applied prospectively; hence, it shall not affect the articles of incorporation or by-laws of financial institutions, where foreign stockholders occupy a substantial minority position, already approved by the Central Bank and/or registered with the Securities and Exchange Commission (SEC). d. The following is a list of permissible special transactions which would require a greater than simple majority vote of the decision-making body concerned: (1) Amendment, repeal or adoption of new by-laws. (2) Issuance of any share of stock of any class, or of any security convertible into or exchangeable for any share of stock, or the grant of an option to purchase any such share or convertible or exchangeable security. (3) Increase or decrease of the number of directors. (4) Incurring or increasing of bonded indebtedness. (5) Appointment of legal counsel or external auditors. (6) Amendment, repeal or adoption of new by-laws where such power has been duly delegated to the board of directors. (7) Entering into a Management Contract, any contract with third persons, firm or corporation for the general management, administration and operation of the company's business and property. (8) Amendment, termination (other than by expiration of term),cancellation, extension or modification of the contract referred to in the immediately preceding item. (9) Investing the funds of the NBQB in the equity of any other corporation or business or for any purpose other than the main purpose for which the NBQB is organized. (10) Selling, exchanging, leasing or otherwise disposing of all or substantially all of the property and assets of the NBQB, including its goodwill, and entering into a merger or consolidation. (11) Issuing stock or bonded dividends. (12) Substantial participation of foreigners in the equity of a NBQB. (13) Increase or decrease of capital stock which would dilute the voting equity of foreign stockholders. (14) Substantial capital expenditures, borrowings, and loans. (15) Concentration of credit to affiliated groups of borrowers. (16) Loans to directors, officers, stock-holders and/or their related interests. SECTIONS 4615Q-4621Q. (Reserved) . SECTION 4622Q. Promotional Campaigns . Programs, plans, benefits or incentives designed to attract placement of funds in NBQBs to provide sufficient time for processing thereof, must be received by the Central Bank at least thirty (30) days before the scheduled launching date of the plan or program for institutions in the Greater Manila Area, and at least forty (40) days for those outside this area. No such programs plan, benefit or incentive shall be advertised, disseminated, or implemented prior to Central Bank approval.(As amended by CBP Circular No. 1156, dated September 22, 1987) For purposes of this Section, Greater Manila Area shall consist of Manila, Quezon City, Pasay City and Caloocan City and the municipalities of Makati, Malabon, Mandaluyong, Marikina, Navotas, Paraaque, Pasig, and San Juan. SUBSECTION 4622Q.1 Raffles, lotteries, contests . Raffles, lotteries or contests shall be subject to the following conditions: a. They must not be held more than once every quarter; b. They must not be tied up with the size of the placement/investment; c. They must not provide placers/investors with financial compensation for the use of their investments; d. New and old placers/investors are qualified, but shall be entitled to only one prize of the contests of any kind, including raffles and lotteries; e. Accounts of personnel of the sponsoring NBQB and those of their relatives within the first degree of affinity or consanguinity are disqualified; f. Total value of prizes, including donated prizes, for promotions in the form of raffles or lotteries for each NBQB, branch or agency shall not be more than P10,000.00 for entities located in the Greater Manila Area and all other cities, and P5,000.00 for those in other areas; g. The results of the raffle, lottery or contest shall be appropriately announced; the list of the winners with the corresponding prizes shall be posted in a conspicuous place within the entity's premises; and the winners shall be notified; and h. The results of such raffle, lottery or contest shall be attested to by two authorized officers of the concerned institution and reported to the Central Bank. SUBSECTION 4622Q.2 Gifts, giveaways . Promotional plans involving gifts or give-aways shall be subject to the following terms and conditions: a. The period for the distribution of the gifts or give-aways shall not exceed 30 days and only in connection with (1) the inauguration or transfer of office, (2) anniversary celebration, and (3) the Christmas season; b. No cash, or certificate, check or instrument which can be exchanged for cash, except government securities, shall be allowed as gift or give-away; c. The cost of the gift or give-away to be offered shall not exceed ten pesos (P10.00) for each account; d. The money value of the gift or give-away shall not be credited to the investor/placer's account; e. Each account shall be entitled to only one gift or give-away; As used in this Subsection, the term "gift" or "give-away" shall mean anything of value given at no charge to a placer/investor by the NBQB, including donations, as an inducement for the placement/investment of a new account or the maintenance of an existing account. SUBSECTION 4622Q.3 Sanctions . Violations of this Section shall subject the institution concerned to a fine of not more than P100 per day until the violation ceases. Directors/officers responsible for the violation shall be jointly liable for the payment of the fine. An entity which persistently violates any of the provisions of this Section shall be liable to such other administrative actions as the Central Bank may impose. SECTIONS 4623Q-4627Q. (Reserved) . SECTION 4628Q. Examination by the Central Bank . The Monetary Board may subject any corporation performing quasi-banking functions to special examination whenever the circumstances so warrant. SECTION 4629Q. Applicability of EKB Rules on NBQBs . In case of conflict between rules applicable to banks with expanded commercial banking authority and those applicable to NBQBs in activities where they perform the same functions, the rules governing banks with expanded commercial banking authority shall prevail. SECTION 4630Q. Guidelines to Govern the Exchange of Credit Information . The following guidelines shall govern the exchange of credit information: SUBSECTION 4630Q.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 in 4161Q.1(l) 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 4630Q.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. 4630Q.1(b). (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 4630Q.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 4630Q.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 4630Q.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. SECTIONS 4631Q-4698Q. (Reserved) . SECTION 4699Q. General Provision on Sanctions . Unless otherwise provided, any violation of the provisions of this Part shall be subject to the sanctions prescribed under Sections 34 and 34-B of Republic Act NO. 265, as amended. NON-BANKS WITHOUT QUASI-BANKING FUNCTIONS SECTION 4601N. Sale of Government Securities . A NBQB may be accredited as a government security dealer and can have access to the Central Bank open market operations under the rules prescribed in Sec. 4601Q. SECTIONS 4602N-4613N. (Reserved) . SECTION 4614N. Prohibition Against Greater Percentage for Veto . The rules on this prohibition which are also applicable to non-banks without quasi-banking functions are prescribed in Sec. 4614Q. SECTIONS 4615N-4623N. (Reserved) SECTION 4624N. Reproduction and Use of Facsimiles of Government Securities . In addition to those mentioned in Sections 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, advertisement, placard, circular, card or object whatsoever bearing the likeness or similitude of any 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 this rule: 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 prescribed in App. 28 shall be followed. SECTION 4625N. Notice of Dissolution . A non-stock savings and loan association contemplating to dissolve shall give written notice thereof to the Monetary Board through the appropriate supervising and examining department of the Central Bank at least thirty (30) days before taking steps to effect dissolution. SECTION 4626N. Confidential Information . No director, officer or employee of non-stock savings and loan associations or of the Central Bank shall disclose any information relating to member-borrowers and their applications or to the operations of the Association unless permitted by the Monetary Board of the Central Bank: Provided, however , That in the case of an Association under examination, the Director of the appropriate supervising and examining department of the Central Bank may furnish findings of examination to the office or firm where such Association does business. All deposits of whatever nature with a non-stock savings and loan association are considered absolutely confidential in nature, and may not be examined, inquired or looked into by any person or government official, bureau or office, except when the examination is conducted by the Monetary Board or the official of the appropriate supervising and examining department of the Central Bank, pursuant to the provisions of Republic Act No. 3779, as amended, or upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. No official or employee of a non-stock savings and loan association shall disclose to any person any information concerning said deposits, except in cases mentioned in the immediately preceding paragraph. SECTION 4627N. (Reserved) . SECTION 4628N. Examination by the Central Bank . The director of the appropriate supervising and examining department of the Central Bank, personally or by deputy, shall make at least once a year and at such other times as he or the Monetary Board may deem necessary and expedient, an examination, inspection or investigation of the books and records, business affairs, administration, and financial condition of any non-stock savings and loan association. "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's custody after giving proper receipts therefor. It shall also include the interview of the directors and personnel of any banking institution. SUBSECTION 4628N.1 Sanctions . Any banking institutions * which shall wilfully refuse to permit examination shall pay a fine of P500.00 daily from the day of refusal and for as long as such refusal lasts. "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. SUBSECTION 4628N.2 Procedures in imposing the 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. SUBSECTION 4628N.3 Manner of payment or collection of fine . Banks and NSSLAs shall pay the fines imposed according to procedures and rules stated in Subsec. 4161N.1 (d). SUBSECTION 4628N.4 Appeal to the Monetary Board . Banking institutions and NSSLAs may appeal to the Monetary Board from a ruling of the appropriate department imposing a fine. SECTION 4629N. Applicability of Other Rules . Other rules and regulations applicable to stock savings and loan associations, insofar as they are applicable and not inconsistent with these rules shall also apply to non-stock savings and loan associations. SECTION 4630N. Basic Laws Governing Non-Bank Financial Intermediaries . The following are the basic laws governing non-bank financial intermediaries: a. Investment houses . Presidential Decree No. 129, as amended, known as "The Investment Houses Law", governs the establishment, operation and regulation of investment houses. To effectively carry out the provisions of this Decree, the Securities and Exchange Commission, pursuant to the powers vested in it by said Decree, promulgated basic rules and regulations (App. 17) to implement the provisions of the Decree. b. Financing companies . Republic Act No. 5980, as amended, known as "The Financing Company Act", regulates the organization and operation of financing companies. To effectively carry out the provisions of this Act, the Securities and Exchange Commission, pursuant to the powers vested in it under said Act, promulgated basic rules and regulations to implement the provisions of the Act (App. 18). c. Non-stock savings and loan associations . Republic Act No. 3779, as amended, known as the "Savings and Loan Associations Act", regulates the organization and operation of savings and loan associations. d. Investment companies . The basic law governing investment companies is Republic Act No. 2629, known as the "Investment Company Act". e. Securities dealers/brokers . The basic law governing securities dealers and brokers is Commonwealth Act No. 83, known as the "Securities Act". f. Building and loan associations . The basic law governing building and loan associations is Republic Act No. 337, as amended, otherwise known as "The General Banking Act". g. Trust corporations . The basic law governing trust corporations, companies and banks authorized to engage in the business of a trust company is Republic Act No. 337, as amended, known as "The General Banking Act". SECTIONS 4631N-4698N. (Reserved) . SECTION 4699N. General Provision on Sanctions . Unless otherwise provided, any violation of the provisions of this Part shall be subject to the sanctions provided in Sections 34 and 34-B of Republic Act No. 265, as amended, whenever applicable. PAWNSHOPS SECTIONS 4601P-4627P. (Reserved) . SECTION 4628P. Supervisory Powers of the Central Bank . The Director, Department of Financial Intermediaries (Non-Bank), and his duly designated representatives are authorized to conduct an examination, inspection, or investigation of books, records, business affairs, administration, and financial condition of any pawnshop, whenever said official deems it necessary for the effective implementation of Presidential Decree No. 114, and other pertinent rules and regulations. Said official and his duly designated representatives may administer oaths to any director, officer, or employee of the pawnshop. If, upon such examination, inspection, or investigation, the official or his deputies shall establish that the pawnshop is violating or is not complying with the requirements of Presidential Decree No. 114 and of the provisions of other pertinent rules and regulations, said official shall immediately inform the Monetary Board of his findings and recommendations, and the Monetary Board shall take appropriate actions to stop such violation or non-compliance, and punish the persons responsible. SECTION 4629P. (Reserved) . SECTION 4630P. Basic Law Governing Pawnshops . Presidential Decree No. 114, known as the "Pawnshop Regulation Act", regulates the establishment and operation of pawnshops. SECTION 4631P. Complaints Against Pawnshops . Complaints against pawnshops must be filed with the Department of Financial Intermediaries (Non-Bank) in writing and signed under oath by the complainant. Procedures for processing complaints against pawnshops are enumerated in App. 29. SECTIONS 4632P-4698P. (Reserved) . SECTION 4699P. General Provision on Sanctions . Any person violating the provisions of Presidential Decree No. 114 or of other pertinent rules and regulations shall be punished by a fine of not less than one hundred pesos (P100.00) or imprisonment for not less than thirty (30) days and not more than one (1) year, or both, at the discretion of the Court. If the violation is committed by a corporation, partnership or association, the penalty shall be imposed on the directors/officers/employees/partners responsible or authorizing the same. SUBSECTION 4699P.1 Administrative Sanctions . The Monetary Board shall impose upon pawnshops, their owners, partners, directors, and officers for any violation of the provisions of the rules on pawnshops, Presidential Decree No. 114, of pertinent laws, of any order or instruction of the Monetary Board or its authorized official; or any commission of irregularities in the conduct of its business, the following administrative sanctions: a. For a violation consummated at a single instance and not punishable on a per day basis, a fine of not more than Five Hundred Pesos (P500.00),or for a violation which is continuing and punishable on a per-day basis a fine of not more than One Hundred Pesos (P100.00) for every day of violation or non-compliance ( Effective January 29, 1985 ) and/or; b. Suspension or, after due hearing, removal of partners/directors of officers. For purposes of this Sub-section, the phrase "any commission of irregularities in the conduct of its business" shall include any act or omission described hereunder: 1. Failure to produce pawn upon redemption or in any other case where the pawnshop has the obligation to produce the pawn. 2. Allowing the redemption of pawned articles without the surrender of the corresponding original pawn ticket/substitute pawn ticket/affidavit of loss. 3. Falsifying pawn tickets. 4. Actual collection of interest in advance and/or service charges without reflecting the same on the pawn ticket. 5. Tampering or substitution of pawn. 6. Failure to issue official receipts for amounts collected. 7. Any other act or omission analogous to above-enumerated acts and omissions. Footnotes * Under Sec. 28(i), RA 3779, as amended, administrative sanctions applicable to SLAs are also applicable to NSSLAs. APPENDICES APPENDIX 1 GUIDELINES TO EVALUATE INVESTMENT HOUSES (Appendix to Sec. 4105Q) 1. Capital The requirement is a minimum paid-in capital of P20 million. Foreign equity, if any, shall be registered with and approved by the Board of Investments and the Central Bank. 2. Citizenship Majority (51%) of the voting stock shall be owned by Filipinos. 3. Directorship/Officership Majority of the board members shall be Filipinos. Resident foreign directors and technicians shall register with the Commission on Immigration and Deportation. Compliance with the prohibition on interlocking directorship/officership between banks and investment houses and between NBQBs shall be observed. 4. Promotion of Public Interest and Economic Growth a. Submission of a one-year investment program indicating: (1) Underwriting and distribution activities . These shall show in detail the various stages leading to the completion of an agreement. Target dates for each stage in the underwriting process shall be indicated which should serve as reference points in the event that an investment house is unable to bring the program and its components to fruition. Target volume of underwriting would be set initially at 25% of paid-in capital. (2) Fund mobilization . Emphasis shall be on maturities beyond one year. Domestic and foreign sources shall be indicated; the latter would be evaluated in terms of pertinent Central Bank regulations. (3) Fund usage . Support of priority investment areas of the Government and other projects which may be determined by the Central Bank shall be emphasized. Funds placed on maturities beyond one year shall be preferred. (4) Planned distribution of portfolio . Activities indicating money-market services and investment in subsidiaries and affiliates, while necessary to sustain the investment house, shall be subordinated to the preferred activities above-indicated. Other activities as financial management, counseling, distribution of equity and debentures for "public" ownership, etc.,shall be considered. b. The one-year investment program of the investment house shall be related to the 4-Year Development Plan by indicating the portion of the investment and savings targets in the Plan which would be supported by the investment house industry. c. A one-year projected Income Statement showing major sources of income and expense items. d. Operational agreement with other financial institutions. e. A statement justifying the operation of the investment house as not in conflict with public interest and economic growth, taking into account the existing number of investment houses. (1) record of underwriting; (2) evidence of medium and long-term loans; (3) evidence of obtaining funds with maturity beyond one year; and (4) equity investments which were subsequently distributed to the public. 5. Organization, Direction and Administration . The organizational/functional chart should match the organization framework with operational objectives. The management of the company, board of directors and the managerial staff, must be firmly designated before it can be granted a license to operate as an investment house. 6. Integrity, Experience and Expertise of Board and Management Staff a. Formal training, academic or others; b. Experience along financial management, securities dealing, fund management, project evaluation and feasibility studies; c. Absence of administrative or criminal conviction; and d. Affiliation with professional organizations. 7. Branching The rate at which branch offices are to be established shall depend upon the ability of the company to conduct operations from headquarters/head offices as well as on correspondent (banking) arrangements. Other factors to be considered are the following: a. Reserve and liquidity position; and b. Profitability and capacity to absorb losses. APPENDIX 2 DETERMINATION OF AMOUNT OF ADDITIONAL CAPITAL THE ENTITY MUST PUT UP (PROJECTION BASE LATEST AVAILABLE REPORT) (IN THOUSAND PESOS) (Appendix to Subsec. 4151Q.4) ________________________ (Name of Entity) A. 1. Estimated Amount of Risk Assets of Present Office for the Next Twelve (12) Months a. Actual Risk Assets P xxx b. Add: xx% of (A) xxx Risk Assets (Base Period) P xxx Risk Assets (Previous Year) xxx Increase P xxx (increase) Rate of Increase = = xx% (actual risk assets) c. Total of (a) and (b) P xxx ==== 2. Maximum Possible Level of Risk Assets Based on the Base Period Figures: a. Networth Less 30% of Paid-in Capital (P xxx xxx) P xxx b. 100% of Borrowings (Bills Payable) xxx c. 80% of Unutilized Acceptances or Credit Line with Foreign Bank(s) xxx P xxx ==== B. Estimated Risk Assets for the First Twelve (12) Months of Operation: 1. Branch Approved but not yet Opened: ____________________ P xxx 2. Branch Being Applied for: ____________________ xxx Add: Lower of A.1 or A.2 C. Total Estimated Risk Assets for 12 Months P xxx ==== D. 10% of C (Minimum Paid-in Capital Required) P xxx E. Less: Present Combined Capital Accounts (Base Period Figures) P xxx Add: xx% of Above xxx xxx Capital Accounts (Base Period) P xxx Capital Accounts (Previous Year) xxx Increase P xxx (Increase) = xx% 1 Rate of Increase = (Capital Accounts of Previous Year) F. Estimated Excess of Capital over Minimum Capital Required or Additional Amount of Capital Applicant Must Put up, as the Case may be P xxx Footnote 1. The computation to arrive at the "rate of increase" in capital accounts shall only be considered if there is sufficient indication of evidence that the NBQB will continue to follow the same amount of increase in capital accounts for the succeeding year. If no such evidence is found that the NBQB will continue to increase its capital accounts for the same amount for the succeeding year, then computations should consider only the amount of net profits (after dividends) plowed into the business for the year immediately preceding the date of application plus the amount of capital that the NBQB promised to put up per its schedule or program submitted to the Central Bank, if no such schedule or program was submitted, then only the amount of net profits (after dividends) for the year immediately preceding the date of application should be considered. APPENDIX 3 CB EXTERNAL REPORT CATEGORIES FOR NON-BANK FINANCIAL INTERMEDIARIES (Appendix to Subsec. 4161Q.2) 1. Category A-1 Published/Condensed Statement of Condition Report Title /Report Number Quarterly Consolidated Balance Sheet CBP-Unnumbered (for NBQBs) 2. Category A-2 Report Title /Report Number Consolidated Balance Sheet CBP-7-26-02 Sworn Statement on Quasi-Banking Operations CBP-7-26-07 3. Category B Report Title /Report Number Non-Bank Financial Intermediaries * Information Sheet CBP-7-26-01 Bio-Data CBP-7-26-10.1 Consolidated Statement of Income and Expenses CBP-7-26-03 Consolidated Report of Required & Available Reserves Against Deposit Substitute CBP-7-26-05 Statement of Capital Required and Capital Accounts CBP-7-26-06 Report of Money Broking Activities CBP-7-26-08 Building and Loan Associations Report of Earnings, Expenses and Undivided Profits CBP-7-16-04-3 Report on Dividends Declared CBP-7-16-12 Schedule of Banking Hours & Days CBP-7-16-16 Bio-Data of Directors/Officers CBP-7-16-18 Loss/Destruction of Bank's Property Caused by Crimes or Fortuitous Events CBP-7-16-20 Notice/Application for Write-off of Loans and Advances CBP-7-16-21 Non-Stock Savings and Loan Associations Consolidated Weekly Report on Required and Available Reserve Fund Against Deposit Liabilities CBP-7-19-01B.1 Consolidated Semi-Annual Report of Earnings, Expenses, Surplus, and Dividends CBP-7-19-05B Statement of Income and Expenses CBP-7-19-05B.1 Consolidated Report of Investment in Loans and Discounts CBP-7-19-06B.1 Consolidated Cash Flow Statement CBP-7-19-07B Consolidated Report on the Utilization of Loanable Funds Generated which were Set Aside for Agrarian Reform Credit/Agricultural Credit CBP-7-19-10B.2 Quarterly Report on CB: IBRD Lending Operation CBP-7-19-10B.2 to CBP-7-19-10B.6 Monthly Report of Arrearages on CB: IBRD Loans CBP-7-19-10B.7 Loans/Credits Granted to Builders or Purchasers of Units/Shares in Condominium Projects, Country Clubs, Sports Clubs, and Other Real Property Developments CBP-7-19-11B Footnote * Investment Houses, Investment Companies, Securities Dealers/Brokers, Financing Companies, Lending Investors, Fund Managers, Money Brokers and Pawnshops. APPENDIX 4 FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORY A-1 REPORTS (Appendix to Subsec. 4161Q.2) Resolution No. _________ Whereas, it is required under Subsec. 4161Q.2 that Category A-1 reports be signed by the institution's President or Senior Executive Vice President/equivalent positions for specific types of non-bank financial intermediaries, and by the Chief Finance Officer (i.e.,Controller or Chief Accountant); Whereas, it is also required that aforesaid officers of the institution be authorized under a resolution duly approved by the institution's Board of Directors; Whereas, we, the members of the Board of Directors of (Name of Institution) are conscious that, in designating the officials who would sign said Category A-1 reports, we are actually empowering and authorizing said officers to represent and act for or in behalf of the Board of Directors in particular and (Name of Institution) in general; Whereas, this Board has full faith and confidence in the institution's President (or the Senior Vice President, etc.,as the case may be) and its Chief Finance Officer (Controller or Chief Accountant) and, therefore, assumes responsibility for all the acts which may be performed by aforesaid officers under its delegated authority; Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby resolved that: 1. Mr. ___________, President __________________ Specimen Signature or 2. Mr. ___________, Senior Executive Vice President ____________ Specimen Signature and 3. Mr. ___________, Chief Finance Office (or Controller or Chief Accountant) ____________ Specimen Signature are hereby authorized to sign the published, condensed statement of condition of ______________________. (Name of Institution) Done in the City of ________________, Philippines, this _______ day of ____________________, 198 ______________ ________________________ CHAIRMAN OF THE BOARD ______________ _____________ DIRECTOR DIRECTOR ______________ _____________ DIRECTOR DIRECTOR ______________ _____________ DIRECTOR DIRECTOR ATTESTED BY: ________________________ CORPORATE SECRETARY APPENDIX 5 FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORY A-2 REPORTS (Appendix to Subsec. 4161Q.2) Resolution No. _________ Whereas, it is required under Subsec. 