Manual of Regulations on the Supervision of Financial Intermediaries — Book I

July 11, 1975 MANUAL OF REGULATIONS ON THE SUPERVISION OF FINANCIAL INTERMEDIARIES IMPORTANT Sectio ns 8 and 10 This Manual is a compilation in convenient form of all Bank Circulars, memoranda and other issuances in force, from January 1949 to June 1975, and is intended as a systematic guide for the user. However, should a conflict arise between any provision herein and the original text of the pertinent CB issuances, the latter shall prevail. MESSAGE Since the Central Bank of the Philippines started operations in January 1949, various attempts have been made to compile and/or codify the different issuances through which the Central Bank exercised its responsibility over the monetary and banking system of the Republic. These efforts proved to be largely unavailing. It is therefore with a sense of accomplishment that the Central Bank presents this compilation of Central Bank regulations which encompasses all its regulatory issuances and amendments, revisions, and repeals effected through the years and by now numbering more than a thousand. cdta This work was undertaken by the Commission on the Supervision of Financial Intermediaries created by Monetary Board Resolution No. 40 dated January 10, 1975. The work embodies the joint efforts of the Central Bank staff and the private sector. It is hoped that this codification of Central Bank rules and regulations will assist the Central Bank staff in the exercise of their work and thus contribute towards the further strengthening of the Philippine financial system. (SGD.) G.S. LICAROS Governor FOREWORD The Central Bank of the Philippines was created by Republic Act No. 265 and was organized in January 1949. Charged with the responsibility of administering the monetary, banking and credit system of the Republic, the Central Bank has issued a total of more than four hundred circulars. Various memoranda and circular-letters have also been issued throughout the years which must have passed the one-thousand mark a long time ago. In recommending to the Monetary Board the creation of the Commission on Supervision of Financial Intermediaries, Governor G. S. Licaros accentuated the need for a "review of existing Central Bank regulations affecting supervision and examination as formulated in existing circulars, memoranda, and other orders, with the intention of recommending improvements consistent with effective supervision and implementation, including the codification of said regulations and possible measures for strengthening internal controls and management of financial intermediaries." The contents of this Manual is the end result of about six months' work. It is a modest approach towards codification and is intended for the use of Central Bank staff, as a systematic guide in the discharge of their examination and supervisory functions. The Manual is divided into five books grouped on the basis of categories of banks and non-bank financial intermediaries under the General Banking Act. It is a compilation of all existing regulatory issuances which are being implemented principally by the Supervision and Examination Sector of the Central Bank, up to June 30, 1975, the cut-off date of this inaugural issue. It is envisioned that the Manual will be up-dated at least every six months in order to incorporate new issuances and otherwise reflect revisions and/or amendments. The Commission made it a working policy to delete statutory provisions since regulations are intended to be implementory and not to be mere repetitions of what are already in the law. Procedural guidelines, as a general rule, were also not incorporated. It is to be emphasized that existing issuances which, for one reason or another, have not been reproduced in this Manual are not to be taken as having been amended, repealed or otherwise superseded . In the preparation of this Manual, valuable assistance was extended by the Department of Loans and Credit, the Accounting Department and the Revenue Collection Office, aside from the departments in the Supervision and Examination Sector, namely, the Department of Commercial and Savings Banks, the Department of Rural Banks and Savings and Loan Associations, and the Office of Non-Bank Financial Intermediaries [now Department of Financial Intermediaries (Non-Bank)]. The Commission members advising on this undertaking were Mr. Armand V. Fabella, Chairman of the Reorganization Commission and Mrs. Carlota P. Valenzuela, Special Assistant to the Governor, Supervision and Examination Sector. Over-all coordination and review was undertaken by Dr. Jaime C. Laya, Commission Chairman and Mrs. Mercedes C. Paderes, Technical Staff Coordinator. The technical staff team that worked on this project was headed by Miss Dominadora C. Suga, Bank Executive Assistant III, Office of the Governor, and included Iigo B. Regalado, Jr. Bank Executive Assistant III, Office of the Deputy Governor and General Counsel; Ludivina V. Andaya, Assistant Director, Feliciano L. Miranda, Jr., Assistant Director, Isabel V. Rimando, Assistant Regional Coordinator, Carlos M. Lacanilao, Supervising Bank Examiner, all of the Department of Commercial and Savings Banks; Jose R. Gonzalez, Assistant Director and Corazon C. Vibar, Bank Examiner A, both of the Department of Rural Banks and Savings and Loan Associations; Candon B. Guerrero, Staff Assistant on Non-Bank Operations and Milagros F. Dumpit, Senior Analyst, both of the Department of Financial Intermediaries (Non-Bank). The Commission secretariat and staff consisted of Alberto R. Enriquez, Teresita S.M. Santos, Ofelia C. Arenas, Carol Blando, Fidel Cabingao, Remedios M. Cochico, Leticia M. Hidalgo, Aurea Perez and Corazon Zapanta. cdtech THE COMMISSION ON THE SUPERVISION OF FINANCIAL INTERMEDIARIES June 1975 COMMISSION ON THE SUPERVISION OF FINANCIAL INTERMEDIARIES Chairman (SGD.) JAIME C. LAYA Deputy Governor Supervision and Examination Sector Central Bank of the Philippines Members (SGD.) BASILIO ESTANISLAO (SGD.) ARMAND V. FABELLA President Chairman Land Bank of the Philippines Presidential Commission on Reorganization (SGD.) JOSE F. UNSON (SGD.) CARLOTA P. VALENZUELA Representative Special Assistant to the Governor Bankers Association of the Philippines Supervision and Examination Sector Central Bank of the Philippines (SGD.) EDUARDO M. VILLANUEVA Vice Chairman, Management Committee Sycip, Gorres, Velayo and Company Technical Staff Coordinator (SGD.) MERCEDES C. PADERES Director Department of Commercial and Savings Banks Central Bank of the Philippines To Users of this Manual of Regulations : The Manual of Regulations is divided into five Books corresponding to the different categories of banks and non-banks under the General Banking Act. Each Book is divided uniformly into nine (9) Parts. Certain Parts not at present applicable to particular Books are merely skipped so as to maintain uniformity in Part number and subject matter for all Books. Each Part will further be subdivided into nine (9) sub-headings which will also be uniform for all Books. For the present, not all nine possible sub-headings have been utilized. The numbering system for the provisions in the Manual has been so devised as to facilitate identification of provisions and comparison between regulations applicable to the different types of banks and non-banks. Thus, the first digit of the Section number refers to the financial institution (which also coincides with the Book number), the second to the Part number and the third to the sub-heading. All provisions for commercial banks, therefore, begin with "1"; for thrift banks, "2"; for regional unit banks (rural banks), "3"; for non-bank financial intermediaries, "4"; and for financial intermediaries performing quasi-banking functions, "5". Regulations on capitalization which is sub-heading 1 of Part 1 will thus be found under Sections 111, 211, 311, 411 and 511. Slight deviations from this pattern had to be made, however, in the case of Book III for Regional Unit Banks. Details of each provision are represented by the numbers after the decimal point following the first three digits of the section number, and are not necessarily uniform for all Books. Thus, Sub-sec. 111.1 for Book One may not have exactly the same title as Sub-sec 211.1 of Book Two, but both provisions will deal with some aspect of capitalization. The same holds true for sub-sections under the other Parts. The pagination for all Books is by Section. Each Section starts with page 1, with an indication of the number of pages constituting said Section, thus: page 1 of ________ pages, and so on. For easy reference, the contents of each page are indicated at either the upper right or left-hand corners, thus: subsection number(s) preceded by the symbol or . The date 75.06.30 found below each subsection number refers to the cut-off date of this inaugural issue of the Manual, which is June 30, 1975. Thereafter, the date will be changed to the end of the semestral period during which subsequent revisions/amendments and/or new regulations will have been issued. TABLE OF CONTENTS PART 1 ORGANIZATION AND OPERATIONS IN GENERAL SEC. 111 Capitalization 111.1 Minimum paid-up capital requirements 111.2 Net worth to risk assets ratio 111.21 Definition/clarification of terms and phrases 111.22 Exemption from compliance with prescribed ratio 111.23 Sanctions in case of capital deficiency 111.24 Required report/records SEC. 112 Stocks and Stockholders 112.1 Acquisition of banks' shares of stock 112.11 Stock options 112.12 Ceilings on voting equity 112.13 Transfers of shares 112.14 Stockholdings in banks of financing companies 112.15 Equity investments by foreigners in domestic banks 112.2 Convertibility of preferred stock to common stock SEC. 113 Dividends 113.1 Declaration of dividends 113.11 Definition of terms 113.12 Accrued interest 113.13 Amount available as dividends 113.14 Reporting and verification 113.15 Recording of dividends 113.16 Sanctions 113.2 When banks prohibited from declaring cash dividends SEC. 114 Branches and Other Banking Offices 114.1 Establishment of banking offices 114.2 Transfer/relocation of banking offices 114.3 Money shops 114.4 Extension offices SEC. 115 Articles of Incorporation and By-Laws 115.1 Place of board of directors' meetings 115.2 Voting requirements with respect to certain corporate transactions 115.3 Stock options Appendix A Guidelines On Increased Capitalization and Merger or Consolidation of Commercial Banks Appendix B Guidelines on the Establishment of Banking Offices (Except Money Shops) For Commercial Banks Appendix C Guidelines/Criteria on the Establishment and Operation of Money Shops PART 2 MANAGEMENT AND ADMINISTRATION SEC. 121 Directors 121.1 Definition of terms 121.2 Qualifications of a director 121.3 Persons disqualified to become directors 121.31 Disqualification procedures 121.4 Effect of non-possession of qualifications or possession of disqualifications 121.5 Bio-data of directors 121.6 Interlocking directorates 121.61 Between banks, and between banks and their allied undertakings 121.62 Between banks and non-bank financial intermediaries SEC. 122 Officers and Employees 122.1 Definition of terms 122.2 Qualifications of an officer 122.3 Persons disqualified to become officers 122.31 Disqualification procedures 122.4 Effect of non-possession of qualifications or possession of disqualifications 122.5 Bio-data of officers 122.6 Interlocking officerships 122.7 Prohibited demand deposits by certain officers and employees SEC. 123 Banking Days and Hours 123.1 Banking days 123.2 Minimum banking hours 123.3 Banking hours beyond the minimum 123.4 Report of, and changes in banking days and hours 123.5 Emergencies 123.6 Reporting requirements 123.61 Clarifications 123.7 Existing authorizations and notifications 123.8 Posting of schedule of banking days and hours SEC. 124 Internal Procedures 124.1 Recording of transactions 124.2 Reporting requirements 124.21 Sanctions in case of willful delay in the submission of reports/refusal to permit examination 124.22 Signatories on required bank reports 124.23 Submission of certain information required 124.24 Submission of report on crimes/losses 124.5 Annual operations/management/financial audits 124.51 Who may conduct 124.52 Minimum coverage 124.53 Minimum contents of reports 124.54 Procedural guidelines 124.55 Exemption 124.7 Internal control 124.8 Bank protection Appendix A Reports Required of Commercial Banks Attachment 1 Instructions on Accomplishment and Submission of Reports Appendix B Chart of Accounts for Reporting Purposes Appendix C Category B Reports of Commercial Banks Appendix D Format-Resolution for Signatories of Category A-1 Reports of Commercial Banks Appendix E Format-Resolution for Signatories of Category A-2 Reports of Commercial Banks Appendix F Format-Resolution for Signatories of Category B Reports of Commercial Banks Appendix G Information Required Under CB Memorandum to All Banks and Non-Bank Financial intermediaries dated October 28, 1975 Appendix H Documents/Information Required Under Circular Letter dated October 18, 1976 Appendix I Minimum Internal Control Standards for Banks Appendix J Rules and Regulations on Bank Protection Attachment 1 Format-Certification on Compliance with Rules and Regulations on Bank Protection Appendix K Procedures on Collection of Fines from Banks PART 3 LENDING OPERATIONS SEC. 131 Loans in General 131.1 Loan Limits 131.11 Definition of terms 131.12 Determination of total loans to a single borrower 131.13 Requirements for grant of additional loans 131.14 Exclusion from loan limit 131.2 Loan proceeds 131.21 Derivative/compensating deposits 131.22 Prohibition from requiring the purchase of lending bank's preferred stock out of loan proceeds 131.23 Utilization of loan proceeds 131.3 Interest and other charges 131.31 Interest 131.32 Miscellaneous charges 131.33 Accrual of interest earned on loans 131.4 Past due accounts 131.41 Definition 131.42 Accounts considered past due 131.43 Demand loans 131.44 Accruals of interest income 131.45 Renewals/extensions 131.46 Reporting requirements 131.47 Restructuring or refinancing of loans 131.48 Writing-off of loans as bad debts 131.5 Truth in Lending Act disclosure requirements 131.51 Requirement of disclosure 131.52 Definition of terms 131.53 Scope of regulations 131.54 Availability for inspection of copies of contracts 131.55 Information sheets and other reports to be submitted to the Central Bank 131.56 Posters 131.57 Office authorized to enforce rules and regulations 131.58 Penal provisions SEC. 132 Unsecured Loans 132.1 Loans against personal security 132.11 General guidelines 132.12 Proof of financial capacity of borrower 132.13 Amounts and terms of credit accommodations; renewals 132.14 Signatories 132.15 Collateral requirement 132.16 Sanctions SEC. 133 Secured Loans 133.1 Interest rate on loans secured by government securities 133.2 Insurance on real estate improvements used as collaterals 133.3 Increased loan values of collaterals in special cases SEC. 134 Loans/Credit Accommodations to Directors, Officers and Stockholders 134.1 Definition of terms 134.2 Transactions not covered 134.3 Direct/indirect borrowings 134.4 Individual/aggregate ceilings 134.5 Transitory period for compliance 134.6 Reporting requirements 134.7 Sanctions in case of refusal to comply with or willful violation of regulations 134.8 Financial assistance to officers and employees under the fringe benefit program 134.81 Types/purposes of financial assistance 134.82 Mechanics of financing plan 134.83 Forms of financial assistance 134.84 Preconditions/limitations on fringe benefit programs 134.85 Other requirements 134.86 Financing plans not covered by fringe benefit programs 134.87 Sanctions SEC. 135 Specific Types/Classes of Loans 135.1 Agrarian reform credit and agricultural credit 135.11 Definition of terms 135.12 Required allocation for agrarian reform credit/agricultural credit in general 135.13 Qualified borrowers under agrarian reform credit/agricultural credit in general 135.14 Securities for loans 135.15 Syndicated type of agrarian reform credit/agricultural credit 135.16 Interest and other charges on loans 135.17 Submission of reports 135.18 Sanctions 135.19 Computation of loanable funds 135.2 IGLF loans 135.3 Loans to rural banks 135.4 Temporary overdrawings in current account 135.5 Interbank loan transactions 135.51 Interbank call loan transactions 135.7 Crop loans 135.8 Supervised credit 135.8 Masagana 99 and Masaganang Maisan Loans 135.9 Peso borrowings by foreign firms SEC. 136 Other Specific Types/Classes of Loans 136.1 Grains Quedan Financing Program 136.2 Aromatic Tobacco Trading Loan Fund Program 136.3 Cooperative Finance System SEC. 139 Sundry Provisions 139.1 Investment-deposit ratio 139.11 Statement of policy 139.12 Methods of compliance 139.13 Government securities as eligible investments 139.14 Clarifications 139.15 Reporting requirements 139.16 Sanctions for non-compliance 139.17 Grace period 139.2 Assets acquired in settlement of loans 139.3 Credit policies of government-owned corporations Appendix A Procedural Requirements: Direct/Indirect Borrowings of Bank Directors, Officers or Stockholders Appendix B Procedures for Interbank Loan Transactions Attachment 1 Prescribed Forms for Transfer Tickets Appendix C Regional Groupings of Provinces for Purposes of the Required Investment- Deposit Ratio of Commercial Bank Branches in a Region Appendix D Format of Disclosure Statement on Loan/Credit Transaction (As Required Under Republic Act No. 3765, Truth in Lending Act) Appendix E Format of Abstract of "Truth in Lending Act" (Republic Act No. 3765) Appendix F Rules and Regulations Governing the Implementation of the Industrial Guarantee and Loan Fund (IGLF) Accreditation System Appendix G Rules and Regulations Governing the Financing of Small Industries Under the Industrial Guarantee and Loan Fund (IGLF) Program Attachment 1 List of Potential Small Industries for IGLF Financing Appendix I Guidelines Governing the Agricultural Supervised Credit Operations of Commercial Banks for Masagana 99 and Masaganang Maisan Loans Appendix J Guidelines in the Setting Up of Valuation Reserves for Doubtful and Loss Loan Accounts Under the Masagana 99 and Other Similar Supervised Credit Programs Appendix K Guidelines on Domestic Borrowings by Foreign Firms Attachment 1 Suggested Debt-to-Equity Ratio of Borrowing Foreign Firms Attachment 2 Suggested Annual Build-Up Program of Borrowing Foreign Firms Appendix L Palay Marketing Credit Program Appendix M Guidelines in Granting IGLF Loans to Medium Scale Industries Appendix N Grains Quedan Financing Program Attachment 1 Rules and Regulations Governing the Guarantee Coverage of Grains Quedan Pursuant to Letter of Instruction No. 704 Appendix O Rules and Regulations Governing the Cooperative Finance System Appendix P Illustrative Examples/Formulas for the Computation of Proceeds/Discount Rates of Loans Appendix Q Rules and Regulations Governing the Lending Program under Aromatic Tobacco Trading Loan Fund for Authorized Commercial Banks Appendix R Financing of Direct Seeding Schemes for Rainfed Areas Under the Masagana 99 Financing Program PART 4 INVESTMENT OPERATIONS SEC. 141 Investment in Equities of Allied Undertakings 141.1 Approved allied undertakings 141.2 Banks disqualified from investing in allied undertakings 141.3 Ceilings on equity investments in allied undertakings 141.4 Interlocking directorates and officerships in banks and allied undertakings SEC. 142 Other Investment Operations 142.1 Security dealership 142.2 Investment in subsidiaries/affiliates 142.21 Submission of periodic reports 142.3 Investment in venture capital corporations (VCC) 142.31 Requirements for investors 142.32 Authorized investments of VCC 142.33 Business name of VCC 142.34 Reportorial requirements; examination by Central Bank 142.35 Interlocks 142.36 Sanctions Appendix A Rules and Regulations Governing the Buying and Selling of Government Securities in the Open Market PART 5 DEPOSIT OPERATIONS SEC. 151 Savings Deposits 151.1 Interest on savings deposit 151.2 Required reserve against savings deposits 151.3 Receiving and paying deposits outside bank premises 151.31 Solicitation of deposits under the TIPID Movement 151.32 Solicitation of deposits under the Barangay Savings Movement 151.4 Deposits to/withdrawals from savings accounts 151.41 Withdrawal authority slips 151.42 Special savings deposits of farmer-borrowers 151.43 Booking of deposits/withdrawals made after banking hours 151.5 Service or maintenance fees on dormant or inactive savings account 151.6 Rental deposits of lessees SEC. 152 Time Deposits 152.1 Interest on time deposits 152.2 Required reserve against time deposits 152.3 Term of time deposits 152.4 Minimum size of deposits 152.5 Special time deposits from the Agrarian Reform Fund Commission SEC. 153 Demand Deposits 153.1 Interest on demand deposits 153.2 Required reserve against demand deposits 153.3 Temporary overdrawings in current account 153.4 Prohibited demand deposits by certain officers and employees 153.5 Issuance of checks without sufficient funds or credit 153.6 Drawings against uncollected deposits SEC. 154 Government Deposits 154.1 General prohibition 154.2 Banks which may be authorized to accept government deposits/funds 154.3 Liquidity floor 154.4 Exempt transactions 154.5 Application for authority 154.6 Sanctions SEC. 155 Reserves on Deposit Liabilities of Banks, Including Specialized and Unique Government Banks 155.1 Reserves against deposits liabilities 155.11 Deposits liabilities in local currency 155.12 Deposit liabilities in foreign currencies 155.2 Form of reserves against deposit liabilities 155.21 Deposit liabilities in local currency 155.22 Deposit liabilities in foreign currencies 155.3 Computation of reserve position 155.4 Reserve deficiencies 155.5 Chronic reserve deficiency; penalties 155.6 Failure to cover overdrawings with Central Bank 155.7 Unpaid fines 155.8 Report on compliance 155.9 Penal sanctions SEC. 156 Schemes to Attract Deposits 156.1 Raffles and lotteries 156.2 Gifts or give-aways 156.3 Other promotional schemes 156.4 Sanctions SEC. 157 Interest on Bank Deposits 157.1 Maximum interest rate on bank deposits 157.11 Demand deposits 157.12 Savings deposits 157.13 Time deposits 157.2 Number of days comprising a year in the computation of interest 157.3 Payment of interest in kind 157.4 Disclosure of effective rates of interest SEC. 159 Sundry Provisions on Deposit Operations 159.1 Basic provisions on opening and operation of deposit accounts 159.2 Employees' Provident Fund contributions 159.3 Unclaimed balances 159.4 Certification on deposit 159.5 Booking of deposits and withdrawals 159.51 General rule 159.52 Definition 159.53 Booking of cash deposits 159.54 Booking of non-cash deposits 159.55 Booking of deposits after regular hours 159.56 Other records required 159.57 Notice required 159.58 Reports required 159.59 Sanctions -Appendix A Minimum Safeguards Required to be Instituted and Maintained by Banks Applying to Solicit and Accept Deposits Outside their Bank Premises Appendix B TIPID Movement Manual Appendix C Rules and Regulations on the Solicitation of Deposits under the Barangay Savings Movement Appendix D SEC Prescribed Format for Certification on Deposit PART 6 BORROWING OPERATIONS SEC. 161 Borrowings from the Government SEC. 162 Loans and Advances/Rediscount from the Central Bank in General 162.1 Basic terms and conditions 162.11 Ceilings 162.12 Eligibility of papers 162.13 Loan values 162.14 Rediscount/interest rates and other charges 162.15 Maturities 162.2 Recording and reporting procedures 162.3 Remittance of collections 162.4 Grounds for suspension of rediscounting privilege 162.41 Capital deficiency 162.42 Chronic reserve deficiency 162.43 Overdrawings in deposit accounts with the Central Bank 162.44 Deficiency in required liquidity floor re: government deposits 162.5 Processing of applications for rediscounting/advances with the Central Bank SEC. 163 Specific Rediscounting/Loan Transactions 163.1 Rediscounting of papers covering export product under the Export Priorities Plan of the Board of Investments 163.11 Eligibility of papers 163.12 Loan value 163 13 Rediscount rate 163.14 Maturities 163.15 Ceilings 163.16 Rediscounting of papers covering non-traditional exports/small-scale/cottage industries and the production/exports/trading of sugar, rice and tobacco 163.17 Failure to negotiate export L/C discounted with Central Bank 163.2 Rediscounting of papers pertaining to Agrarian Reform Credit relative to Presidential Decree No. 717 163.21 Eligibility of papers 163.22 Loan values 163.23 Rediscount/interest rates 163.3 Interbank loan transactions 163.4 Central Bank loans to long-term lending institutions 163.5 Rediscounting regulations governing the Aromatic Tobacco Trading Loan Fund Program 163.6 Rediscounting of papers of exporters of services and construction contracts 163.7 Rehabilitation program for rice producing areas in Central Luzon SEC. 164 Additional Qualifications for Availment of Central Bank Credit Facilities SEC. 169 Sundry Provisions 169.1 Registration requirements for commercial papers Appendix A Credit Priority Classification Appendix B Export Priorities Plan Appendix C Rules and Regulations Governing Rediscounting by Commercial Banks Under the Agrarian Reform Credit Scheme Appendix D SEC Rules on Registration of Commercial Papers Appendix E SEC Rules on Registration of Long-Term Commercial Papers and Bonds Appendix F Rediscounting Privileges Under the Supervised Credit Program Appendix G Guidelines for the Availment of Special Funds Under the Rehabilitation Program for Rice- Producing Areas in Central Luzon Appendix H Sample Certification on Exporter-Borrowers Packing Credits PART 7 TRUST OPERATIONS SEC. 171 Pre-requisite for the Exercise of Trust Functions SEC. 172 Trust Accounts 172.1 Funds considered trust accounts 172.2 Trust accounts treated as ordinary deposits SEC. 173 Trust Agreements SEC. 174 Trust Transactions 174.1 Prohibited trust transactions; exceptions 174.2 Additional regulations on trust operations Appendix A Procedural Requirements Regarding Deposit of Securities for the Faithful Performance of Trust Duties SEC. 179 Sundry Provisions 179.1 Fund borrowings from trust departments PART 8 (RESERVED) PART 9 MISCELLANEOUS PROVISIONS SEC. 191 Other Operations 191.1 Clearing operations 191.11 Overdrawings in deposit (clearing) account with the Central Bank 191.12 Clearing of treasury warrants 191.2 Collection of internal revenue taxes, customs duties and other levies 191.3 Handling of tax and loan accounts arising from sale of Treasury Bills (Tax Anticipation Series) 191.5 Sale of government securities 191.6 Domestic stand-by letters of credit (L/Cs) 191.7 Allowable drawings against reserves on deposit with the Central Bank 191.8 Interest income on reserve deposit with Central Bank 191.9 Depositary relationship arrangement 191.91 As depositary of rediscounting proceeds 191.92 As depositary of funds of various special financing programs SEC. 192 Bank Advertisements SEC. 193 Assessment Fees on Banks SEC. 194 Bank Premises and Other Fixed Assets 194.1 Expansion of bank premises 194.2 Appreciation or increase in book value 194.3 Ceiling on total investments SEC. 198 Other Miscellaneous Provisions 198.1 Cash dispensers 198.2 Armored cars 198.3 Reproduction and use of facsimiles of government securities 198.4 Premyo Savings Bond Agency 198.41 Procedure for payment of cash prize claims to service agency holders of winning bonds 198.5 Collection of interest on government bonds and securities SEC. 199 Sanctions in General Appendix A Clearing Regulations Attachment 1 Designated Clearing Areas Attachment 2 Clearing of Treasury Warrants Attachment 3 Guidelines for Inter-Regional Clearing Operations in Visayas and Mindanao Attachment 4 Clearing Operations Between Regional Clearing Centers and the Manila Clearing Center (Tarlac, Tarlac Used as Sample) Appendix B Tax Collection Procedures Attachment 1 List of National Internal Revenue Taxes Payable Through Authorized Agent Banks Attachment 2 List of Central Bank Offices Where Central Bank Accountable Official Receipt Forms May Be Secured Attachment 3 Deadlines for Tax Payments Attachment 4 Sample Form for Summary Report of Collections of Customs Duties, Taxes and other Levies Attachment 5 Sample Format of Inventory Report of Official Receipts Attachment 6 Sample Format of Inventory Report of Confirmation Receipts Attachment 7 Sample Format of Notice of Loss of Confirmation Receipts Attachment 8 Sample Format of Notice of Loss of Official Receipts Appendix C Procedural Guidelines for the Reproduction of Facsimiles of Government Securities Index Guide to Abbreviations PART 1 Organization and Operations in General SECTION 111. Capitalization SUBSECTION 111.1 Minimum paid-up capital requirement . The unimpaired paid-in capital (including paid-in surplus) of a private domestic commercial bank, net of its aggregate direct and indirect unsecured loans to directors, officers, stockholders and their related interests (DOSRI) (i.e., those included in the ceiling under Section 134) shall not be less than the P100 million capital requirement. aisadc The unimpaired paid-in capital account shall refer to the combined capital accounts (net of the unbooked valuation reserves recommended by the Central Bank) or the actual paid-in capital (including paid-in surplus), whichever is lower. The combined capital accounts (networth) of a private commercial bank with an authorized foreign currency deposit unit (FCDU), net of its unbooked valuation reserves and unsecured DOSRI loans, shall not be less than P150 million as required under existing regulations. Any private commercial bank which fails to comply with the above guidelines shall be subject to the following sanctions: a. The privilege of branching shall be suspended for banks which fail to maintain the minimum capital requirement; b. No new unsecured loans to DOSRI shall be granted by the bank concerned until it attains the minimum capital requirement; c. No cash dividends shall be declared by the bank concerned until it meets the minimum capital requirement; and d. The privilege of dollar-peso swap with the Central Bank shall be suspended for private commercial banks which fail to maintain the minimum capital required for FCDUs or those authorized to accept foreign currency deposits under Circular No. 343. Banks are given until September 30, 1980 within which to collateralize their unsecured loans to directors officer, stockholders and their related interests and/or increase their paid-in capital to at least the minimum required. [Memorandum to All Commercial Banks 4-24-80] SUBSECTION 111.2 Net worth to risk assets ratio The combined capital accounts of each commercial bank (including the Philippine National Bank and the Philippine Veterans Bank) 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: Provided , That such evidences of indebtedness or obligations subject of repurchase or resale agreements may be deducted by both the selling/borrowing and buying/lending banks; d. Loans to the extent covered by holdout on, or assignment of, deposits maintained in the lending bank and held in the Philippines; e. Loans or acceptances under letters of credit to the extent covered by margin deposits; f. Bank premises, depreciated; g. Furniture, fixtures and equipment, depreciated; h. Balances maintained with the Philippine National Bank or any of its branches for clearing checks drawn on banks located in places not serviced by the Central Bank clearing offices; i. Amounts due from foreign banks representing normal working balances in currencies eligible as part of 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; [Circular 355 1-8-73, as amended by Circular 603 4-18-78] j. Portions of special time deposit loans covered by Industrial Guarantee and Loan Fund (IGLF) guarantee; [CL 1-6-75] k. In the case of the Philippine National Bank, outstanding import bills covering corn importation by the National Grains Industry Development Administration under U.S. Public Law 480, provided such import bills are covered by domestic letters of credit or cash deposit for the same amount; and [MB Res. 2515 12-29-72] 1. The portion of a bank loan guaranteed by the Philippine Export and Foreign Loan Guarantee Corporation which is not past due. [Memorandum 7-24-78] SUBSECTION 111.21 Definition/clarification of terms and phrases . For purposes of this section, the following definition or clarification of terms and phrases shall be adopted: a. Total assets . For this purpose, the term "total assets" shall exclude the following: 1) War Items Adjustment accounts (if any); 2) All Trust Department accounts; 3) Unutilized portions of overdraft lines and of letters of credit; and 4) All contingent accounts. b. Combined capital accounts . For domestic banks, "combined capital accounts" shall mean the total of the unimpaired paid-in capital, surplus, and undivided profits, net of such valuation reserves as may be required by the Central Bank, but excluding 1) War Items Adjustment accounts (if any); and 2) Appreciation credit as a result of appreciation or an increase in book value of bank assets, except in such cases as may be authorized by the Monetary Board. In the case of foreign banks presently having branches and agencies in the Philippines which may elect in accordance with the options granted to them under Section 68 of Republic Act No. 265, as amended, either: (1) to assign capital permanently to the local branch with the concurrent maintenance of a "net due to" head office account or (2) to maintain a "net due to" head office account, the "combined capital accounts" shall mean the total of the assigned capital, if any, and net due to head office account which shall include all net amounts due to other branches outside the Philippines, net of valuation reserves as may be required by the Central Bank. c. Cash on hand . Total cash held by the bank consisting of both notes and coins in Philippine currency and in such foreign currencies acceptable as part of international reserves. d. Amount due from the Central Bank . All deposits of the reporting banks with the Central Bank. e. Loans to the extent covered by holdout, or assignment of, deposits maintained in the lending bank and held in the Philippines 1) A loan shall be considered as secured by hold-out on or assignment of deposit only if such deposit account is covered by a hold-out agreement or deed of assignment or a withdrawal slip signed by the depositor in favor of the bank and maintained in the lending bank and held in the Philippines. 2) The amount deductible from total assets shall be the outstanding balance of the loan to the extent covered by the corresponding hold-out on or assignment of deposits or withdrawal slips signed by the depositor in favor of the bank. 3) Loans transferred to/carried by the bank's trust department (secured by deposit hold-out/ assignment) are not deductible items. f. Loans or acceptances under letters of credit to the extent covered by margin deposits 1) Unnegotiated letters of credit or the unutilized portion thereof, or other items booked under contingent deductible items. Only the amount of loans or acceptances (real account) under letters of credit to the extent covered by the corresponding margin deposits shall be considered as a deductible item. 2) Loan or acceptance accounts which are fully liquidated, although covered by margin deposits, shall not be deductible items. g. Bank premises, depreciated . This refers to the cost of the bank premises, including land owned by the bank, less the accumulated depreciation thereon. Properties used as bank premises purchased by the bank in a foreclosure or execution sale shall not be considered owned by the bank until title is consolidated in the bank. h. Furniture, fixtures and equipment, depreciated . This refers to the cost of furniture and fixtures, including equipment, owned by the bank, and used for its banking operations less the accumulated depreciation thereon. [Circular 355 1-8-73] i. Loans secured by Central Bank Certificates of Indebtedness (CBCI) . These loans shall not be classified as non-risk assets in the computation of minimum capital requirement under Section 22 of Republic Act No. 337. casia [MB Res. 1603 10-6-70] SUBSECTION 111.22 Exemption from compliance with prescribed ratio . Where in the process of a bank merger or consolidation, the merged or constituent bank may not be able to comply fully with the net worth to risk assets ratio prescribed above, the Monetary Board may at its discretion, temporarily relieve the bank from full compliance with this requirement under such conditions as it may prescribe. SUBSECTION 111.23 Sanctions in case of capital deficiency . The Monetary Board, upon recommendation of the Department of Commercial and Savings Banks of the Central Bank, may impose on any bank the following sanctions: a. In case the combined capital accounts of a bank are found to be intermittently deficient for five or more times within a 30-day period, but not continuously for a period of thirty days, the bank's privilege to establish branches and receive government deposits shall be suspended for a period of sixty days. b. In case the combined capital accounts of a bank are found to be deficient continuously for a period of thirty days, the bank's rediscounting privilege, as well as its privilege to establish branches and receive government deposits, shall be suspended for a period of sixty days: Provided , That if the bank's capital deficiency recurs within the final thirty days of the 60-day period, the suspension of its rediscounting privilege, as well as its privilege to establish branches and receive government deposits, shall be extended for another period of sixty days. c. The Monetary Board may impose additional sanctions on any erring bank as provided for under Section 22 of Republic Act No. 337, as amended. [Circular 355 1-8-73] d. Central Bank Management, upon recommendation of the Department of Commercial and Savings Banks, is authorized to impose sanctions on any bank if the required periodic Statement of Capital Required and Capital Accounts contains material errors/inaccuracies. [MAB 10-30-72] SUBSECTION 111.24 Required report/records . All banks concerned shall compute for every business day their capital required and capital accounts and a report thereon shall be submitted on a weekly basis not later than Thursday after reference week, on a prescribed form (CBP-7-16-07) to the Department of Commercial and Savings Banks. Banks are enjoined to maintain suitable records to facilitate verification of the required capital accounts. [Circular 355 1-8-73] SECTION 112. Stocks and Stockholders SUBSECTION 112.1 Acquisition of banks' shares of stock SUBSECTION 112.11 Stock options . Any commercial bank may grant options to subscribe at par to its capital stock, provided, however, that: (a) Provisions authorizing such options shall be embodied in its articles of incorporation and not merely in its by-laws; and (b) Such option may be granted for a maximum period of three years only from the date it starts operation. [Circular 198 5-24-65] SUBSECTION 112.12 Ceilings on voting equity (a) Individual/family group/corporate ceiling . Except as provided for in paragraph (b) below, the stockholdings in any bank of any of the following shall not exceed twenty per cent of the voting stock of the bank: (1) Any natural person; or (2) Persons related to each other within the third degree of consanguinity or affinity, herein termed a family group; or (3) Any corporation or corporations which are wholly-owned or a majority of the voting stock of which are owned by a natural person such as in (1) above, or by a family group such as in (2) above, including their wholly or majority-owned subsidiaries; Provided: that, where (3) together with (1) or (2) own or desire to own equity in any bank, their combined voting stockholding shall be the basis for the computation of the twenty per cent ceiling. (b) Stockholdings in excess of ceiling . Any or all, as the case may be, of the above-mentioned stockholders owning more than twenty per cent of the voting stock of any bank on the date of the effectivity of Presidential Decree No. 71 amending Republic Act No. 337, may maintain but may not increase such holdings in percentage terms; and once reduced, the same may not thereafter be increased beyond twenty per cent of the bank's voting stock. (c) Determination of (1) relationship within the third degree of consanguinity or affinity, and (2) a "family group" subject to the twenty per cent ceiling (1) Relationship of persons to each other within the third degree of consanguinity or affinity shall be determined in accordance with the provisions of Articles 963 to 966 of the Civil Code of the Philippines. (2) Persons owning voting stock in a bank who are related to each other within the third degree of consanguinity or affinity shall comprise a family group whose combined holding is subject to the twenty per cent ceiling. Persons who are related to each other but not within the third degree, such as first cousins, do not form a family group. In determining whether the prospective transferee or purchaser is part of a family group subject to the twenty per cent limit/ceiling, the degree of relationship shall be counted from the transferee or purchaser. It is possible for a person to belong to several family groups, and in such a case, it is enough that the percentage limit of twenty per cent for one family group is exceeded for the acquisition/transfer of shares to be considered a violation, even if the transaction may not violate the limit for all of the other possible family groups. [Circular 483 10-20-75] SUBSECTION 112.13 Transfers of shares (a) Transfers and acquisitions of shares within a family group . Transfers of ownership of shares of stock within a family group, which do not thereby increase but merely maintain the aggregate percentage holdings of the group beyond twenty per cent of the bank's voting stock, shall be allowed: Provided that, no stockholder-member of a family group may acquire additional shares from any other member of that group, if such acquisition would increase his holdings of voting stock beyond the twenty per cent ceiling on individual holdings. (b) Transfers to new investors . Any stockholder may transfer in one transaction to a new investor who is a natural person his entire stockholdings of voting stock, even if it is in excess of the twenty per cent ceiling. However, if the new investor belongs to any family group already holding voting stocks in the same bank, his capacity to acquire new shares shall be limited to an extent which is within the individual/family group/corporate ceiling set forth in Subsec. 112.12 paragraph (a). Furthermore, if the new investor acquires twenty per cent or more of the voting stock of the bank in that single transaction, he shall thereafter be subject to the provisions of Subsec. 