4161Q.2 that Category A-2 reports be signed by the institution's President or Senior Executive Vice President/equivalent positions for specific types of non-bank financial intermediaries; Whereas, it is also required that aforesaid officers of the institution be authorized under a resolution duly approved by the institution's Board of Directors; Whereas, we, the members of the Board of Directors of (Name of Institution),________, are conscious that, in designating the officials who would sign said Category A-2 reports, we are actually empowering and authorizing said officers to represent and act for or in behalf of the Board of directors in particular and (Name of Institution) in general; Whereas, this Board has full faith and confidence in the institution's President (or the Senior Vice President, etc.,as the case may be) and, therefore, assumes responsibility for all the acts which may be performed by aforesaid officers under its delegated authority; Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby resolved that: Name of Specimen Position Report Officer Signature Title No . (For consolidated Statement and H.O. Quarterly Statement of Condition) 1. Mr. ___________________ President or Senior Exec. Mr. ___________________ Vice-Pres. (For reports of Banking Office/Unit other than Head Office) Manager/Officer- 2. ______________________ in-charge etc. are hereby authorized to sign Category A-2 reports, of _______________________; (Name of Institution) Done in the City of _________, Philippines, this _________ day of _____, 198 __________. ________________________ CHAIRMAN OF THE BOARD ______________ _____________ DIRECTOR DIRECTOR ______________ _____________ DIRECTOR DIRECTOR ______________ _____________ DIRECTOR DIRECTOR ATTESTED BY: ________________________ CORPORATE SECRETARY APPENDIX 6 FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORY B REPORTS (Appendix to Subsec. 4161Q.2) Resolution No. _________ Whereas, it is required under Subsec. 4161Q.2 that Category B reports be signed by the institution's authorized signatory or alternate/equivalent positions for specific types of non-bank financial intermediaries; Whereas, it is also required that aforesaid officers of the institution be authorized under a resolution duly approved by the institution's Board of Directors; Whereas, we the members of the Board of Directors of (Name of Institution) are conscious that, in designating the officials who would sign said Category B reports, we are actually empowering and authorizing said officers to represent and act for or in behalf of the Board of Directors in particular and (Name of Institution) in general; Whereas, this Board has full faith and confidence in the institution's authorized signatory or alternate/equivalent positions for specific types of non-bank financial intermediaries and, therefore, assumes responsibility for all the acts which may be performed by aforesaid officers under its delegated authority; Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby resolved that: Name of Specimen Position Report Authorized Signature Title No . Signatory/ Alternate 1. Authorized (Alternate) 2. Authorized (Alternate) etc. are hereby authorized to sign the named reports. Done in the City of _____________, Philippines, this _____ day of ______, 198 ____. ________________________ CHAIRMAN OF THE BOARD ______________ _____________ DIRECTOR DIRECTOR ______________ _____________ DIRECTOR DIRECTOR ______________ _____________ DIRECTOR DIRECTOR ATTESTED BY: ________________________ CORPORATE SECRETARY APPENDIX 7 MINIMUM INTERNAL CONTROL STANDARDS FOR NON-BANK FINANCIAL INTERMEDIARIES ENGAGED IN QUASI-BANKING FUNCTIONS (Appendix to Sec. 4166Q) I. Proper Accounting Records 1. All non-bank financial intermediaries engaged in quasi-banking functions should maintain proper and adequate accounting records. 2. These records should be kept currently posted and should contain sufficient detail so that an audit trail is established. 3. All entries should bear official approval and should be initialed by the person originating and another person checking them. II. Independent Balancing 1. Independent balancing shall mean that records posted by a person or cash held by a cashier shall be balanced or counted by another person. 2. The minimum independent balancing procedures which should be adopted are the following: a. Monthly reconcilement of general ledger balances against their respective subsidiary and supporting records and documentations by someone other than the bookkeeper, the person handling the records, or the person directly connected with processing the transactions. b. Irregular and unannounced count of cashier's cash and checks and other cash items at least twice a month by the auditor/control officer or by an officer not connected with the treasurer's/cashier's office or its equivalent. c. Monthly reconcilement of cash in banks accounts (domestic and foreign) and due from/to head office/branches by someone other than the check custodian, the person posting the general ledger entries or the authorized signatory of the bank account. d. Periodic verification of securities and collaterals by someone other than their custodians. Verification should include both the physical inventory of securities and the record checking. e. Periodic verification of the accuracy of the interest credits and payments to deposit substitute liabilities accounts. 3. All exceptions in the reconciliation/verification should be followed up immediately until satisfactorily corrected. III. Division of Duties and Responsibilities 1. 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. 2. The physical handling of a transaction should be separated from its recording and supervision as follows: a. 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 investor's/creditor's subsidiary ledgers; b. A loaning officer should never be allowed to disburse proceeds of notes, accept note payment nor process loan ledgers; c. The functions of issuing, recording and signing of checks should be separated; d. 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 checks; e. Custodians of securities should not be allowed to handle security transactions; f. Collateral appraisals should be done by an employee/officer other than the ones approving the loans; g. Incoming checks and other cash items should be recorded chronologically in a register by an employee other than the bookkeeper; h. Credit reports should be obtained by someone other than lending officers; i. Mailing of client's 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 j. Paid checks drafts should be controlled and maintained by an officer/employee other than the authorized signatory or the cashier. 3. 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. IV. Joint Custody 1. 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. 2. Physical protection should be deemed established through the use of two locks or combinations on a file chest or vault compartment. 3. 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. 4. Persons who are related to each other within the third degree of consanguinity or affinity should not be made joint custodians. 5. The following should be under joint custody: a. Cash on hand or in vault b. All accountable forms c. Collaterals d. Securities e. Documents of title and/or ownership of properties or fixed assets f. Safekeeping items g. Vault doors and safe combinations V. Signing Authorities 1. 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. Borrowing c. Investments d. Approval of expenses e. Various supervisory reports f. Checks VI. Dual Control 1. 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. 2. The routine of each transaction should be designed so that at least two or more individuals are involved in the completion of every transaction. 3. The following accounts/transactions should be under dual control: a. Checks The signature of at least two officers should be required in the issuance of checks. b. Borrowing The signature of at least two authorized officers should be required. c. All transactions giving rise to "due to" or "due from" account and all instruments of remittances evidencing these transactions particularly those involving substantial amounts, should be approved by two authorized officers. VII. Number Control 1. Sequence number controls should be incorporated in the accounting systems 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. 2. The following are the forms, instruments and accounts that should be number-controlled: a. Checks b. Promissory notes and other commercial papers c. Official and provisional receipts d. Certificate of stocks e. Loan accounts f. Expense vouchers VIII. Rotation of Duties 1. The duties of personnel handling cash, securities and bookkeeping records should be rotated. 2. Rotation assignment should be irregular, unannounced and long enough to permit disclosure of any irregularities or manipulations. IX. Independence of the Internal Auditor 1. 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. 2. The internal auditor should report directly to the Board of Directors. 3. The internal auditor should not install nor develop procedures, prepare records or engage in other activities which he normally reviews or appraises. X. Direct Verification 1. Direct verification shall mean the confirmation of account or records by direct correspondence/visits with the institution's customers. 2. The following accounts among others, should be subject to direct verification by the internal auditing staff at least once a year: a. Balances of loans and credit accommodations of borrowers b. Outstanding balances of borrowings and other liabilities c. Outstanding balances of receivables/payables d. Collaterals securing said accounts. XI. Other Internal Control Standards 1. Investments a. Investment limits and a list of accredited companies as approved by the Board of Directors or by its Credit Committee should be established as a guide for investing in any financial institution engaged in money market trading. b. Investments should be secured by assets approved by the Board of Directors or by its Credit Committee. c. Checks representing placements of investments should be released only upon receipt of either the deposit substitute instrument or the underlying securities or documents of title. cdlex 2. Miscellaneous a. Loan applications and related documents should be spot checked to insure their authenticity, including verification of name, residence, employment and current reputation of the borrowers. b. No employee should be permitted to process transaction affecting his own account. c. Cashiers and other employees having contact with customers should be prohibited from preparing deposit substitute tickets or other records for the customers. d. All non-bank financial intermediaries with quasi-banking functions should have a sound recruitment policy since internal control begins from point of hiring. e. All non-bank financial intermediaries with quasi-banking functions should secure adequate insurance coverages, fidelity and other indemnity protection, viz: 1) Insurance coverage for losses arising from calamities and theft/robberies. 2) Fidelity bonds for losses arising from dishonest, fraudulent and criminal acts of accountable officers/employees. APPENDIX 8 PRESCRIBED FORMAT FOR PUBLICATION OF QUARTERLY CONSOLIDATED BALANCE SHEET (Appendix to Sec. 4171Q) (Name of Non-Bank Financial Intermediary Engaged in Quasi-Banking Function) (Address) Tel. No. _______ CONSOLIDATED BALANCE SHEET As of ________________ ASSETS 1. Cash on hand/in banks 2. Commercial papers and other short-term investments 3. Receivables 4. Long-term Receivables portion due within one year 5. Accrued interests, etc.,receivables 6. Other current assets 7. Long-term receivables net of portion due within one year 8. Investments at cost 9. Property and equipment net of depreciation 10. Other Assets Total Assets LIABILITIES AND CAPITAL ACCOUNTS 11. Short-term borrowings and instruments sold under agreements to repurchase 12. Long-term debts portion due within one year 13. Accrued expenses 14. Other current liabilities 15. Long-term debts Net of portion due within one year 16. Unearned income/deferred credits 17. Paid-in capital 18. Retained earnings Total Liabilities and Capital Accounts 19. Contingent Accounts a) Underwriting b) Guaranty c) Instruments sold with recourse d) Others (Specify) REPUBLIC OF THE PHILIPPINES) ____________________________) S.S. I, ____________________________, of the above-mentioned corporation, do solemnly swear that all matters set forth in the above consolidated balance sheet are true and correct to the best of my knowledge and belief. _________________________ Signature _________________________ Title SUBSCRIBED AND SWORN TO before me this _________ day of _____________________ 198____, affiant exhibiting to me his Residence Certificate Number A __________________, issued at _________________ on ____________, 19_____ ____________________________ NOTARY PUBLIC Until December 31, 19_____ PTR No. ________ dated _________ Doc. No. _________ Page No. _________ Book No. _________ Series of 19________. INSTRUCTIONS 1. Reserve for contingencies created out of current earnings shall be construed as a Valuation Reserve and reported as a deduction from the related or appropriate asset accounts. cdlex 2. Appraisal Surplus, if any, shall be reported separately after Retained Earnings account. 3. Notes to the consolidated balance sheet may be reported when appropriate. 4. Accounts in the format which are not applicable to the corporation may be deleted. 5. Specialized accounts which are not mentioned in the format shall be reported in the account having the nearest definition and a note to that effect appended by means of footnote. 6. Generally, the General Instructions/Guidelines for accomplishing report forms for the industry shall be followed. APPENDIX 9 SAFEGUARDS IN BONDING OF NSSLA ACCOUNTABLE OFFICERS AND EMPLOYEES (Appendix to Sec. 4148N) 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. 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 receded 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. APPENDIX 10 LIST OF REPORTS REQUIRED FROM NON-BANK FINANCIAL INTERMEDIARIES (Appendix to Sec. 4161N) Frequency of Deadline for CBP Form No. Subject of Report Reporting Institution Reporting Submission CBP-7-26-01.A Information Sheet IH, IC, SD/B Annually Jan. 30 CBP-7-26-01.1 Bio-data of Directors/ All non-bank financial Annually Jan. 30 or 15 days Officers intermediaries except after change pawnshops CBP-7-26-02.A Consolidated Balance IH, IC, SD/B Quarterly 30 days after end Sheet (non-members of stock- of quarter exchanges) CBP-7-26-02.1A Breakdown of Com'l IH, IC, SD/B Quarterly 30 days after end Papers & Other Short- (non-members of stock- of quarter Term Investments exchanges) CBP-7-26-02.2A Schedule of Balances IH, IC, SD/B Quarterly 30 days after end of Receivables (non-members of stock- of quarter exchanges) CBP-7-26-02.3A Schedule of Balances of IH, IC, SD/B Quarterly 30 days after end Short-Term Borrowings (non-members of stock- of quarter & Instruments Sold under exchanges) Repurchase Agreements CBP-7-26-02.4.A Breakdown of Long- IH, IC, SD/B Quarterly 30 days after end Term Debts (non-members of stock- of quarter exchanges) CBP-7-26-02.5 A Schedule of Contingent IH, IC, SD/B Quarterly 30 days after end Accounts (non-members of stock- of quarter exchanges) CBP-7-26-03.1.A Consolidated Statement IH, IC, SD/B Quarterly 30 days after end of Income & Expenses (non-members of stock- of quarter exchanges) CBP-7-26-03.1 Schedule of Bad NBFIs Quarterly 30 days after end Debts Written Off of quarter CBP-7-26-01.B Information Sheet FC, LI Annually Jan. 30 CBP-7-26-02.B Consolidated Balance FC, LI Quarterly 30 days after Sheet end of quarter CBP-7-26-02.1B Breakdown of Com'l. FC, Ll Quarterly 30 days after Papers & Other Short- end of quarter Term Investments CBP-7-26-02.2B Schedule of Balances FC, Ll Quarterly 30 days after of Financing Receivables end of quarter Current & Long-Term CBP-7-26-02.3B Summary Report of FC, Ll Quarterly 30 days after Short-Term Borrowings end of quarter CBP-7-26-02.4B Breakdown of Long- FC, Ll Quarterly 30 days after Term Debts end of quarter CBP-7-26-02.5B Schedule of Contingent FC, Ll Quarterly 30 days after Accounts end of quarter CBP-7-26-03.B Consolidated Statement FC, Ll Quarterly 30 days after of Income & Expenses end of quarter CBP-7-26-01.C Information Sheet Pawnshops Upon Jan. 30 or 15 days registration after change. CBP-7-26-01.1C Personal Data Sheet of Pawnshops Upon Jan. 30 or 15 days Owner/Partner/Incorpo- registration after change. rator/Director/Officer CBP-7-26-02.C Consolidated Balance Pawnshops Quarterly 30 days after Sheet end of quarter CBP-7-26-02.1C Breakdown of Pledged Pawnshops Annually Jan. 30 Loans According to Size CBP-7-26-03.C Statement of Income & Pawnshops Quarterly 30 days after Expenses end of quarter CBP-7-26-01.E Information Sheet FM Annually Jan. 30 CBP-7-26-02.E Consolidated Balance FM Quarterly 30 days after Sheet end of quarter CBP-7-26-02.1E Breakdown of Com- FM Quarterly 30 days after mercial Paper & Other end of quarter Short-Term Investments CBP-7-26-02.2E Schedule of Balances FM Quarterly 30 days after of Loans/Notes end of quarter Receivables Current & Long-Term CBP-7-26-02.3E Summary Report of FM Quarterly 30 days after Short-Term Borrowings end of quarter CBP-7-26-02.4E Breakdown of Long- FM Quarterly 30 days after Term Debts end of quarter CBP-7-26-02.5E Schedule of Contingent FM Quarterly 30 days after Accounts end of quarter CBP-7-26-03.1E Statement of Income & FM Quarterly 30 days after Expenses end of quarter CBP-7-26-02.F Consolidated Balance SD/B (Member of stock Quarterly 30 days after Sheet exchanges) end of quarter CBP-7-26-02.1F Schedule of Customers- SD/B (Member of stock Quarterly 30 days after Margin Accounts exchanges) end of quarter CBP-7-26-02.2F Schedule of Marketable SD/B (Member of stock Quarterly 30 days after Securities exchanges) end of quarter CBP-7-26-02.3F Schedule of Loans SD/B (Member of stock Quarterly 30 days after Payable exchanges) end of quarter CBP-7-26-03.1F Consolidated Statement SD/B (Member of stock Quarterly 30 days after of Income and Expenses exchanges) end of quarter CBP-7-26-05 Consolidated Report of FC, IH, SD/B with Weekly 4 business days Required & Available quasi-banking functions following reference Reserves against week Deposit Substitutes CBP-7-26-05.1 Components of Total DS FC, IH, SD/B with Weekly 4 business days Non-Interbank Loans quasi-banking functions following reference (Excluding Bonds) week CBP-7-26-05.2 Components of DS Non- FC, IH, SD/B with Weekly 4 business days Interbank Loans (Exclud- quasi-banking functions following reference ing Bonds) Exempted from week Reserve Requirements CBP-7-26-05-3 Schedule of Phil. Gov't. All NBFI performing quasi- Weekly 4 business days Securities Utilized as banking functions following reference Reserves against week Deposits Substitutes CBP-7-26-06 Statement of Capital All NBFI performing quasi- Semi- 7 business days Required and Capital banking functions monthly after 15th & end of Accounts month CBP-7-26-08 Report of Money Broking Money Brokers Monthly 30 days after end Activities of month CBP-7-26-10 Information Sheet and Every creditor, including As needed "Truth in Lending Act" NBFI Creditor's Certification CBP-7-26-13 Past Due Receivables, All NBFI performing quasi- Quarterly 15 calendar days Loans &/or Commercial banking functions after end of refer- Papers/Private Securities ence quarter CBP-7-26-14 Rolled-Over Loans and/ All NBFI performing quasi- Quarterly 30 days after end or Commercial Papers banking functions of quarter (Above P100,000) CBP-7-26-15 Report on Underwriting IH Quarterly 30 days after end Activities of quarter CBP-7-26-18 Consolidated Monthly All NBFI performing quasi- Monthly 15 calendar days Report on Credit banking functions from end of reference Accommodations to month Directors, Officers, Stockholders and their Related Interests CBP-7-26-18.1 Credit Accommodations All NBFI performing quasi- Monthly 15 calendar days to Directors, Officers, banking functions from end of reference Stockholders and their month Related Interest CBP-7-26-19 Deposit Substitutes NBQB Quarterly 15th day from end of with Original/Remaining reference quarter Maturities of over 730 days CBP-7-26-20 Report on Equity NBQB Semestrally 15 business days Investments on Non- following end of Allied Undertakings reference semester CBP-7-26-21 Borrowing-Investment NBQB Annually 1st working day of Program March of reference year CBP-7-26-22 Annual Underwriting IH Annually 1st working day of Program March of reference year CBP-7-26-23 Trust/Fund Management NBFls engaged in trust/ Quarterly On or before the Operations fund management 10th business day operations following end of reference quarter CBP-7-26-24 Credit and Equity Expo- IH, IC, FC Quarterly 10 banking days sures to individuals/ after end of quarter Companies/Groups Aggregating P20M and Above Unnumbered Outstanding Loans NBQBs Monthly 10 banking days Secured by Pledges/ after end of Assignments of Shares reference month of Stocks of Other Banks/ NBQBs CBP-7-26-25 Dividends Declared NBQBs As dividends 10 business days are declared from approval of declaration by the Board of Directors CBP-7-26 Average Required NBQBs Quarterly 4th business day Reserves following end of reference quarter Unnumbered Statement of Condition Financial Intermediaries Monthly 10th business day of Subsidiaries, Affiliates with Subsidiaries/Affiliates following end of and Branches Abroad and Branches Abroad reference month Report of Income and Financial Intermediaries Semestral 10th business day Expenses of with Subsidiaries/Affiliates following end of Subsidiaries, Affiliates and Branches Abroad reference semester and Branches Abroad Unnumbered (No Quarterly Report on NBQBs As dividends 10 business days prescribed form) Operations are declared from approval of declaration by the Board of Directors Unnumbered (No Annual Report of Money Brokers Annually 31 March following prescribed form) Business Activities end of each year Annual Report of Manage- All NBFI Annually 31 March following ment to Stockholders end of each year Covering Results of Operations for the Previous year Audited Financial State- All NBFI Annually 31 March following ment for the Previous end of each year Year Ended Prepared by the External Auditor Loss/Destruction of P As crime or Within 72 hours Pawnshop Property incident from the occurrence Caused by Crimes of occurs of crime/incident Fortuitous Events Change in List of P As change Immediately after Directors/Partners/ occurs change Officers/Employees Letter to SES IV Re: Election/Appoint- As change 10 days from ment of members of NBQB occurs election/assump- board of directors and tion of office committees Legend: IH Investment Houses IC Investment Companies SD/B Security Dealers/Brokers FC Financing Companies LI Lending Investors FM Fund Managers P Pawnshops NBFI Non-Bank Financial Intermediaries NBQB Non-Bank Financial Intermediaries Performing Quasi-Banking Functions APPENDIX 10-a LIST OF REPORTS REQUIRED FROM NON-STOCK SAVINGS AND LOAN ASSOCIATIONS Frequency of Deadline for CBP Form No. Subject of Report Reporting Submission CBP-7-19-01 B.1 Consolidated Weekly Report on Weekly Thursday following reference week Required and Available Reserve Funds Against Deposit Liabilities CBP-7-19-04 B Consolidated Monthly Statement of Monthly 10th day after end of reference month Condition CBP-7-19-04 B.1 Consolidated Monthly Schedule of Monthly 10th day after end of reference month Savings and Time Certificate of Deposits CBP-7-19-05 B Consolidated Semi-Annual Report Semestrally 30th day after end of every semester of Income and Expenses, Surplus and Dividends CBP-7-19-06 B.1 Consolidated Report of Investment Monthly On or before the 10th of the month in Loans and Discounts CBP-7-19-07 B Consolidated Cash Flow Monthly On or before the 10th of the month CBP-7-19-08 B Consolidated Condensed Annually 60th day after December 31 of every Statement of Condition year CBP-7-19-41-B Plantilla of Organization Annually On or before January 15 CBP-7-19-45-B Application for Availment of the Every time an Not later than the banking day imme- Privilege to Use CBCI and Other application is diately following the day when the Government Securities with made 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 Weekly Tuesday following reference week accompany CBP-7-19-45 B) CBP-7-19-45 B.2 Investment in Bonds and Other As change 10 calendar days from date of change Debt Instruments occurs Report of Discrepancies of Every time a Within 15 days from discovery of Accounts discrepancy discrepancy occurs Certification as to the Last Annually Five days after the close of the year Number of Board Resolution Adopted Duplicate of Stockholders' Every meeting Within 5 days after adoption or Resolution approval Serial Number of Time Deposits Monthly On or before the 10th day of the following month for which the report is made. Specimen Signature of Signing Upon assumption of office Officers/Directors Report of Change of Director/ As change Within 10 days after any such change Principal Officer occurs Bonding of Accountable Officers Before assumption of office and Employees Hiring of Independent CPA * Upon consummation of contract Notice/Application for Write-off of As write-off 30 days prior to the intended Loans occurs date of write-off Publication or Mailing of Year-end Annually Within 60 days after the close of Financial Statements fiscal year CBP-7-19-50 B Report on Crimes/Losses Within 48 hours from knowledge of the crime/incident * Non-stock savings and loans associations with resources of P50,000 or more. (As amended by CBP Circular 1218 dated December 26, 1989) ANNEX 1 APPENDIX 10-a LIST OF REPORTS REQUIRED FROM NON-STOCK SAVINGS AND LOAN ASSOCIATION A . MAJOR REPORTS FREQUENCY OF DEADLINE OF CBP FORM NO. SUBJECT OF REPORTS REPORTING SUBMISSION CBP-7-26-05H Consolidated Weekly Report on Monthly Ten (10) calendar days after month-end Required and Available Reserve Funds Against Deposit Liabilities 7-26-03H Investment in Securities (to accompany -do- -do- Consolidated Report on Required and Available Reserve Funds Against Deposit Liabilities) 7-26-03.1H Investment in Bonds and Other -do- -do- Debt Instruments (to accompany Consolidated Report on Required and Available Reserve Funds Against Deposit Liabilities) 7-26-02H Consolidated Statement of Quarterly 30 days after end of each quarter Condition 7-26-03H Consolidated Report of -do- -do- Income and Expenses 7-26-02.2H Consolidated Report of Investment in Loans -do- -do- and Discounts (to accompany Consolidated Statement of Condition) 7-26-18.1H Copy of entry in NSSLA records of written As approved Twenty (20) business days from approval of majority of directors on date of approval credit accommodation to directors and officers with accompanying Certification on Loans Granted to Directors/Officers Audited Financial Statements or Annually One hundred twenty (120) days publication thereof (Publication or after the end of fiscal year mailing of year-end financial statements) * B . MINOR REPORTS Report of Discrepancies of Accounts Everytime a Fifteen (15) days from discrepancy discovery of discrepancy occurs Certification as to the Last Number Annually Five (5) days after the end of Board Resolution Adopted of calendar year Notice/Application for Write-off As write-off Thirty (30) days prior to the of Loans occurs intended date of write-off Report on Crimes/Losses As crime/ Forty-eight (48) hours from incident knowledge of the crime/ occurs incident. Complete report not later than 15 days from termination of investigation Duplicate of Board of Directors' Every Five (5) days after date of Resolution meeting resolution CBP-7-26-25H Dividend Declaration As declared Ten (10) business days after the date of declaration CBP-7-26-01H Information Sheet Annually Thirty (30) days after calendar year-end or 15 days after any change in information required under Section 4161N.c CBP-7-26-01H Bio-data of Directors/Officers -do- Thirty (30) days after calendar year-end or 15 days following creation or filling up of vacancy in Board of Directors, sub-bodies of Board or managerial staff Changes/Amendments in Articles As changes Fifteen (15) days after approval of Incorporation/By-Laws/material occur of such change(s) by the Board documents to be submitted to Central Bank of Directors Information required in Section 4161N.c -do- Fifteen (15) days after any (as addendum to Information Sheet) change Annual Report of management to Annually One hundred twenty (120) days stockholders after end of fiscal year Consolidated Annual financial statements -do- -do- of NSSLAs and their allied undertakings/ affiliates/subsidiaries supported by indi- dual financial statements of allied under- takings/affiliates/subsidiaries Board Resolutions on NSSLA's signatories As authorized Three (3) days from date of to the reports submitted to Central Bank resolution * for NSSLAs with total resources of P500,000.00 or more. APPENDIX 10-b LIST OF REPORTS REQUIRED FROM BUILDING AND LOAN ASSOCIATIONS