112.12 paragraph (b). In any case, the new investor shall not acquire more than twenty per cent of the bank's voting stock from two or more stockholders. [Circular 483 10-20-75] SUBSECTION 112.14 Stockholdings in banks of financing companies . As a general rule, financing companies shall not be eligible to hold shares of stock of any bank. However, they may be permitted to hold bank shares under the following conditions: (a) Financing companies which became stockholders of any bank prior to the adoption on March 9, 1965 of the above-quoted policy shall be allowed to continue holding such shares of stock; provided that, no increase in the amount of said stockholdings existing as of March 9, 1965 shall be permitted, except when the increase arises from stock dividends declared and issued by the bank directly to the stockholder-financing companies; and (b) Banks concerned shall take steps/measures for eventual compliance with the Monetary Board policy on stockholdings of financing companies. [MAB 7-30-68; Circular 198 5-24-65] SUBSECTION 112.15 Equity investments by foreigners in domestic banks . The following guidelines shall be observed in allowing equity investments by foreigners in domestic banks: (a) The prior authority of the Monetary Board shall be obtained by foreign banking institutions, including their wholly or majority-owned subsidiaries and their holding companies having majority holdings in such foreign banking institutions, whenever acquiring shares of domestic banking institutions, including foreign-owned shares outstanding and foreign-held as of April 27, 1973 and which continued to be held by the foreign stockholder up to the date of the acquisition by the foreign banking institutions. (b) If the foreign investor in the equity of a domestic banking institution is (i) an individual, (ii) a non-financial entity, or (iii) a non-bank financial entity which is not owned or controlled by a banking institution, its subsidiary or holding company, and the investor is acquiring shares which were not foreign-held as of April 27, 1973 nor continued to be held by the foreign stockholder up to the date of the acquisition by the foreign investor, the investment may be made only with the prior authority of the Monetary Board. (c) The prior authority of the Monetary Board is not required if the foreign investor is (i) an individual, (ii) a non-financial entity, or (iii) a non-bank financial entity which is not owned or controlled by a banking institution, its subsidiary or holding company, and the investor is acquiring foreign-owned shares in existing domestic banks, provided that said shares were outstanding and foreign-held as of April 27, 1973 and which continued to be foreign-held up to the date of the acquisition by the foreign investor. (d) The maximum stockholdings foreigners may own in domestic banking institutions shall continue to be governed by existing provisions of law. (c) Only foreign-owned shares directly funded by inward remittance of foreign exchange sold to the local banking system are qualified for registration with the Central Bank (thru the Management for External Debt and Investments Accounts Department) for capital repatriation and remittance of profits/dividends privileges, in accordance with existing Central Bank regulations. [Circular 520 5-25-76 as amended by Circular 526 6-22-76] SUBSECTION 112.2 Convertibility of preferred stock to common stock . Out of the preferred shares of stock which commercial banks may henceforth be authorized to issue, at least fifty per cent (50%) of each such issue of preferred stock shall be convertible into common stock at the option of the holders thereof after five years from date of issue; provided, however, that: (a) The bank concerned may, if it so desires, allow the conversion of such preferred stock into common stock even before the lapse of five years from date of issue. (b) At the time of the sale of the preferred stock, both classes thereof (one with convertibility feature and the other without convertibility feature) shall be offered to the purchasers, with the purchasers having the option to acquire either or both classes of preferred stock. [MCSB 6-15-67] (c) Preferred shares of stock with a cumulative feature issued by commercial banks shall automatically be convertible into common shares of stock at the option of the holders thereof whenever the rights as may be acquired by the holders by virtue of such cumulative feature are not satisfied by the bank within a period of three years from date of issue. [MCSB 6-30-67] SECTION 113. Dividends SUBSECTION 113.1 Declaration of cash dividends . Pursuant to the first paragraph of Section 84 of Republic Act No. 337, as amended, and on the underlying principle that no bank shall, while it continues in operation, withdraw or permit to be withdrawn, either in the form of cash dividends or otherwise, any portion of its capital, the following regulations on the declaration of cash dividends by banks shall govern. SUBSECTION 113.11 Definition of terms . For purposes of this subsection, the following definitions shall apply: a. Bad debts shall include any debt on which interest is past due for a period of six (6) months, unless it is well secured and in process of collection. A loan payable in installments with an automatic acceleration clause shall be considered a bad debt within the contemplation of this subsection 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 subsection. b. Well-secured a debt shall be considered "well secured" (or fully secured) if it is covered by collateral in the form of a duly constituted mortgage, pledge, or lien on real or personal properties including securities, having a loan value sufficient to discharge the debt in full, including accrued interest and other pertinent fees and expenses. c. In process of collection a debt due to a bank shall be considered in process of collection when it is the subject of continuing extrajudicial or judicial proceedings aimed towards 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 bank and/or its lawyers before the interest or installments or amortizations on the debt have become past due and unpaid for a period of six (6) months. The debt shall continue to be considered in process of collection for a period of six (6) months counted from date of the first collection or demand letter and if, within this period, the debtor fails to make a payment of at least twenty per cent (20%) of the outstanding balance of the principal on his account, plus all interests which may have accrued thereon, the same shall automatically be classified as bad debt unless judicial proceedings are instituted. LLjur The debt shall continue to be considered in process of collection during the pendency of the judicial proceedings. When judgment against the debtor has been obtained, the bank must be active in enforcing the judgment for the debt to continue to be considered in process of collection. SUBSECTION 113.12 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 113.13 Amount available as dividends The net amount available for cash dividend declaration shall be the total of unrestricted or free earned surplus and undivided profits less: a. Bad debts against which valuation reserves are not required to be set up; b. Unbooked valuation reserves, and other unbooked capital adjustments required by the Central Bank, whether or not allowed to be set up on a staggered basis; and c. Accrued interest receivable credited to income but not yet collected, net of reserve for uncollected interest on loans. SUBSECTION 113.14 Reporting and verification a. Declaration of cash dividends shall be reported by the bank concerned to the appropriate supervising and examining department of the Central Bank within ten (10) banking days from date of approval of the declaration by the bank's board of directors. The report shall be submitted in the prescribed form. b. Pending verification of above-mentioned report by the appropriate supervising and examining department of the Central Bank, the bank concerned shall not make any announcement or communication on the declaration of cash dividends nor shall any payment be made thereon. [Circular 684 7-11-79] Banks, however, whose shares are listed with any domestic stock exchange may declare cash dividends and give immediate notice of such declaration to the Securities and Exchange Commission (SEC) and the stock exchanges, in compliance with pertinent rules of SEC: Provided , That no record date is fixed for such cash dividend pending verification of the report on such declaration by the appropriate supervising and examining department of the Central Bank. [Memorandum 8-22-79] c. In any case, the declaration may be announced and the dividends paid, if, after thirty (30) banking days from the date the report required herein shall have been received by the Central Bank, no advice against such declaration has been received by the bank concerned. SUBSECTION 113.15 Recording of dividends The liability for cash dividends declared shall be taken up in the bank's book on the date of approval of the board of directors. [Circular 684 7-11-79] Dividends of all kinds, whether on common or on preferred shares of stock, should not be treated as interest expense, considering that only irredeemable stock may be issued by banks under existing regulations. [MB Res. 503 4-6-71] SUBSECTION 113.16 Sanctions . Any person or entity violating the provisions of this subsection shall be subject to the penalties provided in Sections 34 and 34-A of Republic Act No. 265, as amended. [Circular 684 7-11-79] SUBSECTION 113.2 When banks prohibited from declaring cash dividends a. . . . If its clearing account is overdrawn for five consecutive banking days, it shall be prohibited from . . . declaring cash dividends until it has maintained credit balances in its Central Bank clearing account for at least fifteen consecutive banking days. (See also Subsec. 191.11.) [Circular 552 1-17-77] b. Any bank with deficiency in the required liquidity floor against deposits of, and/or borrowings from, the Government and government entities or with excess holdings of such deposits shall (if the deficiency lasts for four (4) consecutive weeks) . . . be prohibited from declaring cash dividends . . . The prohibition shall be lifted by the Governor or the Senior Deputy Governor upon certification by the appropriate supervising and examining department that the bank has had no deficiency in its liquidity floor and no excess holdings of the government deposits for at least four (4) consecutive weeks . . . (See also Subsec. 154.6) [Circular 673 4-17-79] SECTION 114. Branches and Other Banking Offices SUBSECTION 114.1 Establishment of banking offices No bank or banking institution operating in the Philippines shall establish, open and/or operate branches, agencies, extension offices, sub-offices, mobile banks, or any office, or transact business (such as the receipt and payment of deposits) outside the premises of its duly authorized principal office, without the prior approval of the Monetary Board. [Circular 176 6-3-64] Applications of commercial banks for authority to establish any banking office, except money shops, shall be processed in accordance with the guidelines embodied in 1.Appendix B and the pertinent guidelines on the availment of branching privileges by commercial banks under the increased capitalization program (1.Appendix A). In addition, the following rules should be observed in the chartering of banking offices: a. A bank's privilege to establish branches, among other privileges, shall be suspended for a period of sixty days if the combined capital accounts of such bank are found to be intermittently deficient for five or more times within a 30-day period, but not continuously for a period of thirty days. In case the combined capital accounts of a bank are found to be deficient continuously for a period of 30 days, the bank's privilege to establish branches shall be suspended for a period of 60 days: Provided , That if the bank's capital deficiency recurs within the final thirty days of the 60-day period, the suspension of the privilege to establish branches shall be extended for another period of sixty days. (See also Sub-sec. 111.23) [Circular 355 1-8-73] b. Transfers of location of branches, agencies, extension offices, sub-offices or any office without prior approval by the Monetary Board shall constitute sufficient ground to suspend the receipt and/or processing of applications to establish new branches, agencies, extension offices, sub-offices or any office by the bank concerned for a period of at least six months. [Circular 176 6-3-64] c. Effective January 31, 1978, compliance with the investment-deposit ratios for four (4) consecutive quarters shall be one of the conditions for the processing and/or approval of any application or request for authority to establish new banking offices or permit to operate new banking offices, regardless of type or category, in or out of the Greater Manila Area. [Circular 571 7-12-77] d. Contracts of lease of premises for a proposed branch which are entered into prior to the approval of the application for the establishment of such branch shall be at the risk of the banks concerned, considering that there is no assurance that the covering application to establish a branch will be approved. The banks' having incurred expenses in connection with their proposed establishment of branches, such as for acquisition/improvement or rental of premises, purchase/installation of equipment and furniture, employment/training of personnel, and acquisition of materials and supplies, is not a basis for, and does not entitle them to, the approval of applications to establish branches. [Circular 352 12-20-72] e. Banks already operating any of the above-mentioned offices or transacting business outside the premises of their duly authorized principal office without authority from the Monetary Board, shall apply for such authority to operate such office or transact such business. [Circular 176 6-3-64] f. Proposed branches of banks (authorized to be established) shall open for business within six months from the date of receipt of notification of the approval of the covering applications: Provided, however , That the Governor or the Senior Deputy Governor may, upon proper application, showing special reason(s) for failure on the part of any proposed branch to open within six months, authorize the extension of the prescribed period for not more than six months. [MAB 2-1-66] g. All applications for branching shall, in addition to the customary requirements, be accompanied with a certification under oath by the bank's Executive Vice-President or equivalent rank to the effect that applicant bank has no float items outstanding for more than 60 calendar days exceeding 1% of its total resources as of end-of-month nearest to application date. [CL 10-14-77] h. Applications for authority to establish additional banking offices (except head offices) shall be accompanied, as minimum requirements, by the papers/documents/information specified in Section D of 1.Appendix B. [CL 1-31-78] SUBSECTION 114.2 Transfer/relocation of banking offices . Applications for authority to transfer or relocate banking offices of commercial banks (except head offices) shall be accompanied by the following information/papers/documents: cdti a. Certified true copy of the resolution of the bank's board of directors authorizing the transfer/relocation; b. Sketch of the area of operations showing the present location and the new location and the approximate distance between the two as well as from other banking offices; c. Reasons/justifications for the transfer/relocation; and d. Estimated expenses to be incurred for the transfer which should include outlays for the new bank premises. No application shall be accepted/processed unless all the minimum requirements accompany the corresponding applications. [CL 1-31-78] SUBSECTION 114.3 Money shops . Money shops shall be established and operated by commercial banks in accordance with the guidelines/criteria embodied in 1.Appendix C. [Circular 551 1-17-77] SUBSECTION 114.4 Extension offices . Extension offices of banks which maintain separate books of accounts shall be subject to all reporting requirements of a regular branch. Extension offices of banks whose record of transactions/accounts are consolidated daily with its mother unit shall submit only "Selected Financial Accounts" form (See 2.Appendix A for CBP 7-16-02KB-A). [Memorandum to All Banks Concerned 5-7-79] * Pages containing Section 115 are not found in original copy. APPENDIX A GUIDELINES ON INCREASED CAPITALIZATION AND MERGER OR CONSOLIDATION OF COMMERCIAL BANKS CONTENTS I. INCREASING BANK CAPITALIZATION A. Program of Capital Build-Up A.1 Definition of terms A.1.1 Paid-in capital A.1.2 Capital gap A.2 Program of a bank with P100 million capital A.3 Program of a bank with less than P100 million capital accounts A.4 Capital gap in a bank merger or consolidation A.5 Calls for payment of subscriptions to capital stock A.6 Requisites for satisfactory compliance with periodic capital build-up B. Paid-In Capital B.1 Capital contributions B.2 Convertible preferred shares B.3 Paid-in surplus B.4 Stock dividends B.5 Capital notes B.6 Revaluation of fixed assets exchanged for bank shares B.7 Shares held in trust B.8 Eligible property in payment for domestic subscription to capital stock C. Purchase of Outstanding Shares in an Existing Bank C.1 By a new investor C.2 By a stockholder in the same bank D. Limitations on Bank Ownership D.1 By foreign-controlled corporations E. Local Branching Privileges E.1 Basic requirements E.2 Strict compliance with periodic capital build-up E.3 Capital requirement E.4 Availment of branching privileges by merged banks E.5 Definition of "Greater Manila Area" F. Greek Formula Concept for Capitalization of Philippine Branches of Foreign Banks II. FOREIGN EQUITY INVESTMENT IN DOMESTIC BANKS A. Equity Investment by Foreign Investors in General A.1 Voting stock A.2 Voting trust B. Equity Investment by Foreign Banks and/or Their Affiliates B.1 Foreign banks with local branches B.2 Foreign banks without local branches B.3 Equity investment through a corporation not majority or wholly-owned by a foreign bank B.4 Pledge of shares to a foreign bank or non-bank financier C. Investment of Pension Funds or Similar Trust Funds in Bank Equity C.1 Determination of citizenship D. Counterpart Foreign Currency Loan or Other Investment D.1 In general D.2 Composition D.3 Foreign exchange credit component of counterpart loan E. Repatriation of Foreign Equity Investment and Remittance of Profits Thereon E.1 Foreign investments existing as of May 31, 1973 E.2 Foreign cash investments made after May 31, 1973 E.3 Remittance of profits and dividends E.4 Investments by non-resident Philippine citizens funded in foreign exchange E.5 Other types of equity investment E.6 Capital gains on sale of foreign-owned shares acquired after May 31, 1973 F. Foreigners as Directors or Officers of Domestic Banks F.1 In general F.2 Management contract or similar agreement between the bank and its foreign investors G. Policy Incentive G.1 Forty per cent foreign equity participation III. EQUITY INVESTMENT FROM THE DEVELOPMENT BANK OF THE PHILIPPINES A. In General A.1 Investment ceiling A.2 Form of investment A.3 Conditions B. Amplification of DBP Conditions Missing pages 3-4 A.4 Capital gap in a bank merger or consolidation The capital gap in a bank merger or consolidation shall be P100 million less the paid-in capital and paid-in surplus, if any, of the surviving or resulting bank after the merger or consolidation shall have been effected. Only the residual amount required to enable the surviving or resulting bank to achieve a paid-in capital of P100 million shall be subject to the periodic capital build-up under the increased capitalization program, provided, however, that the bank shall be entitled to the incentives for banks increasing their paid-in capital to P100 million each, if the circumstances warrant, even if it does not achieve the P100 million paid-in capital within the two-year period from September 30, 1973 to September 30, 1975. LLphil [MACB 4-23-74] A.5 Calls for payment of subscriptions to capital stock The total amount due on calls made before May 31, 1973 for subscription payments to be made after May 31, 1973 shall be considered as fresh capital contributions for purposes of the bank's periodic capital build-up. [MACB 4-23-74] A.6 Requisites for satisfactory compliance with periodic capital build-up For purposes of satisfactory compliance with its approved program, strict adherence by a bank to the schedule of periodic capital build-up need not be required, provided that the bank must put in (a) as a minimum, not later than its first scheduled date, the full amount of capital build-up due on that date, or one-fourth of the capital gap, and (b) not more than the amount of capital build-up due on or before its last scheduled date. The breakdown of the periodic capital build-up may be modified such that the bank may put in more fresh capital and correspondingly less converted capital, but not vice versa. [MACB 4-23-74] B. Paid-in Capital B.1 Capital contributions The capital contributions to the bank shall not be funded by any loan or credit accommodation granted by the same bank. [MACB 8-6-73] B.2 Convertible preferred shares If preferred shares convertible into common voting stock are issued as part of the bank's increased capitalization, the conversion rate should not effect an above-book valuation for the converted shares. [MACB 8-6-73] B.3 Paid-in surplus a. Paid-in surplus representing premium actually paid on the issuance of new shares may be considered as part of paid-in capital for purposes of the increased capitalization program. However, increases in paid-in surplus arising from the conversion of part of earned surplus to paid-in surplus to cover premium on stock dividends declared shall not be permitted. b. In cases where both the local and foreign investors are required to pay premiums, whether at the same or unequal rates of premium, the book value per share of stock at the time of the transaction shall be a major factor in establishing the reasonableness of paid-in surplus that may arise from the sale of shares of individual banks or of merging/merged banks. c. The foregoing need not apply in cases where only the foreign investor is required to pay a premium, whether the sale is made by individual banks or by merging/merged banks, provided there is actual value received for the premium. [MACB 8-6-73 and 4-23-74] B.4 Stock dividends Stock dividends shall be considered accretions to paid-in capital only if there is actual declaration and issuance of stock dividends in accordance with the requirements of applicable laws and regulations. [MACB 8-6-73] B.5 Capital notes Capital notes, in general, shall not be considered as part of capital for purposes of the P100 million paid-in capital requirement. [MACB 4-23-74] B.6 Revaluation of fixed assets exchanged for bank shares For purposes of the increased capitalization program, the revaluation of fixed assets exchanged for bank shares may be allowed in accordance with the following guidelines: a. The bank's program of increasing paid-in capital should disclose whether a prospective stockholder would, in effect, be contributing property in payment of his shares. b. Acquisition by a bank of land and building in exchange for its shares of stock or the sale of its land and building should be based on fair valuation of the property, subject to the prior approval of the Central Bank. c. In a case where a bank purchases property from an actual or prospective stockholder who is indebted after May 31, 1973, to the bank, only the excess of the purchase price of the property over the outstanding debt of the prospective stockholder-seller should be considered as part of the increased capitalization. d. In a merger or consolidation, the fixed assets that may be revalued shall be limited only to bank premises and improvements, including bank equipment, which are absolutely necessary for the immediate accommodation in the direct transaction of the bank's business. e. The sale and subsequent repurchase by a bank of land and building during the period from May 31, 1973 to September 30, 1975 and resulting, directly or indirectly, in increased capital accounts of the bank shall not be acceptable for purposes of the program. [MACB 4-23-74] B.7 Shares held in trust If the shares of stock of a domestic bank have been issued in the name of a trustee, the beneficiaries of such shares should also be disclosed. [MACB 4-23-74] B.8 Eligible property in payment for domestic subscription to capital stock For purposes of the increased capitalization program for commercial banks, 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 (including Land Bank bonds) shall be eligible as property that may be transferred to a bank in payment for domestic subscription to capital stock, subject to procedures on valuation which shall be determined by the Central Bank and to the pertinent provisions of Section 21 of Republic Act No. 337, as amended, restricting the amount which a bank may invest in such evidences of indebtedness. [MACB 9-27-74] C. Purchase of Outstanding Shares in an Existing Bank C.1 By a new investor Natural person A new investor who is a natural person may purchase in one transaction the entire voting stock of a stockholder in an existing bank, regardless of the extent of such stockholdings. If he acquires twenty per cent or more of the voting stock of the bank in that transaction, he shall, thereafter, be subject to the provisions of Section 12-D of Republic Act No. 337, as amended on the maintenance or increase of the percentage of individual stockholdings in the bank. However, a new investor with relatives within the third degree of affinity or consanguinity who owns twenty per cent of voting stock of the bank cannot acquire any share therein. Where the purchase of the shares will increase the group's aggregate holdings of the voting stock to more than twenty per cent of voting stock, the prospective investor may purchase only such number of shares as will bring the group's aggregate holdings to not more than the prescribed twenty per cent ceiling. In any case, the new investor may purchase not more than twenty per cent of voting stock from two or more stockholders of an existing bank. Corporation If the new investor is a corporation, its total holdings in any bank shall not exceed thirty per cent, or twenty per cent, of the voting stock of the bank, as the case may be, as provided in Section 12-B of Republic Act No. 337, as amended. [MACB 8-6-73] C.2 By a stockholder in the same bank Natural person A stockholder of the bank who is a natural person may acquire the voting stock of another stockholder provided that his aggregate holdings, including the shares to be acquired from another stockholder, shall not exceed twenty per cent of the voting stock or such percentage thereof which, if added to the shares therein of relatives within the third degree of affinity or consanguinity, does not exceed the twenty per cent limit prescribed by law. Corporation A corporation already holding stock in a bank may acquire the voting stock of another stockholder provided that the thirty per cent and twenty per cent limits prescribed by Section 12-B and the second paragraph of Section 12-D of Republic Act No. 337, as amended, are not exceeded. [MACB 8-6-73] D. Limitations on Bank Ownership D.1 By foreign-controlled corporations Two or more corporations, at least a majority of the voting stock of which is owned or controlled by foreigners, will not be allowed to acquire, in the aggregate, control of more than thirty per cent or forty per cent, as the case may be, of the voting stocks of a domestic commercial bank. [MACB 4-23-74] E. Local Branching Privileges E.1 Basic requirements A bank may be considered for local branching privileges in the proportions set, at P5 million per branch for Greater Manila and P2 million per branch outside Greater Manila, in the "Guidelines on Increased Capitalization and Merger or Consolidation of Commercial Banks" only after full compliance with the first scheduled build-up capital in accordance with its submitted program as approved by the Monetary Board; provided that the bank may accelerate the implementation of its approved program by increasing its paid-in capital in aggregate amounts corresponding to periodical capital build-up commitment for purposes of qualifying for more branches. [MACB 8-6-73] E.2 Strict compliance with periodic capital build-up A strictly proportional periodic capital build-up shall be the basis for purposes of availment by a bank of branching privileges under the program. The bank must be currently complying with the proportional periodic capital build-up before its application for branches within any semestral period may be considered, even though it may have an approved program with periodic amounts differing from the proportional capital build-up. [MACB 4-23-74] E.3 Capital requirement Locally incorporated commercial banks, the majority of the voting stock of which is owned by foreigners, shall be covered by the existing general policy on eligibility for branching privileges which provides, among others, that at least seventy per cent of the voting stock should be owned by Filipinos except where only at least sixty per cent Filipino-owned voting stock has been allowed pursuant to law. However, if the President of the Philippines makes an exception and permits any other domestic bank to have more than thirty to as much as forty per cent foreign equity participation, such banks may be considered for branching privileges if their foreign-owned voting shares are reduced to at least a comparable percentage of their voting stock. [MACB 4-23-74] E.4 Availment of branching privileges by merged banks The basis for determining the number of new branches to which the merged or consolidated bank may be entitled shall be computed as follows: LLcd Consolidated Net Worth as of effective date of merger or consolidation Less: Combined Net Worth of the participating banks as of May 31, 1973 Equals: Increase in Net Worth Plus: 1/4 of Surplus & Undivided Profits of the participating banks as of May, 31, 1973 Equals: Total amount as basis for determining the number of allowable branches. [MACB 4-23-74] E.5 Definition of "Greater Manila Area" The phrase "Greater Manila Area," for purposes of chartering new banks, bank branches and other banking offices, implementing the "Guidelines on Increased Capitalization and Merger of Commercial Banks" and the "Supplement" thereto, and for other related purposes, is hereby defined as the area comprising the following cities and municipalities: a. Cities : Manila, Quezon City, Pasay City and Caloocan City. b. Municipalities (Province of Rizal): Makati, Malabon, Mandaluyong, Marikina, Navotas Paraaque, Pasig and San Juan. [MAB 9-5-73] F. Greek Formula Concept for Capitalization of Philippine Branches of Foreign Banks Fund placement by a foreign bank in Central Bank long-term "concessional" obligations (12-year) may qualify for Greek Formula capitalization of its branch in the following proportions: a. Up to P100 million (or its dollar equivalent) as assigned (permanent or irreducible) capital; b. Any amount in excess of Item (a) may form part of net "Due to H.O." account to cover any deficiency in the required capital-to-risk asset ratio of its Philippine branch; and c. Any amount may qualify for treatment as counterpart loan purposes for foreign investments in a domestic commercial bank. d. In any case, no amount of the fund placement shall be used for more than one of the above purposes. [CL 9-17-73] II. FOREIGN EQUITY INVESTMENT IN DOMESTIC BANKS A. Equity Investment by Foreign Investors in General A.1 Voting stock The basis for determining the thirty per cent limit on foreign equity participation in a domestic bank shall be the subscribed voting stock, in accordance with Corporation Law and practice, rather than the paid-in capital of the bank, even if the foreign-owned subscribed shares are fully paid up while the Filipino-owned subscribed capital stock may not yet be fully paid. [MACB 4-23-74] A.2 Voting trust A voting trust agreement may be allowed provided that the limitations on individual and corporate stockholdings of voting stocks in a bank are not thereby exceeded. Where foreign investors are concerned, the voting trust should not result in an increase in voting power beyond their combined voting shares. [MACB 4-23-74] B. Equity Investment by Foreign Banks and/or their Affiliates B.1 Foreign banks with local branches For purposes of the increased capitalization program, foreign banks with local branches desiring to invest in equities of existing domestic banks within the limit of allowable foreign investment therein may, with prior approval of the Monetary Board, do so directly or through their subsidiaries or their parent companies under the general provisions of Section 12-B of Republic Act No. 337, as amended, in relation to Section 12 of the same Act. The percentage of foreign-owned voting stock of the bank which is less than thirty per cent of its total voting stock may be increased up to thirty per cent of the bank's voting stock with prior approval of the Monetary Board in accordance with Section 12-A. The investment in voting equity of a bank by any single corporation, domestic or foreign (including the abovementioned foreign banks with local branches, their subsidiaries and/or their parent companies), shall be limited to thirty per cent of voting stock notwithstanding an increase in the percentage of permissible foreign equity investment in such bank from thirty per cent to forty per cent of voting stock, under certain circumstances, as provided for in Section 12 of Republic Act No. 337, as amended. [MACB 8-6-73] B.2 Foreign banks without local branches Foreign banks without local branches, together with their wholly or majority-owned subsidiaries and their parent companies having majority holdings in such foreign banks may invest, with prior approval of the Monetary Board, in equities of existing domestic banks other than rural banks up to an amount not exceeding thirty per cent of the voting stock of the local bank. The investment in voting equity of a bank by any single corporation, domestic or foreign (including the abovementioned foreign banks without local branches, their subsidiaries and/or their parent companies), shall be limited to thirty per cent of voting stock notwithstanding an increase in the percentage of permissible foreign equity investment in such bank from thirty per cent to forty per cent of voting stock, under certain circumstances, as provided for in Section 12 of Republic Act No. 337, as amended. [MACB 8-6-73] B.3 Equity investment through a corporation not majority or wholly-owned by a foreign bank A corporation, whether domestic or foreign, not majority or wholly-owned by a foreign bank, through which the foreign bank invests in equities of a domestic bank, shall be considered a separate entity for purposes of applying the thirty per cent corporate holding limitation on the aggregate equity investment of the foreign bank (without local branches) together with its subsidiaries and/or parent company. [MACB 4-23-74] B.4 Pledge of shares to foreign bank or non-bank financier Bank shares may be pledged to a foreign bank or non-bank financier as security for a loan obtained by the Filipino stockholder from the foreign entity, provided no exercise of its voting rights by the foreign entity or some similar arrangement is involved. If the shares have to be sold in satisfaction for the loan, the foreign entity may only acquire them to the extent that the foreign equity participation in the domestic bank will not exceed the limits provided by law, and subject to the 10:1 counterpart loan requirement, if applicable. [MACB 4-23-74] C. Investment of Pension Funds or Similar Trust Funds in Bank Equity C.1 Determination of citizenship For purposes of the increased capitalization program, the citizenship of a pension fund or a similar trust fund invested in bank shares shall be determined by the citizenship of the trustee and of the beneficiaries of the fund. If the trustee is foreign, the equity investment shall be considered foreign regardless of the citizenship of the beneficiaries. If the trustee is Filipino, or a majority of the board of trustees is Filipino, the citizenship of the beneficiaries of the fund shall be the basis for determining the extent of Filipino citizenship. [MACB 4-23-74] D. Counterpart Foreign Currency Loan or Other Investment D.1 In general The requirement that every $1 of foreign equity investment in new commercial banks that may be established under the increased capitalization program should be accompanied by a $10 counterpart loan or other investment shall also be applied to foreign equity investment in existing commercial banks, as follows: a. Foreign equity investment with respect to which the 10:1 counterpart foreign loan or other investment requirement shall be imposed refers to equity investments of foreign investors, represented by preferred and/or common stock, whether voting or non-voting. b. Except as otherwise provided herein, the foreign investor shall be required to comply with the 10:1 counterpart foreign loan or other investment requirement with regard to the acquisition of outstanding shares and/or of new shares representing increased capitalization of the bank, including (1) stock dividends declared out of surplus earned as of May 31, 1973, and (2) acquisitions through the exercise of pre-emptive rights by the foreign investor. However, if the foreign investor is (1) an individual, (2) a non-bank financial entity which is not owned or controlled by any one or more banking institutions (including their subsidiaries or holding companies), or (3) a non-bank non-financial entity, then the 10:1 counterpart foreign loans or other investment requirement will not be imposed if the aggregate par value of the equity investment (voting and non-voting) of the foreign non-bank investor does not exceed an amount equivalent to two per cent of the aggregate par value of the voting stock of the domestic bank. Only that portion of the equity investment beyond two per cent of the aggregate par value of the voting stock shall be subject to the 10:1 counterpart foreign loan or other investment requirement. c. The 10:1 counterpart foreign loan or other investment will be required to the full extent of its equity investment in the domestic bank, if the foreign investor is a foreign banking institution or its wholly or majority-owned subsidiaries or its holding company having majority holdings in such foreign banking institution. d. The 10:1 counterpart foreign loan or other investment shall, however, not be required of any foreign individual or corporate investor, including foreign banks and their affiliates, acquiring foreign-owned equities in domestic banks: Provided , That said equities were outstanding and foreign held as of April 27, 1973, and continued to be held by foreign stockholders up to the date of the acquisition by the foreign investor. [MACB 8-6-73] The exemption shall also apply to stock dividends declared out of surplus earned as of May 31, 1973. However, the acquisition of shares through the exercise of pre-emptive rights, and other similar arrangements, by the foreign investor shall be subject to the counterpart requirement. e. A foreign stockholder owning bank shares as of April 27, 1973 shall be exempt from the counterpart requirement with respect to the acquisition of additional shares through stock dividends and/or the exercise of pre-emptive rights, and other similar are: Provided , That the percentage of the equity participation in the bank consisting of shares held as of April 27, 1973, which are continuously held by the foreign stockholder up to the date of the stock dividend or the exercise of pre-emptive rights, and other similar arrangements, is not thereby increased. Except as otherwise provided, any acquisition of additional shares which will increase the percentage of the equity participation of the foreign stockholder in the bank will be subject to the counterpart requirement. f. Increases in holdings of foreign stockholders as a result of stock dividends declared out of surplus earned after May 31, 1973 shall be exempt from the counterpart requirement. Except where otherwise provided, stock dividends declared and received by foreign investors up to an amount corresponding to their proportionate share in the earned surplus as of May 31, 1973 shall be subject to the counterpart requirement. [MACB 4-23-74] g. The basis of the 10:1 counterpart foreign loan or other investment shall be the par value of the shares of stock acquired by foreign investors: Provided , That whenever required, the conversion rate to be used shall be the interbank guiding rate of exchange as of the date of the acquisition of equity in the domestic bank. [MACB 8-6-73] h. The 10:1 counterpart loan or other investment requirement shall be imposed on foreign investors corresponding to the par value of the shares of the bank acquired by such foreign investors up to P30 million equity, on the basis of thirty per cent of the required paid-in capital of P100 million (or up to P40 million equity if the bank is allowed to increase the percentage of its foreign-owned voting stocks from thirty per cent to forty per cent pursuant to Section 12-A of Republic Act No. 337, as amended), even after the paid-in capital of the bank exceeds P100 million. [MACB 4-23-74] i. Whenever required, the 10:1 counterpart foreign loan or other investment requirement shall be imposed on the initial acquisition of equity in the domestic bank by foreign investors, with the effect that subsequent transfers of the shares of stock thus acquired to other foreign investors shall not be subject to a further 10-1 counterpart requirement: Provided, That the original 10:1 loan shall run its full term and the matter of assumption thereof shall be left to the buyer and seller to agree upon. j. The 10.1 counterpart foreign loan or other investment requirements shall be complied with by the foreign investor not later than his acquisition of equity in the domestic bank. If the acquisition is done by installments, compliance with the 10:1 requirement may also be done by corresponding installment. k. Failure to maintain the required 10:1 ratio between the foreign loan or other investment and the equity investment at any time shall subject the foreign investor to such measures as may be prescribed by the Monetary Board, such as restrictions on servicing of the foreign investment. l. If at the time of the merger between two commercial banks, say, P100 million capital, there is already foreign bank equity participation in both banks, the 10:1 counterpart loan that will be required will be based on the combined equity participation of both foreign investors, up to thirty per cent or forty per cent, as the case may be, of the capital of the resulting bank. If there is foreign equity participation in only one of the merging banks, the 10:1 counterpart loan that will be required will be based on the equity participation of the foreign investor, up to thirty per cent or forty per cent, as the case may be, of a maximum base of P100 million, even if the foreign investor maintains the permissible maximum percentage of equity participation in the combined capital of the merging banks. m. Where the paid-in capital of an individual bank with foreign equity (item h) or the combined capital of two merging banks, in only one of which there is foreign equity (second paragraph of item l) exceeds P100 million, the foreign equity investment on which the counterpart loan or investment will be required shall not exceed such percentage of P100 million as corresponds to the ratio that the total voting and non-voting shares subscribed by the foreign investors bears to the total subscribed voting and non-voting shares of the bank. In such a case, and until the percentage limit is reached, the counterpart loan or in investment shall be paid as the investment or a part thereof is inwardly remitted. n. The withdrawal of foreign equity investment in the bank does not automatically entitle the foreign investor to withdraw the corresponding 10:1 counterpart loan or other investment. The 5:1 medium term "commercial" portion may be reduced or phased out correspondingly, even within the five-year period, subject to the terms of the respective contracts. However, the long term "concessional" portion shall not be withdrawn within the twelve-year period: Provided , That the foreign investor may sell or otherwise transfer the obligation to another foreigner who will also be obliged to guarantee the redeposit rate on the proceeds of the loan or investment, in accordance with the terms of the obligation. o. If the bank's program of capital build-up includes equity investment by a foreign bank and/or its majority or wholly-owned subsidiary and/or parent company, and any of such entities decides to withdraw any part of its equity investment in the domestic bank, the corresponding counterpart loans or other investments which may have been put up may be credited to form part of the counterpart loan or investment required under the program for the remaining foreign equity investment. p. The foreign investor must put in the corresponding counterpart loan or other investment at the same time that the equity investment in the bank is paid in. In the case of subscriptions to capital stock, the 10:1 requirement shall be based on the actual portion paid in and not necessarily on the entire subscription, and shall be complied with as payments to subscribed capital stock are made. q. In connection with the implementation of their approved programs for increased capitalization, commercial banks must submit a monthly position report on the actual foreign exchange loan or other investment exposure of foreign investors therein in compliance with the 10:1 counterpart requirement on their equity investment. The report shall be made on an approved form of the Department of Commercial and Savings Banks which the bank shall fill up, and submit to the Central Bank, at the time the investment is made and as of the end of every month thereafter. [MACB 8-6-73 and 4-23-74] D.2 Composition The counterpart loan or other investment shall be in foreign exchange eligible to form part of the international reserve. (a) Concessional-term portion 1) Concessional terms refer primarily to time periods and, secondarily to costs, which are more advantageous than normal commercial terms from the point of view of the recipient of the loan or investment. The term of the foreign loan or investment which may be included under this portion shall be more than ten years. 2) To facilitate the entry of the required foreign exchange loan or investment accompanying foreign equity investment in domestic commercial banks, the floatation of 12-year bonds, free of Philippine taxes, is contemplated. [MACB 8-6-73] The long-term "concessional" obligations (straight 12 years or in renewable fractions thereof up to 12 years) denominated in U.S. dollars shall bear an interest rate, net of Philippine taxes, equal to the six-month London Inter Bank Offered (LIBO) rate prevailing at the date of issue, adjustable every six months thereafter, with Central Bank option to deposit all or part of the proceeds thereof with the investor or its designee at the same interest rate. Those denominated in currencies other than U.S. dollars but eligible as part of the international reserve shall bear interest rate at which the Central Bank will have the option to deposit all or part of the proceeds thereof, in the same currency, with the investor or its designee. The principal shall be repayable in lump sum at maturity, with interest payable every six months from date of issue. [MACB 9-3-73] Only the twelve-year dollar-denominated Central Bank Certificates of Indebtedness shall be eligible for (a) the 5:1 long term "concessional" portion of the counterpart loan or other investment requirement or (b) the Greek Formula concept for capitalization of Philippine branches of foreign banks. No other alternative arrangements for long term funding will be considered for either purpose, for the time being. [MACB 4-23-74] 3) Long-term financing on concessional terms by a foreign source other than the foreign investor may be considered as part of the required counterpart foreign exchange loan, provided (a) the foreign lender acknowledges that this is to be credited to the foreign investor for purposes of compliance with the 10:1 counterpart requirement, and (b) the foreign lender extending the funds must be a private entity, as distinguished from a foreign government or an international entity such as AID, World Bank, IFC, or ADB. (b) Normal commercial term portion 1) The normal commercial term portion may be inclusive of outstanding foreign financing (e.g., total credit lines availed of) extended directly to local Filipino enterprises, public and private, and to banks, including the Central Bank of the Philippines. In the case of stand-by L/Cs and similar arrangements, only the actual outstanding drawings thereon shall be considered. 2) Total availments of foreign credits under normal commercial terms should not fall below the required 5:1 ratio for a period of at least five years. 3) In case of failure to maintain the required 5:1 ratio in the form of normal commercial availments, the deficiency may be filled by investment in foreign exchange denominated National Government obligations and/or Central Bank Certificates of Indebtedness with repurchase agreements where required. [MACB 8-6-73] 4) A foreign bank investor may have that portion of its commercial credits, which are in excess of the required 5:1 counterpart foreign exchange loans, credited to another foreign bank investor to cover any deficiency which the latter may have in the counterpart loans required of it, provided both foreign banks are investors in the same local bank. [MACB 6-14-74] 5) For this purpose, the Central Bank shall issue medium-term "commercial" obligations (5-year) which shall be denominated in U.S. dollars, with interest rate, net of Philippine taxes, at 1- per cent below the six-month London Inter Bank Offered (LIBO) rate prevailing at the date of issue, adjustable every 6 months thereafter, and covered by appropriate repurchase agreements. [MACB 9-3-73] 6) Alternative arrangements eligible under the 5:1 normal commercial term portion of the counterpart requirement on foreign equity investments may include the following: a) Central Bank Certificates of Indebtedness (CBCIs), denominated in pesos, purchased out of peso funds of foreign non-bank investors which are repatriable at a definite future time under existing regulations: Provided , That as soon as such peso funds become immediately repatriable, the peso CBCIs may be converted to CBCIs denominated in dollars, at the prevailing exchange rate; b) Foreign exchange loans extended to local enterprises by foreign non-bank investors and/or foreign institutions in which the foreign non-bank investors own equity; c) Foreign currency loans extended by authorized banks to domestic enterprises under Circular No. 343, provided (i) the loans are fully secured by holds-outs on the foreign currency deposits of the foreign bank or non-bank investors with the lending domestic bank (ii) the loans are made with the prior approval of the Central Bank; and (iii) for purposes of compliance with the counterpart requirement, the loans may be credited only to the foreign investor which made the deposit; and d) Other types of investment by non-bank foreign investor as may be considered by the Monetary Board on a case-by-case basis. [MACB 4-23-74] D.3 Foreign exchange credit component of counterpart loan Foreign currency loans or other credit accommodations in foreign exchange to the extent of the excess, if any, in the net "Due to Head Office" account of the local branch of a foreign bank over the minimum amount of capital accounts required of the branch under Section 68 of Republic Act No. 337, as amended, may be applied to the 10:1 counterpart foreign loan requirement. That portion of the excess applied to the 10: 1 loan requirement must be earmarked under a separate account. [MACB 8-6-73] E. Repatriation of Foreign Equity Investment and Remittance of Profits Thereon E.1 Foreign Investments existing as of May 31, 1973 Investments in any domestic commercial bank existing as of May 31, 1973 after they shall have been duly approved and registered with the Central Bank of the Philippines may be repatriated in accordance with the following schedules: $250,000 or less Five (5) equal annual installments after liquidation of investments Over $250,000 to S500,000 Seven (7) equal annual installments after liquidation of investments Over $500,000 Nine (9) equal annual installments after liquidation of investments [Circular 375 8-6-73] E.2 Foreign cash investments made after May 31, 1973 Foreign cash investments in any domestic commercial bank made after May 31, 1973 after they shall have been duly approved and registered with the Central Bank of the Philippines may be repatriated, less losses, if any, at any time at the prevailing rate of exchange. [Circular 375 8-6-73] E.3 Remittance of profits and dividends Remittances of profits and dividends accruing to non-residents out of net profits realized beginning June 1, 1973 and thereafter shall, net of taxes, be allowed in full at the prevailing rate of exchange. [Circular 375 8-6-73] E.4 Investments by non-resident Philippine citizens funded in foreign exchange Capital repatriation and profit remittance privileges, as set forth in Circular No. 365 and Circular No. 375 are also made available to equity investment in banks by non-resident Philippine citizens funded in foreign exchange. [MACB 8-6-73] E.5 Other types of equity investment Certain other types of equity investment by foreigners not covered by Circulars 365 and 375 will also be permitted, but not necessarily the privileges provided for in the circulars. [MACB 8-6-73] E.6 Capital gains on sale of foreign-owned shares acquired after May 31, 1973 Capital gains realized by foreign investors from the sale of shares of bank stock acquired after May 31, 1973 shall be entitled to the same remittability privileges granted under Circular No. 375 for profits or dividends on the foreign equity investment. [MACB 4-23-74] F. Foreigners as Directors or Officers of Domestic Banks F.1 In general a. Foreigners duly elected and qualified under existing laws, regulations and the by-laws of the bank may occupy seats in the directorship of a bank to the number proportionate to the foreign voting equity in the bank but in any case, not exceeding the maximum number allowed by Section 13 of Republic Act No. 337, as amended, where applicable. b. A foreigner may not occupy the position of Chairman of the Board of Directors, nor act as Presiding Officer of the Board of Directors. c. A foreigner-director may be designated to be a member, but not the Presiding Officer, of a Committee which, under the bank's by-laws, is to be created by the Board of Directors from among its members and to exercise any of the powers of the Board of Directors in the management of the business of the bank. d. A foreigner may concurrently hold the positions of director, committee member, and officer of the same bank. e. A foreigner may not hold, regularly or in an acting capacity, the position of President or Executive Vice-President (No. 1 or No. 2 executive position); nor perform under delegated authority any of the functions normally vested upon the President or Executive Vice-President. f. Except as above provided, a foreigner may be an officer of a bank provided all existing laws and regulations are complied with. [MACB 8-6-73] g. Foreigners designated as officers or employees of domestic banks must qualify under the provisions of the Anti-Dummy Law and other pertinent laws and regulations. h. The voting membership of any committee which exercises policy functions delegated by the bank's board of directors and which acts on behalf of the board of directors must be composed exclusively of members of the board. The proportion of voting foreign members in any such committee shall not exceed the proportion of voting foreign members in the entire board. [MACB 4-3-74] The proportion of voting members, Filipino or foreign, representing foreign equity, in any committee which exercises policy functions delegated by the bank's board of directors and which acts on behalf of the board of directors, should not exceed the percentage of voting foreign equity participation in the bank. The provision of the first sentence of Section 13 of Republic Act No. 337, as amended, shall apply to such committee as well. [MACB 9-14-74] i. The designation of foreigners as line officers or as members of committees exercising management functions (other than those referred to in the preceding paragraph) in domestic banks shall be made with the prior approval of the Central Bank. [MACB 4-23-74] F.2 Management contract or similar agreement between the bank and its foreign investors A management contract or similar agreement between a domestic bank and a foreign investor therein may be acceptable under the following conditions: a. The managing company is a foreign banking institution or its affiliate which, on the basis of its financial growth, experience in financing international trade, and managerial talent, could be reasonably expected to assume the role of a catalyst in developing the potentials of the domestic bank to be a firm unit in the Philippine banking system; b. The general powers and authority of the managing company under the contract must relate only to the management and operation of the bank. The managing company shall, in any case, be subject to the supervision and control of the board of directors; while it may make recommendations and suggestions to the board on matters of policy, the final decision thereon must not be abdicated by the board in favor of the managing company; c. The board of directors may delegate powers and responsibilities to the managing company: Provided , That (1) such delegation must be circumscribed by specific and definite standards and guidelines; (2) the board of directors shall not delegate the entire supervision and control of the bank to the managing company; and (3) the board of directors shall not delegate to subordinate officer/s, committee or body the exercise of discretionary powers which by the general law or the bank's by-laws, is vested exclusively in the board of directors. cdt [MACB 4-23-74] d. The managing company may designate a foreigner to occupy any one of the following positions: Chairman, Vice-Chairman or Presiding Officer of the Board of Directors, President or Executive Vice-President of the bank; [MACB 4-23-74, as amended by MACB 8-20-74] e. The contract may not provide that, on matters involving decisions on ordinary transactions, more than a majority of the votes of the members of the bank's board of directors, committee or body is necessary to constitute a valid act of said board, committee or body; f. The management contract or similar agreement shall be for a fixed period of time without automatic renewal provisions; g. In any case, the management contract or similar agreement must be submitted to the Central Bank for prior approval. [MACB 4-23-74] h. 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 corporation in a financial sector 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. The 70% ceiling on the voting concurrence requirement shall extend to all levels of corporate decisions: (1) stockholders, (2) board of directors, as well as (3) 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; i. 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); and j. In addition to previously approved guidelines governing management contracts, the following features shall likewise be provided in any such contract as may be entered into by a domestic bank with foreign equity with a foreign bank or management group: 1) A term which shall in no case exceed five years with any subsequent renewal thereof to be subject to Central Bank approval; 2) A program for ultimate Filipinization of any such staff or line position which may be temporarily held by foreigners under a management contract or similar document; and 3) The conditions under which such contract may be terminated by either party before expiration of the term of the contract. [MACB 8-20-74] G. Policy Incentive G.1 Forty per cent foreign equity participation The Central Bank may favorably recommend to the President of the Philippines the increase up to forty per cent of the allowable foreign-owned voting stock for a commercial bank with an approved program for increasing its paid-in capital to at least P100 million which includes (a) a merger or consolidation with one or more commercial banks and/or (b) equity investment by at least two foreign corporate investors the majority shareholders of each of which are of different nationalities. [MACB 4-23-74] III. EQUITY INVESTMENT FROM THE DEVELOPMENT BANK OF THE PHILIPPINES A. In General A.1 Investment ceiling As a further incentive to banks that shall increase their capitalization, and depending on the merits of each case, the Development Bank of the Philippines will consider investing in equity of banks, (a) up to twenty per cent of paid-up capital, inclusive of DBP's investment, in cases of bank mergers or consolidations, or (b) up to ten per cent of paid-in capital, inclusive of DBP's investment, in cases of individual banks that have shown maximum effort in carrying out an acceptable program to increase their paid-up capital to P100 million. The equity investment of the Development Bank of the Philippines in an individual bank may amount to more than ten per cent of paid-in capital, inclusive of DBP investment: Provided , That the projected total paid-in capital of the bank as of September 30, 1975 exceeds P100 million: and Provided , further , That the additional DBP investment in excess of P10 million shall not be more than one-third of the amount of projected paid-in capital over P100 million. [MACB 7-17-73, as amended by MACB 6-14-74] A.2 Form of investment The DBP's investment will be in the form of preferred shares with the following features: a. a par value equal to that of common stock; b. cumulative dividends (with the rate to be set later), to be paid out of current earnings and/or accumulated surplus; c. non-voting subject to the condition that in the event that dividends are not paid for two consecutive years, the preferred shares shall automatically acquire voting rights; d. convertible into common shares from the 4th to the 10th year from the date of issue of the preferred shares, at a pre-determined price set at the time equity investment from DBP is approved; however , to protect the conversion privilege of DBP and/or subsequent holders of the preferred shares, the conversion price from preferred to common stock will be correspondingly adjusted to compensate for the effect of any stock dividend or stock split; e. redeemable, commencing from the 4th year from the date of issue of the preferred shares, and yearly thereafter, in an amount equivalent to 1/7th of the total value of the shares originally issued. Redemption of the shares by the bank shall be allowed only if the redeemed preferred shares can simultaneously be replaced with an amount of newly paid-up preferred or common stock necessary to maintain total paid-up capital at the same level immediately prior to redemption. Any unredeemed portion of the preferred shares shall be left with DBP, which shall have the options, at any time from the 4th to the 10th year, to (1) convert to common stock; (2) sell to the public; (3) compel redemption at any given year as earnings of the bank may warrant; and/or (4) extend the period of conversion and/or redemption beyond the 10th year until such time as the DBP shareholdings can be redeemed out of earnings. Within the context of the foregoing conditions, redemption of the shares by the bank shall be mandatory if the bank has sufficient earnings. Accordingly, starting from the 3rd year from date of issue of the preferred shares and yearly thereafter, the bank shall be required to reserve out of its annual earnings the equivalent of 1/8th of the value of the preferred shares originally issued. A.3 Conditions At the same time, certain conditions are to be imposed on banks regarding DBP's equity investment: a. DBP held shares shall be listed with both the Manila and Makati Stock Exchanges and such other exchanges as may be organized in the future; b. DBP shall be represented by at least one member in the bank's Board of Directors; c. For as long as DBP's investment in the bank is outstanding, the bank shall not, without the knowledge and prior approval of DBP: 1) float or offer for issue other class or classes of preferred and common stock nor change any voting powers of any class of capital stock; 2) change, alter, or revoke the right and preferences conferred on the preferred or common stocks held by DBP; or 3) declare cash dividends on common stock in any fiscal or calendar year, unless the dividends on the DBP-held preferred shares for the same year and for previous years have been paid; d. DBP may also dispose of its preferred shareholdings through exchange with DBP Progress Bonds held by the private sector. [MACB 7-1/-73] B. Amplification of DBP Conditions Preferential treatment shall be accorded merging or consolidating banks such that: a. DBP's dividend rate on the preferred shares to be issued to DBP by the merging or consolidating banks shall be eight per cent per annum; and b. The merging or consolidating banks shall qualify for equity investment from DBP even if their total paid-in capital, inclusive of DBP equity, does not reach P100 million by September 30, 1975. For its equity investment in individual commercial banks: a. DBP shall charge a dividend rate of ten per cent per annum; b. DBP shall consider investing in equity of qualified individual banks determined on a case-by-case basis, where no merger or consolidation is involved, only if they are able to increase their paid-in capital partly through capital contributions from Filipino stockholders or through foreign equity investment provided that (1) the amount raised from either source or both combined shall not be less than three times the amount of equity investment requested from DBP; (2) all earnings of the commercial bank for the period May 31, 1973 to September 30, 1975 are retained as part of the bank's combined capital accounts: and (3) total projected paid-in capital, including DBP equity, on or before September 30, 1975 shall not be less than P100 million. [MACB 8-6-73] IV. MERGER OR CONSOLIDATION A. Statutory Incentive A.1 Majority vote for increasing capital necessary to effect bank mergers or consolidations The vote of stockholders owning at least a majority of the subscribed capital of a bank is sufficient not only for purposes of carrying out a bank merger or consolidation, but also for increasing the authorized capital stock of the surviving bank to effect the merger or consolidation. However, the majority vote applies only to the increase in capital of the surviving bank "to the extent necessary" to effect the merger; i.e., the increase in the authorized capital of a bank shall be limited to the excess, if any, of the shares issued by the surviving bank in exchange for the assets of the merged bank over the unissued shares of the surviving bank. Any other case shall be subject to the two-thirds vote required under Section 17 of the Corporation Law. [MACB 4-23-74] B. Provisions in Merged Bank's By-Laws B.1 Requirement of two-thirds vote in specific cases The merging or consolidating banks may put in conditions such as providing in the by-laws of the surviving or resulting bank that a two-thirds vote shall be required for certain specific decisions of the Board of Directors, even if the Corporation Law only requires at least a majority vote. [MACB 4-23-74] C. Merger or Consolidation Between Commercial Banks and Savings Banks Mergers between commercial banks and savings banks will be considered, subject to such terms and conditions, including incentives, as may be determined on a case-by-case basis. [MACB 8-6-73] ATTACHMENT 1 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, the 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 properties. 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 bank in the equity of any other corporation or business or for any purpose other than the main purpose for which the Bank is organized. 10. Selling, exchanging, leasing or otherwise disposing of all or substantially all of the properties and assets of the Bank, including its goodwill, and entering into a merger or consolidation. 11. Issuing stock or bond dividends. 12. Substantial participation of foreigners in the equity of the bank. 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, stockholders and/or their related interest. [Source: MACB 8-20-74] APPENDIX B (Book I, Part I) GUIDELINES ON THE ESTABLISHMENT OF BANKING OFFICES (EXCEPT MONEY SHOPS) FOR COMMERCIAL BANKS A. Minimum requirements applicant bank must meet 1. At least 70% of the voting stock is owned by Filipinos; * 2. At least 2/3 of the members of the board of directors are Filipinos; 3. The cumulative method of voting shall be used in electing the members of the board of directors; and [MB Res. 885 5-18-73, as amended by MB Res. 1122 6-22-73] 4. Additional capital shall be put up by any bank which has not fully complied with the minimum paid-in capital requirement in an amount determined by the Department of Commercial and Savings Bank in accordance with the prescribed formula on adequacy of bank capital, or the following amounts, whichever is higher; a. P5 million for every additional unit to be established in Greater Manila Area or fringes thereof; and b. P2 million for every additional unit to be established in places other than (a) above: Provided, however , That any commercial bank which has fully complied with the minimum paid-in capital requirement shall put up additional capital in connection with the establishment of any banking office, as may be required with the prescribed formula on adequacy of bank capital. [Circular 567 5-4-77] B. Other factors to be considered 1. Capital adequacy and solvency of applicant bank; 2. Profitability and capacity to absorb losses of applicant bank; 3. Reserve and liquidity position of applicant bank; 4. General compliance with other laws, rules, regulations and policies of the Central Bank; 5. Qualifications of proposed branch officers; 6. Service area of proposed branch a) The area to be served by the proposed branch is not overbanked and shall show economic growth or reasonable prospects thereof, to warrant the establishment of such branch; b) "Service area" is defined as a pocket of concentrated economic activity, not necessarily a geographical area; c) Criteria on "overbanking" 1) The rates of return are so depressed by an excess of banks in the locality that adequate banking performance for the customers' benefit is threatened in the long run; and 2) The level of deposits of banks in a locality or their growth is such as to indicate no reasonable prospects that the situation in item (1) above will be reversed in the short run; d) Unless there is very strong evidence of lack of banking facilities in a certain area/locality, the Central Bank shall not authorize the establishment of additional branch/office of banks of one category in said area/locality while there are at least two (2) branches/offices of banks of the same category which had been previously authorized to be established, but not yet opened, in the said area/locality; e) The location of the proposed branch shall be at least ten (10) meters apart from any existing bank/branch or from any approved but not yet opened bank/branch, except where they are separated by a street; and 7. All applications for branching shall, in addition to the customary requirements, be accompanied with a certification under oath by the bank's Executive Vice-President or equivalent rank to the effect that applicant bank has no float items outstanding for more than 60 calendar days exceeding 1% of its total resources as of end-of-month nearest to application date. [CL 10-14-77] C. Conditions precluding processing of the application 1. The applicant is a foreign bank. 2. The applicant bank has not completed one year of profitable operations from the date it opened for business. 3. The applicant bank has not complied with the ceiling on credit accommodations to directors, officers and/or stockholders. 4. In case the combined capital accounts of the applicant bank are found to be deficient continuously for a period of thirty days or more during the last twelve months immediately preceding the date the application was received, the bank's privilege to establish branches shall be suspended for the next twelve months: Provided , That the bank may resubmit its application after said period. 5. In case the combined capital accounts of a bank are found to be deficient for five or more times within a 30-day period, but not continuously for a period of thirty days (reckoned during the last six months immediately preceding the date the application was received), the bank's privilege to establish branches shall be suspended for the next sixty days. Provided , That the bank may resubmit its application after said period. 6. Applications of banks for authority to establish branches shall not be processed until the bank concerned, having incurred net deficiencies in reserves against deposit liabilities, shall have had no net reserve deficiencies for eight consecutive weeks: Provided , That in case the bank incurred net deficiencies in reserves for eight consecutive weeks during the last twelve months immediately preceding the date the application was received, the bank's privilege to establish branches shall be suspended for the next twelve months, in which case, the bank may resubmit its application after said period. [MB Res. 885 5-18-73] 7. No application for the establishment of additional offices shall be accepted by the Central Bank from a bank which has six (6) approved but unopened banking offices (including savings agencies and money shops): Provided , That applications which may be accepted at any given time from a bank shall be such that if all these applications were approved, the applicant bank shall not have authorized but unopened offices in excess of the limitations herein prescribed. Applications may be accepted from all banks for any area or locality on a first-come, first-served basis, regardless of whether or not there are approved but unopened banking offices in the area or locality: Provided , That such applications shall be processed, on a priority basis, only when there are less than two (2) approved but unopened banking offices, irrespective of type and category, (excluding head offices, and other banking offices not-opened within the extension period granted) in the same area or locality. 8. The mere filing or pendency of an application for the establishment of a banking office in a particular area shall not give an applicant priority over other applicants with respect to such area. Preference shall be given to an application which satisfies all Central Bank requirements. If two or more applications satisfy all Central Bank requirements, the application which was filed first shall be given preferential consideration. 9. Any bank which exceed the prescribed limits on authorized but unopened banking offices as of May 4, 1977 shall be allowed to open said offices during the period already authorized for their opening. Thereafter, receipt and processing of new applications shall be governed by these guidelines. [Circular 567 5-4-77, as amended by Circular 634 10-3-78] 10. Effective January 13, 1978, compliance with the investment-deposit ratios for four (4) consecutive quarters shall be one of the conditions for the processing of any application or request for authority to establish new banking offices, regardless of type or category, in or out of the Greater Manila area. [Circular 571 7-12-77] 11. The ceiling on applications that may be considered by the Central Bank for the establishment of banking offices may be increased on a case-to-case basis upon prior approval of the Governor, on the basis of resources, personnel capability and generally, a demonstration of the capability of the bank to organize and staff an increased number of such offices within a reasonable time: Provided, however , That for offices authorized under this paragraph, no extension shall be allowed of the prescribed date for their opening. 12. Approved banking offices, other than head offices, shall be opened within six (6) months from date of approval thereof: Provided , That the applicant bank may be given a final extension of another three (3) months subject to the presentation of proof that the said banking office can be opened within this period. [Circular 567 5-4-77, as amended by Circular 634 10-3-78] D. Documentary Requirements for the Establishment of Banking Offices Applications for authority to establish additional banking offices (branch, sub-branch, agency, extension office, savings agency, or money shops) shall be accompanied as minimum requirements, by the following information/papers/documents: 1. Certified true copy of the resolution of the bank's board of directors authorizing the application for the establishment of the additional banking office. 2. Sketch of the area to be served showing the following information.. a) Proposed site of the banking office to be established. b) Names and location of existing banking offices in the area, if any, and approximate distance from the proposed banking office. c) Distance from Head Office or mother branch in case the additional banking office applied for is a savings agency or money shop. d) Distance from market, in case of money shop. 3. Banking facilities and services to be offered. 4. Business or economic justification stating facts and figures (such as population and growth of population, number and names of the principal industrial, commercial and other establishments within the effectiveness of operations, deposit and loaning potentials, traffic flow and other information) tending to show that the establishment of the proposed branch is justified on the basis of need therefor and that there is economic growth or reasonable prospects thereof in the area to be served. 5. Projected Statement of Condition at the end of the first and second semester of operations of the proposed branch. 6. Statement of Estimated Earnings and Expenses for the first 12 months of operations. 7. Organizational set-up of the proposed branch showing the proposed positions and annual pay for each; name, qualifications and experience of proposed manager and other officers. 8. Bank premises and initial outlay. 9. List of unutilized acceptance or other credit lines with foreign banks and/or the Central Bank of the Philippines. No application shall be accepted/processed by the Department of Commercial and Savings Banks unless all the minimum requirements accompany the corresponding applications. [CL 1-31-78] APPENDIX C (Book I, Part I) GUIDELINES/CRITERIA ON THE ESTABLISHMENT AND OPERATION OF MONEY SHOPS I. Factors to be Considered in the Establishment of Money Shops Money shops should be established only upon prior approval by the Central Bank and in accordance with the following: A. Citizenship Requirements The applicant must comply with the following requirements: 1. At least 70% of the voting stock must be owned by Filipinos, except where 60% has been allowed pursuant to law. 2. At least 2/3 of the members of the board of directors are Filipinos. B. Conditions Precluding Processing of Application The application for the establishment of a money shop shall not be considered in any of the following cases: 1. The bank's operations during the year preceding the filing of application was unprofitable. 2. The combined capital accounts of the applicant bank were deficient with respect to the capital-to-risk asset ratio prescribed for said bank for five or more days within a thirty-day period during the six months immediately preceding the date of filing the application with the Central Bank, in which case the application shall not be accepted within the next sixty days. Should the deficiency be continuous for a period of thirty or more days during the last twelve months immediately preceding the date of filing the application with Central Bank, the application shall not be accepted for the next twelve months. 3. The applicant has failed to maintain the required reserves against its deposit liabilities for eight consecutive weeks: Provided , That in case it incurred net deficiencies in reserves for eight consecutive weeks during the last twelve months immediately preceding the date of filing the application with Central Bank, the application shall not be accepted for the next twelve months. 4. The applicant bank has reached the maximum number of applications of approved but unopened offices allowed under existing regulations and there are two or more approved but unopened money shops in the same market belonging to other banks of the same category. Notwithstanding the ceiling on the number of applications prescribed herein, the Central Bank may consider the establishment of money shops beyond such ceiling on a case-to-case basis upon prior approval of the Governor, on the basis of resources, personnel capability, and generally a demonstration of the capability of the bank to organize and staff an increased number of such savings agencies and/or money shops within a reasonable time: Provided, however , That for offices authorized under this paragraph in excess of the ceiling established in existing regulations, no extension of the prescribed date of opening shall be allowed. [Circular 551 1-17-77] 5. Effective January 13, 1978, compliance with the investment-deposit ratios for four (4) consecutive quarters shall be one of the conditions for the processing of any application or request for authority to establish new money shops or permit to operate new money shops in or out of the Greater Manila area. [Circular 571 7-12-77] 6. Such other instances as may be determined by the Monetary Board. C. Priorities Priorities in the establishment of a money shop in the same market shall be based both on date of filing of an application and its completeness with respect to Central Bank regulations. Thus, a complete application even if filed later shall take precedence over another which, although earlier, has not fully complied with Central Bank requirements. D. Money Shop Site and Maximum Number 1. A money shop shall be located inside a market or if located outside a market, it must be within a radius of ten meters from the market perimeter, or directly across the street, as the case may be, and it shall be subject to the supervision or control of the head office or the nearest branch: Provided , That it shall be within a radius of thirty kilometers from its supervising or controlling head office/branch. 2. Only one money shop shall be allowed to be established in any one market: Provided , that in the case where a market has at least 800 stallholders and storeowners, a second money shop may be established: Provided, further , That stallholders and storeowners within the market and within 100 meters from the market perimeter shall be included for the purpose of determining the number of stallholders and storeowners: Provided, finally , That only one money shop shall be allowed for each bank in any one market. 3. A money shop shall be housed in a building which provides adequate security for the safekeeping of its funds and all its records from loss due to fire, burglary and other causes and shall be identified as a money shop by the use of appropriate signboards. [Circular 551 1-17-77, as amended by Circular 620 7-26-78] 4. A maximum of three (3) money shops may be attached to a mother unit and in the case of a commercial bank, only the head office or a branch may be a mother unit of a money shop. [Circular 567 5-4-77] E. Others 1. Effective January 13, 1978, compliance with the investment-deposit ratios for four (4) consecutive quarters shall be one of the conditions for the approval of any application or request for authority to establish new money shops or permit to operate new money shops in or out of the Greater Manila area. [Circular 571 7-12-77] II. Operational Guidelines A. Scope of Operations 1. A money shop shall provide working capital or inventory financing to market stallholders, and stallholders and storeowners within 100 meters from the market perimeter. 2. It shall service deposits and withdrawals on savings and time deposits of said stallholders and storeowners. B. Eligible Borrowers/Co-makers An applicant/co-maker for a loan must be of good moral character and integrity, must have good credit standing and capacity to pay off his debts and must have sufficient capital. C. Loan Limits 1. Loans to be extended shall in no case exceed P10,000 per stallholder or stallowner. 2. Loans for maintaining stocks-in-trade (groceries, textiles, etc.) shall not exceed 50% of actual inventory valuation while loans to replenish daily merchandise requirements such as vegetables, fish, carinderia, etc. shall not exceed 100% of the average daily investment. D. Terms, Interest and Charges The maximum term of money shop loans shall in no case exceed 120 days and the rate of interest on such loans shall not exceed 14% per annum exclusive of fees and charges not exceeding 2% a month. E. New Loan and Renewals A loan granted to a stallholder or storeowner shall not be renewed until after 50% thereof shall have been paid. Likewise, if the ratio of total past due loans of the money shop exceeds 30% of the total outstanding loans, the total money shop loan portfolio at the time the past due ratio of 30% has been exceeded shall not be increased. For this purpose, a loan shall be considered past due where any installment remains unpaid for ten days or more. [Circular 551 1-17-77, as amended by Circular 620 7-26-78] F. Banking Hours 1. Money shops authorized to be established shall open for the same number of banking days applicable to their respective head offices, i.e., at least five (5) days a week for commercial banks. They shall observe banking hours for not less than six hours a day, between 4:30 A.M. and 8:00 P.M. The opening and closing hours and the banking days may be determined by banking institutions depending upon the conditions prevailing in each individual market/locality. [Circular 551 1-17-77, as amended by Circular 655 2-9-79] 2. Any change in money shop banking hours and days will be reported in writing (i.e., need not require prior approval) to the Department of Commercial and Savings Banks seven days prior to the effectivity of the proposed change except in case of an emergency where a twenty-four hour written notice will suffice. G. Records Keeping All transactions of a money shop shall be taken up and recorded daily by the supervising or controlling head office/branch. H. Other Requirements 1. Amortization payments shall be on a periodic basis. 2. A money shop shall observe security and internal control measures in maintaining a banking office. 