Frequency of Deadline for CBP Form No. Subject of Report Reporting Submission CBP-7-16-03-A Published Statement of Condition Quarterly The original and published reports, (Consolidated) with Original of within twelve and twenty banking days, Published Statement respectively, from receipt of call to the association by the Director CBP-7-16-04-B Report of Earnings, Expenses and Semi- Ten banking days after end of calendar Undivided Profits Annually semester CBP-7-16-05.A Statement of Condition (Consolidated) Monthly Seven banking days after end of month CBP-7-16-05.A.1 Supplementary Data on the Lending Monthly Seven banking days after end of month Operations of Building and Loan Associations CBP-7-16-12 Report of Dividends Declared On every Ten banking days after date of declaration dividend declaration CBP-7-16-16 Schedule of Banking Hours and Days As change Seven banking days prior to effectivity occurs of the change CBP-7-16-18 Bio-data of Directors/Officers As change Within twenty-five banking days occurs from election/appointment or change CBP-7-16-20 Loss/Destruction of Property As crime/ Within forty-eight hours from Caused by Crimes or Fortuituous incident knowledge of crime or incident Events CBP-7-16-21 Notice of Application for Write-off of As write-off Within twenty-five banking days of the Loans and Advances occurs intended date of write-off (As amended by CBP Circular 1218 dated December 26, 1989) ANNEX 2 APPENDIX 10-b LIST OF REPORTS REQUIRED FROM BUILDING AND LOAN ASSOCIATIONS A . MAJOR REPORTS FREQUENCY OF DEADLINE OF CBP FORM NO. SUBJECT OF REPORT REPORTING SUBMISSION CBP-7-26-02I Consolidated Statement of Condition Quarterly Thirty (30) days after end of each quarter 7-26-03I Consolidated Statement of Income -do- -do- and Expenses 7-26-02.2I Supplementary data on the Lending -do- -do- Operations Building and Loan Associations (to accompany Consolidated Statement of Condition) Audited Financial Statements or publication Annually One hundred twenty (120) days thereof (publication or mailing of year-end after end of fiscal year financial statements) * B . MINOR REPORTS 7-26-25I Report of Dividends Declared On every Ten (10) banking days after date declaration of dividend declaration 7-26-01I Information Sheet Annually Thirty (30) days after calendar year-end or 15 days after any change in information required under Section 4161N.c 7-26-01.1I Bio-data of Directors/Officers -do- Thirty (30) days after calendar year-end or 15 days following creation or filling up of vacancy in Board of Directors, sub-bodies of Board or managerial staff of BLAs Report on Crimes/Losses As crime/ Forty-eight (48) hours from knowledge incident occurs of crime or incident. Complete report not later than 15 days from termination of investigation Notice/Application for Write-Off As write-off Thirty (30) days prior to the intended of Loans and Advances occurs date of write off Report of Discrepancies of Accounts Everytime a Fifteen (15) days from discovery discrepancy occurs of discrepancy Change/s and amendment/s in Articles As changes Fifteen (15) days after the approval of Incorporation/ By-Laws/material occur of such changes by the Board of Directors documents required to be submitted to Central Bank Information required in Section 4161N.c -do- Fifteen (15) days from date of change (as addendum to Information Sheet) Duplicate of Board of Director's Every Five (5) days after date of resolution Resolution meeting Board Resolutions on BLA's signatories As authorized Three (3) days from date of resolution to the report submitted to Central Bank Annual report of management to Annually One hundred twenty (120) days after stockholders end of fiscal year Consolidated annual financial statements -do- -do- of BLAs and their allied undertakings/ affiliates/subsidiaries supported by individual financial statements of allied undertakings/ affiliates/subsidiaries Certification as to the last number of -do- Five (5) days after end of calendar year Board Resolution adopted * for BLAs with total resources of P500,000.00 or more APPENDIX 10-c INSTRUCTIONS ON THE ACCOMPLISHMENT OF REPORTS REQUIRED OF NON-BANK FINANCIAL INTERMEDIARIES (Appendix to Sec. 4161N) A. General Instructions 1. Except for the Information Sheet and Bio data of Director/Officer which shall be submitted annually, all the other financial reports shall be submitted in accordance with the Instructions/Guidelines attached to the forms. 2. For firms located in the provinces, reports may be filed through the Central Bank Regional and Extension Offices in Davao City, Cebu City, San Fernando, La Union and Bacolod City. 3. Whenever vacancies are created or filled in the board of directors, sub-bodies of the board, or the managerial staff of the non-bank financial intermediary concerned, it shall be the responsibility of the corporate secretary to make the pertinent written report to the Department of Financial Intermediaries (Non-Bank) of the Central Bank, within fifteen days following the occurrence of the event. The bio-data of the newly-elected members of the board, or newly-appointed members of the sub-body of the board or the managerial staff shall likewise be submitted. 4. Any changes or amendments in the articles of incorporation, articles of partnership, by-laws or material documents required to be submitted to the Department of Financial Intermediaries (Non-Bank),shall be reported by submitting copies of the amended articles of incorporation, articles of partnership, by-laws, or material document to that Office within fifteen days following the approval of such changes by the proper authorities. B. Instructions to Specific Entities 1. All Non-Bank Financial Intermediaries Engaged in Quasi-Banking Functions . These entities shall cause the publication of their quarterly consolidated balance sheets dated March 31, June 30, September 30 and December 31 of every year, or as at such other dates as the Central Bank may require, within thirty (30) days following the end of such period, in any of the three (3) daily newspapers with the highest number of paid nationwide circulation as certified by the appropriate government office, in a classified box measuring not less than two-column by seven (7) inches, in accordance with the format and instructions shown in App. 8. An advance copy of the quarterly consolidated balance sheet required to be published shall be furnished the Central Bank department concerned not later than twenty (20) days after end of reference quarter or cut-off date. The published consolidated balance sheet must be signed under oath by the president or, the officer duly authorized by the board of directors of the entity. 2. Fund Managers .The attention of all fund (trust, provident, pension and retirement) managers, is hereby called to the proper accomplishment of the following forms: a. CBP 7-26-01-E (Information Sheet) shall be accomplished by the trust officer in the case of banks, the chairman of the board of trustees in the case of foundations or trust corporations, other than banks, and the fund manager personally managing funds of others in the case of individuals. Any person or institution handling several types of fund management services shall accomplish only one information sheet: Provided ,That a schedule of the types of fund management service being undertaken, containing the information required under Nos. 5-14 of said form for each service and indicating the number of accounts under each service, shall be attached. b. CBP 7-26-02-E (Consolidated Balance Sheet) and CBP 7-26-03-E (Consolidated Statement of Income and Expenses) shall be accomplished by the chief accountant or the fund manager himself, for each type of fund management service, consolidating the accounts falling under each type of fund management service. c. A distinction between corporate and personal funds being managed shall at all times be observed. 3. Building and Loan Associations . All reports regularly submitted by building and loan associations to the Department of Commercial and Savings Banks, Central Bank, shall be numbered in accordance with the Central Bank's Numbering System. Queries with respect to the implementation of the system may be referred to the said Department of Commercial and Savings Bank of the Central Bank or the CBP Reports Review Committee. APPENDIX 11 CERTAIN INFORMATION REQUIRED FROM BANKS AND NON-BANK FINANCIAL INTERMEDIARIES (Appendix to Sec. 4161N) 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 investment houses, financing companies, investment companies and security dealers/brokers, include from President to Vice-President f. For non-stock savings and loan associations and building and loan associations, include from President to Accountant g. 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. APPENDIX 11-a DOCUMENTS/INFORMATION ON ORGANIZATIONAL STRUCTURE AND OPERATIONAL POLICIES REQUIRED FROM BANKS AND NON-BANK FINANCIAL INTERMEDIARIES (Appendix to Sec. 4161N) 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. Designations 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 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. cdlex APPENDIX 12 CHART OF ACCOUNTS AND DESCRIPTION OF LOAN REGISTERS OF PAWNSHOPS (Appendix to Sec. 4161P) A. General Ledger .The General Ledger is the controlling record of all subsidiary ledger accounts. The general ledger accounts shall be grouped as follows: (1) Assets Asset accounts shall consist of the following: (a) Cash on hand and in banks; (b) Pledge loans; (c) Land; (d) Building; (e) Furniture and fixtures; (f) Office equipment; (g) Leasehold improvements; (h) Investment in securities; and (i) Other assets. Other assets shall include all assets not included in any of the above classification, such as prepaid expenses, advances, accounts receivables. (2) Liabilities Liabilities represent obligations of the pawnshop, such as: (a) Loans payable; (b) Accounts payable; and (c) Other liabilities. Other liabilities are liabilities not included in the above classification, such as SSS Premiums and medicare, tax with held, accruals. (3) Capital Capital at the end of the year is the excess of assets over liabilities, or the sum of paid-in capital surplus or retained earnings accounts, and net income for the year. The accounts under this group shall consist of the following: (a) Capital/capital stock; (b) Drawings; (c) Retained earnings; and (d) Net income for the year. (4) Income This account represents the "general ledger control" account for all income of the pawnshop. An "Income Subsidiary Ledger" shall be maintained and the total of this ledger shall equal the balance of "Income Control" account of the general ledger at all times. The "Income Subsidiary Ledger" shall contain the following accounts: (a) Interests pledge loans; (b) Service charges; (c) Gain or loss at auction sale; (d) Interests on securities; and (e) Other income (5) Expenses The expenses account shall include the following: (a) Salaries and allowances; (b) Interest on borrowed money; (c) Rental; (d) Depreciation; (e) Light and water; (f) Taxes and licenses; (g) SSS contributions; (h) Costs of telephone, postage and/or telegram; (i) Stationery and/or supplies; and (j) Miscellaneous expenses. B. Registers .The following registers shall be maintained to trace loan transactions. (1) Loans Extended Register Every pawnbroker shall keep a "Loans Extended Register" in which shall be entered in ink, at the time of each loan or pledge transactions, an accurate account and description, in English, with corresponding translation in the local dialect, the following minimum data: (a) Date of transaction; (b) Number of pawn ticket; (c) Amount of money loaned or principal; (d) Rate of interest to be paid, in per cent; (e) Service charge collected; (f) Description of pawn; (g) Appraised value of pawn; (h) Name of pawner; (i) Address of pawner; (j) Description of the pawner, including: (i) Nationality; (ii) Sex; and (iii) General appearance k) Signature or thumbmark of the pawner and the name of the pawner written by and signature of witness to the thumbmarking. dctai (2) Loans Paid Register A "Loans Paid Register" shall be maintained in which shall be entered in ink, the principal and interest payments of loans. It shall contain the following minimum data: (a) Date of payment; (b) Number of pawn ticket; (c) Name of pawner; (d) Principal amount; and (e) Amount of interest paid. APPENDIX 13 STANDARDIZED DEPOSIT SUBSTITUTE INSTRUMENTS (Appendix to Subsec. 4281Q.2) Serial No .__________ __________________ (Name of Intermediary) PROMISSORY NOTE Issue Date: __________, 19 _______ Maturity Date: _______, 19 ________ FOR PESOS ____________________________ (P ______________________) (Present Value/Principal) RECEIVED, __________________________________________ promises to pay (Name of Issuer/Maker) ____________________________________________________ or order, the sum (Name/Account Number of Payee) of PESOS ___________________________________ (P __________________), (Maturity Value/Principal & Interest) subject to the terms and conditions on the reverse side hereof. ___________________ Duly Authorized Officer NOT INSURED WITH THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) APPENDIX 13-a TERMS AND CONDITIONS OF A PROMISSORY NOTE 1. Computation of Yield Interest is hereby stipulated/computed at % per annum, compounded ( ) monthly ( ) quarterly ( ) semi-annually ( ) others. 2. No Pretermination This promissory note shall not be honored or paid by the issuer/maker before the maturity date indicated on the face hereof. 3. Liquidated Damages In case of default, issuer/maker shall pay, in addition to stipulated interest, liquidated damages of (amount or %),plus attorney's fees of (amount or %), and costs of collection in case of suit. 4. Renewal ( ) No automatic renewal. ( ) Automatic renewal under the following terms: ________________________________________________________ ________________________________________________________ 5. Collateral/Delivery ( ) No collateral ( ) Collateral/secured by (describe collateral) ( ) Physically delivered to payee ( ) Evidenced by Custodian Receipt No. _________________ dated ____________________ issued by _______________________ ( ) Collateralized/secured by ________________________________ share of ____________________ 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. Serial No. _________ __________________ (Name of Intermediary) APPENDIX 13-b REPURCHASE AGREEMENT Issue Date: ____________ 19____ Repurchase Date: _______ 19____ FOR AND IN CONSIDERATION OF PESOS _____________ (P__________) Vendor, (Name of issuer/vendor) hereby sells, transfers and conveys in favor of Vendee, (Name of vendee) the security (ies) described below, it being mutually agreed upon that the same shall be resold by Vendee and repurchased by Vendor on the repurchase date indicated above at the price of PESOS _________ (P_________),subject to the terms and conditions stated on the reverse side hereof. (Description of Securities) Issuer Serial Number/s Maturity Date/s Face Value Interest/Yield P P TOTAL P P CONFORME: _________________ ____________________ (Signature of Vendee) (Duly Authorized Officer) NOT INSURED WITH THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) APPENDIX 13-c 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 collector 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. Serial No. ________ __________________________ (Name of Intermediary) APPENDIX 13-d CERTIFICATE OF ASSIGNMENT WITH RECOURSE Issue Date: ___________ 19____ FOR AND IN CONSIDERATION OF PESOS ____________________ (P________) ________________________ (Name of Assignor) hereby assigns, conveys, and transfers with recourse to _________________ (Name of Assignee) the debt of _____________________ (Name of Principal Debtor) to the Assignor, specifically described as follows: (Description of Debt Securities) ____________________________________________________________________ Principal Debtor Serial Number/s Maturity Date/s Face Value Interest/Yield ____________________________________________________________________ P P ____________________________________________________________________ TOTAL P P ____________________________________________________________________ and Assignor hereby undertakes to pay, jointly and severally with the Principal Debtor, the face value of, and the interest/yield on, said debt securities. The assignment shall be subject to the terms and conditions on the reverse side hereof. CONFORME: ______________________ ______________________ (Signature of Assignee) Duly Authorized Officer NOT INSURED WITH THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) APPENDIX 13-e 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, Assignor shall be liable, in addition to interest, for liquidated damages of ___________ (amount or %) plus attorney's fees of _________ (amount or %),and costs of collection in case of suit. 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. Serial No. _____________ _____________________ (Name of Intermediary) APPENDIX 13-f CERTIFICATE OF ASSIGNMENT WITH RECOURSE Issue Date: _____________, 19___ FOR AND IN CONSIDERATION OF PESOS (Present Value/Principal) (P___________),(Name of Assignor) hereby assigns, conveys, and transfers with recourse to (Name of Assignee) the debt of (Name of Principal Debtor) to the Assignor, specifically described as follows: Principal Debtor Serial Number/s Maturity Date/s Face Value Interest/Yield P P TOTAL and hereby undertakes that in case of default of the Principal Debtor, Assignor shall pay the face value of, and the interest/yield on, said debt securities, subject to the terms and conditions on the reverse side hereof. CONFORME: _______________________ _________________________ (Signature of Assignee) (Duly Authorized Officer) NOT INSURED WITH THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) APPENDIX 13-g 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, Assignor shall be liable, in addition to interest, for liquidated damages of (amount or %) plus attorney's fees of (amount or %) and costs of collection in case of suit. 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. Serial No: ___________ ________________________ (Name of Intermediary) APPENDIX 13-h CERTIFICATE OF PARTICIPATION WITH RECOURSE Issue Date: ____________, 19 ___ For and in consideration of Pesos ___________, this certificate of participation is hereby issued to evidence the (fraction or %) share of (Name of Participant) in the loan/s of _________________ granted by/assigned to the herein issuer, specifically described as follows: (Description of Debt Securities) Principal Debtor Serial Number/s Maturity Date/s Face Value Interest/Yield P P TOTAL P P The issuer shall pay, jointly and severally with the principal debtor, (fraction or %) share of the face value of, and the interest/yield on, said debt security(ies),subject to the terms and conditions an the reverse side hereof. CONFORME: _______________________ _________________________ (Signature of Participant) (Duly Authorized Officer) NOT INSURED WITH PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) APPENDIX 13-i 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 or %),plus attorney's fees of (amount or %) 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 (describe document) dated ___________ executed by (name of party/ies) and made an integral part hereof. Serial No: ___________ ________________________ (Name of Intermediary) APPENDIX 13-j CERTIFICATE OF PARTICIPATION WITH RECOURSE Issue Date: ____________, 19 ___ FOR AND IN CONSIDERATION OF PESOS ________________ (P__________) this certificate of participation is hereby issued to evidence the (fraction or %) share of (Participant) in the loan/s of ____________ granted by/assigned to the herein issuer, specifically described as follows: (Description of Debt Securities) Principal Debtor Serial Number/s Maturity Date/s Face Value Interest/Yield P P TOTAL P P In case of default of the Principal Debtor, the issuer shall pay the (fraction or %) share of the face value of, and interest/yield on, said debt security(ies),subject to the terms and conditions on the reverse side hereof. CONFORME: _______________________ _________________________ (Signature of Participant) (Duly Authorized Officer) NOT INSURED WITH PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) APPENDIX 13-k 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 or %),plus attorney's fees of (amount or %) 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 (describe document) dated ___________ executed by (name of party/ies) and made an integral part hereof. APPENDIX 14 PROCEDURES FOR DEMAND DEPOSIT WITH CENTRAL BANK OF NON-BANK FINANCIAL INTERMEDIARIES ENGAGED IN QUASI-BANKING FUNCTIONS (Appendix to Subsec . 4283Q . 1) The following procedures for demand deposit with the Central Bank shall be followed: I. Opening a Deposit Account 1. The NBQB shall submit a request to the Director, Cash Department, Central Bank together with the following documents: a. Six (6) copies of duly accomplished Central Bank-prescribed Credit Form No. 2 (Official Signatories) each with a minimum of three (3) specimen signatures of each authorized signatories and extent of their signing authority. The official signature cards shall be re-accomplished at least every two (2) years and whenever new or other signatories are so designated and shall be immediately submitted to the Cash Department, Central Bank. b. Six (6) copies of Board of Directors resolution for such authorization. 2. The NBQB shall submit to the Director, Cash Department, Central Bank, an NBI clearance for its representative authorized to receive proceeds of withdrawals from its demand deposits. A Central Bank Cash Department ID shall be issued to him. II. Requisition of Central Bank Checks 1. The NBQB shall address a request to the Director, Cash Department, Central Bank for check forms. 2. The request shall be signed by any of the signatories listed in Credit Form No. 2 mentioned in Item I.1a and shall indicate the name and specimen signature of the representative to whom the CB check forms will be delivered. 3. The NBQB authorized representative shall acknowledge receipt of the check forms. 4. The Cash Department, Central Bank shall confirm by letter to NBQB concerned the issuance of such requisitioned check forms. III. Use of Central Bank Checks NBQBs shall use Central Bank checks exclusively for 1. settlement of obligations with the Central Bank, and 2. withdrawals to meet cash requirements. IV. Withdrawals of Deposit The duly authorized NBQB representative shall present to the Cash Department, the Central Bank check duly accomplished by the NBQB making such withdrawal, and receive the cash withdrawn in accordance with existing rules and regulations. V. Loss of Checks Loss of checks, whether duly accomplished or not, shall be reported immediately in writing by the NBQB to the Cash Department, Central Bank. VI. Credits and Debits to the Deposit Account The Central Bank shall: 1. Credit the deposit account for any deposits made and rediscount proceeds. 2. Debit any amount withdrawn, payments on rediscounting based on advice of the Department of Loans and Credit, and penalties imposed such as on reserve deficiencies, delayed submission of reports required by the Central Bank, aside from reconciliation statements, if unpaid within specified deadline with the corresponding order of payment. 3. Credit overages and debit shortages that may be found after verification of NBQB's cash deposit. The pro-forma of "Authority to Debit Slip" has been prescribed (App. 14-a) for use by NBQBs in the transfer of excess funds which are not otherwise lent out in the interbank loan market from their Central Bank reserve accounts to their operating accounts in their depository commercial banks. An "Authority to Debit Slip" shall have a standard size of 4-" x 8-" and shall be orange in color. It shall contain the minimum data or information as shown in App. 14-a and shall be accomplished and submitted to the Central Bank Accounting Department in duplicate after having been duly signed and/or authenticated by authorized officers of the NBQB. Authority to Debit Slip APPENDIX 15 NEW RULES ON REGISTRATION OF SHORT TERM COMMERCIAL PAPERS (Appendix to Subsec. 4293Q. 1 and Sec. 4293N) 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 Subsec. (3) above in the form as prescribed. (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. cdlex (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. (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 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 prorata 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 , That all such evidences of indebtedness shall be held on to maturity and shall neither be negotiated nor assigned to any one other than the 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. 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 paper 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. cdlex 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 ( MISSING PAGES ) APPENDIX 15 NEW RULES ON REGISTRATION OF SHORT-TERM COMMERCIAL PAPERS (Appendix to Sec. 4289Q and Sec. 4293N) Pursuant to Presidential Decree No. 678, as amended by Presidential Decree No. 1798, and other existing applicable laws, the Securities and Exchange 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 instrument 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; (v) Notwithstanding the foregoing requirements for a committed credit line with a bank, or any financial institution which may be qualified subsequently by the Central Bank of the Philippines, any corporation desiring to issue commercial papers may be exempted from compliance therewith by the Securities and Exchange Commission, should it meet all of the following financial ratios based on consolidated audited financial statements for the immediate past three (3) years: (1) Average current ratio shall be at least 1.2% computed as follows: Current ratio = Current Assets Current Liabilities OR Average acid-test ratios shall be at least 0.5:1 computed as follows: Cash, receivables, and Acid-test ratio = marketable securities Current Liabilities (2) Average solvency position shall be one whereby total assets must not be less than total liabilities; (3) Average net profit margin shall be at least 3% computed as follows: Net income after income tax, corporate development Net profit margin = taxes, and other non-cash charges Net sales or revenues OR Average annual return on equity shall be at least 8% computed as follows: Net income after income tax, corporate development Return on equity = taxes, and other non cash Total stockholders' equity (4) Average interest service coverage ratio shall be at least 1.2:1 computed as follows: Net income before-interest expense, income tax, corporate development taxes, Interest service = and other non-cash charges coverage ratio Interest expense (5) Debt-to-equity ratio shall not exceed 2.5:1. The Securities and Exchange Commission may, in its discretion, consult with industry organization(s) such as Investment Houses Association of the Philippines (IHAP) and Bankers Association of the Philippines (BAP) and/or the Credit Information Bureau, Inc. (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. (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 offer to buy be accepted prior to the time the registration statement is approved. This preliminary prospectus shall not constitute 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 availments, 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 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 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, (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, investment houses, 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; and other entities that may be classified as primary institutional lenders by the Central Bank, in consultation with the Securities and Exchange Commission; 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 privilege; (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 sub-section (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 m quasi-banking activities. Any violation of said Central Bank rules/regulations or circulars shall be considered a violation of these rules and regulations. 