3. The officer, teller/collector and other accountable personnel of a money shop shall be adequately bonded. I. Reports Required To implement these regulations, each money shop shall submit to the Department of Commercial and Savings Banks an updated listing of the names of stall/store owners within 100 meters from the market perimeter and such other reports as may be required. [Circular 551 1-17-77, as amended by Circular 620 7-26-78] III. Documentary Requirements for the Establishment of Money Shops Applications of commercial banks for authority to establish additional money shops shall be accompanied, as minimum requirements, by the papers/documents/information specified in Section D of 1.Appendix B (Documentary Requirements for the Establishment of Banking Offices). [CL 1-31-78] Footnotes * Such as those enumerated in Attachment 1 * Except where 60% had been allowed pursuant to law. PART 2 Management and Administration SECTION 121. Directors . SUBSECTION 121.1 Definition of terms . For purposes of this section, the following terms shall have the meaning indicated unless the context clearly indicates otherwise: cdpr a. Directors shall include: (1) directors who are named as such in the articles of incorporation, (2) directors duly elected in subsequent meetings of the bank's stock-holders, and (3) those elected to fill vacancies in the board of directors. b. Delinquency in the payment of obligations means that an obligation of a person with a bank where he is a director or officer or where he may be elected or appointed to said position, or at least two obligations with other banks and with non-bank financial intermediaries performing quasi-banking functions, under different credit lines of loan contracts, are past due for at least three (3) months. c. Obligations shall include all borrowings from a bank or from a non-bank financial intermediary performing quasi-banking, functions 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 the 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 the foregoing Items (1), (2) and (4). SUBSECTION 121.2 Qualifications of a director . A director shall have the following minimum qualifications: a. He shall be at least twenty five (25) 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 experience in business, or have undergone training in banking acceptable to the Department of Commercial and Savings Banks. The foregoing qualifications for directors shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. SUBSECTION 121.3 Persons disqualified to become directors . Without prejudice to specific provisions of law prescribing disqualifications for directors, the following are disqualified from becoming directors: a. Persons who have been convicted judicially or administratively of an offense involving moral turpitude, or judicially declared insolvent, spend-thrift, or incapacitated to contract; b. Directors, officers and employees who have been removed by the Monetary Board pursuant to the provisions of Section 34-A of Republic Act No. 265, as amended, and other provisions thereof; c. Persons who shall refuse to disclose the extent of their business interest to the Department of Commercial and Savings Banks when required for the proper implementation of a provision of law or of a circular, memorandum or rule or regulation of the Central Bank. This disqualification shall be in effect as long as the refusal persists; d. Directors, excluding non-resident directors, representing foreign equity interests, who have been absent for whatever reasons for more than fifty per cent (50%) of all meetings, both regular and special, of the board of directors for a two-year period reckoned from the date of the election of the director concerned. This disqualification applies for purposes of the succeeding election; e. Those who are delinquent in the payment of their obligations as defined in Subsec. 121.1 (b) and (c). This disqualification shall operate as long as the delinquency persists; f. Persons found by the Monetary Board to have willfully failed or refused to comply with any banking law, order, instruction or regulation issued by the Monetary Board or by the Governor, or to have committed irregularities or to have conducted business in an unlawful, unsafe or unsound manner as determined by the Monetary Board in any institution supervised by the Central Bank. g. Persons who have been dismissed for cause from any institution under the regulation or supervision of the Central Bank. The foregoing disqualifications for directors shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. [Circular 643 12-27-78] SUBSECTION 121.31 Disqualification procedures a. Upon the establishment of any of the grounds for disqualification mentioned in Subsec. 121.3 and Subsec. 521.3 of Book V, the office of the disqualified director or officer shall immediately become vacant, except in the 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 Department of Commercial and Savings Banks 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. [CL 3-1-78] SUBSECTION 121.4 Effect of non-possession of qualifications or possession of disqualifications . Unless otherwise provided, directors elected or appointed without possessing the qualifications abovementioned or possessed of any of the disqualifications as enumerated herein, shall vacate their respective positions immediately. SUBSECTION 121.5 Bio-data of directors a. All banks shall submit to the Department of Commercial and Savings Banks a bio-data of all of their incumbent directors including a list of relatives of legal age within the second degree of consanguinity or affinity. Any subsequent change in the composition of the board of directors, together with the bio-data of the new directors shall be submitted within seven (7) days to the Department of Commercial and Savings Banks. [Circular 643 12-27-78] b. The submission of the bio-data of incumbent directors as of December 31, 1978 within twenty-five (25) banking days from year-end, as required under 2. Appendix A (see CBP 7-16-18KB) shall be considered compliance with the requirement under Item (a) of this subsection as regards such incumbent directors. c. In the case of directors elected or appointed after December 31, 1978 and whose bio-data have not been submitted pursuant to Items (a) and (b) of this subsection, the dead-line for submission shall be within seven (7) banking days after election or appointment. In case of transfers to other banks, the director needs only update the pertinent sections in the pages of the report. Submission shall be within seven (7) banking days from election or appointment. d. A report on changes in the composition of the board of directors shall be submitted within seven (7) banking days after such change. e. For purposes of showing compliance with the minimum qualification requirements in case of promotion, only the updated data need be reflected in the section and page affected. The page shall be submitted within seven (7) banking days after promotion. f. The bio-data shall be submitted only once. Thereafter, in the annual updating, only the pertinent sections and pages in the report form shall be submitted within twenty-five (25) banking days after the end of every calendar year. [Memorandum to All Banks 2-21-79] SUBSECTION 121.6 Interlocking directorates SUBSECTION 121.61 Between banks and between banks and their allied undertakings a. No person shall concurrently be a director and/or officer of two or more banks of the same category: Provided , however , That in no event shall a person be concurrently an officer of two or more banks, whether or not belonging to the same category: Provided , further , That the foregoing prohibitions shall not apply to persons appointed to such positions as representatives of the government or government-owned or controlled entities. b. Except as may be authorized by the Monetary Board, no person shall concurrently be a director and/or officer of a bank and an allied undertaking in which the bank has equity. c. Directors or officers for this purpose shall be those as defined in Subsecs. 121.1(a) and 122.1(a): Provided , That a person holding the position of Chairman or Vice-Chairman of the Board or another position shall not be considered as an officer unless the duties of his position include functions of management such as those ordinarily performed by regular bank officers: Provided , further , That members of a sub-body, group or committee, except those of sub-bodies, groups or committees, the functions of which are purely recommendatory or advisory, shall be subject to this subsection as officers: and Provided , finally , That for purposes of the prohibition against interlocks among directors, a husband and his wife shall be considered as one person. d. The category of a bank shall refer to any of the general categories referred to in Section 6-A of Republic Act. No. 337, as amended: Provided , That for purposes of this subsection, all banks engaged in quasi-banking shall be deemed to belong to one category. e. Incumbent directors and officers as of January 18, 1978 who are disqualified herein shall be allowed to serve until the end of their term of office or one year, whichever is shorter. [Circular 592 1-18-78, as amended by Circular 719 2-18-80] SUBSECTION 121.62 Between banks and non-bank financial intermediaries a. Except as may be authorized by the Monetary Board, no person shall concurrently be a director and/or officer of two or more financial intermediaries performing quasi-banking functions, or a director and/or officer of a bank and investment house: Provided, however , That in no event shall a person be concurrently an officer to two or more financial intermediaries performing quasi-banking functions, or an officer of a bank without quasi-banking functions and a non-bank financial intermediary performing quasi-banking functions: Provided , further , That the foregoing prohibitions shall not apply to persons appointed to such positions as representatives of the government or government-owned or controlled entities. b. Directors or officers for this purpose shall be those as defined in Subsecs. 121.1 (a) and 122.1 (a) and in Subsecs. 521.1 and 522.1 of Book V of this Manual: Provided , That a person holding the position of Chairman or Vice-Chairman of the board or another position shall not be considered an officer unless the duties of his position include functions of management such as those ordinarily performed by regular officers: Provided , further , That members of a sub-body, group or committee, except those of sub-bodies, groups or committees, the functions of which are purely recommendatory or advisory, shall be subject to this subsection as officers: Provided , finally , That for purposes of the prohibition against interlocks among directors, a husband and his wife shall be considered as one person. c. Incumbent directors and officers as of January 18, 1978 who are disqualified herein shall be allowed to serve until the end of their term of office or one year, whichever is shorter. [Circular 591 1-18-78, as amended by Circular 718 2-18-80] SECTION 122. Officers and Employees . SUBSECTION 122.1 Definition of terms . For purposes of this section, the following terms shall have the meaning indicated unless the context indicates otherwise: a. Officers shall include the President, Executive Vice-President, Senior Vice-President, Vice-President, General Manager, Secretary, Trust Officer, and others mentioned as officers of the bank, or those whose duties as such are defined in the by-laws, or are generally known to be the officers of the bank (or any of its branches and offices other than the head office) either through announcement, representation, publication or any kind of communication made by the bank. b. Delinquency in the payment of obligations Please see Subsec. 121.1 (b). c. Obligations Please see Subsec. 121.1 (c). SUBSECTION 122.2 Qualifications of an officer . An officer shall have the following minimum qualifications: a. He shall be at least twenty one (21) years of age; and b. He shall be at least a college graduate, or have at least five (5) years experience in banking or trust operations or related activities or in a field related to his position and responsibilities, or have undergone training in banking or trust operations acceptable to the Department of Commercial and Savings Banks: Provided , however , That trust officers shall have at least two (2) years of actual experience or training in trust operations or fund management or other related fields. The foregoing qualifications for officers shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. SUBSECTION 122.3 Persons disqualified to become officers a. The disqualifications for directors mentioned in Subsec. 121.3 shall likewise apply to Officers, except that stated in Item (d). b. Except as may be authorized by the Monetary Board or the Governor, the spouse or a relative within the second degree of consanguinity or affinity or any person holding the position of Chairman, President, Executive Vice-President or any position of equivalent rank, General Manager, Treasurer, Chief Cashier, or Chief Accountant is disqualified from holding or being elected or appointed to any of said positions in the same bank; and the spouse or a relative within the second degree of consanguinity or affinity of any person holding the position of Manager, Cashier, or Accountant of a branch or extension office of a bank is disqualified from holding or being appointed to any of said positions in the same branch or extension office. In any case, this disqualification shall not affect those holding the position of Chairman as of May 13, 1976 and those holding any of the other said positions as of August 18, 1973 until the expiration of their respective terms of office. [Circular 643 12-27-78] c. 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 commercial banks. Institutions concerned shall file with the Ministry 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. [Notice 8-10-76] The effectivity of Office Circular of the Ministry of Justice dated May 28, 1976 shall be January 31, 1977 for bank employees who have applied for naturalization under LOI 270, and December 31, 1976 for institutions employing foreigners who have not applied for naturalization under LOI 270. [Notice 11-18-76 and 11-26-76] The foregoing disqualifications for officers shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. [Circular 643 12-27-78] SUBSECTION 122.31 Disqualification procedures . The guidelines provided in Subsec. 121.31 shall likewise apply to officers of commercial banks. [CL 3-1-78] SUBSECTION 122.4 Effect of non-possession of qualifications or possession of disqualifications . Unless otherwise provided, officers elected or appointed without possessing the qualifications abovementioned or possessed of any of the disqualifications as enumerated herein, shall vacate their respective positions immediately. SUBSECTION 122.5 Bio-data of officers . The guidelines on the submission of bio-data by directors as provided under Subsec. 121.5 shall likewise apply to officers of commercial banks. [Circular 643 12-27-78 and Memorandum 2-21-79] SUBSECTION 122.6 Interlocking officerships . The regulations on interlocking directorates embodied in Subsec. 121.6 and 141.4 shall likewise govern interlocking officerships. [Circulars 591 and 592 1-18-78, as amended by Circulars 718 and 719 2-18-80] SUBSECTION 122.7 Prohibited demand deposits by certain officers and employees . The following officers and employees of commercial banks are prohibited from maintaining demand deposits or current accounts with the banking Office, such as the head office or branch, in which they are assigned: a. Officers and employees of the cash department; b. Officers of banking offices other than head offices, such as branches, extension offices and money shops; and c. Other officers and employees who have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits or current accounts. The above mentioned prohibition shall include the spouses and minor children under the parental authority of the officers and employees covered by the prohibition, and the business interests of such officers and employees, their spouses and minor children under their parental authority, in single proprietorships, or partnership or corporations in which such officers and employees, individually or as a group, own or control at least a majority of the capital of the partnership or the outstanding subscribed capital stock (voting and non-voting) of the corporation. Officers and employees of commercial banks who do not have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits or current accounts, including their spouses and minor children under their parental authority, and the business interests of such officers and employees, their spouses and minor children under their parental authority, in single proprietorships or partnerships or corporations in which such officers and employees, individually or as a group, own or control at least a majority of the capital of the partnership or the outstanding subscribed capital stock (voting and non-voting) of the corporation, may maintain such deposits or accounts in any office of the banking institution where they are employed as such, including the offices in which they are assigned; officers and employees who are so responsible and those mentioned in the second paragraph of this subsection may maintain such deposits or accounts only in offices in which the officers and employees are not assigned. Any person or entity violating this subsection shall be subject to the penalties provided in Sections 34 and 34-A of Republic Act No. 265, as amended. [Circular 549 12-6-76] [This provision also appears in Subsec. 153.5] SECTION 123. Banking Days and Hours . SUBSECTION 123.1 Banking days . Except as provided in Item F, Sec. II of 1. App. C (Banking Hours of Money Shops) banks and specialized government banks, including their branches, and extension offices, doing business in the Philippines shall observe the following banking days: (a) Commercial Banks Five-day banking week, (including the Monday thru Friday, Philippine National with option to open on Bank and the Philippine Saturdays and Sundays Veterans Bank) (b) Specialized Government Five-day banking week, Banks (the Development Monday thru Friday, Bank of the Philippines, with option to open on the Land Bank of the Saturday and Sundays Philippines and the Philippine Amanah Bank) Banks shall also have the option to open on local or national holidays: Provided , that the options granted under this subsection may be availed of by giving the notice prescribed in Subsec. 123.6 hereof. SUBSECTION 123.2 Minimum banking hours . All banks, including their branches, agencies and extension offices, doing business in the Philippines, shall transact business for not less than six (6) hours a day, to be selected by the bank concerned, between 8:00 o'clock in the morning and 8:00 o'clock in the evening: Provided , That in the exercise of the option granted in Subsec. 123.1, banks may transact business for less than six (6) hours. LexLib SUBSECTION 123.3 Banking hours beyond the minimum . For purposes of servicing deposits and withdrawals, banks may, at their discretion and after prior written notice to the Department of Commercial and Savings Banks, remain open beyond the minimum six (6) hours and for as long as they find it necessary, even before 8:00 o'clock in the morning or after 8:00 o'clock in the evening. Banks may, after prior written notice, also remain open beyond the minimum six (6) hours for banking services other than the servicing of deposits and withdrawals but in no case shall such banking hours start earlier than 8:00 o'clock in the morning nor extend beyond 8:00 o'clock in the evening. SUBSECTION 123.4 Report of, and changes in, banking days and hours . The banking days and hours selected for each of the offices of banks shall be reported in writing to the Department of Commercial and Savings Banks. Banks may change the banking days and hours previously reported to the Central Bank by giving prior written notice to the Department of Commercial and Savings Banks: Provided , That except in emergencies, changes in banking days or hours shall not be made oftener than once every thirty (30) days. SUBSECTION 123.5 Emergencies . Banks shall not close for business during the banking days and hours as reported to the Central Bank, nor shall they open for business outside said days and hours without giving the prior written notice prescribed in Subsec. 123.6 hereof except when such closing or opening is due to an emergency as herein defined. For purposes of this subsection, emergency shall mean (a) a condition of an area or locality proclaimed by the President of the Philippines as in a state of emergency, or (b) an event or occasion or a combination of circumstances equivalent to a public calamity resulting from fire, flood, or like disaster, or through some unusual occurrence or pressing necessity, not reasonably subject to anticipation calling for immediate action or remedy. SUBSECTION 123.6 Reporting requirements . The prior written notice to the Central Bank on changes in banking days and hours as required in this subsection shall be given through the fastest means of communication, at least seven (7) banking days before the intended effectivity of the change in banking hours or days. In case a bank, due to an emergency, has to open outside, or close during, the banking hours or days reported to the Central Bank, a written report submitted within twenty four (24) hours from opening or closing, as the case may be, will suffice. The report shall state the specific nature of the emergency and the period the bank opened or closed or shall open or close by reason of the emergency. [Circular 608 4-20-78] SUBSECTION 123.61 Clarifications . Special holidays proclaimed for local governments shall be considered as regular banking days. Thus, banks should open on such days if the same fall on regular banking days and need not give the notice prescribed under Subsec. 123.6. In the case of special holidays for special purposes under Section 3 of LOI No. 814 such as elections and related events, which, by the terms of their proclamation, are specifically declared as non-working days, banks desiring to open on such days shall comply with the reporting requirement of the same subsection. [Memorandum 7-5-79] SUBSECTION 123.7 Existing authorizations and notifications . Existing authorizations and notifications regarding banking days and hours shall remain in force until changed by the bank in accordance with the provisions of this section. SUBSECTION 123.8 Posting of schedule of banking days and hours . The schedule of banking days and hours reported to the Central Bank shall be posted conspicuously at all times in the bank's premises. [Circular 608 4-20-78] SECTION 124. Internal Procedures . SUBSECTION 124.1 Recording of transactions . All banking institutions shall have a true and accurate account, record or statement of their daily transactions, particularly those referring to their deposit liabilities. The commission of any false entry or the omission to make an entry on any such transactions shall be a ground for the Monetary Board to order the removal from office of any Officer, director, agent or employee responsible therefor without prejudice to their criminal liability under Sections 33 and 34 of Republic Act No. 265, as amended, and/or the applicable provisions of the Revised Penal code. [Circular 307 8-3-70] Commercial banks, thrift banks and specialized government banks shall observe the regulations embodied in Subsec. 159.5 concerning the booking of deposits and withdrawals. [Circular 730 4-18-80] SUBSECTION 124.2 Reporting requirements . By virtue of Section 1636 of the Revised Administrative Code which provides that: "Forms of reports shall be supplied by the Bank Commissioner (now the Deputy Governor, Supervision Examination Sector) to all institutions of which reports are required in the Philippines. . . " all banks are enjoined to use and follow strictly the forms prescribed by the Deputy Governor, Supervision and Examination Sector, and as may be revised from time to time, for their statements and/or periodic reports (2. Appendix A and 2. Appendix B) required for submission to the Department of Commercial and Savings Banks. [Circular 301 6-23-70] Effective July 1, 1977, however, all banks shall strictly adopt/implement the Uniform System of Accounts prescribed in the corresponding Central Bank Manual, including reportorial and publication requirements. [Circular 522 6-7-76, as amended by Circulars 539 8-30-76 and 544 11-15-76] Local branches of foreign banks may continue using their existing accounts provided that published statements and reports submitted to the Central Bank follow the account definitions established in the Uniform System: Provided , That the mathematical formulas for reconciling such published statements and submitted reports with the general ledger accounts of the bank, are submitted to the Department of Commercial and Savings Banks not later than October 1, 1976: and Provided , further , That the bank should prepare for Central Bank use reconciliations of their ledger accounts and the standard accounts described in the Uniform System as of regular or special bank examination dates. The strict adoption/implementation by the Philippine National Bank, the Development Bank of the Philippines, the Land Bank of the Philippines and the Philippine Amanah Bank of the Uniform Systems of Accounts and/or full compliance with this requirement, subject to penalties/sanctions for any violation thereof, shall be effective January 1, 1980. However, for meeting reportorial requirements of the Central Bank and for purposes of published statements, the accounts specified in the said Manuals of Accounts shall be adopted/used by said government banks beginning January 1, 1979. The following penalties/sanctions, whenever applicable, shall be imposed upon any commercial bank or any government bank mentioned above 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-A 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. [Circular 522 6-7-76 and Circular 637 11-7-78] SUBSECTION 124.21 Sanctions in case of wilful delay in the submission of reports/refusal to permit examination . For wilful delay in the submission of reports/refusal to permit examination, specific sanctions shall be imposed in accordance with the following rules: a. Definition of terms . For purposes of this subsection, the following definitions shall apply: 1) Report shall refer to all written reports or 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 specific 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 (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. 3) Examination shall include, but need not be limited to, the verification, review, audit, investigation and inspection of the books and records, business affairs, administration and financial condition of any banking institution including the reproduction of banking records, as well as the taking possession of the books and records and keeping them under Central Bank's custody after giving proper receipts therefor. It shall also include the interview of the directors and personnel of any banking institution. 4) Refusal to permit examination shall mean any act or omission which impedes, delays or obstructs the duly authorized Central Bank officer/examiner/employee from conducting an examination, including the act of refusing to accept or honor a letter of authority to examine presented by any officer/examiner/employee of the Central Bank. b. Fines for wilful delay in the submission of reports 1) Amount of fine Any banking institution which shall willfully delay the submission of reports, as defined above, within the periods prescribed for each particular report, shall pay a fine in accordance with the following schedule: P100 per banking day of default for the first five banking days of default; P150 per banking day of default for the next five successive days of default; P200 per banking day of default for the succeeding banking days of default. In the implementation of the foregoing rules, delay or default shall start to run on the day following the last day required for submission of the reports. However, should the last day of filing fall on a non-working day in the locality where the reporting bank is situated, delay or default shall start to run on the day following the next working day. 2) Manner of filing The submission of the reports shall be effected by filing them personally with the Department of Commercial and Savings Banks 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. In the first case, the date of acknowledgment by the Department of Commercial and Savings Banks/Central Bank Regional Offices 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. [Circular 514 4-20-76] 3) Manner of payment or collection of fines . The following rules shall govern the collection of fines imposed on banks for willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor: a) Banks shall, within thirty (30) calendar days from receipt of the statement of account from the Central Bank, pay the fines imposed thereon for willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor. LLjur b) For banks 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 concerned: Provided , That if the balance of the bank's account is insufficient to cover the fines due, such fines shall be paid not later than the following banking day. For the purpose of this subsection, "banking day" means a day on which the Central Bank head office and the head office of the bank are open for business. c) Outstanding bills for fines which are unpaid after thirty (30) calendar days from April 10, 1980 shall be automatically debited against the bank's demand deposit account with the Central Bank. Where a bank does not maintain a demand deposit account with the Central Bank, it shall pay the full amount of outstanding fines within thirty (30) calendar days from April 10, 1980. d) Failure to settle the full amount of the fines within the period on the day prescribed herein shall make a bank, its directors and officers liable to the sanctions imposed under Sections 34 and 34-A of R.A. No. 265, as amended. For uniform implementation of the above regulations, the procedural guidelines embodied in 2. Appendix K shall be observed. [Circular 728 4-10-80; Memorandum 6-5-80] c. Fine for refusal to permit examination 1) Amount of fine Any banking institution which shall willfully refuse to permit examination as defined above, shall pay a fine of P500 daily from the day of refusal and for as long as such refusal lasts. 2) Basis for, and effectivity of, the imposition of fine (i) The Central Bank officer/examiner/employee shall report the refusal of the banking institution to permit examination to the Department of Commercial and Savings Banks, 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 said department head. (ii) The fine shall be imposed starting on the day following the report by the said 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. (iii) Manner of payment or collection of fine same procedure as in Item (3) of letter (b) of this subsection. d. 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 cases as provided for in other provisions of law, and as may be warranted by the nature of the offense. e. Appeal to the Monetary Board . Any aggrieved banking institution may appeal to the Monetary Board from a ruling of the Department of Commercial and Savings Banks imposing a fine. [Circular 514 4-20-76] SUBSECTION 124.22 Signatories on required bank reports . Certain weekly, monthly, quarterly, semi-annual and annual statements/reports required to be submitted to the Central Bank by commercial banks are grouped into Category A-1, Category A-2, and Category B. a. Categories of reports 1) Category A-1 reports are the quarterly published/condensed statements of condition (CBP 7-16-03). 2) Category A-2 reports are the consolidated monthly statement of condition and the quarterly statement of condition (CBP 7-16-05 and CBP 7-16-02, respectively). 3) Category B reports are those required to be submitted to the Central Bank and which are not included in Categories A-1 and A-2. For a complete listing of these reports, please refer to 2.Appendix C hereof. b. Authorized signatories 1) Category A-1 reports shall be signed by the institution's president or senior executive vice-president, and by the chief finance officer (i.e., controller or chief accountant), who shall be authorized under a resolution approved by the board of directors (sample form of resolution is shown as 2.Appendix D). 2) Category A-2 reports of head offices of financial intermediaries shall be signed by the institution's president or senior executive vice-president. Reports of offices/units (such as branch, sub-branch, agency, etc.) in this category shall be signed by the respective manager/officer-in-charge. The signing authority in this category shall be contained in a resolution approved by the board of directors (sample of resolution is shown as 2.Appendix E). 3) Category B reports (See 2. Appendix C for listing) shall be signed by officers or their alternates, who shall be duly designated by the board of directors. A copy of the board resolution (sample form is shown as 2.Appendix F) covering the initial designation and subsequent change(s) in signatories as well as specimen signatures of the signatories and alternates, shall be submitted to the Department of Commercial and Savings Banks within three (3) days from date of resolution. c. Sanctions If a report is submitted to the Central Bank under the signature of an officer who is not listed or included in any of the resolution(s) mentioned above, the Department of Commercial and Savings Banks shall refuse to acknowledge the report as valid or consider the report as not having been submitted at all. If such a report is not re-submitted by the institution under the signature of a duly authorized signing officer, administrative sanctions/penalties shall be imposed on the erring institution for late reporting or failure to submit the required reports, as the case may be. [CL 12-3-75] SUBSECTION 124.23 Submission of certain information required . All commercial banks shall submit to the Department of Commercial and Savings Banks within ten (10) days from receipt of CB Memorandum to All Banks and Non-Bank Financial intermediaries dated October 28, 1975, the information required in 2.Appendix G. Any changes in any of the required information submitted, after the initial submission, shall be reported to the Department of Commercial and Savings Banks immediately. [MAB-NBFI 10-28-75] All commercial banks shall likewise submit to the said Department within thirty (30) days from receipt of Circular Letter dated October 18, 1976 and of subsequent changes/issuances within fifteen (15) days from such change/issuance any or all of the documents/information enumerated in 2.Appendix H. [CL 10-18-76] SUBSECTION 124.24 Submission of reports on crimes/losses . Effective immediately, all banks shall report on crimes, whether consummated, frustrated or attempted against property/facilities; or on incidents involving material loss, destruction or damage to the institution's property/facilities other than that arising from a crime. The guidelines in the preparation and submission of said report are embodied in Item 4 of 2. Attachment A.1. [Memorandum to All Banks, NASLAs, BLAs 1-25-79] SUBSECTION 124.5 Annual operations/management/financial audits . The boards of directors of banking institutions whose primary responsibility is to exercise general supervision over the affairs of their banks, in order to determine whether operations are carried out with maximum effectiveness and economy, are hereby required to cause an annual operations/management/financial audit, or an overall review and appraisal of management methods and performance, specifically on plans and objectives, organizational structure, systems or procedures, methods of control, means of operation, human and physical facilities, to deliberate and act on the audit report; and to submit a report on the Board's actions to the Central Bank. [Circular 558 3-8-77] The board of directors of each bank is requested to submit before the start of the audit to the Department of Commercial and Savings Banks, for its approval, an audit program. The audit program should indicate in detail, using as basis the requirements provided in Subsecs. 121.52 and 121.53, the scope and coverage of the audit to be conducted. In cases where the audit program will not cover certain specific requirements of this subsection, the board of directors of the bank shall submit its justification therefor. [CL 3-30-77] SUBSECTION 124.51 Who may conduct . The operations/management audit may be made by the bank's Board of Directors, the bank's internal auditor, or responsible employees of the bank or by the Bank's external auditor hired to make the annual financial audit: Provided , That said directors, internal auditor, responsible employees, or external auditor possess the education, training and experience to perform an operations/management audit: and Provided , further , That the Monetary Board may, at its discretion, require the bank's board of directors to engage the services of an independent operations/management auditor acceptable to the Monetary Board. SUBSECTION 124.52 Minimum coverage . The operations/management audit shall at least cover the following aspects which should be specified in the written instructions of the Board to the party commissioned to make the operations/management audit: a. A review of past year's managerial/operational performance; b. A review of bank policies and practices; and c. An overview of operations, prospects and plans for the coming year (when required). SUBSECTION 124.53 Minimum contents of reports . The operations/ management audit report shall contain a discussion of the following aspects (this requirement shall also be mentioned in the written instructions of the Board): a. Past Year's Managerial/Operational Performance 1) A general review and appraisal of past year's operational performance on the basis of the long-range plans, objectives, specific targets and strategies set forth at the start of the year; whether operations were carried out with maximum effectiveness, economy, and made in accordance with banking laws, rules and regulations. 2) An evaluation of the quality of management and executive performance based on adequacy of the organizational structure, staffing, policy and decision-making process, staff development program and compensation structure, accuracy and reliability of controls, satisfactory methods of operation, adequacy and maximum utilization of manpower and physical facilities, existence of standards of performance and measurement of results adequacy of protective methods, whether there are existing operational weaknesses and pitfalls. 3) An evaluation of the bank's general financial condition, liquidity, solvency and profitability including the following aspects: a) An evaluation of the bank's loan and investment portfolio covering (i) industry exposure to economic interest-blocks; (ii) regional exposure, (iii) collection experience and (iv) collateral business. b) An evaluation of the bank's fund sources including cost of capital. b. Bank Policies, Practices and Procedures 1) An evaluation of the policies, practices and procedures on loaning, investment and money market operations, whether they are sound and safe, well-defined and clearly stated, flexible and attuned to the economic conditions of the country, and whether there is need for change or shift in such policies, practices and procedures. cdll 2) A descriptive statement of relationships with subsidiaries, affiliated entities, holding companies, if any, and plans with respect to same. c. Projection, Prospects and Plans 1) A narrative statement of the bank's long-range plans, objectives or goals. 2) A narrative statement of specific targets and general strategy for the incoming year based on past year's performance, long-range bank plans and objectives highlighting possible opportunities. 3) Two to three-year programs of capital and deposit build-up, and decrease in borrowings and money market activities which are high-cost sources of funds. 4) Prospects of adopting new ideas, new development and new types of equipment. The aspects of the operations/management audit report described under this item will be required only when any or all of the following conditions or circumstances exist in the operations of the bank as may be determined by the Department of Commercial and Savings Banks: a) Deterioration of financial condition; b) Existence of liquidity and solvency problems; c) Decreasing profits or incurrence of losses; d) Existence of management problems; e) Overextension of credit including loans to directors/officers/stockholders related interests (DOSRI); f) Capital deficiency; g) Decreasing trend in deposit operations; h) Heavy borrowings; and i) Over-indulgence in money market activities as fund sources. d. The operations/management audit report shall contain a full description of the methodology followed and the names of the audit team members. The Department of Commercial and Savings Banks, at its discretion, shall specify the conditions and coverage of individual bank's operations/management audit report in certain instances where specific problem areas are identifiable. [Circular 558 3-8-77] SUBSECTION 124.54 Procedural guidelines a. Each bank shall cause an annual operations/management audit and a financial audit as required under Section 6 D of R.A. No. 337, as amended, to be conducted simultaneously not later than thirty (30) days after the close of the calendar year or the fiscal year adopted by the bank. Reports on such audits shall be made separately and submitted to the board of directors and the appropriate supervising and examining department of the Central Bank not later than ninety (90) days after the start of such audits. b. The board of directors, in a regular or special meeting, shall consider and act on the operations/management audit and financial audit reports and shall submit, within 30 days after receipt of the reports, a copy of its resolution to the appropriate supervising and examining department of the Central Bank. The resolution shall show, among other things, the names of the directors present and absent, the actions taken on the findings and recommendations as well as the measures adopted by the board of directors to improve or update the bank's managerial/operational performance, policies and practices, and its systems, and procedures. [Circular 558 3-8-77, as amended by Circular 676 5-17-79] SUBSECTION 124.55 Exemption . The Governor of the Central Bank may waive the operations/management audit requirement upon request of the institution with the concurrence of the Department of Commercial and Savings Banks: Provided , That the request of the institution is justified and supported by a showing of managerial capability and a sound and stable financial condition. SUBSECTION 124.7 Internal control . As a guide to banks, particularly the smaller institutions, in order to help promote effective internal control systems, the Central Bank issued a set of minimum internal control standards embodied in 2.Appendix I. Relative thereto, the following records/data should 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. Statements 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 connection with any firm, partnership or corporation organized for profits, of all the bank's directors, officers and major stockholders as defined under Subsec. 