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 paper 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 papers 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 issuer 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 data of draw-down, 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 statements, 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 (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 officers 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 filled with the Commission and the Central Bank, has made untrue statement 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: (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 or more than P50,000 for each violation, plus not more than P500 for each day of continuing violation. Annex "B" hereof shall initially be the guideline on the scale of fines; (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, and 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. APPENDIX 16 NEW RULES ON THE REGISTRATION OF LONG-TERM COMMERCIAL PAPERS (Appendix to Sec. 4289Q and Sec. 4293N) Pursuant to Section 4(b) of the Revised Securities Act and other existing applicable laws, the Securities and Exchange Commission hereby promulgates the following New Rules and Regulations governing long-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 shall apply to long-term commercial papers issued by corporations. SECTION 2. Definition . For purposes of these Rules, the following definition shall apply: a. Long-term commercial papers shall refer to evidence of indebtedness of any corporation to any person or entity with maturity period of more than three hundred sixty-five (365) days. 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 shall refer to the creation of commercial paper and its actual or constructive delivery to the payee. d. Appraised value shall refer to the value of chattel and real property, as established by a duly licensed and independent appraiser. e. Current market value shall refer to the value of the securities at current prices, as quoted at the stock exchanges. f. Recomputed debt-to-equity ratio shall refer to the proportion of total outstanding liabilities, including the amount of long-term commercial papers applied for, and any unissued authorized commercial papers to net worth. g. Specific person shall refer to a duly named juridical or natural person as an investor for its or his own account, a trustee for one or more trustors, agent or fund manager for a principal under a fund management agreement, and does not include numbered accounts. h. Net worth shall refer to the excess of total assets over total liabilities, net of appraisal surplus. i. Subsidiary shall refer to a company more than fifty percent (50%) of the outstanding voting stock of which is directly or indirectly owned, controlled, or held with power to vote by another company. j. Affiliate shall refer to a concern linked, directly or indirectly, to another by means of: 1) Ownership control and power to vote of 10%,but not more than 50%,of the outstanding voting stock. 2) Common major stockholders; i.e.,owning 10%,but not more than 50%,of the outstanding voting stock. 3) Management contract or any arrangement granting power to direct or cause the direction of management and policies. 4) Voting trustee holding 10%,but not more than 50%,of the outstanding voting stock. 5) Permanent proxy constituting 10%,but not more than 50%,of the outstanding voting stock. k. Underwriting shall refer to the act or process of distributing and selling of any kind of original issues of long-term commercial papers of a corporation other than those of the underwriter itself, either on guaranteed or best-effort basis. l. Trust accounts shall refer to those accounts with a financial institution authorized by the Central Bank to engage in trust functions, wherein there is a trustor-trustee relationship under a trust agreement. SECTION 3. Conditions for Registration . Long-term commercial papers shall be registered under any of the following conditions: A. Collateral The amount of long-term commercial papers applied for is covered by the following collaterals which are not encumbered, restricted, or earmarked for any other purpose and which shall be maintained at their respective values at all times, indicated in relation to the face value of the long-term commercial paper issue; 1) Securities listed in Current market the stock exchanges value of 200% 2) Registered real estate Appraised value mortgage of 150% 3) Registered chattel mortgage Appraised value on heavy equipment, of 200% machinery, and similar assets acceptable to the Commission and registrable with the appropriate government agency b. Financial Ratios A registrant who meets such standard, as may be prescribed by the Commission, based on the following complementary financial ratios for each of the immediate past three (3) fiscal years: 1) Ratio of (a) the total cash, marketable securities, current receivables to (b) the total of current liabilities; 2) Debt-to-equity ratio, with debt referring to all kinds of indebtedness, including guarantees; 3) Ratio of (a) net income after taxes to (b) net worth; 4) Net profits to sales ratio; and 5) Such other financial indicators, as may be required by the Commission. c. Debt to equity The recomputed debt-to-equity ratio of the applicant based on the financial statements required under Sec. 4.c. hereof shall not exceed 4:1, provided that the authorized short-term commercial papers do not exceed 300% of net worth and upon compliance with the registration requirements specified in Sec. 4 hereof. The conditions under which the commercial papers of a registrant were registered shall be strictly maintained during the validity of the Certificate of Registration. SECTION 4. Registration Requirements . Any corporation desiring to issue long-term commercial papers shall apply for registration with, and submit to, the Commission the following: a. Sworn Registration Statement in the form prescribed by the Commission; b. Board resolution signed by a majority of its members 1) authorizing the issue of long-term commercial papers; 2) indicating the aggregate amount to be applied for; 3) stating purpose or usage of proceeds thereof; 4) providing that the registration statement shall be signed by any of the following: the principal executive officer, the principal operating officer, the principal financial officer, the comptroller or principal accounting officer, or persons performing similar functions; and 5) designating at least two senior officers with a rank of vice-president, or higher of their equivalent, to sign the commercial paper instruments to be issued. c. 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 statements, 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 five (105) days after the end of the applicant's fiscal year; d. Schedules A to L based on subsection c. above, in the form attached as Annex "A"; e. 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 (3) years, it shall submit income statements for such number of years that it has been in operation; f. An underwriting agreement for the long-term commercial paper issues with an expanded commercial bank or an investment house, or any other financial institution which may be qualified subsequently by the Central Bank with minimum condition, among others, that the underwriter and the issuer shall be jointly responsible for complying with all reportorial requirements of the Commission and the Central Bank in connection with the long-term commercial paper issue, it being understood that the primary responsibility for the submission of the report to these regulatory agencies is upon the underwriting agreement and thereafter, the responsibility shall devolve upon this issuer; Provided, however ,That if the issuer is unable to provide the information necessary to meet such reportorial requirements, the underwriter 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, further , That if the underwriting 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: Provided, finally ,That the underwriter may be changed subject to prior approval by the Commission: g. A typewritten copy of a preliminary prospectus approved by the applicant's Board of Directors which, among others, shall contain the following: 1) A statement printed in red on the left-hand margin of the front page, to wit: "A registration statement relating to these long-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 long-term commercial papers may not be sold nor may offers to buy be accepted prior to the approval of the registration statement. This preliminary prospectus shall not constitute an offer to buy nor shall there be any sale of these long-term commercial papers in the Philippines as such offer, solicitation, or sale is prohibited prior to registration under the Revised Securities Act." 2) Aggregate maximum amount applied for, stated on the front page of the prospectus; 3) Description and nature of the applicant's business; 4) Intended use of proceeds; 5) Provisions in the underwriting agreement, naming the underwriter and its responsibilities in connection with, among others, the reportorial requirements under these Rules; 6) Other obligations of the applicant classified by maturities maturing within six (6) months; from six (6) months to one (1) year; and one (1) year and past-due amounts; 7) List of assets which are encumbered, restricted, or earmarked for any other purposes; 8) List of directors, officers, and stockholders owning 2% or more of the total outstanding voting stock of the corporation, indicating any advance to said directors, officers, and stockholders; 9) List of entities where it owns more than 33-1/3% of the total outstanding voting stock, as well as borrowings from, and advances to, said entities. h. Projected annual cash flow statement presented on a quarterly basis as of the approximate date of issuance for a period coterminous with the life time of the issue, indicating the basic assumptions thereto and supported by schedules on actual maturity patterns of outstanding receivables and liabilities (under six (6) months, six (6) months to one (1) year, over (1) year, and past-due accounts) and inventory turn-over; i. Data on financial indicators, as may be prescribed by the Commission, for each of the immediate past three (3) fiscal years, such as on solvency, liquidity, and profitability. The Commission may, whenever it deems necessary, impose other requirements in addition to those enumerated above. dctai SECTION 5. 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 Long-Term Commercial Papers valid for one year, which may be renewed annually with respect to the unissued balance of the authorized amount, upon showing that the registrant has strictly complied with the provisions of these Rules and the terms and conditions of the Certificate of Registration. b. The Commission shall return any application for registration, in cases where the requirements of applicable laws and regulations governing the issuance of long-term commercial papers have not been complied with, or for reasons which shall be so stated. SECTION 6. Close-end Registration . Registration of long-term commercial papers under these Rules shall be a close-end process, whereby the portion of the authorized amount already issued shall be deducted from the authorized amount and may no longer be reissued even if reacquired in any manner, pursuant to the terms and conditions of issue. cdlex SECTION 7. Long-Term Commercial Papers Exempt Per Se . The following specific long-term 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 by government instrumentalities, the repayment and servicing of which are fully guaranteed by the National Government; d. Evidence of indebtedness issued to the Central Bank under its open market and/or rediscounting operations; e. Evidence of indebtedness issued by the Central Bank of the Philippines, Philippine National Bank, Development Bank of the Philippines, and Land Bank of the Philippines; f. Evidence of indebtedness issued to the following primary institutional lenders: banks including their trust accounts, trust companies, non-bank financial intermediaries authorized to engage in quasi-banking functions, investment houses including their trust accounts, financing companies, investment companies, non-stock savings and loan associations, venture capital corporations, special purpose corporations referred to in Central Bank Monetary Board Resolution No. 1051 dated June 19, 1981, insurance companies, government financial institutions, pawnshops, pension and retirement funds approved by the Bureau of Internal Revenue, educational assistance funds established by the national government, and other entities that may be classified as primary institutional lenders by the Central Bank, in consultation with the Commission; 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; g. Evidence of indebtedness, the total outstanding amount of which does not exceed Fifteen Million Pesos (P15,000,000.00) and issued to not more than fifteen (15) primary lenders other than those mentioned in sub-section (f) above, which evidence of indebtedness shall be payable to specific persons, and not to bearers, and shall neither be negotiated nor assigned but held on to maturity; Provided ,That the aggregate amount of P15,000,000.00 shall include outstanding short-term commercial papers; Provided, further ,That in reckoning compliance with the number of primary lenders under this Section, holders of such papers exempt under Sec. 4(f) of the Rules on Registration of Short-Term Commercial Papers, as amended, shall be counted; Provided furthermore ,That such issuer shall: 1) File (1) a disclosure statement prior to the issuance of any evidence of indebtedness; and (2) a quarterly report on such borrowings in the forms prescribed by the Commission; and 2) Indicate in bold letters on the face of the instrument the words "NON-NEGOTIABLE, NON-ASSIGNABLE"; and Provided, finally ,That any issuer, in accordance with the Rules on Registration of Long-Term Commercial Papers and Bonds dated October 15, 1976 and with outstanding long-term commercial papers falling under this subsection as of the effectivity date hereof, shall likewise file the prescribed disclosure statement and the quarterly report on such borrowings; h. Evidence of indebtedness denominated in foreign currencies; and i. Evidence of indebtedness arising from bona-fide sale of goods or property. SECTION 8. Other Long-Term Commercial Papers Exempt from Registration . The following long-term commercial papers shall be exempt from registration under Secs. 3 and 4 hereof, but shall be subject to the payment of the exemption fee, as prescribed under Section 14, and to the reportorial requirements under Section 15 of these Rules: a. Long-term commercial papers issued by a financial intermediary authorized by the Central Bank to engage in quasi-banking functions; b. Long-term commercial papers fully secured by debt instruments of the National Government and the Central Bank of the Philippines and physically delivered to the trustee in the Trust Indenture. SECTION 9. Prohibitions . a. No long-term commercial papers shall be issued, or negotiated or assigned unless the requirements of these Rules shall have been complied with; Provided ,That no registered long-term commercial paper issuer may issue long-term commercial paper exempt per se under Section 7(g) hereof. b. There shall be no pretermination of long-term commercial papers either by the issuer or the lender within 730 days from issue date. Pretermination shall include optional redemption, partial installments, and amortization payments; however, installment and amortization payments may be allowed, if so stipulated in the loan agreement. LLjur SECTION 10. 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 and regulations governing the performance of quasi-banking functions. Any violation of said Central Bank rules and regulations shall be considered a violation of these Rules. SECTION 11. Conditions of the Authority to Issue Long-Term Commercial Papers . a. During the effectivity of the under-writing agreement, should the issuer fail to pay in full any interest due on or principal of long-term commercial paper upon demand at stated maturity date, the authority to issue long-term commercial papers shall be automatically suspended. The underwriter 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 issuer and the underwriter from further issuing or underwriting long-term commercial papers. b. Upon the expiration of the underwriting agreement, it shall be the responsibility of the issuer to notify the Commission that it failed to pay in full any interest due on, or principal of, long-term commercial paper upon demand at stated maturity date and has accordingly automatically suspended the issuance of its long-term commercial papers. Within the next working day, the Commission shall forthwith issue a formal Cease-and-Desist Order enjoining the issuer from further issuing long-term commercial papers. c. 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 long-term commercial paper or reduce the authorized amount thereunder, or schedule the maturities of the registered long-term commercial paper to be issued. SECTION 12. 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 instrument approved by the Commission shall be printed by an entity authorized by the Commission and shall be released by the Commission to the issuer. SECTION 13. Minimum Principal Amount . The minimum principal a mount of each registered long-term commercial paper instrument shall not be lower than the amounts indicated in the following schedule: a. Up to two years P100,000.00 b. Over two years but less than four years 50,000.00 c. Four years or more 20,000.00 SECTION 14. Fees . Every registrant shall pay the following fees: a. Upon application for registration, a filing fee of 1/20 of 1% based on total commercial paper proposed to be issued, but not to exceed P75,000.00. b. For issuers of commercial papers exempt under Section 8 hereof, an annual exemption fee of P10,000.00. SECTION 15. Periodic Reports . a. Issuers of registered long-term commercial papers, through their underwriters and those exempt under Section 8 hereof, shall submit the following reports in the form prescribed by the Commission: 1) Monthly reports on long-term 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 long-term 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) Actual quarterly cash flow statement, 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, through their underwriters, submit their reports to the nearest extension office of the Commission. SECTION 16. 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: 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 P200.00 nor more than P50,000.00 for each violation, plus not more than P500.00 for each day of continuing violation. Annex "B" hereof shall initially be the guidelines on the scale of fines; 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 17. Cease-and-Desist Order . a. 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 16 hereof may cause great or irreparable injury to the investing public, or will amount to palpable fraud or violation of the disclosure requirements of the Revised Securities Act and of these Rules and Regulations. b. The issuance of such Cease-and-Desist Order automatically suspends the Authority to Issue Long-Term Commercial Paper. c. Such Cease-and-Desist Order shall be confidential in nature, until after the imposition of the sanctions mentioned in Section 16 hereof shall have become final and executory. d. 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 16 not later than fifteen (15) days after receipt of notice. SECTION 18. Repealing Clause . These Rules and Regulations supersede the Rules on Registration of Long-Term Commercial Paper and Bonds dated October 15, 1976 and all the amendments to said Rules except as provided in Section 19 hereof. All other rules, regulations, orders, memoranda-circular of the Commission, which are inconsistent herewith, are likewise hereby repealed or modified accordingly. SECTION 19. Transitory Provision . a. Any authority or Certificate of Exemption to Issue Long-Term Commercial Papers, granted under the Rules on Registration of Long Term Commercial Papers dated October 15, 1976, valid and subsisting as of the date of the effectivity of these Rules, shall remain valid with respect only to all outstanding issue until such issues are retired or redeemed. b. The Commission may, at its discretion and subject to such conditions it may impose, authorize issuance of any unissued portion of the issuer's approved long-term debt ceiling solely for refinancing of maturing long-term commercial paper issue for a period not beyond fifteen (15) months from the effectivity date of these Rules. cdlex SECTION 20. Effectivity . These Rules and Regulations shall take effect fifteen (15) days after publication in two newspapers of general circulation in the Philippines. (Ed. Note: Annexes "A" and "B" are not reproduced in this Appendix.) APPENDIX 17 SEC BASIC RULES AND REGULATIONS TO IMPLEMENT THE PROVISIONS OF PRESIDENTIAL DECREE NO. 129, OTHERWISE KNOWN AS "THE INVESTMENT HOUSES LAW" (Appendix to Sec. 4296Q) To effectively carry out the provisions of Presidential Decree No. 129, otherwise known as "The Investment Houses Law", the Commission, pursuant to the powers vested in it by said Decree, and by Republic Act Nos. 1143 and 5050, hereby promulgates the following rules and regulations for the information and guidance of the public: SECTION 1. Scope of Applicability . These rules and regulations shall apply to any enterprise which engages or purports to engage in the underwriting of securities. LLphil SECTION 2. Definitions . The following terms as used in Presidential Decree No. 129 and these rules shall be understood to mean as follows: a) Investment House is any enterprise which engages or purports to engage, whether regularly or on an isolated basis, in the underwriting of securities of another person or enterprise, including securities of the Government and its instrumentalities. b) Underwriting of securities is the act or process of guaranteeing the distribution and sale within the Philippines of securities issued by another person or enterprise, including securities of the Government or its instrumentalities. The distribution and sale may be on a public or private placement basis. c) Securities are written evidences of ownership, interest or participation, in any enterprise, or written evidences of indebtedness of a person or enterprise. It includes, but is not limited to, the instruments enumerated in Section 2 of the Securities Act. d) Guarantee is any commitment and/or undertaking made by a person, firm or entity to an issuer or holder of securities to raise funds for said issuer or holder, by the distribution of such securities for sale, resale, or subscription, either through an outright purchase or through a corresponding commitment to purchase the balance not subscribed or sold. e) Private placement refers to the underwritten sale of securities to less than 20 persons or enterprises. f) Public distribution refers to the underwritten sale of securities to at least 20 persons or enterprises. g) Voting stock is that portion of the authorized capital stock of an investment house, as are subscribed and entitled to vote. h) Paid - in capital are all payments on subscriptions to the authorized capital of an investment house, including premiums paid in excess of par. i) Officer shall be understood to mean a senior officer of an Investment House or bank, which includes the President, Executive Vice-President, General Manager, Vice-President, Assistant Vice-President, Corporate Secretary, Head of an Operating Department and Branch Manager and such other officers as the Commission, in consultation with the Central Bank, shall determine. j) Organizers are persons who undertake to form an Investment House, among themselves and others, and who are indicated in the Articles of Incorporation as the incorporators and the incorporating directors. k) Managerial staff are the officers of an Investment House. Where an Investment House is under a management contract the term shall be understood to include the officers of the management firm. l) Unimpaired capital and surplus means the total of the unimpaired paid-in capital, surplus, and undivided profits net of such valuation reserves as may be required by the Commission provided that the Commission may include such other items as it may deem appropriate. m) Quasi-banking functions shall refer to the functions defined as such by law and appropriate implementing rules and regulations. n) Commission shall mean the Securities and Exchange Commission. SECTION 3. Organization and Registration . A. Investment Houses shall be organized in the form of stock corporations in accordance with the provisions of the Corporation Law, subject to the following requirements: 1) At least a majority of the voting stock of the corporation shall be owned by citizens of the Philippines. In determining the percentage of foreign-owned voting stocks in an Investment House, the basis of the computation shall be citizenship of each stockholder, and, with respect to corporate owners of voting stock, the citizenship of the individual owners of voting stock in the corporation holding shares in the Investment House; 2) The majority of the members of the Board shall be citizens of the Philippines; 3) Foreign equity participation shall be registered or reported with the Board of Investments in accordance with the rules and regulations of that Office, prior to or simultaneous with the registration with the Commission; 4) The corporation shall have a minimum initial paid-in capital of P20,000,000.00 at the time of incorporation; 5) Resident foreign directors or technicians of an Investment House, if any, shall register with the Bureau of Immigration and Deportation; 6) In no event shall an officer of an Investment House be at the same time an officer of a bank, as defined in Section 2 of R.A. 337, as amended; 7) No director or officer of an Investment House shall at the same time be a director of a bank, and no director of an Investment House shall at the same time be an officer of a bank, except as may be authorized as an exception by the Monetary Board of the Central Bank. B. Procedure . The organizers shall file with the Commission, a sworn application for registration in accordance with the prescribed form, together with the following documents: (1) All documents required for registration as a stock corporation; (2) An information sheet of the registrant corporation; [SEC Form 129-2] (3) A statement under oath by the organizers and the proposed managerial staff, of their educational background and work experience, as well as information on any position currently held by them in banking and other financial institutions, if any (SEC Form 129-3); (4) A one-year projected statement of assets and liabilities of the proposed Investment House; (5) A tentative program of operation for one year, including its investment direction and volume, its expected sources and intended uses of funds and its quasi-banking functions, if any. C. Hearing on Application . The Securities and Exchange Commission shall conduct a hearing to determine whether the establishment of the proposed Investment House will promote public interest and economic growth. The Central Bank shall be officially notified. The SEC Commissioner shall not register any articles of incorporation unless his Office shall have consulted the Central Bank and is satisfied on the basis of the evidence submitted that: (1) All the requirements of Presidential Decree No. 129 and of existing laws relative to the organization of an Investment House have been complied with; (2) Public interest and economic growth are promoted; (3) The amount of capital, the proposed organization, direction and administration, as well as the integrity, experience and expertise of the organizers and the proposed managerial staff, provide reasonable assurance that the enterprise will be conducted with financial prudence. D. Issuance of Certificate of Incorporation . Upon compliance with all the requirements of law and implementing rules, and the Commission is satisfied that the formation of the Investment House will promote public interest and economic growth, a Certificate of Incorporation will be issued to it. A license to operate shall also be granted after it shall have adopted its by-laws, elected its directors and appointed its officers. E. Annual Fees . On or before the fifteenth day of January of each year, and for as long as its license to operate remains in effect, each Investment House shall pay a fee of P200.00. At the time of payment, the Commission may require the licensee to appear and inform the Commission of the results of its operations. F. Branch Operations . No Investment House shall open, maintain or operate a branch or agency without first securing from the Commission a license to operate a branch in a particular locality. All applications for a license to operate a branch shall be acted upon by the Commission within ninety (90) days after submission of such documents as may be required by the Commission in support of such application. G. Use of the Term "Investment House" . No person, association, partnership or corporation other than those duly licensed as an Investment House in accordance with these rules and regulations, shall advertise or hold itself out as being engaged in the business of an Investment House. SECTION 4. Underwriting Requirements . Underwriting agreements entered into by an Investment House, with respect to public distribution of securities, including the fees to be charged in connection therewith, shall be subject to the approval of the Commission, it being understood that no public distribution of securities shall be made without such approval. The Commission may impose such terms and conditions as may be necessary in the public interest and for the protection of investors; and it may require the submission of such documents as may be necessary to ascertain compliance with such standards of operation as it may establish. Transactions which constitute quasi-banking functions shall be subject to Central Bank regulation. As a gesture of faith in the issue, an Investment House may take for its own account a portion of the securities it underwrites but shall sell such securities to the public. SECTION 5. Management of Funds . The Commission, by circular, shall provide limitations on investments of discretionary accounts under the management of an Investment House. Should the Investment House engage in the management of funds, it must at all times adhere to the prudent man's rule. The Investment House shall ensure that the interest of the funds managed is promoted and that the operation of the funds is undertaken on an arms' length basis. The Commission may require such documents and reports as may be necessary, in order to determine if prudence and safety of the principal have been paramount in the decision of the Investment House. SECTION 6. Underwriting Fees . Except in highly meritorious cases, as approved by the Commission, an Investment House shall not collect underwriting fees in excess of five per centum (5%) of the amount generated by the underwriter for the issuer. SECTION 7. Contingency Reserves . An Investment House shall provide annually a reserve for contingencies in such reasonable amount as may be required by the Commission. SECTION 8. Prohibitions . (1) No Investment House shall undertake underwriting commitments for its own account in an aggregate outstanding amount exceeding twenty (20) times its unimpaired capital and surplus. (2) An Investment House shall not at any time allow its unimpaired capital and surplus to fall below twenty million (P20,000,000.00) pesos; otherwise, it shall be prohibited from underwriting securities for so long as such deficiency remains. (3) Whenever an Investment House is engaged in the management of funds, its officers and other personnel directly involved in the management of funds are prohibited from simultaneously or concurrently buying or selling the shares of stock of the same firm that the funds are buying or selling. (4) No advance to directors, officers and stockholders owning at least 10% of the outstanding capital of an Investment House shall be allowed, unless sufficiently collateralized. SECTION 9. Reporting Requirements . Every registered Investment House shall file with the Commission the following periodic reports in triplicate: A. Progress Reports . a quarterly report of the results of its underwriting operations and activities of funds managed on all commitments entered into in such form as may be provided for the purpose, within fifteen (15) days from the end of each quarter. B. Semi-Annual Financial Statement . signed under oath by its chief accountant and verified by the president, within a period of sixty (60) days after the end of each semester containing such data, and in such form as the Commission shall require. A copy shall be filed with the Central Bank. C. Annual Report . concerning its operational activities for the year just ended, signed by its president (SEC Form 129-1) within the month of March of each year. A copy shall be filed with the Central Bank. D. A Report on the composition of the board of directors or any resignation, dismissal, suspension, or filling of vacancies therein, or of any officers or managerial staff, signed under oath by the secretary, within fifteen days after occurrence of the event. Every registered Investment House shall maintain and preserve such records and documents as the Commission may prescribe by way of circulars. Such circulars shall provide for a reasonable degree of uniformity in accounting policies and principles to be followed by Investment Houses in maintaining their accounting records and in preparing financial statements as required by these rules. SECTION 10. Transitory Provisions . A. All existing enterprises which have been operating as Investment Houses, prior to February 15, 1973, shall: (1) Within six (6) months from February 15, 1973 file an information sheet with the Commission in such form and containing such data as may be required, pay the required fee under Sec. 3-E of these rules, and the Commission in consultation with the Monetary Board, after determining compliance with the requirements of Presidential Decree No. 129 and of these Rules, shall issue a License to Operate an Investment House. (2) Within one (1) year from February 15, 1973 comply with the requirement of a minimum paid-in capital of Twenty Million (P20,000,000.00) pesos, citizenship requirements, and the prohibition on interlocking directorate or officership. SECTION 11. Stockbrokerage or Dealership Functions . If an Investment House engages in the business of a stockbroker or dealer pursuant to Presidential Decree No. 129, it shall comply with the provisions of C.A. No. 83, otherwise known as the Securities Act, and the rules and regulations of the Commission promulgated pursuant thereto: Provided , however , that an Investment House need not obtain a separate license under Section 14 of the Securities Act. SECTION 12. Central Bank Rules . Investment Houses shall also be subject to the rules and regulations promulgated by the Central Bank of the Philippines for non-bank financial intermediaries as provided by law. SECTION 13. Visitorial Power . The Commission may, at its discretion, make such investigations as it deems necessary to determine whether or not an Investment House is complying with any of the provisions of Presidential Decree No. 129 or of any applicable laws, rules and regulations. It shall determine all the facts and circumstances concerning the matter to be investigated for the imposition of sanctions/penalties or remedial or preventive measures. SECTION 14. General Exemption Power . The Commission may, upon proper petition and payment of a fee of P100.00, grant an exemption from compliance with any requirements of these rules as may be consistent with public interest and the protection of investors. SECTION 15. Penalties . Any violation of Presidential Decree No. 129 or of these rules and regulations, shall be penalized by suspension or revocation of the License to Operate, after proper notice and hearing. In appropriate cases, a fine not exceeding P200.00 per day for every day during which such violation continues, shall be imposed upon the Investment House and the officer or director who ordered or authorized the violation, without prejudice to the criminal liabilities provided in the second paragraph of Section 16 of Presidential Decree No. 129. In the exercise of its regulatory powers under Section 12 of Presidential Decree No. 129, the Monetary Board may issue a cease-and-desist order upon an Investment House which is not complying with Central Bank rules and regulations pertaining to non-bank financial intermediaries or, in appropriate cases, rules governing quasi-banking functions of Investment Houses. Failure to comply with the cease-and-desist order shall subject an Investment House to a fine to be imposed by the Monetary Board. aisadc SECTION 16. Effectivity . These rules shall take effect immediately. They shall be published in a newspaper of general circulation in the Philippines and in the Official Gazette. Manila, Philippines, July 9, 1973. (SGD.) ARCADIO E. YABYABIN Securities and Exchange Commissioner APPROVED: (SGD.) TROADIO T. QUIAZON, JR. Acting Secretary of Trade Date: July 13, 1973 APPENDIX 18 "BASIC RULES AND REGULATIONS TO IMPLEMENT THE PROVISIONS OF REPUBLIC ACT NO. 5980, OTHERWISE KNOWN AS AN ACT REGULATING THE ORGANIZATION AND OPERATION OF FINANCING COMPANIES" (As Amended) (Appendix to Subsec. 4303Q.9) To effectively carry out the provisions of Republic Act No. 5980, as amended, otherwise known as "An Act Regulating the Organization and Operation of Financing Companies" the Commission, pursuant to the powers vested in it under said Act and Republic Act No. 1143, hereby promulgates the following rules and regulations: cdtech I. ORGANIZATION SECTION 1. Definition of terms . A. "Financing companies" hereinafter called "companies" are corporations or partnerships, except those regulated by the Central Bank of the Philippines, the Insurance Commissioner and the Cooperatives Administration Office, which are primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial, or agricultural enterprises, either by discounting or factoring commercial papers or accounts receivable, or by buying and selling contracts, leases, chattel mortgages, or other evidences of indebtedness, or by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment appliances and other movable property. B. "Securities and Exchange Commission" shall mean the Office of the Securities and Exchange Commission of the Philippines. C. "Credit" shall mean any loan, mortgage, deed of trust, advance or discount; any conditional sales contract, any contract to sell, or sale or contract of sale of property or service either for present or future delivery, under which part or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or money, any purchase, or other acquisition of or any credit upon the security of, any obligation or claim arising out of the foregoing; and any transaction of or any credit upon the security of, any obligation or claim arising out of the foregoing; and any transaction or series of transactions having a similar purpose or effect. D. "Purchase Discount" is the difference between the value of the receivable purchased or credit assigned, and the net amount paid by the finance company for such purchase or assignment, exclusive of fees, service charges, interests and other charges incident to the extension of credit. E. "Primarily Organized" for the purpose of these rules and regulations, shall refer to: 1. Articles of Incorporation or articles of partnership of any corporation or partnership which provide that it shall primarily engage in the business of, or shall hold itself out as doing business as a "financing company". 2. No corporation shall be allowed to include financing as one of its secondary purposes. F. "Discounting" shall mean the purchase and/or assignment of commercial papers at a price or consideration lower than what appears on the face of said paper. G. "Factoring" or "Receivables Financing" shall mean the purchase and/or assignment of receivables such as open accounts, leasing accounts, and the like, not otherwise evidenced by promissory notes. H. "Leasing" is a mode of extending credit whereby a company leases its motor vehicles, heavy equipment, appliances, and other movable property where such items are secured by the leasing company at the instance of the lessee. SECTION 2. Form of Organization . A. Financing companies shall be organized in the form of stock corporations or general partnerships, in accordance with the provisions of the Corporation Law and the New Civil Code in case of partnerships and subject to the following requirements: 1) At least sixty (60%) per centum of its capital must be owned by citizens of the Philippines; 2) It shall have a paid-up capital of not less than P500,000.00 at the time of its organization; 3) At least two-thirds of all the members of the board of directors in the case of a corporation and all the managing partners in the case of partnerships shall be citizens of the Philippines. Any change in the membership or composition of the board of directors or of the managing partners, as the case may be, shall be immediately reported to the Commission. B. Before a financing company can operate as such, it shall secure a certificate of authority from the Commission, for which an application for registration as a financing company under oath, signed by its Acting President/Managing Partner, together with the following documents shall be filed with the Commission : [As amended June 20, 1972] (1) All documents required for registration as corporation or partnership; (2) Information sheet of registrant company; (3) Personal information sheet of each of the directors or managing partners; (4) Answers to Securities & Exchange Commission questionnaire; (5) Schedule of discounting, factoring, leasing or interest rates and other charges prescribed under Act. 2655, as amended, and R.A. 5980 and implementing rules and regulations; (6) Each director or managing partner shall submit the following: (a) Police clearance from the local police of the city or municipality of which he is a resident; (b) NBI clearance; (c) Certificate of good moral character to be executed under oath by at least two reputable and disinterested persons in the community; (d) Bank credit information to be issued by his depository or creditor bank, if any. SECTION 3. Hearing on Application . Upon receipt of the organization papers of a proposed company, the Securities and Exchange Commission shall conduct a hearing to determine whether the establishment of the proposed financing company will promote public interest and convenience, and the Securities and Exchange Commissioner shall not register any articles of incorporation or articles of partnership unless his Office is satisfied with the evidence submitted that: a) All the requirements of existing laws to engage in the business for which the applicant is proposed to be incorporated or organized have been complied with; b) The organization, direction and administration, as well as the integrity and responsibility of the organizers and administrators, reasonably assure the protection of the interest of the general public; and c) All the requirements of R.A. No. 5980 have been complied with. The Commission shall cause the notice of hearing to be published in a newspaper of general circulation in the Philippines once a week for two consecutive weeks, at the expense of the applicant company, and the notice shall be posted in a public and conspicuous place where the principal office of the company will be located and in the office of the Commission for the same period. The notice shall state the name of the proposed financing company and the names of its directors or managing partners. Such hearing shall be held ten (10) days after the date of the last publication of said notice. Any interested party may appear at such hearing in person or thru counsel, and orally or in writing show cause why such application should not be approved. If after the hearing, the SEC finds that the requirements of R.A. 5980, these rules and regulations and other pertinent laws have been complied with and that no valid reason exists for the disapproval of the application, the Commission shall take appropriate action on said application, and issue a certificate of authority to operate as a financing company . As regard existing financing companies, they must submit individual information sheets as required under Section 7-c of the Financing Company Act . Every existing financing company that operates in accordance with law and the applicable rules and regulations, shall be issued the proper certificate of authority . A fee of P200 . 00 shall be charged for the issuance of a certificate of authority to a financing company . [As amended June 20, 1972] SECTION 4. Business Name . a) The business name of financing companies shall contain the term "Financing Company" or "Finance and Investment Company" or other title or name descriptive of its operations and activities as a financing company. b) No person, association, partnership, or corporation shall hold itself out as doing business as a "financing company" or "finance and investment company" or under any other title or name tending to give the public the impression that it is engaged as a financing company unless so authorized under R.A. 5980. SECTION 5. Branch Offices and Agencies . No financing company shall open, maintain or operate a branch or agency without first securing a certificate of authority to operate a branch in a particular locality. The financing company shall first inform the Commission at least fifteen (15) days in advance. The information shall include a copy of the Personnel Chart of, and Schedule of Charges to be imposed by, the proposed branch or agency. [As amended, June 20, 1972] II. CHARGES SECTION 6. In addition to the interest, discounting or factoring rates prescribed under R.A. 5980 and the Usury Law (Act No. 2655), as amended, financing companies may collect other charges to the extent of the following: 1) Actual documentary expenses which consist of the cost of fees for notarization, registration of mortgages, insurance, and such other related expenses which will not inure or accrue to the benefit of the financing company; Provided , however ,that all invoices evidencing these charges shall be receipted for in the name of the customer: 2) Service fees representing expenses in credit investigation, processing, appraisal, and similar services performed by the company's staff shall be as follows: a) On accounts with recourse two percent (2%) of the face value of the paper or transaction but which in no case shall exceed P200.00 per paper or transaction; b) On accounts without recourse two and half percent (2-%) of the face value of the paper or transaction but which in no case shall exceed P250.00 per paper or transaction; 3) Professional service fees which comprise appraisal, credit investigation or the like, if made by an independent outfit separately contracted for either by the applicant borrower or the financing company may be charged based on actual cost of procuring such services; 4) Rebatable prompt payment discounts represent pre-arranged amounts deducted from installment payments of customers who pay promptly at maturity may be allowed (where such amount is taken) as follows: 1. Transactions amounting to P10,000.00 and up: the rebatable discount shall not exceed three per cent (3%) of the amount due; 2. Transactions below P10,000.00: Manila & Suburbs three per cent (3%) of the amount due with a minimum of P5.00 per installment. Provincial three per cent (3%) of the amount due with a minimum of P10.00 per installment; Provided , however , that the foregoing additional charges shall apply in the case of assignment of credit or buying of installment papers, accounts receivable and other evidences of indebtedness pertaining to appliances, furniture and office equipment, pursuant to Section 5 of R.A. 5980. SECTION 7. In the case of leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property, the fees to be collected shall be limited to fourteen per centum (14%) per annum of the cost of procuring the movable lease exclusive of depreciation of such movable over its estimated useful life . [As amended April 15, 1971] SECTION 8. In the case of direct loans, the pertinent rates provided for by the Usury Law, Act No. 2655, shall be applicable. III. EFFECTIVITY SECTION 9. Effectivity . These rules and regulations shall take effect fifteen (15) days after publication in the Official Gazette. Manila, Philippines, October 7, 1970. (SGD.) TROADIO T. QUIAZON, JR. Officer-in-Charge (Undersecretary of Industry) APPROVED: (SGD.) ERNESTO M. MACEDA Secretary of Commerce & Industry APPENDIX 19 ABSTRACT OF "TRUTH IN LENDING ACT" (Republic Act No. 3765) (Appendix to Subsec. 4305Q.6) 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 simple 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 nor more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both. xxx xxx xxx (d) 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. cdlex SECTION 7. This Act shall become effective upon approval. Approved, June 22, 1963. APPENDIX 20 FORMAT-DISCLOSURE STATEMENT OF LOAN/CREDIT TRANSACTION ____________________________ (Business Name of Creditor) DISCLOSURE STATEMENT OF LOAN/CREDIT TRANSACTION (SINGLE PAYMENT OR INSTALLMENT PLAN) (As required under R.A. 3765, Truth in Lending Act) (Appendix to Subsec. 4305Q.7) Name of Borrower _____________________________________________________ Address _____________________________________________________________ 1. Cash/Purchase Price ___________________ or Net Proceeds of Loan P_______________ (Item Purchased) 2. LESS: Downpayment and/or Trade-in Value (Not applicable for loan transaction) _______________ 3. Unpaid Balance of Cash/Purchase Price or Net Proceeds of Loan _______________ 4. Non-Finance charges [Advanced by Seller/Creditor]: a. Insurance Premium P_______________ b. Taxes _______________ c. Registration Fees _______________ d. Documentary/Science Stamps _______________ e. Notarial Fees _______________ f. Others: _______________ _______________ _______________ _______________ _______________ _______________ _______________ Total Non-Finance Charges _______________ P 5. Amount to be Financed (Items 3 + 4) =============== 6. Finance Charges * a. Interest _______% p.a. from ____ to ______ P___________ [ ] Simple [ ] Monthly [ ] Compound [ ] Quarterly [ ] Semi-Annual [ ] Annual b. Discounts _______________ c. Service/Handling Charges _______________ d. Collection Charges _______________ e. Credit Investigation Fees _______________ f. Appraisal Fees _______________ g. Attorney's/Legal Fees _______________ h. Other charges incidental to the extension of credit (specify): _______________ _______________ _______________ _______________ _______________ _______________ Total Finance Charges P =============== 7. Percentage of Finance Charges to Total Amount Financed (Computed in accordance with Subsec. 4305Q.2 ===========% 8. Effective Interest Rate (Method of computation attached) ===========% 9. Payment a. Single Payment due _____________ P (Date) =============== b. Total Installment Payments (Payable in _________ weeks/months @ P__________) P =============== 10. Additional charges in case certain stipulations in the contract are not met by the debtor: Nature Rate Amount ______________________ ________________ ________________ ______________________ ________________ ________________ ______________________ ________________ ________________ ______________________ ________________ ________________ CERTIFIED CORRECT: _________________________ (Signature of Creditor/ Authorized Representative Over Printed Name) _________________________ Position I ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT PRIOR TO THE CONSUMMATION OF THE CREDIT TRANSACTION AND THAT I UNDERSTAND AND FULLY AGREE TO THE TERMS AND CONDITIONS THEREOF. _______________________ (Signature of Buyer/ Borrower Over Printed Name) DATE __________________ NOTICE TO BUYER/BORROWER: YOU ARE ENTITLED TO A COPY OF THIS PAPER WHICH YOU SHALL SIGN APPENDIX 21 GUIDELINES ON DOMESTIC BORROWINGS BY FOREIGN FIRMS (Appendix to Sec. 4341Q) Pursuant to the authority granted under Republic Act No. 265, as amended, and other pertinent laws, the Monetary Board, under its Resolution No. 1397 dated July 15, 1977 promulgated the following, to implement the provisions of Sec. 4341Q: 1. Composition and Functions of the Inter-Agency Committee 1.1 The permanent Inter-Agency Committee, which shall implement the provisions of Sec. 4341Q and these Guidelines, shall be composed of the following: Chairman Vice Chairman and Managing Head, Board of Investments Co-Chairman Senior Deputy Governor, Central Bank of the Philippines Members Deputy Governor, Supervision and Examination Sector Central Bank of the Philippines Deputy Governor, Research Sector Central Bank of the Philippines Special Assistant to the Governor, In-charge of MEDIAD and Foreign Loans Negotiations Central Bank of the Philippines One (1) representative designated by the Director General National Economic and Development Authority One (1) representative designated by the Minister, Ministry of Finance Special Assistant to the Governor, Domestic Operations Sector Central Bank of the Philippines 1.2 The Inter-Agency Committee shall be assisted by a permanent Secretariat with offices at Room 402, 5-Storey Building, Central Bank of the Philippines, A. Mabini Street, Metro Manila. 1.3 The Inter-Agency Committee may consult with advisers to assist them in their deliberations, as the need arises. 1.4 The Inter-Agency Committee may adopt rules and regulations for the effective implementation of Sec. 4341Q and these Guidelines. 1.5 The Inter-Agency Committee may submit to the Monetary Board appropriate recommendations for additional policies or supplemental guidelines. 1.6 The members of the Inter-Agency Committee may designate their respective alternates or representatives whenever they are unable to attend Committee meetings. 2. Peso Borrowings by Foreign Firms 2.1 A foreign firm availing itself of peso borrowings shall observe at the time of borrowing, a debt-to-equity ratio determined by the Inter-Agency Committee. The debt-to-equity ratio shall take into account, among others, the firm's economic activity. Initially, the Inter-Agency Committee may be guided by the ratios and the corresponding classification as listed in App. 21-a. 2.2 The debt-to-equity ratio shall be maintained by the foreign firm as long as it has outstanding peso borrowings. 2.3 Foreign firms whose total debt-to-equity ratio exceeds the ratio prescribed by the Inter-Agency Committee may be given reasonable time within which to meet such ratio or to adopt such alternative measures as the Inter-Agency Committee may prescribe. The Inter-Agency Committee, however, shall insure the gradual improvement of the firm's ratio through an annual build-up program, which initially may follow App. 21-b. The annual build-up program shall not be understood as allowing any deterioration of the total debt-to-equity ratio of the foreign firm at any time during the period of the program. A foreign firm whose total debt-to-equity ratio exceeds the ratio prescribed by the Inter-Agency Committee and who has been given reasonable time within which to meet such ratio through the annual build-up program (following App. 21-b) as provided in the preceding paragraph shall be issued certificates for peso borrowings provided that such foreign firm (a) has not declared/distributed dividends or profits and/or has not partially withdrawn capital after July 1, 1978 and (b) undertakes or commits itself not to distribute profits, earnings, declare dividends and/or partially withdraw capital during the validity or life of the certification or until such time when the prescribed debt/equity ratio has been attained. 2.4 Export-oriented firms' total debt shall be net of an amount equivalent to seventy per cent (70%) of the two (2) months average export earnings from non-traditional products during the six (6) months immediately preceding the date of application. 2.5 In the case of Philippine branch of a foreign firm, equity shall be in the form of assigned capital, which may be increased but shall not be reduced as long as the firm has outstanding peso borrowings. It is understood that for purposes of repatriating assigned capital, the pertinent Central Bank rules and regulations shall apply. 3. Exemptions 3.1 The provisions of Sec. 4341Q and these Guidelines shall not apply to foreign banks and foreign-owned non-bank financial intermediaries with respect to their peso borrowings. 