134.1 should be maintained. [CL 11-29-76] The internal control procedures for dormant/inactive accounts are likewise embodied in 2.Appendix I. [CL 11-29-76; CL 9-8-78, as amended by CL 2-5-79] SUBSECTION 124.8 Bank protection . All commercial banks are required to observe the rules and regulations on bank protection embodied in 2. Appendix J. acd [Circular 566 4-27-77] APPENDIX A (Book I, Part 2) REPORTS REQUIRED OF COMMERCIAL BANKS New Form No.. Subject of Report Frequency Deadline Issuance CBP-7-16-01 1 Consolidated Report Weekly Four banking days from CL 8-4-77 of Required and Available end of reference week Reserves Against Deposit Liabilities CBP-7-16-01.1 Report of Cash on Hand Weekly Four banking days from CL 8-4-77 end of reference week CBP-7-16-01.2 Special Time Deposits and Weekly Four banking days from CL 8-4-77 Reserves Against Them end of reference week (Consolidated) CBP-7-16-01.3 Supporting Schedule of Item Weekly Four banking days from CL 8-4-77 3.a in CBP-7-16-01 end of reference week CBP-7-16-01.A Report of Changes in the As changes Two banking days Circular 4 56 3-19-75, as Composition of Securities occur following the day of amended by CL 6-10-75 (Except Premyo Savings change Bonds) Held as Reserves for Deposit Liabilities CBP-7-16-01-B Report of Changes in the Weekly Four banking days after Circular 4 56 3.-19-75, as Composition of Premyo end of week amended by CL 6-10-75 Savings Bond Held as Reserves for Deposit Liabilities CBP-7-16-02 KB Statement of Condition Quarterly Tenth banking day after Memo 11-8-78 end of reference quarter CBP-7-16-02 KB-A 2 Selected Financial Part I End of quarter Memo 11-8-78; MAB 5-7-79 Accounts Quarterly Part II End of semester Memo 11-8-78 Semestrally CBP-7-16-02-KB.1 Breakdown of Due From/ Quarterly Tenth banking day after Memo 11-8-78 Due to Local Banks and end of reference quarter Domestic Deposit Liabilities CBP-7-16-02 KB.2 Breakdown of Domestic Quarterly Tenth banking day after Memo 11-8-78 Savings Deposit end of reference quarter CBP-7-16-03 KB 3 Consolidated Statement Quarterly The original and published CL 8-4-77, as of Condition (Published) reports within twelve and amended by twenty banking days, Memos 11-15-79 and respectively, from receipt 12-23-79 of call to the bank by the DCSB Director CBP-7-16-04 KB Consolidated Report of Semestral Twenty banking days after CL 8-4-77, as amended Income Expenses, and end of calendar semester/ by Memo 4-11-80 Surplus (Free) year CBP-7-16-04-A Report of Income and Semestral Ten banking days after end CL 8-4-77, as amended Expenses of calendar semester/year by Memo 4-11-80 CBP-7-16-05 Consolidated Statement Monthly Seven banking days after CL 8-4-77, as amended of Condition end of month by Memo 4-11-80 CBP-7-16-05.1 Breakdown of Due Monthly Seven banking days after CL 8-4-77, as amended by From/Due to Local end of month Memo 7-23-79 Banks and Domestic Deposit Liabilities-Banks CBP-7-16-05.2 Breakdown of All Deposit Monthly Seven banking days after CL 8-4-77 Liabilities by Type end of month CBP-7-16-05.3 Breakdown of Borrowings/ Monthly Seven banking days after CL 8-4-77, as amended by Funds obtained end of month CL 3-1-78 CBP-7-16-05.4 Computation of Investment- Quarterly Seven banking days after CL 8-4-77, as amended by Deposit Ratio of Branches, end of quarter MACTB 3-30-79 etc. and/or Head Offices in the Provinces of Commercial Banks CBP-7-16-05.5 Bills Payable-Deposit Monthly Seven banking days after CL 8-4-77 Substitutes Outstanding end of month CBP-7-16-05.6 Breakdown of Private Monthly Seven banking days after CL 8-4-77 Loans and Investments end of month in Bonds and Other Debt Instruments CBP-7-16-05.7 Breakdown of Bills Monthly Seven banking days after CL 8-4-77, as amended by Payable and Deposit end of month Memo 7-23-79 Substitutes-Contingent CBP-7-16-05.8 Breakdown of Peso Time Monthly Seven banking days after CL 8-4-77 Certificates of Deposits end of month as to Maturity CBP-7-16-05.9 Schedule of Reconciling Quarterly Twenty-five banking CL 8-4-77, as amended by Items Lodged in Due after end of quarter CL 3-1-78 From/Due to Head Office, Branches and Agencies Account CBP-7-16-05.10 Breakdown of Loan Monthly Seven banking days CL 8-4-77, as amended by Portfolio and Investment after end of month Memo 7-23-79 Accounts Classified as to Type of Borrowers CBP-7-16-05.11 Breakdown of Deposit Monthly Seven banking days CL 8-4-77, as amended by Liabilities of Private after end of month Memo 7-23-79 Residents of the Philippines CBP-7-16-05.12 Breakdown of Other Monthly Seven banking days CL 8-4-77, as amended by Assets and Other Liabilities after end of month Memo 7-23-79 CBP-7-16-05.13 Miscellaneous Monthly Seven banking days CL 8-4-77, as amended by after end of month Memo 7-23-79 CBP-7-16-05.14 Additional information for Monthly Seven banking days CL 8-4-77, as amended by Agricultural Credit Loan after end of month Memo 7-23-79 P.D. 717 CBP-7-16-06 Consolidated Report Monthly Seven banking days CL 8-4-77, as amended by of Investments in after reference month Memo 7-23-79 Bonds and Other Debt Instruments and Selected Trading Account Securities CBP-7-16-07 Statement of Capital Weekly Four banking days after Circular 355 1-8-73; Required and Capital end of reference week CL 8-4-77, as amended by Accounts under Sec. 22 or except for the report for CL 3-1-78 and 30 of R.A. 337, As Amended the week wherein the Memo 3-11-80 end of month falls, in which case deadline shall be the 7th banking day after end of month or the 4th banking day after end of reference week, whichever is later CBP-7-16-07-A Daily Report on Compliance Weekly Four banking days after CL 10-31-77 with Aggregate end of reference week Ceilings on Direct/ Indirect Credit Accommodations to Directors/Officers/ Stockholders/ Related Interest (DOSRI) CBP-7-16-07-B) Daily Report on Compliance Weekly Four banking days after CL 10-31-77 CBP-7-16-07-B.1) with Individual Ceiling on end of reference week Direct Credit Accommodations to Directors/Officers/Stockholders CBP-7-16-08 Consolidated Report on Monthly Three banking days after MACSDB Government Funds Held end of month 11-24-76 CBP-7-16-08.1 Breakdown of Government Monthly Three banking days after MACSDB Funds Held in the Form of end of month 11-24-76 Deposit Liabilities CBP-7-16-08.2 Breakdown of Government Monthly Three banking days after MACSDB Funds Held in the Form of end of month Non-Deposit Liabilities CBP-7-16-09 Consolidated Report of Weekly Five banking days after CL 8-4-77 Available Coverage Against end of week Import Letters of Credit Outstanding CBP-7-16-09.1 Unmatured Advances Weekly Five banking days after CL 8-4-77 Against Export Products end of week Supported by Letters of Credit CBP-7-16-09.2 Unmatured Advances Weekly Five banking days after CL 8-4-77 Against US Quota Export end of week Sugar (A) CBP-7-16-09.3 Unmatured Advances Weekly Five banking days after CL 8-4-77 Against Outward Bills for end of week Collection CBP-7-16-11 List of Stockholders and Annually and Twelve banking days from Circular 449 2-3-75; Their Stockholdings after every beginning of year and if Memo 8-27-79 change there are changes, seven banking days after end of quarter CBP-7-16-12 Report on Dividends On every Ten banking days after Circular 684 7-11-79 Declared declaration date of dividend Memo 12-28-79 declaration CBP-7-16-13 Consolidated Report on Semi-annually Fifteen banking days after CL 10-31-17 Compliance with Aggregate end on semester Ceilings on Credit Accommodations to Directors/Officers/Stockholders/ Related Interests CBP7-7-16-13-A Report on Stockholdings of Semi-annually Fifteen banking days after CL 10-31-17 Bank's Directors/Officers/ end on semester Stockholders/their Spouses/ Relatives in Borrowing Corporation/Association Firm CBP-7-16-14 Marginal Deposits on Weekly and Fourth banking day after CL 8-4-77, as amended by Import Letters of Credit and as changes end of reference week or MACB 7-25-79 Reserves Against Them occur 7th banking day after reference week if end of reference week coincides with end of month; one day after there is a change in composition of reserves CBP-7-16-15 Consolidated Report Semi-Annually Fifteen banking days CL 10-31-77 on Compliance with after end of semester Individual Ceiling on Direct Credit Accommodations to Directors/Officers/Stockholders CBP-7-16-15.A Report on Financing Plan Semi-Annually Fifteen banking days CL 7-19-77 for Officers after end of semester CBP-7-16-15.B Report on Financing Plan Semi-Annually Fifteen banking days CL 7-19-77 for Employees after end of semester CBP-7-16-15.C Contingent Accounts of Semi-Annually Fifteen banking days CL 10-31-77 Directors/Officers/Stock- after end of semester holders/Related Interests CBP-7-16-16 Schedule of Banking Hours As changes Seven banking days Circular 608 and Days occur prior to effectivity of 4-20-78 the change CBP-7-16-17 Report of Loans Granted As loan is Fifteen banking days CL 7-5-74, as amended by under Section 83 of R.A. approved from date of approval CL 2-28-75 No. 337 of loan, whether direct or indirect, granted to any bank director or officer CBP-7-16-18 KB Bio-data of Directors/ Annually Twenty-five banking days Memo 11-15-78, as Officers after end of calendar amended by Memo quarter 12-8-78 CBP-7-16-19 Report on Compliance Quarterly After end of quarter MAB 9-27-72; CL with the Obligation to 2-28-75 Withhold the Tax on Interest Income of Non-Resident Foreign Individuals or Corporations Not Engaged in Trade or Business in the Philippines CBP-7-16-20 Report on Crimes/Losses As crime Within forty-eight hours from CL 3-10-78; Memo or incident knowledge of crime or incident 1-25-79 occurs CBP-7-16-21 Notice/Application for As write-off Twenty-five banking days Circular 358, as amended by Write-off of Loans and occurs prior to the intended date Memo 1-28-76 Advances of write-off CBP-7-16-22 Consolidated Report Weekly Four banking days after end of Memo 10-17-78 of Required and Available reference week Reserves Against Deposit Substitutes and Interbank Loans CBP-7-16-23 KB Report on Foreign Basic-every- Within twelve days MACB 12-7-73; CL 2-28-75, Currency Counterpart time foreign from date of foreign as amended by Loans equity invest- equity investment MACB 8-6-79 ment is made Commercial Within twelve banking MACB 12-7-73; CL 2-28-75, Term portion- day after end of quarter as amended by quarterly MACB 8-6-79 CBP-7-16-25 Sworn Statement Monthly Fifteen banking days after end CL 12-18-73 on Quasi-banking of month Operations CBP-7-16-26* Consolidated Report on Semestrally Not later than fifteen CL 2-12-74, as amended by Loans and Advances banking days after end CL 1-15-76 with Arrearages, Including of each semester Interest and Charges, Amounting to at Least Twenty Per Cent (20%) of the Total Outstanding Obligations Including Interest and Charges (pursuant to P.D. No. 385 dated January 31, 1974 CBP-7-16-26.1 * Accounts on Which No Semestrally Not later than fifteen CL 2-12-74, as amended by Foreclosure Proceedings banking days after end CL 1-15-76 Were Instituted (with Total of each semester Outstanding Obligations of P500,000 and above) CBP-7-16-26.2 * Accounts on Which No Semestrally Not later than fifteen CL 2-12-74, as amended by Foreclosure Proceedings banking days after end CL 1-15-76 were Instituted (with Total of each semester Outstanding Obligations below P500,000) CBP-7-16-26.3 4 Accounts on Which Semestrally Not later than fifteen CL 2-12-74, as amended by Foreclosure Proceedings banking days after CL 6-19-74; CL Were Instituted But Without end of each semester 1-15-76 Court Injunction/Restraining Order (with Total Outstanding Obligations of P500,000 and Above) CBP-7-16-26.4 4 Accounts on Which Semestrally Not later than fifteen CL 2-12-74, as amended by Foreclosure Proceedings banking days after CL 6-19-74; CL Were Instituted But Without end of each semester 1-15-76 Court Injunction/Restraining Order (with Total Outstanding Obligations below P500,000) CBP-7-16-26.5 4 Accounts with Court Semestrally Not later than fifteen CL 2-12-74, as amended by Injunctions or Restraining banking days after CL 6-19-74; CL Orders Issued against end of each semester 1-15-76 Foreclosure Proceedings Instituted (Accounts with Total Outstanding Obligations of P500,000 and Above) CBP-7-16-26.6 4 Accounts with Court Semestrally Not later than fifteen CL 2-12-74, as amended by Injunctions or Restraining banking days after CL 6-19-74; CL Orders Issued Against end of each semester 1-15-76 Foreclosure Proceedings Instituted (Accounts with Total Outstanding Obligations below P500,000) CBP-7-16-26.7 4 Foreclosed Properties Semestrally Not later than fifteen CL 2-12-74, as amended by Acquired by Bank/Institution banking days after CL 6-19-74; CL end of each semester 1-15-76 CBP-7-16-27 Consolidated Report Monthly Twelve banking days CL 8-4-77, as amended by on the Utilization of from end of reference CL 3-1-78 and MAB 4-19-79 Loanable Funds Gene- month rated Which Were Set Aside for Agrarian Reform/Agricultural Credits CBP-7-16-27.A Monthly Consolidated Monthly Twelve banking days CL 7-19-77 Report of Existing Eligible from end of reference Government Securities month Held for Temporary Investment CBP-7-16-28 5 Semestral Report of Semestrally Fifteen banking days CL 7-5-74 Outstanding Loans after end of semester Classified by Types of Industry CBP-7-16-29 Applications for the Everytime Not later than the banking CL 7-5-74 Temporary Use of CBCIs application day immediately following and Other Government is to be made the day when the bank Securities with Remaining incurred a reserve Maturities of Less than deficiency Two (2) Years, Not Other- wise Eligible As Reserves Against Deposit Liabilities CBP-7-16-30 Application for the Everytime Not later than the banking day CL 7-5-74 Temporary Use of Export application immediately preceding the day Bills with Maturities of is to be made when the bank intends to start Not More Than Thirty (30) the fifteen-day period Days As Eligible Reserves Against Marginal Deposits on Import Letter of Credit CBP-7-16-31 Sworn Statement on Real As transaction Ten banking days after CL 2-11-75; CL 5-5-75 Estate Transactions is approved approval of transactions CBP-7-16-32 Loans/Credits Granted to Monthly Five banking days after CL 7-31-75; CL 8-29-75 Builders or Purchasers of end of month Units/Shares in Condo- minium Projects, Country Clubs, Sports Clubs and Other Real Property Developments CBP-7-16-33 Consolidated Report on Monthly Ten banking days after CL 8-4-77 Matching of Outstanding end of month Purchases/Acquisitions of Receivables Against Outstanding Bills Payable Deposit Substitutes with Maturities of 730 Days or Less Under Circular No. 494, As Amended Unnumbered Reconciliation Statement Yearly Not later than end of Circular 503 2-2-76 Between Head Office and January of the following All Branches year Unnumbered Unresponded or Outstanding As necessary Within 30 days of the six- Circular 503 2-2-76 Items for Over Six (6) Months month period as of Date of the Recon- ciliation Statement Unnumbered Statement of Departmental Quarterly Thirty days after end MACB 2-9-76 Profit and Loss of quarter Unnumbered Annual Report of Manage- Annually CL 7-6-76 ment to Stockholders Covering Results of Operations for the Past Year Unnumbered Audited Financial State- Annually CL 7-6-76 ments for the Past Year Prepared by the External Auditor Footnotes * For banks not participating in the CDRC Program 1. Banks which have adopted the revised weekly reporting of capital and reserve positions in the Consolidated Report of Condition (CDRC) in lieu of CBP 7-16-07, CBP 7-16-09, CBP 7-16-14 and CBP 7-16-22 are hereby advised that said CDRC shall, effective with the report for the week ending October 14, 1979, be accomplished in three (3) copies for submission as follows: Original duplicate Department of Commercial and Savings Banks Triplicate Department of Economic Research 2. To be submitted in lieu of CBP 7-16-02 KB and CBP 7-16-04 A by each extension office/savings agency/sub-branch/money shop under the supervision of another branch/office. 3. Indicate PNB, LBP, PAB, or DBP for reports of the government banks. 4. These reports are for government financial institution only per CL 2-12-74 5. For DBP only ATTACHMENT I (Book I, Part 2) INSTRUCTIONS ON ACCOMPLISHMENT AND SUBMISSION OF REPORTS A. Nature and Content of Reports 1. Consolidated Report of Required and Available Reserves against Deposit Liabilities [CBP 7-16-01] a. Blocked peso deposits . Blocked peso deposits of non-residents have now been reverted to their status as ordinary deposits and hence, for purposes of the report on required and available reserves against deposit liabilities, shall be classified as ordinary peso demand, savings or time deposits (as the case may be), subject to the prevailing reserve requirements for each type of deposit. [MAB-DSE 1-23-62] b. Matured peso time deposits . For purposes of the report on required and available reserves against deposit liabilities, matured peso time deposits shall be reported under "Peso Time Deposits". [MAB-DSE 8-14-69] c. Deposits in foreign currency . "Deposits in Foreign Currency" account shall be reflected at net amount under the report on required deposit reserves. LexLib [MAB-DG 12-8-69] d. Cash and/or Due from the Central Bank . This item utilized to satisfy reserves against marginal deposits, shall not form part of available reserves against deposit liabilities to be reported each day of the succeeding week on this form. [MACB-DSE 8-27-71] e. Checks and other cash items . Those items which have not been cleared yet through the Clearing Office should not be debited to the account "Due from the Central Bank of the Philippines" and should not be considered as available reserves against deposit liabilities. Such items shall invariably be debited to the "Checks and Other Cash Items" account. Only after the checks and other cash items have been cleared through the Clearing Office can the bank debit the "Due from the Central Bank of the Philippines" account for said items. [MAB-DG 6-5-64] 2. Consolidated Report of Available Coverage against Outstanding Import Letters of Credit [CBP 7-16-09] a. Items to be covered by eligible assets . All outstanding import letters of credit including deferred payment letters of credit (net of those expected to be covered by negotiations and/or drawings beyond 180 days from date of report) should be covered by eligible assets. [CL 9-6-71] b. Required ratio between total import letters of credit and net foreign exchange assets . Authorized agent banks are required to maintain a thirty per cent (30%) ratio between the total of their net foreign exchange assets, cash in vault, excess reserves, eligible securities other than those which have been utilized, and advances against export products, and the total of their outstanding import letters of credit. [MAAB-DSE 7-20-61 and 9-24-65] c. Computation of net foreign exchange assets as eligible cover . In the computation of net foreign exchange assets for purposes of the report on CBP-7-16-09, the gross foreign exchange assets may include all current import bills, and the total foreign exchange liabilities shall include all foreign exchange liabilities irrespective of their maturities. [MACB-DSE 9-24-65] (1) Use of the " Due from Local Banks" account as reserves against outstanding import letters of credit . The account "Due from Local Banks" shall be included among those assets which may be utilized by banks as available reserves; provided, however, that (a) the said account represents a demand deposit subject to withdrawal by check; and (b) the said account or any portion thereof which cannot be drawn upon immediately for whatever reason or the withdrawal of which is subject to certain restrictions shall not be included among the assets eligible as reserves against outstanding import letters of credit. [MAAB-DSE 9-13-61] (2) Determination of advances against export products as eligible cover . "Eligible packing credit overdrafts" as eligible assets, is hereby revised to read "advances against export products." The advances which should be reported shall be limited only to outstanding unmatured advances but in no case to exceed: (a) Eighty per cent (80%) of the unused balances of valid and subsisting export L/Cs converted at the prevailing buying rate/s of exchange at the date of the report. (b) Eighty per cent (80%) of the market value, at the date of the report, of U.S. quota export sugar (A) provided that the bank has in its possession or under its control, negotiable export sugar quedans and/or trust receipts covering export sugar quedans withdrawn by the borrower for the purpose of loading the same on board for shipment; and (c) Eighty per cent (80%) of the amount of the outward bills for collection converted at the prevailing buying rate/s of exchange at the date of the report. Banks utilizing advances of the nature mentioned above as eligible cover shall accomplish and append Schedules A, B, and C to their report on CBP-7-16-09. [MACB-DSE 9-24-65] (3) Treasury bills part of available coverage . Treasury bills are now included as part of the available coverage. [MAAB-DSE 7-24-67] (4) Definition of "Current Import Bills" (a) As a general rule, the "current import bills" which may be considered as foreign exchange assets on CBP-7-16-09 include: (i) Bills on which the dollar obligation of the importer has not been converted into pesos, i.e., the importer's dollar liability to the bank has not been "liquidated" by his assumption of a peso obligation; and are not past due. (ii) Sight bills (whether covered or not by refinancing arrangements) not paid on sight but goods are released under trust receipt and importer is given some time (say 30 days) within which to pay his obligation, provided, that the dollar obligation is retained and the bills are not past due. (b) The following shall not be considered as "current import bills" for purposes of CBP-7-16-09: (i) Sight bills (whether covered or not by refinancing arrangements) not accepted or paid by the importer within thirty calendar days after date of arrival of carrying vessel. (ii) Usance bills (suppliers and ACF) not presented to importer within thirty calendar days after date of arrival of carrying vessel. Accordingly, bills not paid on maturity or where maturity is extended, or where obligation is renewed, shall not be considered as current. [MAAB-DSE 1-14-66] (5) Bills payable in foreign exchange (a) Bills payable representing amounts which are payable in foreign exchange by local banks to foreign banking institutions or the Central Bank on a periodic payment basis shall be considered as foreign exchange liabilities of the local banks and as such shall be reported on CBP-7-16-09. (b) The amount to be reported shall be the sum of the installments on the principal of the loan and the corresponding interest maturing within one year from the date of the report, as well as the amount of unpaid matured installments and interest, if any. The amount may be reported under the heading "Foreign Exchange Liabilities", opposite the item "Other Foreign Liabilities". The total unpaid and unmatured balance of the loan as of the reporting date shall be shown at the bottom of this report either as a footnote or as "Additional Information", which information shall include the name of the creditor bank abroad, the total unpaid and unmatured balance due to said foreign bank, and the date of the final maturity of the loan. (c) The above rules shall apply only to obligations of the local banks to foreign banks or to the Central Bank which have to be liquidated by the local bank in foreign exchange even in cases where such foreign exchange is, under the arrangement, to be purchased by the local bank in pesos from the Central Bank. The following obligations of the local bank in dollars shall therefore be included among the local bank's foreign exchange liabilities on CBP-7-16-09: (i) Direct obligations of local banks to pay in dollars the Eximbank for loans extended by the Eximbank to the local banks under the local banks' own credit lines. These obligations are evidenced by dollar promissory notes executed by local banks in favor of the Eximbank. (ii) Obligations of local banks for transactions coming under the credit line of the Central Bank with the Eximbank evidenced by U.S. dollar promissory notes executed by local banks in favor of the Central Bank. (iii) Obligations of local banks to foreign banks to be liquidated by the dollar proceeds of export bills or by debits to the regular accounts maintained by local banks with the foreign banks. On the other hand, the following shall be excluded from the local banks' foreign exchange liabilities on CBP-7-16-09: (i) Obligations of local banks to foreign banks under the arrangement whereby the foreign bank credits the Special Account No. 2 of the Central Bank and where the obligation is liquidated simply by the Central Bank debiting the clearing account of the local bank at P2 to $1. (ii) Obligations of local banks for transactions coming under the credit line of the Central Bank with the Eximbank evidenced by peso promissory notes executed by local banks in favor of the Central Bank. [MAAB-DSE 8-30-60] (6) Other clarifications on reporting CBP 7-16-09 (a) Futures bought are not to be considered as foreign exchange assets. (b) Futures bought are not to be deducted from letters of credit outstanding to arrive at the amount of letters of credit to be subjected to the thirty per cent (30%) required coverage. (c) Bank's liability for usance (suppliers) drawn under the bank's letter of credit are to be booked as a real liability (foreign exchange) and reported as such. [MAAB-DSE 1-14-66] Portions of eligible assets used as available reserves against letters of credit (as reflected in CBP-7-16-09) may not be used at the same time as reserves against marginal deposits (as reflected in CBP-7-16-14) nor as reserves against deposit liabilities (as reflected in CBP-7-16-01). [MAAB-DSE 7-24-67] (d) "Other Foreign Currency Deposits" has been added to the list of foreign exchange liabilities. [CL 8-24-74] 3. Consolidated Published Statement of Condition [CBP-7-16-03] The following items shall be broken down into (a) Deposit Substitutes, and (b) Others: Item 20 Bills Payable (CBP-7-16-03) Item 12 Domestic Borrowings in the published statement of condition (CBP 7-16-03B) The amount "Deposit Substitutes" refers to Item 21(e) of CBP-7-16-05 (Consolidated Statement of Condition). [CL 3-19-75] 4. Reports on Crimes/Losses [CBP-7-16-20] Effective immediately, all banks shall report on the following matters to the Central Bank through the appropriate supervising and examining department: a. 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 bank property when the amount involved for commercial banks, including specialized government banks, for each crime is P20,000 or more. Crimes involving bank personnel, even if the amount involved is less than those above specified, shall likewise be reported to the Central Bank whenever the bank initiates judicial or extrajudicial action, or imposes sanctions against such bank personnel. cdi b. Incidents involving material loss, destruction or damage to the institution's property/facilities, other than that arising from a crime, when the amount involved per incident for commercial banks, including specialized government banks, is P100,000 or more. c. The following guidelines shall be observed in the preparation and submission of the report: 1) The report shall be submitted within forty-eight (48) hours from knowledge of the crime or incident with the details contained in CBP 7-16-20: Provided , That in the cases mentioned in the second paragraph of Item a, the report shall be submitted within forty-eight (48) hours from initiation of judicial or extrajudicial action or from the imposition of sanctions against such bank personnel; 2) Where a thorough investigation and evaluation of facts is necessary to complete the report, an initial report submitted within the 48-hour deadline may be accepted: Provided , That a complete report is submitted not later than fifteen (15) days from termination of investigation; 3) 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 mad 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. 4) Violations of these regulations shall be punishable under Section 34-A of Republic Act No. 265 and Section 29 of Republic Act No. 3779, both Acts as amended. [Memorandum to All Banks, NSLAs, BLAs 1-25-79] 5. Report on Real Estate Transactions Between a Bank and Its Directors, Officers, Stockholders or Any Firm Substantially Owned by One or More of Such Directors, Officers or Stockholders The board of directors of the bank shall, through the Department of Commercial and Savings Banks of the Central Bank: a. Report to the Monetary Board any real estate transaction (such as, but not limited to, rentals or leases, purchases and sales, or foreclosed assets) by and between the bank and its Director(s), officer(s), stockholder(s) owning at least two per cent (2%) of the bank's subscribed capital stock or any firm substantially owned (in the aggregate of at least twenty per cent (20%) of the paid-in capital of such firm) by one or more of such directors/officers/stockholders; and b. Certify to the Monetary Board that such transaction has been thoroughly reviewed and verified as having been entered into in the best interest of the bank. [CL 2-11-75] 6. Reconciliation of Head Office and Branch Transactions All banking institutions shall prepare monthly reconciliation statements covering transactions between the head office and all its branches within fifteen (15) days after the end of each month. All items which are unresponded or outstanding in the reconciliation statement for more than six (6) months as of reconciliation statement date shall be reported, with explanations/reasons for their being outstanding, to the Department of Commercial and Savings Banks within the next fifteen (15) days after the deadline set in the preceding paragraph. The reconciliation statement shall be made available to any duly authorized bank examiner for inspection/examination without need of advance notice. A copy of the year-end reconciliation statement covering transactions between a bank's head office and all its branches shall be furnished the Department of Commercial and Savings Banks not later than the end of January of the following year. [Circular 503 2-2-76] 7. Statement of Departmental Profit and Loss Banks are enjoined to maintain a system/record of income and expense allocation on a departmental basis and to prepare departmental profit and loss statements observing commonly used and generally accepted accounting principles. The statement shall be submitted to the Department of Commercial and Savings Banks on a quarterly basis, within thirty (30) days after the end of the quarter. Data should be submitted covering at least the following activities, if undertaken by the banks: (a) loans and discounts (b) investments, (c) international operations, (d) trust operations, and (e) quasi-banking activities. The initial report shall be submitted to the Central Bank as of the end of December 31, 1976, but records shall be made available for inspection effective February 9, 1976. [MACB 2-9-76] 8. Statement of Capital Required and Capital Accounts under Sec. 22 or 30 of R . A . 337, as amended (CBP 7-16-07) Each bank shall indicate the following additional information in its report on statement of capital required and capital accounts under Section 22/30 of R.A. No. 337, as amended; a. Total loan portfolio; b. 15% of total loan portfolio, or 100% of combined capital accounts net of valuation reserve as approved by the Central Bank, whichever is lower (or approved periodic ceiling during the transition period); c. Outstanding daily balances of loans to directors, officers, stockholders and related interests; and d. Difference (Item b less Item c). [Circular 357 1-22-73, as amended by Circular 568 5-4-77] B. Central Bank Offices Where Reports Are Submitted 1. Manila . Submission of DCSB periodic/call reports shall be as follows: a. All banking offices (except those located in Cebu and Davao cities) shall submit required reports (original and duplicate) direct to the Department of Commercial and Savings Banks, Manila, either by messenger, or by mail addressed to: DEPARTMENT OF COMMERCIAL AND SAVINGS BANKS Central Bank of the Philippines P.O. Box 616, Manila b. All banking offices located in Cebu City and Davao City shall submit both the original and the duplicate of required reports direct to the respective Central Bank Regional Offices located in said cities. c. Where a particular report forms calls for distribution of copies to other departments of the Central Bank, the bank concerned shall furnish said copies of the report direct to the respective department of the Central Bank. [MAB-DSE 3-11-71] C. Manner of Submission of Reports 1. Regular Reports on the Various DCSB Forms . Original report is to be submitted to the respective regional office; duplicate to the Department of Commercial and Savings Banks. 2. "Call" Reports . The manner of submission shall be as specified in the letter calling for the report. 3. Replies to Letters Emanating from the DCSB (Manila) . These shall be addressed and sent direct to the Department of Commercial and Savings Banks, Central Bank. D. Deadlines for Submission of Reports The deadlines for submission of reports enumerated in 2.Appendix A, both periodic and non-periodic, which are being submitted/to be submitted by banks to the Department of Commercial and Savings Banks, Central Bank, are hereby amended such that the period within which to submit said reports shall be reckoned on the basis of banking days instead of on calendar days . For this purpose, banking days shall be understood to mean Monday thru Friday or banking days of the Central Bank. [CL 2-28-75] APPENDIX B (Book I, Part 2) CHART OF ACCOUNTS FOR REPORTING PURPOSES For the purpose of achieving uniformity in reporting on CBP-7-16-03, (Published Statement of Condition) and other related Central bank report forms, below are definitions/descriptions of the accounts appearing in said report form. Certain items which should not be included in a particular account are clearly mentioned to emphasize that they should be categorized elsewhere. [MAB-GOV. 11-18-70] a. Cash . Total cash held by the bank consisting of both notes and coins in Philippine currency. DO NOT INCLUDE in this item, foreign currency held by the bank and petty cash fund being maintains for petty expenses, which should, be reported in item j, Other Assets. b. Checks and Other Cash Items . The account includes (1) Checks, drawn on other banks negotiated and presented for clearing/payment through established clearing channels in Manila or to any established CB regional clearing offices. (2) Government checks, postal money orders and warrants drawn on the Treasurer of the Philippines which are in process of collection. (3) Such other items in process of collection payable immediately upon presentation in the Philippines as are customarily collected by banks as cash items. DO NOT INCLUDE foreign currency checks; post-dated checks; checks and other cash items received on a "collection basis"; out-of-town checks encashed or accepted for deposits or received in payment of a liability account which are not collectible through established clearing channels; returned items (whether or not in process of collection); and all other cash items not in process of collection. c. Due from the Central Bank of the Philippines . All deposits of the reporting banks with the Central Bank. Credit balance or the overdrawing on this account should be reported in item o, Bills Payable. cdlex d. Due from Other Banks . The item includes (1) Deposits (demand, savings and time) of the reporting bank with other banks in the Philippines. (2) Deposits (demand, savings and time) of the reporting bank with correspondents or other banks in foreign countries. (3) Debit balances of accounts maintained by the reporting bank with other local banks for direct settlement of interbank claims. The account should be reflected at gross amount and any credit balances or over-drawings of the account should be shown in item o, Bills Payable. DO NOT INCLUDE in this item, balances with closed banks or banks in liquidation, which should be reported under item j, Other Assets; and loans to banks (such as call loans or those evidenced by bankers acceptances, promissory notes, etc.) which should be shown under item e(1) Loans and Discounts. e. Loan Portfolio . Loans by banks to other banks shall be considered as part of the loan portfolio of the lending banks. [MAB-DG 6-30-71] (1) Loans and Discounts . The account represents the aggregate book value (net of valuation reserves) of (a) All loans, advances and discounts (including call loans and notes, bills or other Commercial paper issued by private concerns acquired by the bank either directly from issuing company or from other holders by Subsequent discounting of the instrument extended to persons or firms, including banking institutions; [MAB-G 3-2-71] (b) Past due loans and discounts; (c) Loans and discounts under litigation; and (d) Contract mortgage receivable arising from the sale of assets acquired in settlement of loans where title to the property has been transferred to the buyer. [MAB-DAB 10-23-63] The loans and discounts, bills purchased, acceptances and other accounts affected by discounting and/or rediscounting transactions with recourse" with the Central Bank and/or other financial intermediaries shall remain as part of the bank's loan portfolio. A footnote in the financial statement shall indicate the outstanding balances of the discounted and/or rediscounted loans. [MAB 1-30-76] (2) Overdrafts . The aggregate (less valuation reserves) of debit balances of customers' checking accounts which the bank has authorized to be overdrawn, whether or not covered by an overdraft agreement. (3) Bills Purchased . The aggregate book value (less valuation reserves) of negotiable commercial paper such as notes, domestic bills and foreign bills purchased by the bank. DO NOT INCLUDE in this item, out-of-town checks (those which are not collectible through established clearing channels) encashed or credited to customers' accounts, which should be reported under item j, Other Assets. (4) Customers' Liability on Drafts under L/C and T/R . The item includes the total (less valuation reserves) of (a) Liability of customers on drafts drawn or negotiated under letters of credit issued by the reporting bank. (b) Liability of customers arising from other credit instruments in connection with import financing and/or transactions; (c) Liability of customers originating from transactions described in e.(4)(a) and e.