3.2 The Monetary Board, upon recommendation of the Inter-Agency Committee, may exempt other foreign firms from the requirements of Sec. 4341Q and these Guidelines in meritorious cases. cdlex 4. Definition of Terms The terms used in these Guidelines shall be understood as follows: (a) "Foreign firms" shall refer to (a) single proprietorships owned by non-Filipino citizens, (b) partnerships, more than forty percent (40%) of whose total capital is owned by non-Filipino citizens, and (c) corporations, more than forty per cent (40%) of whose total subscribed capital stock is owned by non-Filipino citizens. (b) "Debt" shall refer to all types of liabilities as reflected in the balance sheet prepared in conformity with generally accepted accounting principles. However, in the case of inter-company accounts of foreign firms with their offices or branches abroad, payables shall be netted against receivables. (c) "Peso borrowing" shall refer to credit in Philippine currency obtained from banks and other financial institutions. Any renewal or extension of peso borrowings shall be considered new peso borrowings and shall, therefore, be subject to the requirements of Sec. 4341Q and these Guidelines. (d) "Equity" shall refer to the paid-in capital and retained earnings, whether appropriated or not. Appraisal surplus, however, shall not be considered in determining "Equity". (e) "Assigned capital" shall refer to that amount specifically denominated as such, which is known to and duly registered with the Central Bank and/or with the Committee in accordance with the conditions and procedures which the Committee may prescribe. (f) "Export-oriented firms" shall refer to firms certified as such in accordance with existing Central Bank regulations. (g) "Non-traditional products" shall refer to export products identified as such by the Board of Investments. 5. Procedural Requirements 5.1 A foreign firm shall obtain a certification from the Inter-Agency Committee prior to obtaining peso borrowings, as provided for in Sec. 4341Q and these Guidelines. 5.2 The certification to be issued by the Inter-Agency Committee shall be to the effect that the applicant foreign firm may avail itself of peso borrowings up to the ceiling indicated therein under the provisions of Sec. 4341Q and these Guidelines. 5.3 The certification shall be valid for one (1) year, unless sooner revoked by the Inter-Agency Committee by reason of any violation of the requirements of Sec. 4341Q and these Guidelines. For this Purpose, quarterly financial statements shall be submitted by the firm to the Committee and such other documents as the Committee may deem necessary to monitor the firm's debt-to-equity ratio. 5.4 For purposes of securing a certification, the documentary requirements shall include, but need not be limited to the following: (a) Extent of foreign equity; (b) Statement of economic activity; (c) Latest financial statements; (d) Statements as to the amount of outstanding peso borrowings, if any, at the time of application; (e) In the case of branches, Central Bank certificate of assigned capital; (f) In the case of foreign firms whose total debt/equity ratio exceeds the ratio prescribed by the Inter-Agency Committee: (1) evidence that applicant firm has not distributed profits/earnings, declared dividends and/or has not withdrawn capital after July 1, 1978; and (2) undertaking that applicant firm shall not distribute profits/earnings, or withdraw capital during the validity of the certification or until such time when the prescribed debt/equity ratio is attained. 5.5 The Inter-Agency Committee may collect reasonable fees for every application filed. In the case of firms with cancelled certifications, the Committee may collect a filing fee in an amount equivalent to twice the amount of the regular filing fee for applications for authority to borrow, in order to cover the cost of additional work involved in the closer monitoring of the errant firm's compliance with all pertinent requirements, rules and regulations, as well as its financial and operating reports. APPENDIX 21-a SUGGESTED DEBT-TO-EQUITY RATIO 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: (i) Animal feeds (ii) Cement (iii) Chemicals and fertilizers (iv) Drugs and medicines (v) Flour (vi) Products which are classified as essential commodities in the list of the 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. (vii) Iron, steel, copper, tin plates and other basic mineral products; (viii) Milk (ix) Newsprint (x) Tires (xi) Sugar (xii) Textile and garments (3) Companies engaged in exploration development, mining, smelting or refining of coal, oil, iron, copper, gold and other minerals; and (4) Companies or firms which are actually engaged in manufacturing activities covered by Defense contracts. cdlex GROUP B 55:45 Firms engaged in other manufacturing activities GROUP C 50:50 Firms engaged in non-manufacturing activities APPENDIX 21-b SUGGESTED ANNUAL BUILD-UP PROGRAM CATEGORY (AS CLASSIFIED AT THE END AT THE END AT THE END IN App. 21-a) 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 72:25 65:35 55:45 GROUP C Total debt-to- equity ratio of 70:30 60:40 50:50 APPENDIX 22 APPENDIX 22-a APPENDIX 22-b APPENDIX 22-c APPENDIX 23 RULES AND REGULATIONS GOVERNING THE AVAILMENT BY ACCREDITED BANKS AND NON-BANK FINANCIAL INTERMEDIARIES OF SPECIAL TIME DEPOSITS/DEPOSIT SUBSTITUTES UNDER THE IGLF PROGRAM (Appendix to Sec. 4351Q) A. Eligible Projects . Projects eligible for IGLF financing shall include: a) Projects of manufacturing industries enumerated in App. 23-a; b) Tourist inns outside Metro Manila Area with the required indorsement/certificate from the Department of Tourism: Provided, That the total assets of the prospective IGLF grantee shall not exceed P1 million as of the date of application; and c) Rice and/or corn mill projects: Provided ,That said projects also meet the other IGLF eligibility requirements. ( Effective May 8, 1984 ) The following policy changes have been adopted by the IGLF Review Committee in respect to rice and/or corn mill projects, to wit: 1. Loans granted for working capital shall be for a maximum period of six (6) months only, and 2. These loans may be secured by a Deed of Pledge on negotiable grains quedans issued by NFA-franchised rice/corn mills/warehouses with eighty per cent (80%) guarantee coverage of the Quedan Guarantee Fund Board. ( Effective February 18, 1985 ) B. Purpose of Financing . The IGLF facility, which should not exceed P500,000, may be utilized for any, or a combination, of the following purposes: a) Working capital requirements; b) Fixed assets costs, such as the acquisition of factory site, which shall be strictly on a case-by-case basis, building construction and improvements, purchase of machinery, equipment or spare parts, and installation costs. C. Papers Required 1. The application of an accredited bank/non-bank financial intermediary for initial release (50% of amount approved) against an approved project shall be filed in duplicate with the Industrial Loans Division (IGLF Unit), Department of Loans and Credit, Central Bank, together with the following supporting papers: a) A certification that both the borrower-firm and the project being financed meet the eligibility requirements of IGLF, and that the approved loan has been processed/evaluated in accordance with IGLF rules and regulations. b) Original and two (2) copies of Deed of Undertaking (assurance of Peso Payment/Deposit Substitute Utilization),duly accomplished and signed by an authorized officer of the financial institution. c) Original and three (3) copies of Guarantee Agreement, duly accomplished and signed by an authorized officer of the financing institution, with its seal affixed thereto, as indicated in the Agreement. d) Borrower-firm's request for release of the approved IGLF facility, duly endorsed by the applicant-financing institution. e) Whenever applicable, an insurance policy on the life of the proponent (single proprietor) in an amount equal to 60% of the approved loan, duly endorsed/assigned in favor of the CBP-IGLF. (This is required where the applicant is a single proprietorship and the approved loan is P100,000.00 or more).This old policy is amended so as to make the said insurance requirement optional, rather than mandatory, on the part of the borrower. f) Certification on non-arrearages with the DBP, PNB, GSIS, and SSS on behalf of the following: For single proprietorship the proprietor Partnership the partnership and all partners Corporation the corporation officers and directors The certification may be issued by the agencies or may be in the form of a sworn statement executed by the aforementioned parties. g) Certificate of Time Deposit or Certificate of Assignment with Recourse corresponding to the amount released, signed by authorized officer(s) of the financial institution. Separate certificates, shall be submitted for the working capital and fixed asset portion of the approved loans. 2. The subsequent application of the accredited financial institution for the final release (balance of 50%) against an approved project shall be supported by the following: a) A duplicate of the borrower-firm s promissory note covering the initial release. b) A copy of the corresponding credit advice/memo or check stub evidencing release to the borrower-firm of the initial funding from IGLF. c) Certificate of Time Deposit or Certificate of Assignment with Recourse, covering the final release of the 50% balance, signed by authorized officer(s) of the financial institution. 3. Under the sponsorship scheme for rural banks; Eligible rural banks shall continue to file applications for IGLF STDs in the prescribed forms, with the National Economic and Development Authority (NEDA),in quadruplicate. Other supporting papers shall be submitted as indicated in the notice of approval of the application for IGLF facility. Applications may no longer be submitted through a consortium of rural banks. The minimum STD loan that a rural bank may extend to a single borrower shall be P20,000. D. Criteria for Project Evaluation . The criteria in the evaluation of projects shall be as follows: 1. Project feasibility it must be economically, technically, and financially feasible. 2. Foreign exchange earnings/savings It should contribute to the reduction of trade imbalance through the manufacture of export products and the utilization of indigenous raw materials. 3. Regional dispersal Priority shall be given to industries located outside Metro Manila. Only expansion and new export-oriented projects within the Metro Manila Area will qualify. 4. Employment generation Priority shall be given to projects which are labor-intensive. 5. Equitable distribution of income To spread the benefits of IGLF financing to as broad a base as possible, the prospective IGLF grantee shall not be shareholder of another IGLF beneficiary firm(s).Where the project is a spin-off or subsidiary of another firm(s),the combined assets should not exceed P1 million. 6. Compliance with existing requirements of other government agencies, e.g.,pollution control. The prospective borrower shall have complied with all the requirements in connection with the project to be financed. E. Debt-Equity Requirement . The maximum amount of financing that may be extended shall not exceed 80% of the total long-term debt (inclusive of the amount applied for) and equity of the applicant-firm, such that the resulting debt-equity ratio would be 80:20. F. Maturity Period . The Special Time Deposits/Deposit Substitutes shall have maturities not exceeding three (3) years for working capital and (10) years for fixed assets. For new projects, STD/DS loans for working capital and fixed assets shall have a grace period of one (1) year and two (2) years, respectively, in payment of principal amortization, inclusive of the approved terms. G. Interest rates/Loan ceilings . Effective November 1, 1984, the new interest rates/policy change governing the operations of the Industrial Guarantee and Loan Fund (IGLF) shall be as follows: Cottage and Small Industries Interest Rates 1. From IGLF to Accredited 16% p.a. Institutions 2. From Accredited Institution 23% p.a.,inclusive of a to End-Users service charge of 1.5 % p.a. Medium Industries 1. From IGLF to Accredited 18% p.a. Indentions 2. From Accredited Institutions 23% p.a. inclusive to End-Users of a service charge of 1.0% p.a. The maximum loan ceiling for cottage/small industries is fixed at P2.0 million. H. Guarantee Coverage 1. All IGLF Special Time Deposits/Deposit Substitutes availed of shall be covered by an automatic 60% guarantee for which a guarantee fee of 2% per annum shall be assessed, in addition to interest. The guarantee fee shall be equal to 2% of 60% of the outstanding balance, per annum, payment of which shall follow the schedule of payments on principal and interest. The financial institutions may pass on to its borrowers the 2% guarantee fee. 2. Straight guarantee of industrial loans for projects eligible under the IGLF program may be allowed up to a maximum of 80%,subject to approval by the IGLF Review Committee. The guarantee fee shall be equal to 2% of the approved guarantee coverage. I. Amortization payments . Accredited financial institutions/eligible rural banks shall submit a schedule of equal amortization payments (principal and interest) computed on a quarterly basis. J. Releases on Approved IGLF Facility . All amounts released to accredited financial institutions/eligible rural banks shall immediately be released to the project proponent and no part thereof shall be retained in the form of deposits/compensating balances. Special Time Deposits approved in favor of eligible rural banks (under the sponsorship scheme) shall be effected upon the request of the financial institutions and submission of all the required documents as indicated in the letter of advice. Failure to submit these documents within one hundred twenty (120) days from receipt of such advice shall be sufficient cause for reversion of the approved amount to the uncommitted resources of the IGLF. K. Service Charges . The maximum charges, including commissions, premiums and service fees other than interests and guarantee fees, regulation fees, mortgage redemption insurance, documentary and science taxes and similar expenses that financial institutions may collect on loans granted under the Program shall be as follows: a) Charges on the loan principal which shall be collected only once and only upon the full release of the loan shall not exceed the following rates: Over P250,000 1-% P250,000 and below 1% b. On the second year and every year thereafter, and for as long as the loan or any portion thereof remains unpaid, a service fee on the outstanding balance may likewise be collected in accordance with the following schedules: Over P250,000 P200.00 Over P100,000 to P250,000 100.00 P100,000 and below 50.00 L. Default in Amortization/Payments . A financial institution is considered in default upon failure to pay the amortization on its IGLF special time deposits/deposit substitutes as they fall due. In case of default, its demand deposit account with the Central Bank and/or its duly designated depository bank shall be debited for the equivalent amount in default, plus the corresponding interests and guarantee fee due thereon: Provided , That such debit shall not result in overdrawing; otherwise, the financial institution binds itself to remit directly to the Central Bank the total amount due. Failure to remit the amortizations due within a specified period may temporarily disqualify the financial institutions from availing itself of the privilege of access to the rediscounting facilities of the Central Bank subject to approval of the Monetary Board and/or participating in the IGLF Program. M. Violations by the Financial Institution/IGLF Grantee . Any violation or infraction of these regulations, including loan diversion and misrepresentation in the application, will serve as sufficient basis for the recall of the special time deposit/deposit substitutes within thirty (30) days from receipt of notice and/or to the imposition of administrative sanctions as provided for under existing laws, rules and regulations insofar as these are applicable. N. Supplementary Rules . The Central Bank may from time to time issue additional rules and regulations to supplement, complement or amend rules and regulations as may be initiated by the National Economic and Development Authority. O. Effectivity . These rules and regulations shall take effect immediately. APPENDIX 23-a LIST OF POTENTIAL SMALL INDUSTRIES FOR IGLF FINANCING (Appendix to Sec. 4351Q) 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 LexLib 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 cdpr 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 on 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 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 reeds 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. Welling electrodes 3. Motor control center 4. Hermetic compressors 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, placemats, 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. LLpr 15. Wastes recycling 16. Threads of cotton or synthetic fiber 17. Cufflinks 18. Plaques and trophies APPENDIX 24 ASSIGNOR'S UNDERTAKING IN FAVOR OF THE CENTRAL BANK OF THE PHILIPPINES (IGLF) (Appendix to Sec. 4351Q) Certificate of Assignment No. ____ dated _____ for P _______ at 7% interest per annum and 2% guarantee fee per annum. The ______________________________ hereby gives assurance to the Central Bank of the Philippines and hereby undertakes that the full amount of the proceeds of this Deposit Substitute shall be released immediately to ______________________ to finance the following: aisadc The _______________________ hereby undertakes to take such steps as may be necessary to ensure that the proceeds of this Deposit Substitute shall be used exclusively for the above-mentioned purpose, provided that if such proceeds shall be utilized for the construction, acquisition or purchase of plant assets, the same shall be covered by duly registered real estate and/or chattel mortgages. The __________________________________ further assures the Central Bank of the Philippines and accordingly undertakes that it shall pay the amortizations as they fall due per amortization schedule and that at no time shall the outstanding balance of this Deposit Substitute exceed the amount of the outstanding balance of the loan granted to the borrower. The ___________________________________ shall deposit with its depositary bank _________________________________ and maintain thereat on or before the due date of each amortization an amount equivalent to at least one quarterly amortization on principal, interest and guarantee fees against which the periodic amortization (including interest and guarantee fees) shall be debited by the Department of Loans and Credit, Central Bank of the Philippines, which is hereby authorized to effect such debits. For this purpose, it shall be incumbent on the part of _______________________________ to notify its said depositary bank before the due date of the first amortization of the authority given to the Department of Loans and Credit, Central Bank of the Philippines to effect such debits. In lieu of the above-mentioned deposit with its depositary bank, the ____________________________________________ may assign in favor of the Central Bank of the Philippines CBCI's (Central Bank Certificates of Indebtedness) in a principal amount sufficient to cover the quarterly amortizations due, plus interest and guarantee fees, to answer for any default in the payment thereof. The ________________________ undertakes to assign additional CBCI's from time to time in order to cover the amount of the succeeding amortizations as they become due. The __________________________________ assures the Central Bank of the Philippines and hereby undertakes that it shall see to it that ________________________________________ shall comply with all the conditions imposed for the approval of the Deposit Substitute, submit annual financial statements and other data relative to its operations, as well as allow the authorized representative(s) of the Central Bank of the Philippines to conduct regular examination and/or inspection of the firm's operations including its books of accounts. __________________ Name of Intermediary _______________ __________________ Date Authorized Signature APPENDIX 25 GUIDELINES IN GRANTING IGLF LOANS TO MEDIUM-SCALE INDUSTRIES (Appendix to Sec. 4351Q) All duly accredited commercial and thrift banks and non-bank financial intermediaries may grant IGLF loans to medium-scale industries not exceeding P500,000. The total amount of loans an institution can grant to medium-scale industries shall not, however, exceed the total IGLF loans granted to small-scale industries in the preceding twelve (12)-month period. A. Eligible Projects .Projects eligible for financing shall include non-traditional export manufacturing industries, as defined by the BOI and CB's Export Department: Provided ,That: 1. Total assets must not exceed P4 million as of the date of application; 2. New projects located within the Metro Manila Area must comply with the requirements of the National Pollution Control Commission (NPCC); 3. The project is a labor-intensive enterprise that employs at a ratio of one (1) worker for every thirty thousand pesos (P30,000) or less of its total asset. Rice and/or corn mill projects are likewise eligible for financing under the IGLF Program: Provided ,That said projects also meet the other IGLF eligibility requirements. ( Effective May 8, 1984 ) The following policy changes have been adopted by the IGLF Review Committee in respect to rice and/or corn mill projects, to wit: 1. Loans granted for working capital shall be for a maximum period of six (6) months only; and 2. These loans may be secured by a Deed of Pledge on negotiable grains quedans issued by NFA-franchised rice/corn mills/warehouses with eighty per cent (80%) guarantee coverage of the Quedan Guarantee Fund Board. ( Effective February 18, 1985 ) B. Purpose of Financing .The IGLF facility, which should not exceed P500,000, may be utilized for any or a combination of the following purposes: 1. Working capital requirements; and 2. Fixed assets costs, such as the acquisition of factory site, which shall be strictly on a case-by-case basis, building construction and improvements, purchase of machinery, equipment or spare parts, and installation costs. C. Papers Required 1. The application (CB-DLC-IGLF Form Nos. 1-A, 1-B and 2-A) of an accredited bank/non-bank financial intermediary for initial release (50% of amount approved) against an approved project shall be filed in duplicate with the Industrial Loans Division (IGLF Unit), Department of Loans and credit, Central Bank, together with the following supporting papers: a. A certification that both the borrower-firm and the project being financed meet the eligibility requirements of IGLF and that the approved loan has been processed/evaluated in accordance with IGLF rules and regulations; b. Original and two (2) copies of Deed of Undertaking (assurance of Peso Payment/Deposit Substitute Utilization),duly accomplished and signed by an authorized officer of the financial institution (CBP-DLC-IGLF Form Nos. 3-A and 3-B); c. Original and three (3) copies of Guarantee Agreement (CB-DLC-IGLF Form No. 4),duly accomplished and signed by an authorized officer of the financing institution, with its seal affixed thereto, as indicated in the Agreement; d. Borrower-firm's request for release of the approved IGLF facility, duly endorsed by the applicant financing institution; e. Certification on non-arrearages with the DBP, PNB, GSIS, and SSS on behalf of the following: For single proprietorship the proprietor Partnership the partnership and all partners Corporation the corporation officers and Directors The certification may be issued by the agencies or may be in the form of a sworn statement executed by the aforementioned parties; and f. Certificate of Time Deposit or Certificate of Assignment with Recourse, corresponding to the amount released, signed by authorized officer(s) of the financial institution. Separate certificates shall be submitted for the working capital and fixed asset portion of the approved plan. 2. The subsequent application (CBDLC-IGLF Form No. 2-B) of the accredited financial institution for the final release (balance of 50%) against an approved project shall be supported by the following: a. A duplicate of the borrower-firm's promissory note covering the initial release; b. A copy of the corresponding credit advice/memo or check stub, evidencing release to the borrower-firm of the initial funding from IGLF; and c. Certificate of Time Deposit or Certificate of Assignment with Recourse, covering the final release of the 50% balance, signed by authorized officer(s) of the financial institution. d. Criteria for Project Evaluation. The criteria in the evaluation of projects shall be as follows: 1. Project feasibility It must be economically, technically, and financially feasible; 2. Foreign exchange earnings/savings It should contribute to the reduction of trade imbalance through the manufacture of export products and the utilization of indigenous raw materials; 3. Regional dispersal Priority shall be given to industries located outside Metro Manila; 4. Projects must be labor-intensive, with a minimum capital/labor ratio of P30,000.00; 5. Equitable distribution of income To spread the benefits of IGLF financing to as broad a base as possible, the prospective IGLF grantee shall not be a shareholder of another IGLF beneficiary firm(s).Where the project is a spin-off or subsidiary of another firm(s),the combined assets should not exceed P4 million; and 6. Compliance with existing requirements of the government agencies, e.g.,pollution control. The prospective borrower shall have complied with all the requirements in connection with the project to be financed. E. Debt Equity Requirement .The maximum amount of financing that may be extended shall not exceed 80% of the total long-term debt (inclusive of the amount applied for) and equity of the applicant-firm, such that the resulting debt-equity ratio would be 80:20. F. Maturity Period .The Special Time Deposit/Deposit Substitute shall have maturities not exceeding three (3) years for working capital and ten (10) years for fixed assets. STD loans for working capital and fixed assets shall have a grace period of one (1) year and two (2) years, respectively, in payment of principal amortization, inclusive of the approved term. G. Interest Rates/Loans Ceilings .Effective November 1, 1984, the new interest rates/policy change governing the operations of the Industrial Guarantee and Loan Fund (IGLF) shall be as follows: A. Cottage and Small Industries Interest Rates 1. From IGLF to Accredited 16% p.a. Institutions 2. From Accredited Institutions 23% p.a. inclusive to End-Users of a service charge of 1.5% p.a. B. Medium Industries 1. From IGLF to Accredited 18% p.a. Institutions 2. From Accredited Institutions 23% p.a.,inclusive to End-Users of a service charge of 1.0% p.a. The maximum loan ceiling for cottage/small industries is fixed at P2.0 million. H. Guarantee Coverage 1. All IGLF Special Time Deposits/Deposit Substitutes availed of shall be covered by an automatic 60% guarantee for which a guarantee fee of 2% per annum shall be assessed, in addition to interest. The guarantee fee shall be equal to 2% of 60% of the outstanding balances per annum, payment of which shall follow the schedule of payments on principal and interest. The financial institutions may pass on to its borrowers the 2% guarantee fee. 2. Straight guarantee of industrial loans for projects eligible under the IGLF program may be allowed up to a maximum of 80%,subject to approval by the IGLF Review Committee, The guarantee fee shall be equal to 2% of the approved guarantee coverage. I. Amortization Payments .Accredited financial institutions shall submit a schedule of equal amortization payments (principal and interest) computed on a quarterly basis. J. Releases on Approved IGLF Facility .All amounts released to accredited financial institutions shall immediately be released to the project proponent and no part thereof shall be retained in the form of deposits/compensating balances. LLjur K. Service Charges .The maximum charges, including commissions, premiums and service fees other than interests and guarantee fees, regulation fees, mortgage redemption insurance, documentary and science taxes and similar expenses that financial institutions may collect on loans granted under the Program shall be as follows: a) Charges on the loan principal which shall be collected only once and only upon the full release of the loan shall not exceed the following rates: Over P250,000 1-1/2% P250,000 and below 1% b.) On the second year and every year thereafter, and for as long as the loan or any portion thereof remains unpaid, a service fee on the outstanding balance may likewise be collected in accordance with the following schedules: Over P250,000 P200.00 Over 100,000 to P250,000 P100.00 P100,000 and below P50.00 L. Default in Amortization Payments .A financial institution is considered in default upon failure to pay the amortization on its IGLF special time deposits/deposit substitutes as they fall due. In case of default, its demand deposit account with the Central Bank and/or its duly designated depository bank shall be debited for the equivalent amount in default, plus the corresponding interests and guarantee fees due thereon: Provided , That such debit shall not result in overdrawings; otherwise, the financial institution binds itself to remit directly to the Central Bank the total amount due. Failure to remit the amortization(s) due within a specified period may temporarily disqualify the financial institution from availing itself of the privilege of access to the rediscounting facilities of the Central Bank subject to approval of the Monetary Board and/or participating in the IGLF Program. M. Violations by the Financial Institution/IGLF Grantee .Any violation or infraction of these regulations, including loan diversion and misrepresentation in the application, will serve as sufficient basis for the recall of the special time deposit/deposit substitutes within thirty (30) days from receipt of notice and/or to the imposition of administrative sanctions as provided for under existing laws, rules and regulations insofar as these are applicable. N. Supplementary Rules . The Central Bank may from time to time issue additional rules and regulations to supplement, complement or amend rules and regulations as may be initiated by the National Economic and Development Authority. LLcd O. Effectivity .These rules and regulations shall take effect immediately. APPENDIX 26 RULES AND REGULATIONS GOVERNING THE IMPLEMENTATION OF THE INDUSTRIAL GUARANTEE AND LOAN FUND ACCREDITATION SYSTEM (Appendix to Sec. 4351Q) To promote and further accelerate the development and dispersal of small (scale) sized industries under the revised lending program of the Industrial Guarantee and Loan Fund (IGLF),eligible commercial and thrift banks and non-bank financial intermediaries which qualify under the IGLF accreditation program shall be solely responsible for the evaluation and approval of applications for IGLF financing. A. General Procedure 1. Commercial and thrift banks and non-bank financial intermediaries may apply for accreditation with the Industrial Guarantee and Loan Fund (IGLF). 