(4)(b) above where the corresponding goods and/or documents are released to the customer under trust receipt agreement. DO NOT INCLUDE customers' liability on drafts which may be properly included in the next item Customers' Liability for this Bank's Acceptances Outstanding. (5) Customers' Liability for this Bank's Acceptances Outstanding . The total liability (less valuation reserves) of the bank's customers on drafts or bills of exchange arising from import-export transactions and movement or storage of goods which have been accepted by the reporting bank or by its agents or correspondents. f. Investment in Bonds and Other Securities . The total holdings (less valuation reserves) of all bonds, treasury bills and other securities. Philippine Government securities are classified under three categories (national government; provincial, city and municipal governments; and government instrumentalities and agencies). All other securities which do not fall under these three categories are to be classified either as securities of domestic private enterprises; foreign government issues; or foreign corporation issues, as the case may be. The basic criterion in the classification of bonds and securities is the character of the original issuing entity, that is, the principal debtor for the bond issue. [MAB-DSE 8-17-67] Listed below are government securities issued and/or serviced by the Central Bank (outstanding as of August 31, 1972) grouped according to its correct classification: (1) National Government Direct Issues : (a) Treasury Bills (b) Treasury Notes (c) Capital Treasury Notes (d) Treasury Certificates of indebtedness (c) Public Works and Economic Development Bonds (f) Socio-Economic Bonds (g) Republic of the Philippines 6-% External Loan Bonds (h) Republic of the Philippines Replacement Bonds (i) National Irrigation Administration Bonds (j) Negotiable Land Certificates (k) Land Bank Capital Bonds (should be distinguished from Land Bank Bonds) (2) Government Instrumentalities and Agencies * (Government Guaranteed Bonds) : (a) Metropolitan Water District Bonds (b) National Waterworks & Sewerage Authority Bonds (c) National Power Corporation Bonds (d) Central Bank Stabilization Certificates of Indebtedness, Series A, B & C (for open market operations) (e) Central Bank Stabilization Certificates of Indebtedness Special Series (for implementation of CB Circular No. 332) [CL-AB-DSE 9-27-72] Classification of items on CBP-7-16-05 should tally with that on CBP-7-16-06. [CL-AB DSE 7-12-71] DO NOT INCLUDE shares of stock representing membership in clubs for public relations purposes (which should be reported in item j, Other Assets) and corporate shares of stock held temporarily as a result of foreclosure on loans (which should be shown in item i, Other Property Owned or Acquired); and commercial paper (which should be reported in item e(1), Loans and Discounts or item e(3) Bills Purchased). g. Due from Head Office, Branches and Agencies . Total balances due from the head office, branches and agencies of the reporting bank. h. Bank Premises, Furniture and Equipment . The book value, net of depreciation reserves, of all bank premises, furniture and equipment. Bank premises owned include premises actually occupied by the bank and its branches including construction in process, lease hold improvements, vaults, fixed machinery, equipment and installations, manager's and officer's residences, staff houses, and parking lots which are used by the employees or customers. The term "leasehold improvements" comprehends the following: (1) Where the bank erects a building on leased property; (2) Where the bank occupies premises and capitalizes the cost of vaults, fixed installations and equipment, and of other improvements which will become an integral part of said leased property. i. Other Property Owned or Acquired . The item includes the book value of (1) Real estate acquired through foreclosure proceedings; (2) Shares of stock, bonds or chattels acquired in settlement of loans or debts previously contracted; (3) Contract mortgage receivable arising from the sale of assets acquired in settlement of loans where the corresponding title to the property is still with the reporting bank. j. Other Assets . All assets that cannot be properly included in any of the preceding accounts such as foreign currencies, petty cash, accounts receivable, deferred charges, shortages, etc. k. Deposits . The total amount of deposit liabilities of the reporting bank including garnished accounts and guaranty accounts securing loans granted by the reporting bank. Deposits shall be grouped into the following: (1) Demand deposits all demand deposits of individuals and firms (excluding banking institutions) subject to withdrawal by check; (2) Savings deposits Deposits of individuals and firms (excluding banking institutions) ordinarily evidenced by savings pass books; (3) Time certificates of deposits Deposits of individuals and firms (excluding banking institutions) evidenced by an instrument issued by the reporting bank providing that such deposit will mature at a specified future date; (4) Deposits of the Government, its political subdivisions and instrumentalities Total amount of all types of deposits of the Philippine Government and its political subdivisions and government-owned and/or controlled corporations. prlex DO NOT INCLUDE collections of internal revenue taxes and stabilization taxes, customs duties, etc. which should be reported under item q, Other Liabilities. Where the peso equivalents of the foreign currency deposits under Circular No. 304 are to be shown, said peso equivalents shall be computed by applying the guiding rate obtained on the reporting date. [MAAB-DG 6-17-71] (5) Deposits of banks The total of all types of deposits of other banks, including credit balances, of accounts used to settle inter-bank claims. Overdrawn deposits of banks should be included in item e(2), Over-drafts. l. Due to Head Office, Branches and Agencies . Total balances due to head office, branches and agencies of the reporting bank. m. Cashiers', Managers' and Certified Checks . Included in this item are (1) Outstanding checks drawn on the reporting bank by a cashier, manager or other authorized officer of the bank; (2) Outstanding certified checks drawn upon the reporting bank where the drawers' account is immediately charged; (3) Such checks sold to other customers. n. Outstanding Acceptances Executed by, or for Account of this Bank . This is the contra of "Customer's Liability for this Bank's Acceptances Outstanding". o. Bills Payable . Includes (1) all borrowings from any source, such as the Central Bank, other banks, or other creditors, whether bank or not or whether the creditor is located here or abroad, (2) all borrowings of any type or form, such as call loans, regular overdrafts, temporary overdrafts or over-drawings, acceptances payable, advances, open accounts and all other borrowings regardless of the account title used in the bank's books including deposit substitutes, and (3) bank's liability for discounted and/or rediscounted papers "with recourse" with the Central Bank and/or other financial intermediaries. [MAB 1-30-76] p. Marginal Deposits on Letters of Credit . Deposits made by importers/customers on opening of letters of credit and/or authorities to purchase for imports. q. Other Liabilities . All liabilities that cannot be properly included in any of the preceding liability accounts such as accrued taxes, interest and other expenses, overages, collections of internal revenue taxes and stabilization taxes, and sales of CBCI. [MAB-DCSB 12-28-70] All unclaimed balances, which include credits or deposits of money, bullion, securities or other evidences of indebtedness of any kind, and interest thereon, already reported to the Treasurer of the Philippines in accordance with the Unclaimed Balances Act (Act No. 3936, as amended by Presidential Decree No. 679 dated April 2, 1975) shall be transferred/reclassified from the deposit liability/other credits accounts to the liability account under caption "Due to the Treasurer of the Philippines," until they are deposited with or turned over to the Treasurer of the Philippines upon order of the court that the same have been escheated in favor of the government. [MAB 2-6-76] r. Unearned Income and Other Deferred Credits . The unearned portion of items of income received or collected in advance. s. Capital Stock . Includes total value of common and/or preferred stock outstanding and paid-up. DO NOT INCLUDE advance payments on capital corresponding to an increase in authorized capital stock, which increase has not yet been approved by the Central Bank and not yet registered with the Securities and Exchange Commission. This should be reported under item q, Other Liabilities. t. Assigned Capital . Total capital assigned by a foreign bank to its Philippine branch. To be filled only by Philippine branches of foreign banks. u. Surplus . Includes amounts formally transferred to the surplus account usually derived from undistributed earnings. v. Surplus Reserves . That part of surplus designated, appropriated or earmarked for specific purposes such as reserve for bank's expansion, reserve for contingencies, etc. Reserve for Contingencies consists of amounts set aside for possible or unforeseen decrease or shrinkage in the book value of assets, or for other unforeseen or indeterminate liabilities not otherwise reflected in the books of the bank. DO NOT INCLUDE valuation reserves (like reserve for depreciation or reserve for bad debts) created to reduce the carrying value of certain assets, which should be shown as deduction from the specific assets against which they have been provided. w. Undivided Profits . The portion of undistributed earnings, including the balance of the profit and loss account as of date of the report, which have not been transferred to surplus. x. Contingent Accounts . When denominated in foreign currency, Contingent Accounts shall be converted into pesos at the guiding rate on reporting date. (1) Unused commercial letters of credit . The unutilized balances of all commercial letters of credit issued by the bank, grouped into: (a) Foreign Letters of credit covering foreign trade transactions including letters of credit issued under various and special types of financing agreements. (b) Domestic Letters of credit covering domestic or local transactions. (2) Inward bills for collection . Domestic or foreign bills, drafts or checks received for collection by the reporting bank. (3) Outward bills for collection . Domestic or foreign bills, drafts or checks sent by the reporting bank to other banks, foreign branches or correspondents for collection by the latter. (4) Future exchange bought . Actual commitments entered into by the bank which involve the purchase by the bank of foreign exchange at an agreed rate, delivery and payment to be made at a stipulated future date. (5) Future exchange sold . Actual commitments entered into by the bank which involve the sale by the bank of foreign exchange at an agreed rate, delivery and payment to be effected at a stipulated future date. (6) Items held for safekeeping . Shares of stocks, bonds, and other securities which may be entrusted to the bank for sale to the public; securities assigned or pledged to the bank as guaranty for advances or loans made, if the bank desires to record such securities for control purposes; all other items which the bank may hold for safekeeping for its customers which cannot be included properly under Trust Department accounts. (7) Trust Department accounts . All accounts administered by, standing to the credit of the Trust Department of the bank. (8) Rediscounts . All amounts representing the secondary liability of the bank for rediscounts with or sale to the Central Bank or other banks of eligible papers. DO NOT INCLUDE bank's liability for the discounted papers "with re-course" with the Central Bank and/or other intermediaries. The outstanding balances of the discounted/rediscounted loans shall however be indicated in a footnote in the financial statement. [MAB 1-30-76] (9) Others (specify) . All other accounts which are contingent in nature and cannot be properly classified under any of the preceding accounts. Development Bank of the Philippines (DBP) Progress Bonds held by Agent Banks on consignment basis should be reported at par value in the financial statements of banks. [MAAB 8-5-69] The par value of CBCI's held by banks on consignment basis are lodged under contingent accounts, and the amount of CBCI'S, if any, should be shown by footnote on CBP-7-16-05. [MAB-DSE 11-5-70] Footnotes * Other government securities issued and serviced directly by the issuing corporation: 1. DBP Progress Bonds 2. DBP Interim Bonds 3. Land Bank Bonds APPENDIX C CATEGORY B REPORTS OF COMMERCIAL BANKS Report Title Report Number Consolidated Report of Required and Available Reserve Against Deposit Liabilities CBP-7-16-01 Report of Cash in Bank's Vault CBP-7-16-01.1 Special Time Deposit & Reserve Against Them (Consolidated) CBP-7-16-01.2 Report of Changes in the Composition of Securities (Except Premyo Savings Bonds) Held as Reserve for Deposit Liabilities (Rev. March 19, 1975) CBP-7-16-01.A Report of Changes in the Composition of Premyo Savings Bonds Held as Reserve for Deposit Liabilities (New: March 19, 1975) CBP-7-16-01.B Consolidated Report of Earnings, Expenses, Undivided Profits & Surplus CBP-7-16-04 Report of Earnings & Expenses CBP-7-16-04-A Schedules/Attachments to Consolidated CBP-7-16-05.1 to Statement of Condition (CBP-7-16-05) CBP-7-16-05.10 Report on Holdings of Bonds, Notes & Securities (Consolidated) CBP-7-16-06 Statement of Capital Required & Capital Accounts under Sec. 22 or 30 of R.A. 337, as amended CBP-7-16-07 Report on Government Deposits (Consolidated) CBP-7-16-08 Breakdown of Government Deposits CBP-7-16-08.1 Consolidated Report of Available Coverage Against Outstanding Import L/Cs CBP-7-16-09 Unmatured Advances Against Export Products Supported by L/Cs CBP-7-16-09.1 Unmatured Advances Against U. S. Export Sugar (A) CBP-7-16-09.2 Unmatured Advances Against Outward Bills for Collection CBP-7-16-09.3 List of Stockholders & their Stockholdings CBP-7-16-11 Consolidated Report on Compliance with Aggregate Ceiling on Credit Accommodations To Directors/Officers/Stockholders under Circular 357 CBP-7-16-13 Report on Stockholdings of Banks' Directors/ Officers/Stockholders and their wives/husbands/ minor children in Borrowing Corporation/ Association/Firm CBP-7-16-13A Marginal Deposits on import L/Cs & Reserve Against Them (Consolidated) CBP-7-16-14 Consolidated Report on Compliance with Individual Ceiling on Credit Accommodation to Directors/Officers/Stockholders under Circular 357 CBP-7-16-15 Schedule of Banking Hours & Days CBP-7-16-16 Bio-Data of Directors/Officers CBP-7-16-18 Report on Compliance with Obligation to Withhold Tax on Interest Income of Non- Resident Foreign Individuals or Corporations not engaged in Trade or Business in the Philippines CBP-7-16-19 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 Consolidated Report of Required & Available Reserve Against Deposit Substitutes CBP-7-16-22 Basic Report on Foreign Currency Counter- part Loans CBP-7-16-23 Monthly Report on Foreign Currency Counter- part Loans Commercial Terms CBP-7-16-24 Sworn Statement of Quasi-Banking Operation CBP-7-16-25 Consolidated Report on the Utilization of Loanable Funds Set Aside for Agricultural CBP-7-16-27 Credit Application for the Temporary Use of CBCIs & other Government Securities with Remaining Maturities of Less than Two (2) Years, Not Otherwise Eligible as Reserve Against Deposit Liabilities CBP-7-16-29 Application for the Temporary Use of Export Bills With Maturities of Not More than Thirty (30) Days as Eligible Reserves Against Marginal Deposit on Import L/Cs CBP-7-16-30 Loans/Credits Granted to Builders or Purchasers of Units/Shares in Condominium Projects, Country Clubs, Sports clubs and Other Real Property Developments CBP-7-16-32 [Source: CL 12-3-75] APPENDIX D FORMAT RESOLUTION FOR SIGNATORIES OF CATEGORY A-1 REPORTS OF COMMERCIAL BANKS RESOLUTION NO. _______ Whereas, under its Circular-Letter dated December 3, 1975 to all Banks and Non-Bank Financial Intermediaries, the Central Bank of the Philippines requires Category A-1 reports to be signed by the institution's President or Senior Executive Vice-President and by the Chief Finance Officer (i.e., Controller or Chief Accountant); Whereas, the same Circular-Letter requires 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 Executive Vice President 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 2. Mr. _____________, Senior Exec. Vice-President ___________ Specimen Signature and 3. Mr. ______________, Chief Finance Officer (or Controller or Chief Accountant) _______________ Specimen Signature are hereby authorized to sign the Bank's published/condensed statement of condition of _________________________. (Name of Institution) Done in the City of __________________, Philippines, this _______ day of ___________, 197 _______. __________________________ CHAIRMAN OF THE BOARD __________________ __________________ DIRECTOR DIRECTOR __________________ __________________ DIRECTOR DIRECTOR __________________ __________________ DIRECTOR DIRECTOR ATTESTED BY: _________________________ CORPORATE SECRETARY [Source: CL 12-3-75] APPENDIX E FORMAT RESOLUTION FOR SIGNATORIES OF CATEGORY A-2 REPORTS OF COMMERCIAL BANKS RESOLUTION NO. ________ Whereas, under its Circular-Letter dated December 3, 1975 to all Banks and Non-Bank Financial Intermediaries, the Central Bank of the Philippines requires Category A-2 reports to be signed by the institution's President or Senior Executive Vice-President; Whereas, the same Circular-Letter requires 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; prll Whereas, this Board has full faith and confidence in the institution's President or Senior Executive Vice-President 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 Name of Report Officer Signature Title Banking Office No . (For Consolidated Statement and H. O. Quarterly Statement of Condition) 1. Mr. ____________________________________ President or Mr. ____________________________________ Senior Exec. Vice-Pres. 2. Mr. ____________________________________ Manager/Officer-in-Charge are hereby authorized to sign Category A-2 reports, of ( Name of Institution ). Done in the City of ____________, Philippines this __________ day of _______, 197 _________. _________________________________ CHAIRMAN OF THE BOARD __________________ __________________ DIRECTOR DIRECTOR __________________ __________________ DIRECTOR DIRECTOR __________________ __________________ DIRECTOR DIRECTOR ATTESTED BY: _______________________ CORPORATE SECRETARY [Source: CL 12-3-75] APPENDIX F FORMAT RESOLUTION FOR SIGNATORIES OF CATEGORY B REPORTS OF COMMERCIAL BANKS RESOLUTION NO. _________ Whereas, under its Circular-Letter dated December 3, 1975 to all Banks and Non-Bank Financial Intermediaries, the Central Bank of the Philippines requires Category B reports to be signed by the institution's authorized signatories; Whereas, the same Circular-Letter requires 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 signatories 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 Authorized Specimen Position Report Signatory/Alternate Signature Title No . 1. Authorized _____________ _________ ______________ (Alternate) 2. Authorized _____________ _________ ______________ (Alternate) etc. are hereby authorized to sign the named reports. Done in the City of ___________, Philippines, this ______ day of _________ 197 ________. __________________________ CHAIRMAN OF THE BOARD ___________________ _________________ DIRECTOR DIRECTOR ____________________ _________________ DIRECTOR DIRECTOR ____________________ _________________ DIRECTOR DIRECTOR ATTESTED BY: _______________________ CORPORATE SECRETARY [Source: CL 12-3-75] APPENDIX G INFORMATION REQUIRED UNDER CB MEMORANDUM TO ALL BANKS AND NON-BANK FINANCIAL AND NON-BANK FINANCIAL INTERMEDIARIES DATED OCTOBER 28, 1975 1. Name of Institution 2. Address 3. P.O. Box Number 4. Cable address or cable code 5. Board of Directors including Corporate Secretary: a. Names of Chairman, Vice-Chairman and Directors b. Number of directors per By-Laws c. Number of vacancies in the Board d. Names of corporations where they serve as Chairman of the Board or as President and names of other business enterprises of which they are proprietors or partners e. For the Corporate Secretary, indicate if he is also a Director f. Date of annual election of directors per By-Laws 6. Executive officers including Auditor: a. Names and titles b. Telephone Number of each officer (office) c. For the Executive Vice-President, state the names of corporations where he serves as Chairman of the Board and names of other business enterprises of which he is proprietor or partner d. For Vice-Presidents and other officers with non-descriptive titles, indicate area of responsibility, e.g., Vice-President for Operations or Vice-President, International Department e. For commercial banks, DBP, Land Bank and Amanah Bank, include from President to Department Heads 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. [Source: MAB - NBFI 10-28-74] APPENDIX H (Book I, Part 2) DOCUMENTS/INFORMATION REQUIRED UNDER CIRCULAR LETTER DATED OCTOBER 18, 1976 1. Chart of the firm's organizational structures 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 by the supervisory/regulatory department concerned. LLpr [Source: Circular Letter dated 10-18-76] APPENDIX I (Book I, Part 2) MINIMUM INTERNAL CONTROL STANDARDS FOR BANKS I. Proper Accounting Records 1. All banks 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 tickets 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 teller or cashier shall be balanced or counted by another person. 2. The minimum dependent 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 or the person handling the records. b. Irregular and unannounced count of teller's cash and checks and other cash items at, least twice a month and vault cash at least once a month by the auditor/control officer or by an officer not connected with the cash department. c. Monthly reconcilement of due from banks/cash in banks accounts (domestic and foreign) and due from/to head office/branches by someone other than the person handling the records or posting the general ledger entries. d. Periodic verification of securities and collaterals by someone other than their custodian. e. Periodic verification of the accuracy of the interest credits to deposit liabilities accounts. 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, without some check or balance from some other part of the organization. 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 post the depositor'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 drafts/checks should be separated. d. Checks and other cash items should be maintained either by an employee not handling cash or by the Rack/Distributing Department provided that adequate control as to custody and, disposition of funds are properly maintained. e. The receipt of statements from depository bank should be assigned to an employee other than the one connected with the preparation, recording and signing of bank drafts. f. Custodians of securities should not be allowed to handle security transactions. g. Collateral appraisals should be done by us an employee/officer other than the ones approving the loans. h. Incoming checks and other cash items should be recorded chronologically in a register by an employee other than the bookkeeper before they are forwarded for posting purposes. i. Credit reports should be obtained by someone other than lending officers. j. Mailing of customers' statements and delinquent notices should be done by an employee other than the one who granted the loan or the one handling the records. k. Dispatching and delivery of current account statements should be done by someone other than those who have something to do with current account operations such as tellers and bookkeepers. 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 in vault b. All accountable forms c. Collaterals d. Securities e. Documents of title and/or ownership of properties or fixed assets f. Dormant or inactive deposit ledgers and corresponding signature cards g. Import documents h. Trust receipts i. Collection items j. Duplicate keys, safe deposit, spare locks and keys, unrented keys to safe deposit boxes k. Safekeeping items l. Vault doors and safe combinations m. Unissued specimen signature books n. Test key fixed numbers unissued o. Correspondent's and institution's own telegraphic or cable test keys currently in use. V. Signing Authorities Signing authorities for the different levels of officers to sign for and in behalf of the institutions should be approved by the board of directors and the extent of each level of authority should be clearly defined. This signing authorities should include but need not be limited to the following: 1. Lending 2. Investment 3. Approval of expenses 4. Various supervisory reports 5. Bank drafts, manager's/cashier's checks, bank money orders and certificate of time deposits. 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. Cashier's/Manager's checks and Telegraphic Transfers The signature of at least two officers should be required in the issuance of cashier's/manager's checks and telegraphic transfers. The board of directors may, however, prescribe a certain pre-determined amount, by which, one senior officer could sign checks or telegraphic transfers, subject to appropriate control measures. b. Certificate of Time Deposit All certificates of time deposits issued should be signed jointly by two authorized officers. c. Bank Drafts The signature of two authorized officers should be required in the issuance of bank drafts. d. Borrowing The signature of at least two authorized officers should be required. e. 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 system and should be used in registering notes, in issuing official checks and in other similar situations. Number control should be policed by a person designated by senior management who should be detached from the particular operations involved. 2. The following are the forms, instruments and accounts that should be number-controlled: a. Bank drafts b. Manager's and/or Cashier's checks c. Promissory notes d. Savings deposit accounts e. Demand deposit accounts f. Time deposit certificates g. Letters of credit h. Collection items i. Official and provisional receipts j. Certificate of stocks k. Loan accounts l. 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. 3. Tellers should be relieved of their duties during the actual count of their cash accountabilities performed during annual bank examinations. 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 or to an Audit and Examining Committee composed of directors who are not connected with the management. 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 accounts or records by direct correspondence 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. Deposit account balances particularly new deposit accounts, inactive or dormant accounts and close accounts. c. Outstanding balances of borrowings and other liabilities. d. Outstanding balances of receivables/payables. XI. Other Internal Control Standards 1. Deposit Accounts a. Entries to dormant account ledgers should be verified and approved by a designated officer. His initials should be placed next to the entry on the ledger sheet. b. Dormant accounts should be segregated from active account ledgers with a separate subsidiary control. c. Signature cards for dormant accounts should be removed from active files. d. All new current accounts should be approved by a designated officer. e. Signature cards and deposit ledger sheets should be authenticated by some form of validation. Subsequent changes should also be validated. f. Signature cards and deposit ledger sheets should be accessible only to authorized persons. g. Dates appearing on deposit tickets should be occasionally examined at irregular intervals after they have been posted to determine that posting was made on the actual date deposit is received. h. Withdrawals against uncleared check deposits should be allowed only upon prior approval of a responsible officer within the limits of authority set by the board of directors. However, rural banks should not under any circumstances, allow withdrawals against uncleared check deposits. i. Checks should be cancelled as soon as they have been paid and posted. j. Reports on closed accounts and returned checks should be prepared daily. k. All current account statements should be mailed direct to the depositors. Undelivered statements should be retained by an organizational unit not responsible for demand deposit account processing. l. An officer should be designated to attend to customers who report differences on their statements. m. Checkbooks should be issued only against requisition forms signed by an authorized signatory to the account. 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 borrower. b. Employees paying checks for strangers should obtain positive identification of the person and when a large sum is involved, the account on which the check is drawn should be verified. c. No employee should be permitted to process transaction affecting his own account. d. Tellers and other employees having contact with customers should be prohibited from preparing deposit ticket or other records for the customer. e. All banks should have a Sound Recruitment Policy since internal control begins from point of hiring. XII. Internal Control Procedure for Dormant/Inactive Accounts 1. Definition of dormant or inactive accounts a. Current or checking accounts showing no activity (deposit or withdrawal) for a period of one year. b. Savings accounts showing no activity (deposit or withdrawal) for a period of two years. 2. Procedure for classification Initially, review all deposit ledgers and segregate accounts that fall under 1.a and 1.b above At the end of every semester thereafter, review all deposit accounts and segregate those accounts that became dormant during the semester just ended. 3. Internal Control Measures a. As a matter of policy, banks should exert all efforts to prevent checking and savings accounts from becoming dormant. When it becomes apparent that an account is inactive, a short letter should be sent to the depositor encouraging him to use his account. In case of checking accounts, the bank should exert effort to assure itself that the monthly statement of accounts reach the depositors. If the depositors cannot be located, the following steps should be undertaken: 1) Check any significant changes or fluctuations in the depositors account balance over a period of time with emphasis on accounts with decreasing balances. 2) Verify apparent reactivation entries, represented either by deposit or withdrawal, that appears to have prevented the account from being classified as dormant. 3) Investigate any obvious alteration of the ledger records. b. Segregated dormant accounts should be placed under joint custody of two responsible officers/employees. c. A separate ledger control for dormant accounts should be maintained. d. Signature cards for dormant accounts should also be segregated from active files and held under joint custody. e. Entries to dormant account ledgers should be verified and approved by a designated officer. His initials should be placed next to the entry on the ledger sheet. f. All inquiries on dormant accounts should be coursed to one officer who should obtain sufficient identification from the inquirer to assure that he is entitled to the information. g. A trial balance of dormant account ledgers should be taken periodically and balanced with the general control account by an employee other than the bookkeeper. h. Dormant or inactive accounts should be verified directly with depositors. i. All transactions affecting dormant accounts should be subject to audit by the internal auditor. j. A semestral report on deposit accounts transferred to dormant should be rendered to bank management. [Sources: Circular Letter dated 11-29-76; Circular Letter dated 9-8-78, as amended by Circular Letter 2-5-79] APPENDIX J (Book I, Part 2) RULES AND REGULATIONS ON BANK PROTECTION The following rules and regulations shall be observed on bank protection: SECTION 1. Objectives . These regulations are designed to: a) Insure maximum protection of lives and property against bank robberies; b) Prevent bank robberies by making it difficult for or discouraging would-be robbers to carry out their nefarious plans; and c) See to it that, if robberies are indeed committed, bank employees and other witnesses can effectively help law-enforcement authorities in the identification, eventual apprehension and successful prosecution of the perpetrators thereof. SECTION 2. Definitions . For purposes of these regulations, the following definitions are hereby adopted unless the context clearly indicates otherwise: a) "Banking Office" means the main office of a bank or a branch and includes an extension office, sub-office, agency or a moneyshop. b) "Banking Hours" means the time during which a banking office is open for the normal transaction of business with the public. c) "Teller's Station" or "Window" means a location in a banking office at which bank customers routinely conduct transactions with the bank including a walk-up or drive-in teller's station or window. SECTION 3. Designation of Security Officer . Within sixty (60) days from April 27, 1977, the board of directors of each bank shall appoint or designate a qualified Security Officer who shall be under the direct supervision of the president and shall be responsible for the development and administration of a security program and the installation, maintenance and operation of security devices in accordance with the standards prescribed by the Central Bank in separate rules and regulations. The Security Officer must be at least twenty-five years of age, a college graduate, with at least two years experience in the field of law-enforcement/police matters, of unquestionable integrity and of good moral character. SECTION 4. Security Program . The security program of each bank shall be in writing, approved by its board of directors and retained in such form as will readily permit determination of its adequacy and effectiveness and shall contain provisions as may be prescribed by the Central Bank. SECTION 5. Security Devices . Within thirty (30) days from the designation of the Security Officer in the case of a bank with less than ten (10) branches; sixty (60) days in the case of a bank with ten (10) but less than twenty (20) branches; and ninety (90) days in the case of a bank with twenty (20) or more branches, the Security Officer shall, under the direction of the bank's president, conduct a security survey and submit a report on the needed security devices in each of the bank's banking offices. cd Within one (1) year from April 27, 1977, banks shall effect the installation, maintenance and operation, as individually appropriate, of the following in each banking office existing as of the effectivity hereof: a) A lighting system for illuminating, during the hours of darkness, the area around the vault, if the vault is visible from outside the banking office; b) Tamper-resistant locks on exterior doors and windows designed to be opened; c) An alarm system or other appropriate device for promptly notifying the nearest law-enforcement officers of an attempted or perpetrated robbery; and d) Such other devices as the Security Officer shall determine to be appropriate for discouraging robberies and for assisting in the identification and apprehension of persons who commit such acts: Provided, That the Security Officer shall consider, among other things, the following: 1) The incidence of crimes against the particular banking office and other business establishments in the area in which the banking office is located; 2) The amount of currency or other valuables exposed to robbery; 3) The distance of the banking office from the nearest law-enforcement officers and the time ordinarily required for such law-enforcement officers to arrive at the banking office; 4) The cost of the security devices; 5) Other existing security measures in effect at the banking office; and 6) The physical characteristics of the banking office structure and its surroundings. Each bank shall install, maintain and operate security devices which are expected to give a general level of bank protection equivalent, at least, to the standards prescribed by the Central Bank in separate rules and regulations. SECTION 6. Reports . Within fourteen (14) months after April 27, 1977 and as of the last business day of December of every year thereafter, each bank shall file with the Department of Commercial and Savings Banks a statement certifying to its compliance with the requirements of Central Bank rules and regulations on bank protection in accordance with the format shown in Attachment J.1 SECTION 7. Corrective Action . The Governor of the Central Bank shall designate a representative or representatives who shall be knowledgeable in bank protection to personally determine if the security measures, devices or procedures used or adopted by a bank meets the requirements of these regulations and its suppletory regulations, and if based on the report of the representative/s, the bank fails to meet the standards herein set forth, the Governor may direct or require the bank to take necessary corrective actions. SECTION 8. Penalty Provision . Violation of or failure to comply with any of the provisions of these regulations or of such other rules and directives which may be issued by the Central Bank in the implementation hereof shall subject the offenders to the administrative sanctions which may be imposed by the Central Bank, and/or to the penal provisions of Republic Act No. 265, as amended. [Source: Circular 566 dated 4-27-77] ATTACHMENT 1 (Book I, Part 2) FORMAT CERTIFICATION ON COMPLIANCE WITH RULES AND REGULATIONS ON BANK PROTECTION I hereby certify to the best of my knowledge and belief that the security program that this bank has developed and is administering equals or exceeds the standards prescribed by the Central Bank rules and regulations under Circular No. 566 dated April 27, 1977, and Memorandum Circular to All Banks dated April 27, 1977 that such security program has been reduced to writing, approved by this Bank's, Board of Directors in Resolution No. _______ dated __________ and retained by this Bank in such form as will readily permit determination of its adequacy and effectiveness. I hereby further certify that the bank Security Officer has provided for the installation, maintenance and operation of appropriate security devices as prescribed by the aforementioned Appendix. ___________________ President or Authorized Officer __________________ Date [Source: Circular 566 dated 4-27-77] APPENDIX K (Book I, Part 2) PROCEDURES ON COLLECTION OF FINES FROM BANKS For uniform implementation of the regulations on collection of fines from banks (see Item (b)(3) of Subsec. 124.21), the following procedures shall be observed: 1. The department or office imposing the fine shall furnish the Accounting Department a copy of its notice to the bank for the fines imposed indicating therein the date said notice was received by the bank. This shall serve as basis for entries to Accounts Receivable and debit against the bank's demand deposit account after the lapse of thirty (30) days. 2. In the case of fines which the department/office concerned requests the Accounting Department to bill the bank, the date the bill sent by the Accounting Department is received by the bank shall serve as basis for entries to Accounts Receivable and debit against the bank's demand deposit account after the lapse of thirty (30) days. 3. If the fine is not paid voluntarily within the 30-day period, the Accounting Department shall debit the demand deposit account of the bank, provided, the balance of said demand deposit account is sufficient to cover the fines due. Fines that cannot be debited against the bank's demand deposit account due to insufficiency of balance shall be reported by the Accounting Department to the department/office concerned which shall then recommend the appropriate sanctions against the bank, its directors and/or officers. [Source: Memorandum (To All Heads of Sectors, Departments and Offices) dated 6-5-80] PART 3 Lending Operations SECTION 131. Loans in General . * SUBSECTION 131.1 Loan Limits a. Loan limit to a single borrower . Except as the Monetary Board may otherwise prescribe, and subject to the exclusions provided in Section 23 of Republic Act No. 337, as amended, the total liabilities of any person, company, corporation or firm, to a commercial banking corporation for money borrowed shall at no time exceed fifteen per cent (15%) of the unimpaired capital and surplus of such bank. The total liabilities of any borrower may amount to a further fifteen per cent (15%) of the unimpaired capital and surplus of such banking corporation, subject to the requirements of the second paragraph of Section 23 of Republic Act No. 337, as amended. aisadc b. Loan limits to allied undertakings . The total loans which a commercial bank may extend to a company/firm where the bank has an equity investment shall, unless otherwise allowed by the Monetary Board, not exceed 15% of the bank's networth after deducting the bank's investment in the stock of the borrowing company/firm. [CL 1-4-74] [All loans granted, whether funded by trust funds or not, shall be subject to loan limits to a single borrower. (See Subsec. 174.2)]. SUBSECTION 131.11 Definition of terms . For the purpose of implementing Subsec. 131.1 (a), the following definitions of terms and phrases shall apply: a. The term "liabilities" shall mean the direct liability of the maker or acceptor of paper discounted with, or sold to such bank, and the liability of the indorser, drawer, or guarantor who obtains a loan from or discounts paper with or sells paper under his guaranty to such bank, and shall include, in the case of liabilities of a co-partnership or association, the liabilities of the several members thereof; and in the case of liabilities of a corporation, all liabilities of all subsidiaries thereof in which such corporation owns or controls a majority interest. b. The term "money borrowed" shall include the direct liability of the maker or acceptor of paper discounted with or sold to such bank, commercial or business paper actually owned and discounted by the person negotiating the same, which are either past due or renewed at maturity; and bills of exchange which exempt the drawer from liability and holds only the acceptor liable. c. The term "unimpaired capital and surplus" means the combined capital accounts of such bank, and shall include its paid-in capital and surplus. The term "surplus" shall include the sum of such items representing the excess of the assets over the sum of the liabilities and paid-in capital of the bank, but excluding not only the reserves set aside for valuation purposes, but also reserves set aside to cover liabilities. d. "Readily marketable non-perishable staples" shall mean articles of commerce, agriculture or industry of such uses as to make them the subject of constant dealings in ready markets with such frequent quotations as to make their prices easily and definitely ascertainable, or which lend themselves easily to disposal by sale at any time to pay the obligations secured by the said staples and which are non-perishable in character, and reasonably sure of maintaining their values as security at least for the duration of the obligation secured by the said staples or the usance of the draft drawn against them. A staple is not considered readily marketable if it is imported not for resale, but for the exclusive use of the buyer or the importer; such as, machinery, equipment and construction materials which are to be used exclusively for the construction of the factory or building belonging to the buyer or importer of the said staple. e. The term "bill of exchange drawn in good faith against actually existing values" shall mean one which is drawn by a seller on the purchaser for the purchase price of commodities sold. A bill of exchange, whether drawn against goods for exports or against goods to be sold locally, which is discounted or purchased by a bank is a bill drawn against existing values only when it is accompanied by shipping documents, warehouse receipts or other papers securing title to the goods sold. However, bills of exchange drawn in good faith against actually existing values as defined in this paragraph, which are past due or the maturities of which have been extended, shall be considered as additional loans authorized under the second paragraph of Section 23 of Republic Act No. 337, as amended, and shall be subject to the fifteen per cent (15%) limitation provided therein. f. The term "commercial or business paper actually owned by the person negotiating the same" shall mean a paper arising from an actual business transaction. A trade acceptance or promissory note actually owned by the person negotiating the same is a commercial or a business paper. However, if a bill is drawn against an agent or fictitious drawee, or if a promissory note is executed by an agent or fictitious drawee, neither is a commercial nor a business paper. Commercial or business papers actually owned and discounted by the person negotiating the same, which are past due or the maturity of which have been extended, shall be considered as money borrowed and shall be subject to the limitation of fifteen per cent (15%) provided in the first paragraph of Section 23 of Republic Act No. 337, as amended. [Regulation A, 7-8-54] SUBSECTION 131.12 Determination of total loans to a single borrower a. The liabilities to the bank of borrowers whose papers were discounted and/or rediscounted by banks with the Central Bank or any other institution shall not be deemed as having been extinguished by the discount and/or rediscount, but shall be considered as still existing and shall be included in determining the total loans to a single borrower for purposes of compliance with Section 23 of Republic Act No. 337, as amended, until such papers are paid by the borrowers. [MAB 3-17-64] b. The portions of the special time deposit loans covered by IGLF guarantee shall be excluded in the determination of the maximum aggregate loans which a commercial bank may grant to a person, company, corporation or firm. [MB Res. 371-2-22-74] SUBSECTION 131.13 Requirements for grant of additional loans . No bank shall make any additional loan and advance under the second paragraph of Section 23 of Republic Act No. 337, as amended, unless these three requirements are fulfilled: a. The actual market value of the staples securing the additional loan or advance is equal to at least 125% of such additional liabilities; b. The staples are fully covered by insurance; and c. The additional loans or advances are adequately secured by the collateral specified in the second paragraph of Section 23 of Republic Act No. 337, as amended, and as defined in this subsection. [Regulation A 7-8-54] SUBSECTION 131.14 Exclusions from loan limit . The following shall be in addition to transactions not subject to the limitations under Section 23 of Republic Act No. 337, as amended: a. Accommodations to authorized gold dealers; (Memo to All Authorized Gold Dealers and Primary Gold Purchasers 8-2-74) b. The unused portion of "Authority to Pay" locally known as commercial letter of credit, which is issued for the purpose of financing importation of goods; [Regulation A 7-8-54] c. Credit accommodations to finance the importation of rice and corn to the extent of 100% of the unimpaired capital and surplus of the bank concerned, subject to the following conditions: 1) The importation shall be made in pursuance of a national policy duly enunciated by the National Government; 2) The importation shall have been approved by the National Economic and Development Authority (NEDA); LLpr 3) The letter of credit shall specify that the importation shall be made with a certification from the National Grains Authority (NGA) or the consular establishment of the Philippine Government at the source of any such shipment to the effect that the commodity being imported is either rice or corn; 4) The relative bills of lading shall specify, in addition to the name of the importer concerned, that the NGA shall be the consignee of the shipment; and [MACB 6-29-66] d. The portion of a bank loan guaranteed by the Philippine Export and Foreign Loan Guarantee Corporation which is not past due. [Memorandum 7-24-78] SUBSECTION 131.2 Loan Proceeds SUBSECTION 131.21 Derivative/compensating deposits . As a general rule, banks shall, in no case, require borrowers to leave behind or deposit back with them (lending banks) a portion of the loan proceeds, whether in the form of demand, savings or time deposits. Likewise, no bank shall, during the processing of any loan application or at any time after approval thereof or release of the loan proceeds, enter into any form of agreement, irrespective of the purpose thereof, under which the borrower shall be prohibited from, or limited in, making withdrawals from any of his deposit accounts with such bank while any portion of his loan is outstanding: Provided, however , That this prohibition shall not apply in cases of loans secured by a holdout on deposit(s) to the extent of the unencumbered amount of the deposit(s) existing at the time of the filing of the abovementioned loan application. Violation of this subsection shall subject the bank concerned to the penal sanctions of Section 34 of Republic Act No. 265, as amended, and Section 87 of Republic Act No. 337, as amended, without prejudice to the imposition of administrative sanctions under Section 34-A of Republic Act No. 265, as amended. [Circular 516 5-19-76] The balance of loans granted under the supervised credit program and deposited in special savings deposits of farmers-borrowers is not covered by the aforementioned prohibition. [MB Res. 775 5-4-73] SUBSECTION 131.22 Prohibition from requiring the purchase of lending bank's preferred stock out of loan proceeds . Banks are hereby prohibited from requiring their borrowers to acquire preferred shares of stock of the lending banks out of loan proceeds. [MAB 10 31-69] SUBSECTION 131.23 Utilization of loan proceeds . Before granting a loan, banks shall ascertain the purpose of the loan which shall be clearly stated in the contract between the bank and borrower. The proceeds of a loan shall be utilized only for the purpose(s) stated in the loan contract; otherwise, the bank may terminate the loan and demand immediate repayment of the obligation. Notwithstanding the preceding sentence, the proceeds of a loan may be utilized by the borrower for a purpose(s) other than that originally stated in the loan contract: Provided , That such other purpose(s) is/are among those for which the lending bank may grant loans under existing laws and regulations: Provided, further , That such utilization shall be with the prior written approval of duly authorized officer(s)/committee of the lending bank/its Board of Directors and such written approval shall form part of the contract between the bank and the borrower. Violation of any of the provisions of this subsection shall subject the person(s) responsible/bank concerned to the penal sanctions of Section 34 of Republic Act No. 265, as amended, and Section 87 of Republic Act No. 337, as amended, without prejudice to the imposition of administrative sanctions under Section 34-A of Republic Act No. 265, as amended. [Circular 517 5-19-76] SUBSECTION 131.3 Interest and Other Charges SUBSECTION 131.31 Interest a. Maximum interest rate 1) The effective rate of interest, excluding commissions, premiums, fees and other charges on loan transactions with maturity periods of seven hundred thirty (730) days or less, that may be charged or received by all banks shall not exceed fourteen per cent (14%) per annum for unsecured loans and twelve per cent (12%) per annum for secured loans as defined by Section 2 of the Usury Law, as amended. The charges herein authorized to be collected exclusive of interest shall be governed by the provisions of Subsec. 131.32. 2) The effective rate of interest, including commissions, premiums, fees and other charges, on loan transactions with maturity periods of more than seven hundred thirty (730) days, that may be charged or received by all banks shall not exceed nineteen per cent (19%) per annum, for both unsecured and secured loans as defined by the Usury Law, as amended. 3) 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 outstanding balance. The computation assumes that interest is paid at maturity, or at the end of one (1) year if the maturity of the loan exceeds one (1) year; 4) Except as provided for in this subsection and in Subsec. 152.1, all loans or renewals thereof shall continue to be governed by the Usury Law, as amended. [Circular 586 12-24-77] 5) Whenever any person or entity violates any of the provisions of Subsec. 131.31 (a) the person or persons responsible for such violation shall be subject to the penalty prescribed in the first paragraph of Section 34 of Republic Act No. 265, as amended, and/or the penalty prescribed in Section 10 of Act No. 2655, as amended, without prejudice to any action under the provisions of the second paragraph of Section 34 of Republic Act No. 265, as amended, and the imposition of administrative sanctions under Section 34-A of said Republic Act. [Circular 498 1-2-76 and Circular 589 12-24-77] 6) In the computation of interest on loans/other credit accommodations, the number of days comprising a year shall be based on the following: when the term is one (1) year or more, a year shall mean 365 days; and when the term is less than one (1) year, the interest/yield shall be computed on the basis of 360 days in a year. The illustrative examples/formulas shown in 3. Appendix P shall be the basis for the computation of proceeds/discount rates on loans at effective rates of 12 and 14 per cent per annum. [Memorandum 12-29-78] 7) Section 2 of Presidential Decree 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. [CL 3-19-80] b. Interest rate in the absence of stipulation . The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be twelve per cent (12%) per annum. [Circular 416 7-29-74] SUBSECTION 131.32 Miscellaneous charges . For loans with a maturity of 730 days or less, commercial banks, specialized banking institutions such as the Development Bank of the Philippines and the Land Bank, shall be allowed to collect charges other than pure interest, on a per annum basis on the loan principal or the outstanding balance thereof, whichever is lower, not exceeding the following rates: Amount Maximum Rate Per annum Not over P500,000 2.00% Over P500,000 but not over P1,000,000 1.75% Over P1,000,000 but not over P2,000,000 1.50% Over P2,000,000 but not over P3,000,000 1.25% Over P3,000,000 but not over P5,000,000 1.00% Over P5,000,000 .75% A minimum charge of P20.00 per annum may be collected for loans below P1,000.00. No person or corporation shall require charges to be paid in advance for a period of more than one year. In the case of a credit line and other similar credit accommodations, the charges shall be computed on the amount of each availment. Charges for purposes of this subsection shall include commissions, premiums, fees, such as commitment fees, and other similar charges, but shall not include registration fees, mortgage redemption insurance, documentary and science taxes and such other expenses independently determinable and which do not accrue to the ending entity, its affiliates, subsidiaries and their personnel. cdtech The provisions of Subsec. 131.31 (a) (2) shall govern charges on loan with a maturity of more than 730 days. [Circular 504 2-6-76, as amended by Circular 727 4-8-80] SUBSECTION 131.33 Accrual of interest earned on loans . All banks are allowed to accrue interest earned on loans, subject to the following guidelines and/or procedures: a. Only interest earned on current loans shall be accrued. Therefore, no accrual of interest income is allowed if the loans or loan installments have matured or have become past due, in accordance with the criteria for past due accounts or loan installments in arrears, provided in Subsec. 131.4. Current loans , as used herein, includes extended, renewed and restructured loans. b. Interest earned on extended, renewed or restructured loans may be accrued, provided there is no previously accrued but uncollected interest thereon. c. Accrued interest earned but not yet collected/received on loans or loan installments shall not be considered as profits and/or earnings eligible for dividend declaration and/or profit-sharing purposes. d. A contra account to be designated "Allowance for Uncollected Interest on Loans" shall be set up if accrued interest receivable on loans or loan installments as set up in Items (a) and (b) above is still uncollected after six (6) months from the date such loans or loan installments have matured or have become past due. e. The amount representing Allowance for Uncollected Interest on Loans may be chargeable against the excess of outstanding valuation reserves for loans and other risk assets as appearing in the bank's books, over those recommended by the appropriate supervising and examining department of the Central Bank. The balance thereof, if any, shall be chargeable against operations. f. For all purposes, the Allowance for Uncollected Interest on Loans shall be considered a valuation reserve/allowance against the Accrued Interest Receivable account. [MAB 6-3-76] SUBSECTION 131.4 Past due accounts SUBSECTION 131.41 Definition . 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 Manuals of Accounts for banks, which are not paid at maturity. SUBSECTION 131.42 Accounts considered 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. 131.43 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. Bills 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; 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 Provided, however , That in the case of loans or receivables of rural banks payable in installments, only the loan installment or portion thereof shall be considered past due; f. Any due and unpaid loan installment or portion thereof, from the time the obligor defaults, for the purpose of determining delinquency on the payment of obligations as defined in Subsec. 121.1(b); and g. All items in litigation as defined in the Manuals of Accounts for banks and non-bank financial intermediaries. SUBSECTION 131.43 Demand loans . Banks 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 131.44 Accruals of interest income . 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 131.45 Renewals/extensions . 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 131.46 Reporting requirements . Banks shall report the end-of-month level of their past due accounts and installments in arrears for less than the number indicated in Subsec. 131.42(e), and for those using the accrual basis of accounting, the accrued interest thereon, subject to Subsec. 131.44. [Circular 645 12-27-78] SUBSECTION 131.47 Restructuring or refinancing of loans . Restructuring or refinancing of a loan or an advance may be favorably considered when the arrearages thereon, including interest and other charges, amount to less than twenty per cent (20%) of the total outstanding obligation including interest and other charges: Provided . That: (a) the security position permits (which should be realistic, i.e., the loan value, as prescribed under Section 78 of Republic Act No. 337, as amended, of the collaterals exceeds or equals the outstanding balance of the loan plus accrued interest and other charges); and (b) the accrued interest so restructured is credited to "Interest Earned Not yet Collected" or other account of similar import, and treated as a deferred credit pending its collection. [MB Res. 1002 5-17-74] SUBSECTION 131.48 Writing-off of loans as bad debts a. Definition of loans and advances . The term "loans and advances" shall include all types of credit accommodations granted to, and advances made by the bank for the account of, the borrowers/debtors, including interest thereon recorded in the books. b. Frequency of write-off . Writing-off of loans and advances by all banking institutions shall be made not oftener than twice a year by its Board of Directors. c. Procedural requirements . Notice/Application for write-off of loans and advances shall be submitted, on the prescribed form, to the Department of Commercial and Savings Banks at least thirty days prior to the intended date of write-off: Provided , That no such loans and advances with an aggregate outstanding amount of P100,000 or more, as certified in said notice/application, shall be written-off without the prior approval of: (1) the Monetary Board, in the case of loans and advances to directors, officers and stockholders of the bank, direct or indirect, as defined in Subsec. 134.3; or (2) the head of the Department of Commercial and Savings Banks subject to confirmation by the Monetary Board in the case of loans and advances other than those mentioned in Item (1) above. [Circular 358 1-22-78] SUBSECTION 131.5 Truth in Lending Act disclosure requirements . All banks are required to strictly adhere to the provisions of Republic Act No. 3765, otherwise known as the "Truth in Lending Act", and shall make the true and effective cost of borrowing an integral part of every loan contract. [Circular 504 2-6-76] SUBSECTION 131.51 Requirement of 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 difference 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. LLcd [Circular 158 10-29-63] The format of the disclosure statement on loan/credit transaction prescribed by the Monetary Board is found in 3. Appendix D, a copy of which disclosure statement shall be furnished every borrower. [Circular 485 10-30-75] SUBSECTION 131.52 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. [Circular 158 10-29-63] 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. [Circular 431 9-2-74] 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 transaction, 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. Amounts 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 (a) the aggregate consideration (down payment plus installments) on the part of the debtor, and (b) the sum of the cash price and non-finance charges. i. Simple annualrate is the uniform percentage which represents the ratio, on an annual basis, between the finance charges and the amount to be financed. 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 financed) in 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 payments (finance charge) in a year) R = 2 x ____________________ x _____________________ x 100 (amount to be (total no. of payments financed) 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 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 131.53 Scope of regulations . The foregoing regulations shall apply to all creditors engaged in the following types of credit transactions: a. Any loan, mortgage, deed of trust, advance and discount; 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. 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 prcd 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. [Circular 158 10-29-63] SUBSECTION 131.54 Availability for inspection of copies of contracts . 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 Director of the Department of Commercial and Savings Banks or his duly authorized deputies. In case the seven items of information mentioned in Subsec. 131.51 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 131.55 Information sheets and other reports to be submitted to the Central Bank Every creditor shall file with the Department of Commercial and Savings Banks an information sheet and such other reports as the Director of the said Department may require, in the form or forms to be prescribed by the Monetary Board, regarding credit transactions entered into by such creditor. SUBSECTION 131.56 Posters . Every creditor shall post in a conspicuous place, in his principal place of business, and branches, if any, an abstract of the provisions of Republic Act No. 3765 in the form (3. Appendix E) prescribed by the Monetary Board which shall be reproduced in a format 60 cms. wide and 75 cms. long. [Circulars 431 9-2-74 and Circular 485 10-30-75] SUBSECTION 131.57 Office authorized to enforce rules and regulations . All orders, policies, instructions, rules and regulations promulgated by the Monetary Board to implement Republic Act No. 3765 shall be enforced by the Department of Commercial and Savings Banks with respect to commercial banks. The head of the Department of Commercial and Savings Banks shall have the authority to inspect or examine, personally or by deputy, all books, documents, papers or records of any creditor, necessary in his judgment to ascertain the facts relative to any credit transaction where the creditor requires as an incident to the extension of credit, the payment of a finance charge. Furthermore, he may require every creditor to submit data or information regarding contracts within the purview of Republic Act No. 3765 which he may deem necessary in carrying out the purposes of said Act. [Circular 431 9-2-74] SUBSECTION 131.58 Penal provisions . The provisions of Section 6 of Republic Act No. 3765 shall apply in cases of non-compliance with or violation of the Act or any regulation issued thereunder. Non-compliance with the provisions on the disclosure statement and the posting of the abstract of R.A. 3765 shall subject the credit- or concerned to such administrative sanctions as the Monetary Board shall impose. [Circular 158 10-29-63 and Circular 485 10-30-75] SECTION 132. Unsecured Loans . SUBSECTION 132.1 Loans against personal security SUBSECTION 132.11 General guidelines . Before granting credit accommodations against personal security, banks must exercise proper caution by ascertaining that the borrowers, co-makers, indorsers, sureties and/or guarantors possess good credit standing and are financially capable of fulfilling their commitments to the bank. For this purpose, banks shall keep records containing information on the credit standing and financial capacity of credit applicants. SUBSECTION 132.12 Proof of financial capacity of borrower . As minimum requirements, in addition to the usual personal information sheet about the borrower, banks shall require that an application for a credit accommodation against personal security be accompanied by: a. a certified true copy of the latest income tax return of the borrower, in all cases, and b. a certified true copy of the corresponding annual financial statement duly certified by an independent certified public accountant, if the borrower is engaged in business and the credit accommodation applied for exceeds P100,000. SUBSECTION 132.13 Amounts and terms of credit accommodations ; renewals . Banks shall grant credit accommodations against personal security only in amounts and for the periods of time essential for the completion of the operations to be financed. Any extension or renewal of such credit accommodations may be granted only in the amounts and for the periods of time essential for the completion of the particular operation originally financed, subject to the provisions of Subsec. 131.41 (a) on renewals. SUBSECTION 132.14 Signatories . Banks shall require that credit accommodations against personal security be made under the signature of the principal borrower and at least one co-maker, except in the case of a principal borrower whose responsibility and financial capacity are unquestionable, in which case the signature of the borrower shall suffice. SUBSECTION 132.15 Collateral requirement . When circumstances so warrant, banks may require applicants for credit accommodations against personal security to furnish collaterals, without subjecting such collaterals to the maximum loan values prescribed under the first and second paragraphs of Section 78 of Republic Act No. 337, as amended. Such credit accommodations shall continue to be subject to the provisions of this section. SUBSECTION 132.16 Sanctions . The Department of Commercial and Savings Banks may recommend to the Monetary Board, for a violation of the provisions of this section, the imposition of any or a combination of the following sanctions: a. Disqualification of the bank concerned from the credit facilities of the Central Bank; b. Prohibition of the bank concerned from the extension of additional credit accommodations against personal security; and cdt c. Sanctions provided under Sections 34 and 34-A of Republic Act No. 265, as amended, and Section 87 of Republic Act No. 337, as amended. [Circular 583 11-24-77] SECTION 133. Secured Loans . SUBSECTION 133.1 Interest rate on loans secured by government securities . 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 cent (12%) per annum. [Circular 417 7-29-74] For purposes of these regulations, 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. [Circular 433 10-14-74] SUBSECTION 133.2 Insurance on real estate improvements used as collaterals . The required insurance on improvements used as collateral for loans should be such as shall be sufficient to secure seventy per cent (70%) of the appraised value of such improvements or, if inadequately insured, the loan value shall correspond to the extent of insurance taken on such improvements. [Circular 310 8-11-70] SUBSECTION 133.3 Increased loan values of collaterals in special cases . Pursuant to Section 78 of Republic Act No. 337, as amended, the following special cases shall have increased loan values: a. Loans for home building and subdivision development for low and middle-income families against real estate security may be granted up to eighty per cent (80%) of the appraised value of the real estate security: Provided , That 1) such loans shall not be made unless the title to the real estate security is in the name of the borrower or mortgagor; and 2) the subdivision/housing project or plan has been approved by the proper authorities or up to ninety per cent (90%) of the appraised value of the real estate security if such loans are fully guaranteed by the Home Financing Commission (HFC) or other similar government institutions, in addition to the foregoing conditions. b. Loans for the acquisition of any instrument, machinery and other equipment for the use of the borrower in the production, processing, transformation, handling or transportation of agricultural and industrial products may be granted up to sixty per cent (60%) of the appraised value of the assets so acquired with the proceeds of the loan: Provided , That such loans shall not be made unless title to the chattels is in the name of the borrower or mortgagor. If such loan is secured by real estate, the loan may amount up to eighty per cent (80%) of the appraised value of the real estate: Provided , That title to the real estate security is in the name of the borrower or mortgagor. [Circular 627 8-21-78] SECTION 134. Loans/Credit Accommodations to Directors, Officers and Stockholders . As a matter of policy, with respect to loans or credit accommodations, dealings of a bank with any of its directors, officers or stockholders should be in the regular course of business and upon terms not less favorable to the bank than those offered to others. [Circular 357 1-22-73] Any credit accommodation extended by any banking institution to its own stockholders, directly or indirectly, shall require the written approval of the majority of the directors of such financial institution. [Circular 455 3-17-75] SUBSECTION 134.1 Definition of terms . For purposes of this section a. Directors shall refer to the incumbent bank directors duly holding their positions as such in accordance with the corporate by-laws and pertinent provisions of law; b. Officers shall include the president, vice-president, general manager, secretary and others mentioned as officers of the bank, or whose duties as such are defined in the by-laws; or are generally known to be the officers of the bank (or of any of its branches/offices other than the head office) either thru announcement, representation, publication or any kind of communication made by the bank; c. Stockholders shall include any stockholder of record in the books of the bank, 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 bank, individually and/or together with those enumerated in items (b) (1) to (3) of Subsec. 134.3 amount to two per cent (2%) or more of the total subscribed capital stock of the bank; and d. The terms " loans ", " borrow ," " money borrowed " and " credit accommodations " as used in Section 83 of R.A. No. 337, as amended, have reference to the grant, renewal or extension of any loan, discount, credit or advance in any form whatsoever, and shall include 1) Any advance by means of an incidental or temporary overdraft, cash item, vale, etc.; 2) The establishment of a credit line (such as a regular overdraft line, trust receipt line, or discounting line); 3) The opening of a letter of credit (excepted are cash letters of credit); 4) 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; 5) Any advance of unearned salary or other unearned compensation for periods in excess of thirty days; 6) Any other transaction as a result of which a director, officer or stockholder becomes obligated or may become obligated to the bank, directly or indirectly, by any means whatsoever to pay money or its equivalent; and 7) The increase of an existing indebtedness or credit line or letter of credit of the type referred to in items (2) and (3) above. [Circular 357 1-22-73] e. Delinquency in the payment of obligations . See Subsec. 121.1 (b). SUBSECTION 134.2 Transactions not covered . The term "loan", "borrow", "money borrowed" or "credit accommodations" shall not refer to the following transactions: 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 bank or for utilization of maternity and other leave credits; b. The acquisition by a bank of any check or cash item deposited in or delivered to the bank in the usual course of business unless it results in the granting of an overdraft or the carrying of a cash item or checks to prevent an overdraft; c. The increase in the amount of outstanding credit accommodation as a result of additional charges or advances made by the bank to protect its interest such as taxes, insurance, etc. d. 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 by a domestic bank 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 under Subsec. 134.4 once the director, officer or stockholder and/or their related interest, who is a party to the transaction, becomes directly liable to the bank; e. Transactions with a foreign bank which has stockholdings in the local bank where the foreign bank acts as guarantor through the issuance of letters of credit 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 under Subsec. 134.4 in the event that its contingent liability as guarantor becomes a real liability; and f. Deposits of a domestic bank with a foreign bank which has stockholdings in the domestic bank. [Circular 357 1-22-73, as amended by Circular 596 3-1-78] The credit card operations of a banking institution shall not be subject to the regulatory provisions of Subsecs. 134.1 to 134.7 where the credit card holder is a director, officer or stockholder of the bank: Provided , That (a) the privilege of becoming a credit card holder is open to all qualified persons on the basis of selective criteria which are applied by the bank to all applicants thereof; and (b) the bank director, officer or stockholder concerned reimburses the bank for advances made on availments on his credit card within a period of thirty (30) days from the date the bank made such advances. If the director, officer or stockholder concerned fails to reimburse the bank within the 30-day period mentioned above, the transaction shall be subject to the applicable requirements of the aforesaid subsections. [MACB 7-10-78] SUBSECTION 134.3 Direct/indirect borrowings . A director, officer or stockholder is directly/indirectly a party to a loan or credit accommodation extended by a bank in any of the following capacities or instances: a. If the director, officer or stockholder is a party to any of the transactions enumerated in item (d) of Subsec. 134.1 for himself or as the representative or agent of others, or if he acts as a guarantor, indorser or surety for loans from the bank; b. If in any of the credit transactions in item (d) of Subsec. 134.1, the borrower, guarantor, indorser, or surety is a: 1) Spouse or relative within the first degree of consanguinity or affinity, or relative within the same degree by legal adoption of a director, officer or stockholder of the bank; 2) Partnership of which a director, officer, or stockholder (or his spouse or relative within the first degree of consanguinity or affinity, or relative within the same degree 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 within the same degree by legal adoption) of the property or interest or right mortgaged, pledge 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 bank, or his spouse, is also a director or officer of such corporation, association or firm, except where the securities of such corporation, association or firm are listed and traded in the big board of domestic stock exchanges and not more than 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; cdlex 5) Corporation, association or firm of which any or a group of directors, officers, stockholders of the lending bank and/or their spouses or relatives within the first degree of consanguinity or affinity, or relative within the same degree by legal adoption, hold/own more than 15% of the subscribed capital of such corporation, or of the equity of such association or firm; and 6) Corporation, association or firm wholly or majority-owned or controlled by any or a group of related entities mentioned in the foregoing Items (b)2, (b)4 and (b)5. Other similar circumstances shall be resolved on a case-by-case basis to determine direct/indirect borrowings. It shall be the responsibility of the banking institution concerned to ascertain whether the borrower, guarantor, representative, indorser or surety is related to persons mentioned in Item (b)(1) of this subsection or connected with any of the directors, officers or stockholders of the bank in any of the capacities mentioned in Items (b)(2) to (b)(6) of this subsection. [Circular 357 1-22-73, as amended by Circular 568 5-4-77] [Please see 3. Appendix A for the procedural requirements applicable if a director, officer or stockholder is a party, directly or indirectly, to any of the transactions enumerated in Item (d) of Subsec. 134.1. Loans funded by trust funds shall be subject to the above-mentioned procedural requirements (See Subsec. 174.2)] SUBSECTION 134.4 Individual/aggregate ceilings a. Individual ceiling . The total outstanding direct credit accommodations to each of the bank's directors, officer or stockholders shall not exceed an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contribution in the bank of such director, officer, or stockholder. "Outstanding deposits" shall include savings, time and demand deposits: Provided , That such deposits of the director, officer, or stockholder concerned are not subject to an assignment or hold-out agreement. "Book value of the paid-in capital contribution" shall be a proportional amount of the bank's total capital accounts (net of valuation reserves as approved by the Central Bank) as the corresponding paid-in capital contribution of each director/officer/ stockholder concerned bears to total paid-in capital of the bank. The sum of such outstanding deposits and the respective book value of the paid-in-capital contribution shall, at all times, be at least equal to the outstanding credit accommodations to each director/officer/stockholder concerned. b. Aggregate ceiling . Total direct/indirect borrowings of the parties mentioned in Subsec. 134.3 (a) to (b) shall not exceed 15% of the total loan portfolio of the bank or 100% of combined capital accounts net of valuation reserves as approved by the Central Bank, whichever is lower: Provided , That a bank may exceed its aggregate ceiling with the prior approval of the Monetary Board upon recommendation of the Department of Commercial and Savings Banks: Provided, however, That in no case shall the total unsecured direct/indirect loans to directors, officers and stockholders, exceed 30% of such aggregate ceiling or the outstanding direct/indirect loans thereto, whichever is lower. Total loan portfolio for this purpose shall refer to the sum of all loan accounts outstanding, gross of valuation reserves, as reflected in the bank's consolidated statement of condition (CBP 7-16-05), excluding loans financed by special/specific funds from the government and government financial institutions, such as Masagana 99, to the extent of the outstanding liability on such funds. [Circular 357 1-22-73, as amended by Circular 568 5-4-77] The phrase "loans financed by special/specific funds from the government and government financial institutions, such as Masagana 99, to the extent of the outstanding liability on such funds" refer to the "total outstanding loans granted by the bank from the special/specific funds". [CL 1-13-78] 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. The aggregate ceiling prescribed herein shall also apply to a Philippine branch of a foreign bank, the total capital accounts of which, for the purpose of this subsection, shall be: 1) The total capital accounts, if any, representing funds definitely assigned to the branch by its head office abroad; and 2) The net amount due by such branch to the head office and branches outside of the Philippines, net of valuation reserves approved by the Central Bank. [Circular 357 1-22-73, as amended by Circular 568 5-4-77] [All loans granted, whether funded by trust funds or not, subject to the quantitative ceilings provided in Items (a) and (b) of this subsection (See Subsec. 174. 2).] c. Actual usage of credit lines in determination of ceilings . With respect to Items (d) (2) and (3) of Subsec. 134.1, only the actual usage of the lines constituting outstanding real liabilities shall be used in determining the actual accommodation existing under individual or aggregate ceiling: Provided , That the credit line agreement to be executed by and between the bank and its client shall incorporate a proviso to the effect that the bank reserves the right to suspend or cancel the line without previous notice to the party concerned if utilization thereunder might result in violation by the bank of the ceiling prescribed in these regulations. d. Exclusions from aggregate ceilings . The following credit accommodations shall be excluded in determining compliance with the aggregate ceiling defined in Item (b) of this subsection: 1) Credit accommodations or portions thereof to the extent covered by a hold-out on deposits or covered by cash marginal deposits or secured by evidences 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; 2) Credit accommodations to a corporation in whose board of directors a director or officer or stockholder of the lending bank sits as a representative of the bank: Provided , That the bank representative shall not have any equity interest in the borrowing corporation except for the minimum shares required by law, rules and regulations, or the by-laws of the corporation, to qualify a person as director of the corporation: Provided, however , That the borrowing corporation is not among those mentioned in Items (b)(5) and (b)(6) of Subsec. 134.3; 3) Credit accommodations to a corporate stockholder which meets the following conditions: a) The corporation is a non-financial institution; b) Its shares are listed and traded in the big board or commercial and industrial board of domestic stock exchanges; c) It shall have at least 300 shareholders whose aggregate holdings shall not be less than 30% of its total subscribed capital and whose individual holdings shall not exceed 1% of such total subscribed capital; d) Its stockholdings in the lending bank do not exceed 30% of the voting stock of the bank; and e) No person or group of persons related within the first degree of consanguinity or affinity holds/owns more than 15% of the subscribed capital of the corporation. [Circular 357 1-22-73, as amended by Circular 568 5-4-77, Circular 596 3-1-78 and Circular 688 7-23-79] SUBSECTION 134.5 Transitory period for compliance Banks which have outstanding loans to directors, officers, stockholders and related interests in excess of the aggregate ceiling and the ceiling on unsecured loans shall take measures to attain compliance with the prescribed ceilings within three (3) years from May 4, 1977. The aggregate amount of outstanding loans in excess of the aggregate ceiling and the ceiling on unsecured loans shall be reduced to be within the ceilings and once reduced shall not thereafter be increased beyond such ceilings: Provided , That outstanding loans with maturities beyond three years from May 4, 1977 shall be allowed until maturity thereof and that loans maturing within the three-year period may be reloaned or renewed to the same borrower to the extent of 90% thereof with maturities not extending beyond said three-year period even if the bank is in excess of said ceilings. SUBSECTION 134.6 Reporting requirements . Commercial banks shall submit to the Department of Commercial and Savings Banks within sixty (60) days from May 4, 1977 their respective reduction programs in attaining compliance with the prescribed ceilings in this section. These programs shall be subject to approval by the Monetary Board. Each bank shall maintain a record of loans covered by this section in a manner and form that will facilitate verification of such transactions by Central Bank examiners. [Circular 357 1-22-73, as amended by Circular 568 5-4-77] In the case of real estate transactions between a bank and its directors, officers, stockholders or any firm substantially owned by one or more of such directors, officers or stockholders, the board of directors of the bank shall, through the Department of Commercial and Savings Banks: a. Report to the Monetary Board any real estate transaction (such as, but not limited to, rentals or leases, purchases and sales, or foreclosed assets) by and between the bank and its director/s, officer/s, stockholder/s owning at least two per cent (2%) of the bank's subscribed capital stock or any firm substantially owned (in the aggregate of at least twenty per cent (20%) of the paid-in capital of such firm) by one or more of such directors/officers/stockholders; and b. Certify to the Monetary Board that such transaction has been thoroughly reviewed and verified as having been entered into in the best interest of the bank. [CL 2-11-75] SUBSECTION 134.7 Sanctions in case of refusal to comply with or wilful violation of regulations . The Department of Commercial and Savings Banks may recommend to the Monetary Board, for refusal to comply with or wilful violation of the provisions of this section, the imposition of any or a combination of the following sanctions: a. Restriction or prohibition on the bank from declaring dividends until the excess has been reduced to within the ceiling. b. Disqualification of the directors voting for the approval of the loan or credit in excess of any of the ceilings prescribed in this section from participating in the approval of loans or credits to officers, directors and stockholders of the bank: Provided, however , That the disqualification shall be lifted by the Department of Commercial and Savings Banks when the grounds for the disqualification shall have ceased to exist. c. Application of the share in the bank's profit sharing program of the director or officer borrowing from the bank to liquidate his loan in excess of the individual ceiling, and the share of the directors voting for the approval of the loans or credits in excess of any of the ceilings prescribed in this section to liquidate said excess, for such period as may be recommended to and approved by the Monetary Board. d. For the duration of each violation, imposition of a fine of 1/10 of 1% per day but not to exceed P500 a day on the bank, each of the directors and/or officers borrowing from the bank in excess of their respective individual ceilings, and each of the directors voting for the approval of the granting of the loans or credits in excess of any of the ceiling prescribed in this section. For purposes of computing the penalty during the three-year transition period, the periodic ceilings as approved by the Monetary Board in the case of banks required to submit the program of reduction herein specified, shall serve as the prescribed ceilings for that particular bank. The penalty for exceeding the aggregate ceiling or ceiling on unsecured loans shall be computed on the average amount of loans in excess of said ceilings: Provided , That banks shall be permitted to offset daily loan balances which are in excess against those which are below said ceilings during the same week. e. Suspension, or after due hearing, removal of the director or officer borrowing from the bank in excess of his individual ceiling and the directors voting for the approval of the loan or credit in excess of any of the ceilings prescribed in this section. f. Other administrative and/or penal sanctions including sanctions under Sections 34 and 34-A of Republic Act No. 265, as amended. [Circular 357 1-22-73, as amended by Circular 568 5-4-77 and Circular 688 7-23-79] SUBSECTION 134.8 Financial assistance to officers and employees under the fringe benefit program . The following regulations shall govern financial assistance by banks to their officers and employees as part of their fringe benefit programs. SUBSECTION 134.81 Types/purposes of financial assistance . The types of financial assistance that may be available to officers/employees of banking institutions may only be in the nature of: a. Real Estate for the purchase or acquisition of a residential house and lot and/or construction, renovation or repair of a residential house to be occupied by the officer or employee of the bank. b. Equipment for the purchase of transportation vehicles, household equipment and appliance for the personal use of the officer or employee. c. Personal to defray expenses for medical, maternity, education and emergency needs of the officer or employee or his family. SUBSECTION 134.82 Mechanics of financing plan a. Eligibility Only full time and permanent officers and employees shall be eligible to participate under fringe benefit financing plans. b. Maturity The maximum term for any form of financing plan for the following shall be: Purpose Maturity Real Estate 15 years Car 5 years Other Equipment/Chattel 3 years Personal Loan 2 years c. Amount The amount of financing assistance shall be within the paying capacity of the officer or employee and stated as a percentage or multiple of the total monthly compensation of such officer or employee: Provided , That the maximum amount available for each type of financing shall be standardized for officers and employees belonging to the same salary range or level: Provided , further, That the amount shall not exceed the following: Purpose Maximum Amount Real Estate P300,000 Car 70,000 Other Equipment/Chattel 10,000 Personal Loan An amount equivalent to 3 times the total monthly compensation from the bank d. Repayment 1) Total monthly amortization, deductible from the borrowing officers or employee's salary, shall not exceed twenty five per cent (25%) of his total monthly compensation from the bank. Total monthly compensation shall refer to the sum of the basic salary, fixed and regular monthly allowances. In no case shall payments for sickness benefits and other special emoluments which are not fixed or regular in nature, or the commutation into cash of unused leave credits, be included in the computation of total monthly compensation. 2) Amortization payment shall include a proportionate part of the amounts required annually for mortgage insurance, fire insurance, taxes, special assessment, etc., as may be necessary. e. Ceiling on total loans to officers/employees Financial assistance to officers under the bank's fringe benefit program except in the form of lease with option to purchase shall be subject to the ceilings provided under Section 83 of R.A. No. 337, as amended, and Subsec 134.4. The aggregate outstanding loans and credit accommodations to bank employees (i.e., excluding "officers" as the term is defined in Subsec. 