2. All applications for accreditation shall be in the prescribed form (App. 26-a) and shall be filed in quadruplicate with the Department of Loans and Credit, Central Bank. 3. As IGLF Administrator for NEDA, the Central Bank (Department of Loans and Credit) shall evaluate applications for accreditation in accordance with the criteria below. 4. The Central Bank's Department of Loans and Credit shall communicate to the applicant commercial bank, thrift bank or non-bank financial intermediary the action taken by the Governor/Senior Deputy Governor on its application for accreditation copy furnished NEDA. B. Accreditation Criteria 1. Commercial and Thrift Banks The accreditation criteria for participating banks under the IGLF scheme consist of compliance with the following requirements in addition to the central Bank's normal criteria for credit availment: a. Minimum paid-in capital; b. Sound and efficient management and an adequate number of qualified staff to carry out the institution's normal business; c. Capability for satisfactorily appraising the technical, marketing and financial viability of small industry projects together with satisfactory systems and procedures for regularly following up on the progress of project implementation and operation; d. An overall level of arrearages (amounts over four months overdue) of no more than 15% of the total outstanding loans of the institution. In any financial year, actual collections would be no less than 70% of amounts overdue and amounts falling due in that financial year as applied to the IGLF loan portfolio only; e. Non-arrearages with the Central Bank/IGLF. 2. Non-Bank Financial Intermediaries a. A non-bank financial intermediary which has been issued a certificate of authority to engage in quasi-banking functions may participate in the IGLF Program, provided it has complied with the minimum paid-in capital requirement and with existing rules and regulations of the Central Bank, such as, but not limited to: (1) Submission of the required reports on time; (2) Reserve requirement against deposit substitute liabilities; (3) Capital-to-asset ratio. b. In addition, it must have complied with its letters of undertaking with the Central Bank, if any, as well as with the following requirements: (1) Sound and efficient management and an adequate number of qualified staff to carry out its normal business; (2) Capability for satisfactorily appraising the technical, marketing and financial viability of small industry projects together with satisfactory systems and procedures for regularly following up on the progress of project implementation and operation; (3) An overall level of arrearages (amounts over four months overdue) of no more than 15% of its total loans/receivables. In any financial year, actual collections would be no less than 70% of amounts overdue and amounts falling due in that financial year as applied to the IGLF loan portfolio only; LLjur (4) Non-arrearages with the Central Bank/IGLF. It is understood that a duly accredited bank/non-bank financial intermediary shall at all times meet the foregoing criteria. C. Guidelines for Loan Evaluation .The accredited sponsoring banks/non-bank financial intermediaries should follow all the policies, guidelines and procedures set by the IGLF in the evaluation and approval of loan applications. D. Release of Funds .Upon submission of the required documents and other papers by an accredited bank/non-bank financial intermediary, an initial 50% of the total amounts for approved project(s) shall be released in the form of special Time Deposit for banks, and Deposit Substitute (Certificate of Assignment with Recourse) for non-bank financial intermediaries, by the Central Bank. The remaining 50% shall be released to the accredited bank/financial intermediary upon submission of evidence of disbursement of the initial funding to the borrowers, in accordance with the purposes for which the IGLF facility is secured. However, requests for releases by a duly accredited bank/non-bank financial intermediary may be held in temporary abeyance by the Central Bank in case of non-compliance with any of the foregoing criteria. This accommodation does not apply to straight guarantee scheme, which is subject to prior approval by the IGLF Review Committee. E. Post Audit . The Central Bank's Department of Loans and Credit shall undertake the post-audit (end-use verification survey) of IGLF-assisted projects on a periodic basis and submit the corresponding reports to the IGLF Review Committee. The sponsoring bank/non-bank financial intermediary shall see to it that the Special Time Deposit for banks, and Deposit Substitute for non-bank financial intermediaries, shall be used exclusively for the purposes for which the loan was granted. Loan diversion shall constitute sufficient cause for the automatic immediate withdrawal of the Special Time Deposit for banks, and Deposit Substitute for non-bank financial intermediaries, by the IGLF Review Committee. F. Limit on Loans .In order to comply with the objectives of industrial dispersal, it shall be required that during a 6-month period an accredited bank/non-bank financial intermediary shall channel to rural areas (outside Metro Manila),a minimum of 60% of the total amount of approved applications. (To be accomplished in quintuplicate) APPENDIX 26-a APPLICATION OF _______________________ ______________________ (Name of Financial Institution) (Address) FOR INDUSTRIAL GUARANTEE AND LOAN FUND (IGLF) ACCREDITATION (Appendix to Sec . 4351Q) ______________________ (Date) The Department of Loans and Credit Central Bank of the Philippines Manila Gentlemen : Pursuant to Circular No. ___________ dated __________________, we hereby apply for accreditation to participate in the Industrial Guarantee and Loan Fund (IGLF) Program. In support of this application, we are submitting herewith the following required papers/information as part of this application: 1. Resolution of our Board of Directors authorizing this application and designating our duly authorized officer(s) to act in behalf of this institution. 2. Copy of our latest financial statements and reports (Statement of Condition, Statement of Earnings and Expenses, a copy each of our Reports on Required and Available Reserves against Deposit Liabilities and Deposit Substitute Liabilities for the past four (4) consecutive weeks, and a copy each of our Statement of Capital Required and Capital Accounts for the past 30 days). 3. Certification that we have competent and sufficient staff to evaluate loan applications of small industries. 4. Certification as to our level of arrearages and collection ratio in 1975. 5. A listing of our branches and location thereof. Very truly yours, _________________________ (Name of Financial Institution) By: _________________________ (Printed Name of Officer) _________________________ (Designation) APPENDIX 26-b CIRCULAR LETTER TO ALL QUALIFIED COMMERCIAL, THRIFT AND RURAL BANKS AND NON-BANK FINANCIAL INTERMEDIARIES NO. 85-02 (IGLF) SUBJECT : Supplementary Guidelines on the IGLF-Quedan Financing Scheme for Rice/Corn Mill Projects Further to Circular Letter No. 85-01 dated February 18, 1985, the following guidelines shall govern working capital loans to NFA-franchised rice/corn mill projects under the IGLF-Quedan Financing Scheme as a supplement to the IGLF Policy Manual. 1. Guarantees required by participating financial institutions (PFI's) for working capital loans of NFA-franchised rice/corn mills shall be arranged with the Quedan Guarantee Fund Board (QGFB). 2. Applications of rice/corn mills, whose loans are to be covered by QGFB guarantees, shall be supported by the following: a. Audited and/or duly certified financial statements for the last three (3) years. b. Xerox copy of applicable business papers, e.g.,Bureau of Domestic Trade Registration, Articles of Incorporation and By-Laws, and SEC registration. c. Income Tax Returns for the past three (3) years. d. Data/Figures needed by the accredited bank in the preparation of the project appraisal report. e. Certificate of Special Franchise (CSF) or Certificate of Pending Franchise (CPF) from the National Food Authority. f. Borrower's request for release of the loan. g. Other requirements of the accredited financial institution. 3. Requests of IGLF-accredited financial institutions for funding of these loans shall be filed with the CB-IGLF, together with the required supporting papers, as follows: a. A simplified Project Appraisal Report (PAR) for loans below P2.0 million, without projections. b. An expanded PAR for loans of P2.0 million and above, including a 6-month projection. c. If already available, List of Quedans, xerox copies of the affidavit of ownership, stock inspection reports, and certificate of special franchise. cdll d. Other supporting papers/documents specified in the IGLF Policy Manual to support the application for release, if applicable. 4. An accredited financial institution applying for release of an approved IGLF working capital loan covered by QGFB Guarantee shall first comply with the QGFB requirements, including the payment of the corresponding 2% guarantee fee. This Circular Letter shall take effect immediately. (SGD.) EUGENIO NIERRAS, JR. Deputy Governor August 19, 1985 APPENDIX 27-a TERMS AND CONDITIONS OF STANDARD PAWN TICKET 1. The pawner hereby accepts the pawnshop's appraised as proper. 2. The interest rate stipulated herein is in accordance with the Usury Law. The maximum rates of interest for any loan or forbearance of a pawnbroker or a pawnbroker's agent shall be: a. 2-1/2% monthly, for loans of not more than P2,000.00; b. 18% per annum, for loans exceeding P2,000.00. The pawnshop hereby agrees not to collect in advance interest for a period of more than one year, and not to divide a pawn into two or more fractions to enable it to collect a higher interest rate. 3. The service charge is equivalent to one per cent (1%) of the principal loan, but not exceeding five pesos (P5.00).No other charges shall be collected. 4. This loan is renewable for such amount and period as may be agreed upon between the pawnshop and the pawner, subject to the requirements of P.D. 114 for a new loan. 5. Upon maturity of this-loan, as indicated on the face of this ticket, the pawner still has ninety(90) days from maturity date within which to redeem the pawn by paying the principal loan plus the interest that shall have accrued thereon. The amount of interest due and payable after the maturity date of the loan and during the redemption period shall be computed upon redemption at the same rate of interest provided in No. 2 above based on the sum of the principal loan and interest earned as of the date of maturity. 6. The pawnshop shall send a written reminder to pawner, before the expiration of the 90-day grace period, that the pawn shall be sold or disposed of in the event the pawner fails to redeem the pawn within the 90-day grace period. 7. The parties hereby agree that this ticket shall be surrendered at maturity date upon payment of the loan. In case of loss or destruction of this ticket, the pawner hereby undertakes to personally present an affidavit to the pawnshop before the redemption period expires. It is hereby agreed upon that the pawnshop has a period of two (2) days within which to verify from its records before (1) indicating on the affidavit that it shall take the place of the original pawn ticket for purposes of redemption; or (2) issuing a substitute ticket, the original pawn ticket thereby being deemed cancelled. 8. The pawner hereby agrees not to assign, sell or in any other way alienate the pawn securing this loan as evidenced by the pawn ticket without prior written consent of the pawnshop and subject to the terms and conditions of this contract. 9. In case of prepayment of this loan by pawner, the interest collected in advance shall accrue in full to the pawnshop, provided said interest does not exceed the rates fixed by law. 10. The pawner shall not be entitled to the excess of the public auction sale price over the amount of principal, interest and service fee; neither shall the pawnshop be entitled to recover the deficiency from the pawner. APPENDIX 28 PROCEDURAL GUIDELINES FOR THE REPRODUCTION AND USE OF FACSIMILES OF GOVERNMENT SECURITIES (Appendix to Sec. 4624N) The following guidelines shall be observed in the filing of applications for reproduction and use of facsimiles of government securities: 1. All applications/requests for authority to reproduce and use facsimiles of government securities issued by and/or through the Central Bank shall be submitted to the Office of the Governor through the Securities Marketing Department. To provide sufficient time for the processing thereof, applications/requests must be submitted at least thirty (30) days before the scheduled date of reproduction of the facsimile of the pertinent government security/ies. 2. The application/request must contain, among other things, the following: a. Name of person or entity b. Address c. Purpose/intended use d. Name of printer and address e. Undertaking that applicant shall furnish within five (5) days from the date of reproduction of the facsimile of the corresponding government security/ies, the Securities Marketing Department, Central Bank of the Philippines, for record purposes, with a copy of the facsimile thereof. 3. The Securities Marketing Department shall advise as soon as possible the applicant of the action taken thereon by the Governor. APPENDIX 29 PROCEDURES FOR PROCESSING COMPLAINTS AGAINST PAWNSHOPS (Appendix to Sec. 4631P) 1. Complaints against pawnshops must be filed with the Department of Financial Intermediaries (Non-Bank), Central Bank of the Philippines, in writing and signed under oath by the complainant. 2. Verbal or telephone complaints or letters not under oath shall not be given due course. 3. Whenever the complaint is found meritorious, the pawnbroker concerned shall be furnished a copy thereof and shall be directed to reply in writing and under oath. 4. If on the basis of the sworn statements, the facts cannot be ascertained, the DFI (Non-Bank) may take the following alternative courses of action: a. Refer the matter to the Hearing Officer, who shall then summon the parties to a confrontation. The Hearing Officer has been authorized to administer oaths, take depositions, rule on questions of law during the proceedings; or b. Refer the matter for examination, inspection or investigation of the books of account or records of the pawnshops concerned. 5. The Hearing Officer or the examiner, as the case may be, shall report to the Governor. The report shall contain: a. A summary of the complaint and the reply; b. Findings of fact; and c. Applicable provisions of law. 6. The DFI (Non-Bank) shall then submit a report and recommendation to the Governor, Central Bank for decision. 7. The Governor shall render a decision and/or issue an order; 8. The decision/order may be as follows: a. Dismissal of the case; b. Reprimand or warning against a second offense; c. Suspension of operation of the pawnshop for a certain period; d. Suspension of partners, directors or officers for a certain period; e. Removal of partners, directors or officers; f. Fine of not more than P100.00 for every day of violation or non-compliance; g. Criminal prosecution; h. Such other actions the Governor deems warranted. APPENDIX 30 DOMESTIC OPERATIONS SECTOR CIRCULAR LETTER July 8, 1985 (Appendix to Subsec. 4283Q. 1 ) TO: ALL BANKS AND NBQBs In attention to several inquiries and by way of clarification, set forth below are the criteria/guidelines to determine whether or not certain outstanding government securities are eligible for purposes of compliance with Central Bank reserve requirements: aisadc 1. Bonds or other evidences of indebtedness representing direct obligations of the Government of the Republic of the Philippines , i.e., PWED Bonds, Treasury Bonds, Treasury Notes, NIA Bonds, bearing an interest rate of not more than four per cent (4%) per annum, non-negotiable, and carrying Central Bank support are eligible as reserves of banks against peso deposit liabilities and deposit substitute liabilities .(CB Circular No. 638 dated November 8, 1978, as amended by Circular No. 752 dated August 22, 1980). Bonds and other evidences of indebtedness bearing an interest rate of four per cent (4%) per annum, issued by government-owned or-controlled corporation, political subdivisions, and instrumentalities ,and outstanding as of May 9, 1966 up to the present are eligible as reserves of banks against peso deposit liabilities .(M.B. Res. No. 656 dated April 29, 1966, as amended by Res. No. 812, May 20, 1966). Regular CBCIs Series 8th and 9th being used by banks for such reserve purposes as of January 17, 1977 shall continue to be eligible; provided, however ,that the maximum portion of such reserves shall not exceed ten per cent (10%) of the maximum securities and cash-in-vault reserve requirement for commercial banks, including Land Bank of the Philippines and the Philippine Amanah Bank, and twenty per cent (20%) for rural banks, thrift banks, and the Development Bank of the Philippines. (Sec. 2, CB Circular No. 552); provided, further ,that whenever said CBCIs shall have matured, they shall be replaced by securities carrying the features/conditions imposed under CB Circular No. 752. Evidences of indebtedness of the Republic of the Philippines, the Central Bank, and evidences of indebtedness or obligations of other government entities being used as reserve by banks against deposit substitute liabilities as of January 17, 1977 prescribed by Circular No. 552, whether Central Bank supported or not, but are fully guaranteed by the Republic of the Philippines, shall continue to be eligible against deposit substitute liabilities ; provided ,that whenever said securities shall have matured, they shall be replaced by securities carrying the features/conditions required under CB Circular No. 638, Series of 1978, as amended by Circular No. 752, Series of 1980. Four per cent (4%) Capital Treasury Bonds and Treasury Capital Bonds are eligible as reserve against peso deposit liabilities when used as such only by the Philippine National Bank and Development Bank of the Philippines, respectively. (M.B. Resolution No. 1451 dated July 18, 1975; No. 1458 dated August 6, 1982). The gradual phasing out of the use of Premyo Savings Bonds (both regular and Biglang Bahay Series),as part of reserves, shall be in accordance with the following schedule: Per Cent of Reserve Gov't. Securities Requirement Held as Reserves July 1, 1983 June 30, 1984 37.50 50 July 1, 1984 June 30, 1986 18.75 25 After July 1, 1986 0.0 0 (M.B. Res. No. 561 dated April 8, 1983) 2. Evidences of indebtedness of the Republic of the Philippines, the Central Bank, and evidences of indebtedness or obligations of government-owned or-controlled corporations , the servicing and repayment of which are fully guaranteed by the Republic of the Philippines, with or without Central Bank support and used as such reserve as of January 17, 1977, shall continue to be eligible against deposit substitute liabilities by NBQBs. (Circular No. 553 dated January 17, 1977) 3. Reserves against marginal deposits on all import letters of credit opened on or after July 9, 1979 shall be in the form of: (a) Treasury Bonds and Treasury Notes ,with interest rates not exceeding four per cent (4%) per annum, and/or (b) the 4 . 7% and 6% Treasury Bonds , issued on a "one-to-one package deal" basis still held by banks; provided, that the latter, once presented to, and repurchased by, the Central Bank, shall not be reissued. (M.B. Res. No. 1326 dated August 4, 1978). 4. For Agri-Agra Requirement Only the following government securities are eligible for purposes of registration of compliance with agri-agra requirement: a) Discounted 5-year Treasury Notes 9% Series 1 to 22 (MBR No. 150 dated January 22, 1982) b) CBCIs outstanding issues, except CBCI Special Series (MBR No. 2516 dated November 28, 1975) c) Discounted NDC Bonds Series AA to AC (MBR No. 422 dated February 26, 1982) d) DBP Countryside Bills 1st and 6th Series (MBR No. 2381 dated October 31, 1974) 5. Securities held as reserves shall be valued at cost of acquisition .(Circular No. 552, dated January 17, 1977) 6. Banks may freely alter the composition of its reserves; provided ,that any substitution or new acquisition must satisfy the eligibility requirement/s prescribed at the time; provided, further , that the bank/NBQB notifies the Central Bank of any such change in the prescribed form not later than the reporting day following the change, as provided in Section 3 of CB Circular No. 752 dated August 22, 1980. 7. 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. (Circular No. 552, dated January 17, 1977). 8. For ready reference, attached is a listing of reserve-eligible and non-eligible securities. Please be guided accordingly. EUGENIO NIERRAS, JR. Deputy Governor LIST OF RESERVE ELIGIBLE AND NON ELIGIBLE SECURITIES (AS OF JULY 5, 1985) 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.) 3-1/4% T/Bond L of 1974/1999 6th Series (1st and 2nd Rel.) 3-1/4% 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, 64th, 66th, & 67th Series 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 holder 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 per cent (4%) 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 . dctai 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 per cent (4%) 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 All outstanding issues 6% NPC Bonds All outstanding issues 7% NPC Bonds All outstanding issues 8-1/2% NPC Bonds 13th-22nd Series 7% NPC Capital Bonds 7th-9th Series 7% MWSS Capital Bonds All outstanding issues 6% NIA Bonds All outstanding issues 4-1/2% Treasury Bonds All outstanding issues 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 10-3/4% Treasury Bonds All outstanding issues 9% Treasury Notes 60th and 65th Series 10-1/2% Treasury Notes 101st Series (1st & 2nd Rel.) 10-3/4% Treasury Notes 56th and 61st Series 11-3/4% Treasury Notes 59th Series 6% NAWASA Bonds 11th, 12th, and 1st Series 10% EPZA Bonds 9th-11th Series 10-3/4% EPZA Bonds 3rd-8th Series B. The following government securities are NOT ELIGIBLE whatsoever for 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 per cent (4%) per annum, but not given CB support as follows: Treasury Bonds 2% T/Bond L of 1973/2003 4th Series 2-3/4% T/Bond L of 1974/1986 7-A & 7-B Series 3% T/Bond L of 1976/2001 26th, 27th, 31st-34th, 46th, & 47th Series 3% T/Bond L of 1977/2002 49th Series 3-1/4% T/Bond L of 1974/1999 6th Series, 3rd & 4th Releases 3-1/4% T/Bond L of 1977/2002 6th Series, 5th Release 3-1/4% T/Bond L of 1975/2000 21st Series, 1st Release 3-1/4% T/Bond L of 1977/2002 21st Series, 2nd Release 3-1/4% T/Bond L of 1977&2002 51st Series, 1st & 2nd Releases 3-1/4% T/Bond L of 1978/2003 54th Series, 1st & 2nd Releases 3-1/4% T/Bond L of 1980/2005 58th Series 3-3/4% 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 & 125th Series 3-1/2% T/Notes L of 1982/1997 Special Series, 1st-24th Releases BOOK IV SUBJECT INDEX (References are to section/subsection numbers and appendices) Acceptances as Deposit Substitute Liabilities , 4281Q.4 Accounts uniform system for NBFIs, 4166N uniform system for NBQBs, 4166Q.1 Accreditation of NBQBs as security dealers, 4601Q of NBQBs for IGLF loans, guidelines, App. 26 Administration of Trust Operations ,4407Q Affiliates definition, 4101Q.2; 4161Q.1(m);Sec. 2(d),App. 16 equity investment of NBQB affiliates, 4376Q Agency Arrangements ,4151Q; 4152Q Agreements non-trust agreements, 4405Q selling agreement for commercial papers, Sec. 3(a)(6),App. 15 Allied Interest/Undertakings allied financial undertaking, 4161Q.1(m) loans to, 4326Q Arms Length Transactions ,4301Q.1 Articles of Incorporation greater percentage veto, 4614Q; 4614N of NSSLAs, 4101N.2 of pawnshops, 4171P; 4101P.2 provisions on voting requirements for certain corporate transactions, 4614Q Assets capital to risk assets ratio of NSSLAs, 4116N risk assets of NBQBs, definition, 4116Q total assets definition, 4117Q Audit of Trust Operations ,4415Q.2 Auditor for NSSLAs ,4165N Authority to engage in quasi-banking functions, 4101Q of NSSLAs, 4101N of pawnshops, 4101P of investment houses to engage in foreign exchange operations, 4501Q Bad Debts definition for dividend purposes, 436Q.1a write off, 4304N.1 Banking Day definition, 4151N.1 Biglang Bahay Bonds as reserves of NBQBs against deposit substitute liabilities, 4283Q.1 as reserves of NSSLAs against deposit liabilities, 4254N Bills of Exchange as Deposit Substitutes , 4281Q.4 Bio-Data of Directors/Officers NBQBs, 4144Q; 4161Q.1 J(4) NSSLAs, 4144N pawnshops, 4151P.5; 4101P.2 Bond Issues collaterals, 4297Q.3 minimum features, 4297Q.3 minimum trading lot, 4297Q.5 National Housing Authority (NHA) bonds, 4601Q.1 reserves, 4297Q.5 sinking fund, 4297Q.3 trust indenture, 4297Q.3 underwriting, 4297Q.4 Bonding NSSLA officers and employees, 4148N; App. 9 pawnshop officers and employees, 4148P safeguards in bonding NSSLA officers/employees, 4148N, App. 9 Book Entry Method for reserve securities, 4283Q.7 Book Value of Paid-In Capital definition, 4236Q Borrowings of BLAs, 4295N borrow, definition, 4327Q from CB, 4269Q; 4270Q definition, 4101Q thru deposit substitute (See Quasi-Banking ) direct/indirect borrowings, 4329Q of DOSRI, 4326Q-4337Q by foreign firms, 4341Q; Guidelines, App. 21 from the Government, 4291Q from managed funds, 4292Q of NBQBs from banks, 4281Q.3 of NSSLAs, 4294N thru rediscounting with CB (See Rediscounting ) from trust department, 4292Q without recourse, 4290Q Branches/Branching agency arrangements, 4151Q; 4152Q capital requirements, 4151Q.3; 4151Q.4; App. 2 documentary requirements, 4151Q.7 establishment of, 4151Q evaluation of guideposts, 4151Q.2 filing of application, 4151Q.8 of financing companies, Sec. 5, App. 18 in Metro Manila, 4151Q.1 other requirements, 4151Q.5 of pawnshops, 4151P precluding conditions, 4151Q.6 Building and Loan Associations (BLAs) acceptance of deposits; 4262N borrowings, 4295N past due accounts, 4304N.2 Bulky Pawn definition, 4102P(i) Business Day and Hours NSSLAs, 4156N pawnshops, 4156P Business Name NSSLAs, 4174N pawnshops, 4172P financing companies, Sec. 4, App. 18 By-Laws voting requirements for certain corporate transactions, 4614Q Call Loan/Slips evidence; 4281Q.6 for 24-hour loans, 4281Q.6 Campaigns for Promotions ,4622Q gifts, give-aways, 4622Q.2 raffles, lotteries, contests, 4622Q.1 sanctions, 4622Q.3 Capital Accounts of NBQBs, 4116Q; 4117Q of NSSLAs, 4116N Capital for availment of CB credit facility, 4270Q.1 of financing companies, Sec. 2, App. 18 foreign equity in NBQBs, 4106Q of investment houses, App. 1; Sec. 2(h),App. 17 of NSSLAs, 4106N paid-in capital of NBQBs, 4106Q of pawnshops, 4106P for pawnshop branching, 4151P.4 for quasi-banking functions, 4106Q risk asset ratio of NSSLAs, 4116N unimpaired capital and surplus, definition, Sec. 2(1),App. 17 Cash Price definition, 4305Q.1(c) Categories of Reports ,4161Q.2 CB-IBRD Fourth Rural Credit Project, rules ,4359Q Ceilings DOSRI loans 4330Q; 4331Q investments in non-allied undertakings, 4377Q rediscounting CB loans to NBQBs, 4270Q.8; 4269Q.5 rediscounting of EKBs, KBs and NBQBs, 4269Q.5; 4270Q.8 single borrower, 4330Q trust loans, 4409Q unsecured loans, 4331Q yields/interest on deposit substitutes, 4285Q Central Bank Examination of NSSLAs ,4628N Central Bank Loans and Advances ,4270Q collateral, 4270Q.4 liquidated damages, 4270Q.11 loan values, 4270Q.5 maturity, 4270Q.7 qualifications of NBQBs, 4270Q.1 rediscount rates/ceilings, 4270Q.6; 4270Q.8 repayment, 4270Q.9 types of credit accommodation, 4270Q.2 Certificate of Authority NBQBs, 4101Q NSSLAs, 4101N.2(d) Charges of financing companies, 4383N; 4389Q; Sec. 6, App. 18 finance charge, definition, 4305Q.1(h) of NBFIs without QB, 4303N non-finance charge, definition 4305Q.(f) on pawnshop loans, 4303P Chart of Accounts of NBQBs, 4166Q.1 of pawnshops, 4161P; App. 12 Checking Account prohibition on NSSLAs, 4261N.7 Citizenship directors of financing companies, Sec. 2, App. 18 investment houses, requirements, 4102Q.2 veto provisions in articles of incorporation/by-laws, 4614Q pawnshop single proprietor, 4101P.1 Close-End Registration of Commercial Papers , Sec. 4, App. 16 Collateral of bonds, 4297Q.3(d) of CB loans to NBQBs, 4270Q.4 loan values of collateral for CB loans, 4270Q.5 Commercial Papers long term commercial papers, 4289Q; 4293N; App. 16 basic features, Sec. 12, App. 16 close-end registration, Sec. 6, App. 16 definition, Sec. 2, App. 16 exemption from registration, Sec. 7 and 8, App. 16 fees, Sec. 14, App. 16 issue, definition, Sec. 2(c),App. 16 reports, Sec. 15, App. 16 sanctions, Sec. 16, App. 16 purchase of commercial paper, 4388Q short term commercial papers, 4289Q, 4293N, App. 15 basic features, Sec. 13, App. 15 definition, Sec. 2(a),App. 15 exemption from registration, Sec. 4 & 5, App. 15 fees, Sec. 15, App. 15 minimum maturity value, Sec. 14, App. 15 registration/issuance, rules, 4289Q, 4293N, App. 15 reports, Sec. 17, App. 15 sanctions, Sec. 18, App. 15 selling agreement, Sec. 3(a) (6),App. 15 Commingling of funds ,4424Q.1 Commissions on managed funds, 4426Q on trust operations, 4412Q Committee on Trust ,4407Q.3 Common Trust Fund audit of operations, 4415Q.2 definition, 4402Q.1(d) establishment of, 4414Q exposure limit to single person/entity, 4414 Q.4 management of, 4414Q.2 reports, 4415Q.1 trust plan, 4414Q.1 trustee participation, 4414Q.3 Compensation NSSLA directors, officers, 4145N Complaints against Pawnshops procedures, App. 29 Confidential Information, NSSLAs ,4626N Consolidation for capital requirements, 4111Q for EKB functions, 4111Q of financial statements, 4161Q.1(m) in trust operations, 4406Q Controlled Corporations rules on transactions, 4302Q Cost Method definition, 4161Q.1(m) Credit Accommodations (See also Loans ) ceilings on, 4330Q-4332Q credit, defined, Sec. 1(c),App. 18 definition of credit accommodation, 4327Q delinquency in payment of, definition, 4143Q.g direct/indirect accommodations, defined, 4329Q DOSRI, 4326Q-4337Q; 4326N-4328N for fringe benefit program 4333Q policy on, 4326Q procedural requirements, 4334Q reports, 4337Q sanctions, 4336Q single borrower limit, 4330Q Credit Facilities of CB (See Central Bank Loans and Advances ) Credit Information System reports, 4161 q.1(1) Credit Line for Commercial Papers ,Sec. 3(a)(5),App. 15 Creditor definition, 4305Q.1 Crimes, Report of NSSLAs, BLAs ,4161N.d Current Market Value definition, 4294Q.1 Dealership in Government Securities ,4601Q; 4601N Definitions abuse in privilege of offsetting reserve deficiencies, 4283Q.5 * cash price, 4305Q.1 (c) chronic reserve deficiency, 4283Q.5 commercial paper, Sec. 2(a),App. 15; Sec. 2(a),App. 16 common trust fund, 4402Q.1(d) cost method, 4161Q.1(m) credit, Sec. 1(c),App. 18 credit accommodation, 4327Q creditor, 4305Q.1 current market value, 4294Q.1 delinquency in payment of obligation, 4143Q.g depository funds of the government, 4291Q.1b delivered price, 4305Q.1c direct/indirect accommodations, 4329Q directors, 4141Q discounting, Sec. 2(f),App. 18 down payment, 4305Q.1(d) effective rate of interest, 4303Q.5 equity investment 4161Q.1(m) equity method, 4161Q.1(m) examination, 4628N factoring, Sec. 1(g),App. 18 false statement, 4163P faulty report, 4163P finance charge, 4305Q.1(h) financial allied undertaking, 4161Q.1(m) financial assistance, 4148Q financial intermediaries, 4101Q.1 financial manager, 4421Q.1 financing companies, Sec. 1(a),App. 18 fund manager, 4102N government depository fund, 4291Q.1(b) government fund/money 4291Q.1(b) government-owned/controlled corporations, 4291Q.1(a) government securities, 4287Q; 4294Q.1; 4297Q.1(a) government trust funds, 4291Q.1 guarantee, Sec. 2(d),App. 17 in process of collection, 4136Q.1c interbank loan transaction, 4343Q; Sec. 2, App. 15 investment house, Sec. 2(a),App. 17 issue, Sec. 2(c) App. 15; Sec. 2(b) App. 16 issue of commercial papers, 4293Q.1(b);Sec. 1(c),App. 15 leasing, Sec. 1(h),App. 18 loans, 4327Q; 4304N.1 managerial staff, Sec. 2(k),App. 17 money borrowed, 4327Q money market placement, 4287Q negotiation of commercial papers, Sec. 2(c),App. 16 net book value, 4294Q.1 net worth, 4117Q new loans and new investments, 4120Q non-finance charges, 4305Q.1f non-stock SLAs, 4101N officers, 4142Q.5; 4142N; Sec. 2(i),App. 17 paid-in capital of pawnshops, 4106P past due accounts, 4304Q pawn, 4102P.d pawn ticket, 4102P.e pawnee, 4102P.c pawner, 4102P.b persistent violation, 4163P persons, 4305Q.1(b) premises, 4102P(j) private placement, Sec. 2(e),App. 17 property, 4102P(f) public distribution, Sec. 2(f),App. 17 purchase discount, Sec. 1(d),App. 18 purchase receivables, 4101Q quasi-banking, 4101Q receivables and other obligations, 4303Q.5(b) relending, 4101Q repeated violation, 4163P report, 4161N.1 revenue funds, 4291Q.1b risk assets, 4116Q savings deposits of NSSLAs, 4212N secured loans, 4326Q.d securities, Sec. 2(c),App. 17 service charge, 4303P.1 short term commercial papers, 4293Q.1 simple annual rate, 4305Q.1(i) stockholders, 4326Q subsidiaries, 4101Q.2; 4161Q.1(m);Sec. 2(e),App. 16 total assets, 4117Q trade-in, 4305Q.1.e trust account, 4402Q.1(b) trust operations, 4402Q.1(a) underwriting of securities, Sec. 2(b),App. 17 unimpaired capital and surplus, Sec. 2(1),App. 17 unsecured loan, 4326Q.d vital records, 4102P(h) voting stock, 4102P(g);Sec. 2(g),App. 17 well secured debt 4136Q.1b willful delay/default in submitting reports, 4163P Delinquency in Payment of Obligations definition, 4143Q.g Demand Deposits of NBQBs ,4283Q.1 procedures, App. 14 Deposits of NBQBs with Central Bank , 4283Q.1 Deposits in General acceptance by BLAs, 4262N checks and other cash items of NSSLAs, 4261N.6 demand deposits of NBQBs, 4283Q.1; App. 14 deposits of NSSLAs with banks, 4301N(d) government deposits, rules, 4291Q interest on deposits (See Interest ) opening and operation of NSSLA deposit accounts, 4261N savings deposits of NSSLAs, (See Savings Deposits ) time deposits of NSSLAs, (See Time Deposits of NSSLAs ) Deposit Substitutes ceilings on yields and interests, 4285Q exemptions from documentation requirements, 4281Q.3 instruments, rules, 4281Q interest, 4285Q maturity, 4282Q matured and unclaimed, 4283Q.6 minimum features, 4281Q.1 minimum trading lot, 4284Q payment, 4282Q physical delivery of instruments, 4281Q.10 prescribed forms, 4281Q.2 pretermination, 4282Q recording and reporting, 4161Q renewal, 4282Q reserve requirements, 4283Q standard forms, 4281Q.2; Apps. 13 and 13-a to 13-k underlying securities, 4281Q.7; 4281Q.9; 4281Q.10 yields, 4285Q Depository Funds of the Government definition, 4291Q.1(b) Directors bio-data of NBQB directors/officers, 4161Q. 1j(4) bio-data of NSSLA director, 4144N compensation of NSSLA directors, 4145N definition, 4141Q disclosure requirement on relatives, 4161Q.1j(4) disqualifications, 4143Q documentary requirements, 4161Q.1j(4) DOSRI loans, 4326Q-4337Q; 4326N-4328N list for submission, 4144N of NSSLAs, 4141N in trust operations, 4407Q.1 interlocks, 4146Q profit sharing, 4148Q qualifications, 4141Q reports, 4103Q Discounting definition, Sec. 2(f),App. 18 Dividends accrued interest, 4136Q.2 amount available, 4136Q.3 definition of terms, 4136Q.1 limitation on declaration by NSSLAs, 4126N recording, 4136Q.5 reports and verification, 4136Q.4 Domestic Borrowings by Foreign Firms annual build-up program, App. 21-b debt-to-equity ratio, App. 21-a guidelines, App. 21 debt-to-equity ratio, App. 21-a guidelines, App. 21 policies, rules, 4341Q sanctions, 4341Q.1 DOSRI Loans aggregate ceiling, 4331Q ceiling on unsecured loan, 4331Q direct, indirect borrowings, 4329Q general policy, 4326Q individual ceiling, 4330Q for officers' fringe benefits plan, 4333Q procedural requirements, 4334Q reports, 4337Q sanctions, 4336Q single borrower limit, 4330Q Doubtful Accounts, Reserves ,4304Q.5 EKB Rules' Applicability to NBQBs ,4629Q Emergency Loans penalties, 4270Q.14 Employees bonding of NSSLA employees, 4148N bonding of pawnshop employees, 4148P prohibition against foreign employees, 4143N.1 Equity Investments definition, 4161Q.1(m) foreign equity, registration of, 4106Q by NBQBs, rules, 4376Q-4380Q in NBQBs, 4127Q net worth-to-risk assets ratio, 4119Q non-allied undertaking, ceilings, 4377Q; report on, 4161Q.1d reciprocal holdings, 4119Q; 4379Q reports, 461Q.1(d) Equity Method definition, 4161Q.1(m) Escalation of Interest ,4303Q.6; 4303N.4 Examination by Central Bank examination, definition, 4628N imposition of fines, 4628N.2 of NBQBs, 4628Q of NBQBs, borrowings from CB, 4270Q.13 of NSSLA; 4628N refusal to permit examination, sanctions, 4628N.1 Exchange of Credit Information ,4630Q External Auditor for NSSLAs ,4165N Facsimiles of Government Securities application for, App. 28 rules, 4624N Fee (See also Charges ) filing entrance fees of NSSLAs, 4101N.2(e) (f) of financing companies, 4389Q; 4383N for managed funds, 4426Q on pawnshop loans, 4303P for trust operations, 4412Q for underwriting by investment houses, 4295Q Finance Charge definition, 4305Q.1(h) Financial Allied Undertaking definition, 4161Q.1(m) Financial Intermediaries definition, 4101Q.1 non-bank financial intermediaries, 4101Q.1 Financial Manager definition, 4421Q.1 Financial Statements consolidation, 4161Q.1(m) pawnshops, 4161P.1 publication by NSSLAs, 4171N publication by NBQB balance sheet, 4171Q Financing Companies (FCs) basic rules and regulations (SEC),App. 18 capital, Sec. 2, App. 18 charges/fees, Sec. 6, App. 18; 4389Q; 4383N branching, Sec. 5, App. 18 business name, Sec. 4, App. 18 definition, Sec. 1(a),App. 18 foreign officers/employees, prohibition on, 4143N.1 purchase discounts, fees, service and other charges, 4389Q, 4389N Fines delayed reports on exposure, 4161Q.1(1) pawnshops' reports, 4163P payment and collection, 4161N.1(d) for refusal to permit examination, 4628N.1, 4628N.2 Floating Rate of Interest ,4303Q.3 Foreign Equity in NBQBs, 4106Q registration of, 4106Q Foreign Exchange (FX) applicability of CB rules on investment houses, 4504Q authority of investment houses to engage in FX operations, 4501Q FX activities of investment houses, 4502Q guarantees for overseas projects, 4505Q overseas projects of Philippine contractors, 4505Q Foreign Firm's Borrowings ,4341Q Foreign Investment in Philippine Securities ,4382N Formats/Forms deposit substitute instruments, 4281Q.2; Apps. 13 & 13-a to 13-k disclosure statement of loan/credit transactions, App. 20 interbank loan tickets, Apps. 22, 22-a to 22-c published quarterly consolidated balance sheet, App. 8 resolutions, 4161Q.2; Apps. 4-6 standard pawn ticket, App. 27 Fourth CB-IBRD Rural Credit Project ,4359Q Fringe Benefits of Officers ,4333Q Fund Management authorized investments, 4424Q commingling of funds, 4424Q.1 contract, minimum features, 4423Q fees & commissions, 4426Q fund manager, definition, 4102N limitations on investments, 4424Q reports, 4425Q responsibilities of administration, 4422Q security for faithful performance, 4427Q separation of accounts, 4425Q Gifts, Giveaways ,4622Q.2 Government Deposit/Funds definition, 4291Q.1(b) rules, 4291Q trust funds, 4291Q.1(b) Government-Owned/Controlled Corporations definition, 4291Q.1(a) Government Securities broker's transactions, 4382N dealership in 4601Q; 4601N definition, 4287Q; 4297Q.1(a) facsimiles, 4624N minimum features, as reserves, 4283Q.1 purchase of, 4601Q; 4601N as reserves, 4283Q.1; App. 30 repurchase of, 4269Q.6 sale of 4601Q; 4601N Grandfather Rule ,4102Q.2 Greater Percentage Veto ,4614Q Guarantee(s) definition, Sec. 2(d),App. 17 for overseas projects, 4505Q IBRD 4th Rural Credit Project rules, 4359Q Indenture Feature of Trust Bonds , 4294Q . 3(d) and (e) Industrial Guarantee & Loan Program accreditation system guidelines, App. 26 application for IGLF accreditation, App. 26-a assignor's undertaking, App. 24 guidelines on loans to medium-scale industries, App. 25 loans under IGLF, 4351Q potential small industries for IGLF financing, App. 23-a rice/corn mill projects, App. 26-b special time deposit availment, App. 23 Interbank Borrowings/Loans definition, Sec. 2, App. 15; 4343Q.a excluded transactions, 4282Q; 4343Q formats for tickets (See Formats/Forms ) recording of transactions, 4343Q reserve requirement, 4343Q.d Interest absence of contract, 4303N.3 accrued interest on NSSLA past-due loans, 4304N(b) CB special credit accommodation, 4299Q.3 ceilings on deposit substitutes, 4285Q deposit substitutes, 4285Q deposits of NSSLAs, 4243N-4244N escalation, 4303Q.6 floating rates, 4303Q.3 loans of NBFIs without QB, 4303N loans of NBQBs, 4303Q.2 loans of NSSLAs, 4303N past-due loans, 4304Q.3 pawnshop loans, 4303P purchases of instruments, 4303Q.1 reference rate, 4303Q.3 savings deposits, of NSSLAs, 4243N time deposits of NSSLAs, 4231N; 4244N Interlocks directors, 4146Q.1 directors and officers, 4146Q.2 officers, 4146Q.3 representatives of government, 41460.4 Internal Control minimum internal control standards, 4166Q; App. 7 NSSLAs, reports, and other information required, 4161N pawnshops records and reports, 4161P recording of transactions, 4161P records, data for CB inspection, 4166Q reporting requirements, 4161Q reports to be submitted, 4161Q.1 Inventory Financing for Securities Dealers , 4276Q.1 Investments abroad, 4376Q.1 ceiling on non-allied enterprise, 4377Q equity investments by NBQBs, rules, 4376Q equity investments in NBQBs, 4127Q foreign investment in Philippine securities, 4382Q of managed funds, 4424Q of NSSLA funds, 4381N in non-allied undertakings, 4377Q reciprocal stockholdings, 4119Q of trust funds, 4410Q Investment Houses basic rules implementing investment Houses Law (SEC), App. 17 branching, App. 1 capital, App. 1 citizenship requirements, 4102Q.2; App.1 definition, Sec. 2(a),App. 17 foreign exchange operations, 4501Q-4505Q guidelines to evaluate, App . 1 licensing, 4105Q reports on underwriting, 4161Q.1 underwriting of securities, definition, Sec. (2(b),App. 17 Issue of Commercial Papers definition, Sec. 2(c),App. 15; 4293Q.1(b) Leasing definition, Sec. 1(h),App. 18 Lender Count ,4101Q.3 Lending Rates of NBQBs, 4270 Q.6 Licensing of Investment Houses ,4105Q Liquidated Damages on CB Loans to NBQBs , 4270Q.11 Liquidity Floor Requirements ,4291Q.2 Liquidity Window ,4269Q nature of, 4269Q.1 Loan Register of Pawnshop ,4161P; App. 12 Loan Maturity , extension for NSSLAs ,4304N Loans allied interests, 4326Q arm's length transactions, 4301Q.1 basic requirements, NSSLAs loans, 4306N CB loans to NBQBs, rules, 4270Q ceiling, 4301Q definition, 4327Q; 4304N.1 DOSRI loans, 4326Q-4337Q; 4326N-4328N doubtful accounts, 4304Q.5 extension/renewals of NSSLA loans, 4304N, of NBQB loans, 4304Q.4 foreign firms, 4341Q guidelines on NBQB lending, 4302Q under IGLF, 4351Q; App. 24 to 27-a interbank loans, rules, 4343Q interest/charges on NSSLA loans, 4303N interest, yield, other charges on NBQB loans, 4303Q limit on single borrower of NBQBs, 4301Q exclusions from loan limit, 4301Q.2 limit for pawnshops, 4301P limit on single borrower of NSSLA, 4301N NSSLA limits on lending authority, 4301N NSSLA unauthorized loans, 4145N.1 past-due accounts, 4304Q; 4304N.2 pawnshop loans in general, 4301P-4304P policies on lending operations, 4302Q prepayments, 4303Q.4, 4303Q.5 4303N.2 proceeds of NSSLA loans, 4302N renewal/extension of maturity, 4303Q.3; 4304N restructuring/refinancing of loans, 4304Q.6 secured loan, definition, 4326Q.d secured loans, of NSSLAs, 4311N trust loans, 4408Q-4410Q types of CB loans to NBQBs, 4270Q.2 unsecured loan, definition, 4326Q.d unpaid demand loan, 4304Q.2 usury law, 4303Q values of collateral for CB loans, 4270Q.5 write-offs, 4304N.1 Loss Accounts, Reserves ,4304Q.5 Losses, Report on ,4161N.d Lotteries ,4622Q.1 Managed Funds, Borrowings from ,4292Q Management Agreements ,4147Q Managerial Staff definition. Sec. 2(k),App. 17 Merger (See Consolidation ) Minimum Trading Lot bond issues, 4297Q.5 borrowings from managed funds, 4292Q borrowings from trust funds, 4292Q deposit substitutes, 4284Q Money Borrowed definition, 4327Q Money Market Placements of Rural Banks definition, 4287Q requirements for placement, 4287Q.1 prohibition, 4287Q National Housing Authority (NHA) Bonds 46010.1 Negotiation of Commercial Papers definition, Sec. 2(c),App. 16 Net Book Value definition, 4294Q.1 Net Worth deficiency, sanctions, 4120Q definition, 4117Q to risk assets ratio, 4116Q Non-Allied Undertakings, Investments ,4377Q Non-Finance Charge definition, 4305Q.1(f) Non-Stock SLAs (NSSLAs) accounting system and classification of accounts, 4166N auditor, 4165N authority, 4101N basic requirements in loans, 4306N bonding of officers and employees, 4148N borrowings, 4294N capital to risk assets ratio, 4116N capitalization, 4106N certification of authority, 4101N.2(d) compensation of directors, officers and employees, 4145N definition, 4101N deposits with banks, 4301N(d) directors, 4141N; 4143N; 4145N dissolution, 4625N fees, 4101N.2(e) and (f) fund investments, 4381N interest/charges on NSSLA loans, 4303N internal control reports, 4161N loan limits, 4301N(a) and (b) loan proceeds, 4302N maximum loan maturity, 4301N(c) officers, 4142N to 4145N; 4148N opening and operation of deposit accounts, 4261N organization, 4101N.1; 4101N.2 past due accounts, 4304N reserve for office premises, furniture, fixtures and equipment, 4119N savings deposit, 4213N; 4214N; 4216N surplus reserves, 4118N time deposits, 4230N to 4244N withdrawable share reserve, 4117N Non-Trust Agreements ,4405Q Officers bonding of pawnshop officers and employees, 4148P credit accommodations (See DOSRI Loans ) definition, 4142Q; of IH, definition, Sec. 2(i),App. 17 disqualifications, 4143Q documentary requirements, 4161Q.1j(4) foreign officers in FCs, 4143Q.2; 4143N.1 fringe benefits, 4333Q interlocks, 4146Q officers of NSSLA bio-data of officers, 4144N bonding, 4148N compensation, 4145N definition and qualifications, 4142N disqualifications, 4143N loans to officers, 4326Q-4337Q; 4326N-4328N profit-sharing, 4148Q qualifications, 4142Q reports, 4103Q trust officers, 4407Q.2 Open Market Operations ,4601Q Organization of NSSLAs, 4101N.1 of pawnshops, 4101P.1 organizational requirements of pawnshops, 4101P.2 organizers, definition, Sec. 2(j),App. 17 Paid-in Capital book value, 4326Q definition, Sec. 2(h),App. 17 of NBQBs, 4106Q Past Due Accounts building and loan associations, 4304N.2 definition, 4304Q demand loans, 4304Q.2 doubtful accounts, 4304Q.5 interest, 4304Q.3 of NSSLAs, 4304N of pawnshops, 4304P renewals, extension of maturity, 4304Q.4; 4304N what accounts past due, 4304Q.1 Pawnshops articles of incorporation, 4171P auction of pawns, 4315P authority, 4101P bonding of officers and employees, 4148P branching, 4151P business name, 4172P capital, 4106P chart of accounts, 4161P, App. 12 Closing, transfer of business, 4174P complaints procedures, App. 29 filing of reports, 4163P(b) interest on loans, 4303P insurance of office building, 4173P loan registers, 4161P; App. 12 loans in general, 4301P-4304P organization, 4101P.1; 4101P.2 pawn auction, 4315P pawn, definition, 4102P.d pawnee, definition, 4102P.c pawner, definition, 4102P.b penalties on reportorial requirements, 4163P records and reports, 4161P safekeeping of pawns and records, 4173P security of loans, 4311P separation from other business, 4175P Pawnticket ,4313P contents, 4313P.1 definition, 4102P.e Persons definition, 4305Q.1(b) Peso Borrowings by Foreign Firms (See Domestic Borrowings by Foreign Firms ) Premyo Savings Bonds as reserves of NBQBs against deposit substitute liabilities, 4283Q.1 as reserves of NSSLAs against deposit liabilities, 4254N Prepayment of Loans ,4303Q.4; 4303Q.5; 4303N.2 Pretermination of Time Deposits ,4244N.3 Private Placement definition, Sec. 2(e),App. 17 Procedures for complaints against pawnshops, App. 29 NBQB demand deposits with CB, App. 14 Profit-Sharing Programs ,4148Q Prohibition Against Greater Percentage Veto ,4614Q Promissory Notes as deposit substitute instrument, 4281Q negotiation as deposit substitute, 4281Q.5 standard format, App. 13 Promotional Campaigns ,(See Campaigns for Promotions ) Property definition, 4102P(f) Public Auction of Pawns ,4315P Public Distribution definition, Sec. 2(f),App. 17 Publication of NSSLA financial statements, 4171N of reports, 4171Q Purchase Discount definition, Sec. 1(d),App. 18 of financing companies without QB, 4389Q; 4383N Purchase Receivables definition, 4101Q prohibition on, 4301Q.1 yields, 4303Q.1 Quasi-Banking Functions capital requirements, 4102Q.2; 4106Q certificate of authority, 4104Q citizenship requirements, 4102Q.2 definition, 4101Q documentary requirements for application 4303Q foreign equity requirements, 4106Q managerial expertise necessary, 4102Q.3 methods of borrowings, 4101Q preconditions, 4102Q purpose, 4101Q Raffles ,4622Q.1 Ratios capital to risk assets of NSSLAs, 4116N debt-to-equity for borrowings of foreign firms, App. 21-a net worth to risk assets, 4116Q Receivables Financing ,Sec. 1(g),App. 18 Reciprocal Stockholdings ,4119Q Records disposition of pawnshop records, 4162P pawnshops, 4161P recording of transactions, 4161Q records, data for CB inspection, 4166Q Rediscounting ceilings of EKBS; KBs and NBQBs, 4269Q.5; 4270Q.8 ceilings on CB loans to NBQBs, 4270Q.8; 4269Q.5 lending rates of NBQBs, 4270Q.2 loan values, 4270Q.5 rates on CB loans to NBQBs; 4270Q.6 reference rate, 4269Q.3 Reference Rate ,4269Q.3; 4303Q.3 Registration of Commercial Papers, Apps .15, 16 Related interests, Loans to ,4326Q-4337Q; 4326N-4328N Relending definition, 4101Q prohibition, 4301Q.1 Reports articles of incorporation/by-laws 4161Q.1j(2) balance sheet/income statement, 4161Q.1(e),(f) borrowing-investment program, 4161Q.1(i)(3) categories and signatories, 4161Q.2 credit exposure, 4161Q.1(1) credit information exchange, 4161Q.1(1) crimes and losses, 4161N(d) directors information sheet/bio-data, 4161Q.1 (i);4161Q.1j(4) DOSRI loans, 4161Q1(c) equity investment, 4161Q.1(d) external report categories, 4161Q.2, App. 3 fund management, 4425Q investors aggrupation, 4161Q.1(j)(1) management report to stockholders, 4161Q.1(i)(2) NBFIs, 4161N; App. 10 NBQBs, 4161Q.1 ;App. 10 NSSLA reports and other information, 4161N, App. 10-a organizational structure, 4161Q.1j(3) past due/rolled-over, renewed loans, 4161Q.1(g) pawnshop reports, 4161P pawnshop report, definition, sanctions 4163P publication requirements, 4171Q reporting requirements for NBQBs, 4161Q trust operations, 4415Q.1 underwriting, 4161Q.1(h) Repurchase of CBCIs and Other Government Securities ,4276Q Reserves on deposit substitute liabilities, 4283Q accounts subject to reserves, 4283Q.2 book-entry method for reserve securities, 4283Q.7 form and amount, 4283Q.1 computation and valuation, 4283Q.4 deficiencies, sanction, 4283Q.5 exemption, 4283Q.3 on doubtful accounts, 4304Q.5 on interbank loans, 4343Q.d on managed funds, 4292Q on loss accounts, 4304Q.5 NSSLAs composition on reserves, 4254N savings deposit 4253N time deposits, 4232N office premises, furniture, fixtures and equipment, 4119N sanctions, 4283Q.5 surplus reserves for NSSLAs, 4118N trust department funds, 4292Q withdrawable share reserve of NSSLAs, 4117N Reserves Fund of NSSLAs ,4253N Revenue Funds definition, 4291Q.1(b) Risk Assets definition, 4116Q Rules on EKBs Applicable to NBQBs ,4629Q Rural Banks, Money Market Placements , 4287Q Sale of Government Securities ,4601Q Sanctions DOSRI rules violation, 4336Q general provision on sanctions, 4199Q; 4199N; 4199P; 4299Q; 4299N; 4399Q; 4399N; 4399P; 4499Q; 4699Q; 4699N; 4699P late reporting or failure to submit reports, 4161Q.3 net-worth deficiency of NBQBs, 4120Q pawnshop reports 4163P peso borrowings, 4341Q.1 reporting requirements of NSSLAs, 4161N.1 reserve deficiencies on deposit substitutes, 4283Q.5 truth in lending act, 4305Q.9 unauthorized signatories, 4161Q.3 willful delay in submission of reports, 4161Q.4 Savings Deposit of NSSLAs definition, 4212N interest, 4213N, 4243N reserves, 4214N; 4253N withdrawals, 4216N Secured Loans definition 4326Q.d NSSLAs, 4311N Security/Securities definition Sec. 2(c),App. 17 dealership, 4601Q for fund management operations, 4427Q for pawnshop loans, 4311 switching transactions, 4382N for trust operations, 4404Q Selling Agreement for Commercial Papers , Sec. 3(a)(6),App. 15 Signatories of Reports ,4161Q.2 Simple Annual Rate definition, 4305Q.1(i) determined 4305Q.2 Single Borrower Limit ,4301Q, 4301N Sinking Fund Feature of Bonds ,4297Q.3(d) Special Credit Accommodations ,4269Q; 4269Q.1-4269Q.4 conditions to access, 4269Q.2 interest rate, 4269Q.3 terms of credit 4269Q.3 Standard Pawn Ticket format, App. 27 Stock/Stockholder definitions 4326Q loans, 4326Q-4337Q, 4326N-4328N reciprocal stocks, 4119Q Total Assets definition, 4117Q Trading Lot Rule, 4284Q Trust account, definition, 4402Q.1(b) borrowings from trust departments of banks, 4292Q certificates as deposit substitutes, 4281Q.4 committee, 4407Q.3 common trust funds, rules, 4414Q government trust funds, definition 4291Q.1(b) indenture feature of bonds, 4297Q.3(d) & (e) loan ceilings, 4409Q loans to foreign firms, 4341Q(g);4415Q.4 officers, 4407Q.2 operations authority, 4401.Q common trust fund (See Common Trust Fund ) definition, 4402Q.1(a) directors/officers responsibilities, 4407Q fees and commissions, 4412Q loans and investments of trust funds, 4410Q pre-requisites, 4403Q prohibited transactions, 4408Q security for faithful performance, 4404Q separation of account, 4411Q surplus, 4413Q trust plan, 4414Q.1 Truth in Lending Act ,4305Q abstract, posting requirement, 4305Q.6; App. 19 disclosure format, 4305Q.7 App. 20 records subject to examination, 4305Q.5 sanctions, 4305Q.9 simple annual rate, determined, 4305Q.2 transactions covered, 4305Q.3 Unauthorized NSSLA Loans or Investments , 4145N.1 Underwriting of bonds, 4297Q.4 by investment houses, 4296Q of securities, definition, Sec. 2(b);App. 17 Uniform System of Accounts ,4166Q.1; 4166N Unimpaired Capital & Surplus definition, Sec. 2(l),App. 17 Unsecured Loan definition, 4326Q.d DOSRI, ceiling on, 4331Q Usury Law, application on NBQB Loans , 4303Q.3; 4303Q.6; 4303Q.12 Vital Records definition, 4101P(h) Voting Stock definition, 4102P(g);Sec. 2(g) Without Recourse Transactions ,4290Q Write-Off of Loans/Bad Debts ,4304N.1 Yield ceiling of deposit substitutes, 4285Q on matured /unclaimed deposit substitute, 4285Q.a on preterminated deposit substitute, 4285Q.b(1) & (2) * Copied verbatim from documents directly obtained from the Bangko Sentral ng Pilipinas .