134.1) under the bank's fringe benefit program shall not exceed five per cent (5%) of the bank's total loan portfolio. SUBSECTION 134.83 Forms of financial assistance a. Financial assistance under fringe benefit programs in favor of officers/employees for real estate and equipment purposes may be in the form of a loan, advance or credit accommodation, installment sale, lease with option to purchase or lease-purchase arrangement where the lessee is obliged to purchase the real estate or equipment. Fringe benefit programs may also include personal loans for medical, educational, maternity and emergency purposes. b. In the case of local branches of foreign banks, credit accommodations for real estate, equipment and personal purposes may be financed under any of the following means: 1) Through a local affiliate by special arrangement with the head office abroad in any of the following forms: a) Inward remittance from the head office to the affiliate; b) Assignment to the affiliate of equivalent amounts of profits otherwise remittable abroad under existing regulations; or c) Direct loans by the foreign bank to the affiliate; or 2) Through the local branch itself, either by a) Segregation or transfer of Undivided Profits normally remitted to head offices abroad equivalent to the loans to officers and employees which shall be lodged under "Other Liabilities-Head Office Account". This account shall at all times have a balance equivalent to the outstanding loans to officers/employees financed under this scheme; or b) Inward remittance. Loans under Items (2)(a) and (2)(b) shall be treated in the branch books as loans granted by its head office. The documentation and collection of such loans shall be handled by the branch for the account of the head office. Loans financed under Items (b) (1) and (b) (2) shall be subject to the reporting requirements of loans granted to officers and employees but not to the ceiling provided therein. The same shall not also be subject to the capital to risk assets ratio. SUBSECTION 134.84 Preconditions/limitations on fringe benefit programs a. The officer or employee (or his spouse) who already owns a residential house shall not be eligible for this type of financing plan. However, financing for repair or renovation of a residential house may be allowed provided the total cost thereof shall not exceed one-half of the original cost of such residential house. b. An eligible officer or employee may avail of the financing plan to construct or acquire a residential house and lot only once during his employment with the bank, except when the ownership or real estate right, previously acquired under such financing plan is transferred or assigned to another eligible officer or employee of the same bank. c. An officer or employee may avail of the financing plan for a specific type of equipment only once every five (5) years: Provided , That re-availment shall be allowed only after his previous obligations in connection with the acquisition of the same type of equipment have been fully liquidated. d. The applicable contract shall incorporate mortgage and insurance clauses, whenever applicable, in favor of the bank. e. The investment by a bank in real estate, equipment and other chattels contemplated under these guidelines shall not be for the purpose of profit in the course of business for the bank, but for the purpose of meeting the housing, transportation, medical, educational and personal credit needs of officers or employees of banks. f. The investment by a bank in real estate, equipment and other chattels for the needs of officers and employees shall be included in determining the extent of the investment of the bank in real estate and improvements thereof (including bank equipment) necessary in the transaction of the bank's business. SUBSECTION 134.85 Other requirements a. Whenever applicable or desirable, the bank shall adopt other appropriate measures as hedge against probable losses by incorporating in the plan or contract, features such as co-signor, mortgage redemption insurance, assignment of money value of accrued leave credits, pension or retirement benefits. b. Financing plans and amendments thereto shall be submitted to the Central Bank within thirty (30) days from approval thereof by the bank's board of directors for review and for purposes of determining compliance with the provisions of these guidelines and other applicable rules and regulations. The Department of Commercial and Savings Banks may require the banks concerned to submit a regular report monitoring the various transactions under the bank's financing plans for officers/employees. SUBSECTION 134.86 Financing plans not covered by fringe benefit program Loans or credit accommodations to bank officers and employees for purposes not covered by the fringe benefit program of the bank shall be subject to the same terms and conditions imposed on its regular lending operations and shall continue to be subject to the provisions of Section 83 of Republic Act No. 337, as amended, and Section 134 of this Manual. SUBSECTION 134.87 Sanctions . Violations of the provisions of this subsection shall, whenever applicable, be subject to the penalties under Section 83 of Republic Act No. 337, as amended, and Sections 34 and 34-A of Republic Act No. 265, as amended. [Circular 561 3-28-77, as amended by Circular 622 8-11-78 and Circular 689 7-23-79] SECTION 135. Specific Types/Classes of Loans . SUBSECTION 135.1 Agrarian reform credit and agricultural credit . Pursuant to Presidential Decree No. 717, the following guidelines shall govern the grant of agrarian reform credit and agricultural credit by banks, government or private, as defined in Section 2 of Republic Act No. 337, as amended. SUBSECTION 135.11 Definition of terms . For purposes of this subsection the following definitions shall apply: a. Loanable funds shall refer to total funds generated after the effectivity of Presidential Decree No. 717, the composition of which shall be determined by the appropriate department of the Central Bank. (See Subsec. 135.19 for computation.) b. Agrarian reform credit shall refer to production and other types of loans granted to beneficiaries of agrarian reform for the following purposes: acquisition of work animals, farm equipment and machinery, seeds, fertilizers, poultry, livestock, feeds and other similar items; acquisition of lands authorized under the Agrarian Reform Code of the Philippines; construction and/or acquisition of facilities for production, processing, storage and marketing; and efficient and effective merchandising of agricultural commodities stored and/or processed by the facilities aforecited in domestic and foreign commerce. c. Agricultural credit in general shall include all loans and/or advances granted to borrowers, whether beneficiaries of agrarian reform or not, to finance activities relating to agriculture, and for processing, marketing, storage, and distribution of products resulting from these activities. d. Agrarian reform beneficiaries shall include tillers, tenant-farmers, settlers, agricultural lessees, amortizing owners, owner-cultivators, farmers' cooperatives and compact farms, as determined by the Department of Agrarian Reform. The term shall likewise include agricultural enterprises registered under Presidential Decree No. 1159 as well as projects undertaken pursuant to the Corporate Farming Program under General Order No. 47: Provided , That the borrower submits the following documents to the lending bank: 1) A certification from the Board of Investments to the effect that the borrower is an agricultural enterprise duly registered under P.D. No. 1159; and 2) An endorsement of the Ministry of Agrarian Reform stating that land reform beneficiaries shall benefit from the agricultural enterprises' projects. SUBSECTION 135.12 Required allocation for agrarian reform credit and agricultural credit in general . Each bank shall set aside an amount equivalent to at least twenty-five per cent (25%) of its loanable funds for agricultural credit in general, of which an amount equivalent to at least ten per cent (10%) of the loanable funds shall be made available for agrarian reform credit. In the absence of qualified borrowers, the following shall apply: a. Agrarian reform credit the amount set aside for agrarian reform credit not actually loaned out may be invested temporarily in government securities expressly declared eligible for the purpose by the Central Bank, subject to the following conditions: 1) such securities shall be held to maturity, without prejudice to the right of the holder bank to require the issuing government entity to monetize, encash or repurchase such securities whenever funds are needed by the bank for lending to the beneficiaries of agrarian reform; 2) such securities shall not be hypothecated or encumbered in any way or earmarked for any other purpose; 3) such securities shall be marked "For Agrarian Reform Credit" and shall be segregated from the bank's investment portfolio; and 4) only the buying/lending bank may use, during the holding period, eligible government securities subject of a resale/repurchase agreement between private entities for purposes of compliance with this subsection, subject to the following: (a) the resale/repurchase should be for terms not less than thirty (30) days without pretermination during the first successive thirty (30) days, which condition shall be embodied in the resale/repurchase agreement; and (b) the buying/lending bank, with the consent of the selling/borrowing entity, shall register with the Central Bank its holdings of CBCIs under repurchase/resale agreement. b. Agricultural credit in general the amount set aside for agricultural credit in general not actually loaned out may be invested in commercial papers issued by entities engaged in agricultural production, processing, storage, marketing, or exportation of agricultural products; and importation, manufacture, distribution of farm machineries and equipment, fertilizers, etc. used for agricultural production: Provided , That for purposes of compliance with this subsection, only the buying/lending bank may use commercial papers acquired in a resale/repurchase agreement during the holding period thereof subject to the conditions in Item (a)(4)(a) of this subsection. c. A certification under oath by the duly designated officer of the bank of the absence of qualified borrowers for agrarian reform credit or agricultural credit in general shall be submitted to the appropriate supervising and examining department of the Central Bank together with the report as required in Subsec. 135.17. [Circular 687 7-20-79] SUBSECTION 135.13 Qualified borrowers under agrarian reform credit/agricultural credit in general . a. All beneficiaries of agrarian reform credit mentioned under Presidential Decree No. 717 and its implementing regulations which credit shall be used for agricultural production or for other purposes mentioned therein shall be qualified borrowers under agrarian reform credit. The bases for determining who are agrarian reform beneficiaries are: 1) Documentary evidence, namely, certificate of land transfer or order of approval of application from Department of Agrarian Reform (DAR) or agreement to sell/order of award from DAR or its predecessors such as LTA and NARRA (in case of settlers); or 2) In the absence of documentary evidence above stated, a certification from the nearest DAR office that borrower is an agrarian reform beneficiary. Qualified borrowers under agricultural credit in general are all corporations, entities, or private individuals engaged in agricultural production, processing, storage, marketing, or exportation of agricultural products; and, importation/manufacture/distribution of farm machineries and equipment, fertilizers, etc., used for agricultural production. SUBSECTION 135.14 Securities for loans a. Loans granted under agrarian reform credit shall be secured by any or a combination of: 1) Real estate property owned by the borrower or his co-maker, not necessarily the same real estate property used by the borrower for his agricultural or farm project; cdti 2) Poultry; 3) Stored crops in bonded warehouse; 4) Assets acquired with the proceeds of the loan, such as farm machinery; 5) One co-maker acceptable to the bank: Provided , That in case a borrower is a member of a cooperative, the cooperative may act as a co-maker: and Provided, further , That in case the borrower is a farmers' cooperative, no co-maker shall be required; and/or 6) Other collateral acceptable to the bank, such as, but not limited to, standing crops, livestock or work animal, etc. b. For agricultural credit in general, loans shall be secured by the usual collateral required by banks. [MAB 7-28-75] c. All financing institutions shall accept as collateral for loans any duly registered Land Transfer Certificate issued by the government, through the Department of Agrarian Reform, to tenant-farmers in an amount not less than sixty per cent (60%) of the value of the farmholding as determined under Presidential Decree No. 27: Provided , That (1) such loans shall be guaranteed by the Guarantee Fund established by the Samahang Nayon (Barrio Association) in which a tenant-farmer is a full-pledged member and (2) the loans obtained shall be used in the improvement or development of the farm-holding of the tenant-farmer or the establishment of facilities that will enhance production or marketing of agricultural products or increase farm income therefrom. [Circular 385 11-2-73] Prior to the acceptance of the Certificate of Land Transfer (CLT) issued pursuant to P.D. No. 27 as collateral for loans, a certification shall be first secured from the offices of the Register of Deeds to the effect that the CLT being presented is still valid. [CL 3-27-78] SUBSECTION 135.15 Syndicated type of agrarian reform credit/agricultural credit . Banks may grant a syndicated type of loan for agrarian reform credit/agricultural credit in general, either between or among themselves. The mechanics, including the recording of such syndicated type of loan transactions shall follow existing practices and regulations applicable both to the lead bank and other participating bank(s). Accordingly, the formal booking of loans shall only be for the amount of actual participation of each syndicate bank concerned. Memorandum entries, references or notations shall be made for the other participating bank(s). [MAB 7-28-75] SUBSECTION 135.16 Interest and other charges Interest, service fees and other charges shall be governed by existing rules and regulations thereon. SUBSECTION 135.17 Submission of reports . A monthly report on the following shall be submitted to the appropriate supervising and examining department of the Central Bank within twelve (12) banking days after end of each reference month: a. Utilization of loanable funds set aside for agrarian reform credit and agricultural credit in general; and b. Any change in the composition of government securities and commercial papers held as temporary investments for agrarian reform credit and agricultural credit in general, respectively. SUBSECTION 135.18 Sanctions . Violations of Subsecs. 135.11, 135.12, 135.16 and 135.17 shall be subject to the provisions of Sections 34 and 34-A of Republic Act No. 265, as amended. [Circular 687 7-20-79] SUBSECTION 135.19 Computation of loanable funds Loanable funds shall be the net increase from May 29, 1975 to date of the report of the individual accounts which represent the following: The total banks' funds consisting of deposits (demand, savings, and time) excluding foreign currency deposits under Circular No. 343; deposits of banks, net of due from other banks; bills payable, including borrowings from banks; total capital accounts; and added to the net increase is the total collections from the loan portfolio outstanding as of May 31, 1975 to date of the report less net increase of the following: bank premises, furniture and equipment (net book value); other property owned or acquired (representing properties acquired in satisfaction of debts); other assets; required reserves (reserves against deposit liabilities, deposit substitutes, coverage against outstanding letter of credit in the case of commercial banks, etc.), excluding reserves for marginal deposits; provisions for liquidity (15% of total deposits and demand liabilities); and loans to small and medium scale industries for export. [MAB 7-28-75 as amended by MAB 4-19-79] SUBSECTION 135.2 IGLF loans . The implementation of the accreditation scheme for commercial banks which may participate in the Industrial Guarantee and Loan Fund (IGLF) Program shall be governed by the rules and regulations embodied in 3 Appendix F. The availment by duly accredited commercial banks of special time deposits under the IGLF Program for financing of small and medium scale industries shall be governed by the rules and regulations embodied in 3.Appendices G and M, respectively. [MC 10-25-76 and 10-28-77] SUBSECTION 135.3 Loans to rural banks . For purposes of complying with the provisions of Section 11 of Republic Act No. 720, as amended, requiring the written permission of the Monetary Board when any rural bank rediscounts paper with the Philippine National Bank or Development Bank of the Philippines or other banks and their branches and agencies, banks are enjoined not to extend a loan to any rural bank in the absence of such approval of the Monetary Board. [MACBSMB 5-8-61] SUBSECTION 135.4 Temporary overdrawings in current account . Temporary overdrawings against current accounts shall not be allowed, unless caused by normal bank charges and other fees incidental to handling such accounts, which in no case shall exceed Two Hundred Pesos (P200.00). Banks which violate these regulations shall be subject to a fine of one tenth of one per cent per day of violation, computed on the basis of the amount of overdrawing, without prejudice to the provisions of Sections 34 and 34-A of Republic Act No. 265, as amended. [MAB 11-15-76] Fines for violations of this subsection shall be governed by the regulations on collections of fines from banks as enumerated under Item (b) (3) of Subsec. 124.21. [Memorandum 8-3-79, as amended by Circular 728 4-10-80] Technical overdrawings arising out of "force-posting" in-clearing checks shall be debited by banks under "Returned Checks and Other Cash Items Not in Process of Collection" which is part of "Other Assets" in the Statement of Condition. Items to be lodged under this account shall consist only of in-clearing checks which may result in "technically overdrawn" accounts and shall be immediately reversed the following day. The checks lodged under "Returned Checks, etc," shall either be returned or honored the following day before Central Bank clearing. The items to be used as cover for the honored checks should only consist of any of the following: a. Cash b. Cashier's, Manager's or Certified Checks c. Bank Drafts d. Postal Money Orders e. Treasury Warrants f. Duly Funded "On Us" Checks g. Fund transfers/credit memos within the same bank representing proceeds of loans granted under existing regulations. (See also Subsecs. 131.42(b) and 153.3) [MAB 4-26-78] SUBSECTION 135.5 Interbank loan transactions . All interbank loan transactions shall be submitted to the Central Bank Accounting Department by means of interbank loan advice or repayment transfer tickets not later than 7:30 P.M. of the same banking day that a loan transaction is consummated. 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. All interbank loans shall be recorded by the borrowing bank as "Bills Payable-Interbank Loans" and shall be subject to reserve requirements of five per cent (5%). The maximum interest/yield rate for interbank loan transactions between and among banks, between banks and non-bank financial intermediaries performing quasi-banking functions, and among non-bank financial intermediaries performing quasi-banking functions shall be eighteen per cent (18%) per annum, inclusive of commissions, premiums, fees and other charges. [See also Subsec. 163.3] [MACB 1-25-78, as amended by Circular 732 5-5-80] [Please refer to 3.Appendix B for the procedural requirements for interbank loan transactions.] SUBSECTION 135.51 Interbank call loan transactions Call slips or tickets may be used to evidence call loan transactions of not more than twenty-four hours maturity to cover reserve deficiencies. In all other cases, call transactions shall be evidenced by a promissory note containing the minimum features prescribed in Subsec. 567.32 of Book V of this Manual. (See also Subsec. 163.3) [Circular 438 11-4-74] SUBSECTION 135.7 Crop loans . Effective September 30, 1978, all banking institutions are required to make the submission of parcellary plans a requisite for the purpose of granting crop loans to sugarcane planters starting Crop Year 1978-79. [CL 10-19-76, as amended by CL 10-24-77] SUBSECTION 135.8 Supervised credit . Under the supervised credit system, the farmer-borrower agrees in writing that he will apply proven farm practices necessary to conserve the land, improve its fertility and increase its production, and abide by the approved farm plan and budget jointly prepared by him and a duly accredited supervised credit technician. [Circular 474 6-30-75 and CL 3-28-77] SUBSECTION 135.81 Masagana 99 and Masaganang Maisan loans . Commercial banks participating in the Masagana 99 and Masaganang Maisan food production programs should observe the guidelines embodied in 3.Appendix I in their supervised credit lending operations should they wish to avail of the privilege of access to the credit facilities of the Central Bank. (The guidelines on rediscounting privileges under the supervised credit program are embodied in 6.Appendix F.) [CL 3-28-77] The Philippine National Bank should likewise observe the following additional guidelines in the handling of Masagana 99 and other similar supervised credit loans: a. Court proceedings shall be initiated against persons who have misrepresented themselves as farmers in order to obtain production loans under any supervised credit program. b. Valuation reserves equivalent to 50% and 100% of Masagana 99 and other similar supervised credit loans considered as "doubtful" of collection and "uncollectible or worthless or loss," respectively, shall be set up and adjusted at the end of each year and/or prior to any declaration of dividends. Guidelines in categorizing loans as "doubtful" of collection or "loss" under the Masagana 99 Program and other similar supervised credit programs are shown in 3.Appendix J. [CL 4-21-77] As part of the "Masagana 99 Rice Production Program", the National Food and Agriculture Council (NFAC) is presently initiating a rice planting program for rainfed areas using the direct seeding method (Sabog Tanim) which eliminates the necessity of seed bed preparation and seedling transplanting. The Central Bank, as member of the NFAC, is cooperating in this effort by providing part of the financing through the Philippine National Bank and the Rural Banking System. The details of this scheme is embodied in 3.Appendix R. [MCARB and PNB 1-2-74] Under the Masagana 99 Program, the President of the Philippines directed the Philippine National Bank to give priority to all Area Marketing cooperatives (AMCs) in servicing purchase orders or coupons for fertilizer and agricultural inputs of farmer borrowers who are members of Samahang Nayons (SN). [MC to RBs and PNB 11-9-77] SUBSECTION 135.9 Peso borrowings by foreign firms A permanent Inter-Agency Committee composed of representatives from the Central Bank of the Philippines, the Board of Investments, the National Economic and Development Authority and the Ministry of Finance has been constituted to administer the following policies, rules and regulations under which foreign companies in the Philippines may avail themselves of peso borrowings: a. The Committee shall implement the provisions of this subsection under the guiding principle that foreign companies operating in the Philippines are expected to bring in adequate capital and that peso borrowings for capital requirements should be maintained at reasonable levels. b. No bank on non-bank financial intermediary 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 embodied in 3.Appendix K. Banks and non-bank financial intermediaries 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 borrowers 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 certifications 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 subsection and its 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 subsection and the guidelines in meritorious cases. f. For purposes of this subsection, foreign firms are hereby defined to include (1) single proprietorships owned by non-Filipino citizens, (2) partnership, more than forty per cent (40%) of whose capital is owned by non-Filipino citizens, and (3) corporations, more than forty per cent (40%) of whose total subscribed capital stock is owned by the non-Filipino citizens. g. The following sanctions shall be imposed for violation of this subsection and the guidelines embodied in 3.Appendix K: 1) Any wilful violation of the provisions of Subsec. 135.9 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 a bank, the bank officer or employees responsible therefor shall be subject further to the administrative sanctions provided for under Section 34-A of the same Act; 2) 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 circumstances. 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 3) 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. [Circular 572 7-27-77, as amended by Circular 582 11-3-77, Circular 601 3-31-78, Circular 616 7-5-78 and Circular 657 2-20-79] A pamphlet containing the Questions and Answers in the Seminar on Domestic Borrowings of Foreign Firms held in Manila on June 21, 1978 was recently issued by the Inter-Agency Committee on Domestic Borrowings of Foreign Firms (IAC-DBFF) which is implementing the provisions of this subsection and its guidelines. For a better understanding of the rationale and mechanics of the above provisions and to minimize the incidence of violations thereof, all banks and non-bank financial intermediaries are urged and enjoined to secure the necessary copies of the pamphlet from the Secretariat of the IAC-DBFF; Room 203 EDPC Building, Central Bank Complex, Mabini, Manila. [Memorandum 11-29-79] SECTION 136. Other Specific Types/Classes of Loans . SUBSECTION 136.1 Grains Quedan Financing Program . In accordance with the pertinent provisions of LOI 704 dated June 9, 1978, the guidelines on Grains Quedan Financing Program embodied in 3.Appendix N shall take effect immediately. [Circular 624 8-11-78, as amended by Circular 680 6-4-79] SUBSECTION 136.2 Aromatic Tobacco Trading Loan Fund Program . The revised rules and regulations shown in 3.Appendix Q shall govern the lending program of authorized commercial banks in connection with the Aromatic Tobacco Trading Loan Fund (ATTLF) and the availment of special time deposit/rediscounting facilities from the Central Bank. [Circular 715 2-1-80] Special time deposits in connection with the abovementioned lending program are exempted from the reserve requirements provided under Subsec. 155.1. cdt [Circular 669 3-20-79] SUBSECTION 136.3 Cooperative Finance System Pursuant to the provisions of the Cooperative Marketing Project Loan Agreement between the Republic of the Philippines and the United States of America dated May 3, 1978, the rules and regulations governing the operation of the Cooperative Finance System are embodied in 3.Appendix Q. While cooperative rural banks are the principal participating banks, other financing institutions not under the supervision of the Department of Rural Banks and Savings and Loan Associations may participate in this program provided they meet all the requirements enumerated under Section 4 of 3.Appendix O. [Circular 674 5-11-79] SECTION 139. Sundry Provisions . SUBSECTION 139.1 Investment-deposit ratio . The following are the revised policy and guidelines relating to the investment-deposit ratio of branches, agencies, extension offices, etc., and/or head offices in the provinces, of commercial banks. SUBSECTION 139.11 Statement of policy . At least 75% of total deposits accumulated by branches, agencies, extension offices, etc., and/or head offices of commercial banks in a particular region (outside Metropolitan Manila) shall be invested therein as a means to develop that region. The twelve (12) regional groupings shown in 3.Appendix C shall be used for purposes of determining the regional retention of deposits. [Circular 536 7-22-76] SUBSECTION 139.12 Methods of compliance . In case a bank has two or more offices (i.e., head office and/or branches, etc.) in a particular regional grouping, the policy may be deemed complied with if the aggregate investment of such bank's offices is not below 75% of its aggregate deposit held in that region: Provided, however , That the bank may be permitted to devote at least 60% of said 75% ratio of aggregate investment to loans for the financing of agricultural and export industries: and, Provided, further , That any bank which finds difficulty to comply with this requirement may be permitted to make arrangements with any government financial institution that may be willing to transfer some of its loan accounts to the said bank so that the surplus funds of such bank may be properly invested in that area: Provided, finally , That loans granted by offices in a region may be assigned and considered part of the loans/investments of offices in another region, subject to the presentation of acceptable proof that the end-users of the loan proceeds are located in the latter region. Acceptable proof may include but need not be limited to the following: (a) ticket showing that the loan proceeds were released by an office in that region and/or (b) cable advice from the lending office to the office in the region where end-users are located re: approval of loan and release thereof. [Circular 536 7-22-76, as amended by Circular 625 8-18-78] SUBSECTION 139.13 Government securities as eligible investments . Investments in Central Bank Certificates of Indebtedness (CBCIs) and in national or local government securities (including but not limited to, Land Bank Bonds, Treasury Notes, Treasury Bills and DBP Countryside Bills) are considered eligible for purposes of this policy: Provided , That the total sector shall not fall below 50% of total deposits. [Circular 536 7-22-76, as amended by CL 9-13-76] SUBSECTION 139.14 Clarifications . Investments in bank premises, furniture and equipment, and other real and chattel properties may not be considered as among the investments for this purpose. Government deposits and deposit of banks lodged in "Due to Banks" shall be included in computing the total accumulated deposits. SUBSECTION 139.15 Reporting requirements . A report on the "Computation of Investment Deposit Ratio of Branches, etc. and/or Head Offices of Commercial Banks in the Provinces" shall be made as accompanying schedule to the banks' "Statement of Condition (Consolidated)" every quarter. [Circular 536 7-22-76] SUBSECTION 139.16 Sanctions for non-compliance Effective January 12, 1978, compliance with the investment-deposit ratio for four consecutive quarters shall be one of the conditions for the processing and/or approval of any of the following applications or requests of commercial banks: a. For authority to establish new banking offices, regardless of type or category, in or out of the Greater Manila area; b. For permit to operate new banking offices, regardless of type or category, in or out of the Greater Manila area; c. For authority to utilize unmatured export bills for purposes of reserve against marginal deposits; and d. To avail of Central Bank credit facilities, except as may be allowed under Sec. 90 of R.A. 265, as amended. [Circular 571 7-12-77] SUBSECTION 139.17 Grace period . For purposes of determining compliance with the investment-deposit ratio, banks shall be granted a six-month grace period from every reporting date within which to invest their loanable funds. Effective on the quarter period ending March 31, 1979, all banks shall submit a report of compliance under the revised form (CBP-7-16-05.4), the guidelines for the proper accomplishment of which are found in the accompanying instructions. [Circular 625 8-18-78 and MACTB 3-30-79] SUBSECTION 139.2 Assets acquired in settlement of loans . All commercial banks shall post at all times in a conspicuous place on the premises of its head office and each of its branches and other banking offices a list of acquired assets together with the corresponding lowest price at which the bank is willing to sell such property. However, this requirement shall not relieve the banks from the requirement under Section 25 of Republic Act No. 337, as amended, to dispose of such acquired assets. [CL 6 20-78] SUBSECTION 139.3 Credit policies of government-owned corporations . Pursuant to Sections 2 and 114 of Republic Act No. 265, as amended, government-owned corporations which perform banking or credit functions shall coordinate their general credit policies with the Schedule of Credit Priorities embodied in 6.Appendix A. Within the provisions of their respective charters, these corporations shall limit their credits to the economic activities falling under Priority II of said schedule to 50% of their outstanding loans at any time. [Circular 223 6-25-66] Footnotes * For lending operations of money shops, please refer to 1. Appendix C. 1. This can be determined by dividing twelve, the number of months in a year, by the number or fraction of months between installment payment. APPENDIX A PROCEDURAL REQUIREMENTS: DIRECT/INDIRECT BORROWINGS OF BANK DIRECTORS, OFFICERS OR STOCKHOLDERS Procedural requirements . For purposes of implementing the first paragraph of Section 83 of Republic Act No. 337, as amended, the following rules are applicable if a director, officer or stockholders is a party, directly or indirectly, as described in Subsec. 134.3, to any of the transactions enumerated in Item (d) of Subsec. 134.1: (a) No loan shall be granted, nor a credit line, letter of credit facility or any of the transactions mentioned in Item (d) of Subsec. 134.1 established, without the prior approval of the directors as required in the subject provision of law. (b) The approval of the majority of the directors, excluding the director/s concerned, must be manifested in a resolution passed by the Board of Directors duly assembled during a regular or special meeting for that purpose, and made of record, and such approval shall also be manifested by the signature of the directors approving the accommodation. (c) The computation of the "majority of the directors of the bank, excluding the director concerned" should be based on the total number of directors of the bank, i.e., the entire membership provided for in the articles and by-laws of the corporation. (d) The resolution of the Board of Directors should contain the following information: (1) Name/s of the director, officer or stockholder concerned, and in what capacity he is interested in relation to the credit accommodation (Ex.: principal, indorser, husband/wife of borrower, etc.); (2) Nature of the loan, purpose, amount, credit basis for the loan, security and appraisal thereof, maturity, interest rate, schedule of repayment and other terms of the 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/s who was present in the board meeting and approved such resolution, in instances where such signature/s is necessary to indicate that such resolution was approved by a majority of the directors: and (6) Other pertinent information. (e) The "copy of such entry" required to be transmitted to the Department of Commercial and Savings Banks in compliance with Section 83 of Republic Act No. 337, as amended, is a copy of the written approval as mentioned in Item (b) of this Appendix showing the names in print and signatures of the directors approving the credit accommodation. The copy may be signed carbon copy or duplicate-original; or in lieu thereof, a photostatic copy showing clearly the signatures of the directors approving the loan. In case the document to be submitted to the Department of Commercial and Savings Banks is a photostatic copy of the written approval, such copy should contain on its face or reverse side a signed certification by the Secretary that it is a photostatic copy of the original written approval. The "copy of such entry", as defined herein, should be transmitted to the Department of Commercial and Savings Banks within twenty days from the date of the subject approval; and such copy should contain all the information mentioned in Item (d) of this Appendix. [Source: Circular 357 1-22-73] APPENDIX B (Book I, Part 3) PROCEDURES FOR INTERBANK LOAN TRANSACTIONS 1. The Central Bank Accounting Department shall not accept or give due course to interbank loan transfer tickets unless the following are complied with: a. For Granting of Loans "Interbank loan advise transfer ticket" forms shall be used. The form to be accomplished by the lending bank, whose account shall be debited by the Central Bank, shall be white in color and the form to be accomplished by the borrowing bank, whose account shall be credited by the Central Bank, shall be green in color. For Repayment of Loans "Interbank loan repayment transfer ticket" forms shall be used. The form to be accomplished by the borrowing bank 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 receiving the payment and whose account shall be credited by the Central Bank, shall be pink in color. b. Transfer tickets (prescribed forms may be found in Attachment 1) shall have a standard size of 4 " x 8 " and shall contain the following minimum data or information: 1) Date of grant (white and green tickets), or date of repayment (yellow and pink tickets) of loan; 2) 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 3) Repayment tickets (yellow and pink) shall make reference to the date of the corresponding tickets recording grant of the loan. Commercial banks may continue to use their old unused call ticket forms for interbank loan transactions, provided the same are modified to reflect all the desired information required under this Appendix. It is further clarified that the prescribed format and the information required to be contained in the said forms are minimum requirements and that banks may include additional information therein as may be required or necessary. Two copies of the transfer tickets shall be submitted to the Central Bank Accounting Department for each interbank loan transaction. c. Transfer tickets shall be signed or authenticated by officers whose names and specimen signatures are in the bank's list or book of Authorized Specimen Signatures, a copy of which shall be submitted to the Central Bank Accounting Department. d. The bank 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, while the loan repayment tickets (yellow and pink) shall be submitted to the Central Bank by the lending bank. aisadc 2. Both banks 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 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, to the same ticket passed in its books on the day payment is made. 3. All banks shall reconcile their clearing 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 Statements of Accounts from the Central Bank the original and three copies to the Central Bank Accounting Department and one copy to the Department of Commercial and Savings Banks. [Sources: MACB 1-25-78; CL 2-23-78] APPENDIX C (Book I, Part 3) REGIONAL GROUPINGS OF PROVINCES FOR PURPOSES OF THE REQUIRED INVESTMENT DEPOSIT RATIO OF COMMERCIAL BANK BRANCHES IN A REGION Region No. I Ilocos Region (Regional Center-San Fernando, La Union) 1. Ilocos Norte 2. Ilocos Sur 3. Abra 4. La Union 5. Benguet 6. Mountain Province 7. Pangasinan 8. Baguio City 9. Laoag City 10. Dagupan City 11. San Carlos City Region No. II Cagayan Valley Region (Regional Center-Tuguegarao, Cagayan) 1. Batanes 2. Cagayan 3. Isabela 4. Nueva Vizcaya 5. Quirino 6. Ifugao 7. Kalinga-Apayao Region No. III Central Luzon Region (Regional Center San Fernando, Pampanga) 1. Tarlac 2. Nueva Ecija 3. Pampanga 4. Zambales 5. Bulacan * 6. Bataan 7. Angeles City 8. Cabanatuan City 9. Olongapo City 10. Palayan City 11. San Jose City (Nueva Ecija) Region No. IV Metropolitan Manila Area 1. Manila 2. Quezon City 3. Pasay City 4. Caloocan City 5. Makati, Rizal 6. Mandaluyong, Rizal 7. San Juan, Rizal 8. Las Pias, Rizal 9. Malabon, Rizal 10. Navotas, Rizal 11. Pasig, Rizal 12. Pateros, Rizal 13. Paraaque, Rizal 14. Marikina, Rizal 15. Muntinlupa, Rizal 16. Taguig, Rizal 17 Valenzuela, Bulacan Region No. IV-A Southern Tagalog Region 1. Towns of Rizal not included in Metropolitan Manila 2. Cavite 3. Laguna 4. Batangas 5. Quezon 6. Aurora (sub-province) 7. Marinduque 8. Mindoro Oriental 9. Mindoro Occidental 10. Romblon 11. Palawan 12. Batangas City 13. Cavite City 14. Lipa City 15. Lucena City 16. San Pablo City 17. Tagaytay City 18. Trece Martires City 19. Puerto Princesa City Region No. V Bicol Region (Regional Center-Legaspi City) 1. Camarines Norte 2. Camarines Sur 3. Albay 4. Catanduanes 5. Masbate 6. Sorsogon 7. Iriga City 8. Legaspi City 9. Naga City Region No. VI Western Visayas Region (Regional Center Iloilo City) 1. Negros Occidental 2. Iloilo 3. Guimaras (sub-province) 4. Antique 5. Aklan 6. Capiz 7. Bacolod City 8. Bago City 9. Cadiz City 10. Iloilo City 11. La Carlota City 12. Roxas City 13. San Carlos City 14. Silay City Region No. VII Central Visayas Region (Regional Center Cebu City) 1. Negros Oriental 2. Siquijor 3. Cebu 4. Bohol 5. Bais City 6. Canlaon City 7. Cebu City 8. Danao City 9. Dumaguete City 10. Lapu-Lapu City 11. Mandaue City 12. Tagbilaran City 13. Toledo City Region No. VIII Eastern Visayas Region (Regional Center Tacloban City) 1. Northern Samar 2. Eastern Samar 3. Western Samar 4. Leyte 5. Southern Leyte 6. Biliran (sub-province) 7. Calbayog City 8. Ormoc City 9. Tacloban City Region No. IX Western Mindanao Region (Regional Center Jolo) 1. Zamboanga del Norte 2. Zamboanga del Sur 3. Basilan 4. Sulu 5. Tawi-Tawi 6. Dapitan City 7. Dipolog City 8. Pagadian City 9. Zamboanga City Region No. X Northern Mindanao Region (Regional Center Cagayan de Oro City) 1. Camiguin 2. Misamis Oriental 3. Misamis Occidental 4. Bukidnon 5. Agusan del Norte 6. Agusan del Sur 7. Surigao del Norte 8. Cagayan de Oro City 9. Gingoog City 10. Oroquieta City 11. Ozamis City 12. Tangub City 13. Surigao City 14. Butuan City Region No. XI Southern Mindanao Region (Regional Center-Davao City) 1. Davao del Norte 2. Davao Oriental 3. Davao del Sur 4. South Cotabato 5. Surigao del Sur 6. Davao City 7. General Santos City Region No. XII Central Mindanao Region (Regional Center Cotabato City) 1. Lanao del Norte 2. Lanao del Sur 3. Maguindanao 4. North Cotabato 5. Sultan Kudarat 6. Iligan City 7. Marawi City 8. Cotabato City For purposes of computing the loan/investment-deposit ratio, exclude banking offices located within Greater Manila Area, as follows: Cities 1. City of Manila 3. Pasay City 2. Quezon City 4. Caloocan City Municipalities 1. Makati 5. Navotas 2. Malabon 6. Paraaque 3. Mandaluyong 7. Pasig 4. Marikina 8. San Juan [Source: Memorandum to All Commercial Banks dated 3-17-76, as amended by Circular 536 dated 7-22-76] Footnotes * Excluding the town of Valenzuela which is included in Region IV Metropolitan Manila Area pursuant to PD 824. APPENDIX D FORMAT OF DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION _________________________ (Business Name of Creditor) DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION (As Required under RA. 3765, Truth in Lending Act) NAME OF BORROWER ________________________________________________ ADDRESS ___________________________________________________________ 1. LOAN GRANTED (Amount to be financed) P (A) 2. FINANCE CHARGES: Not Deducted Deducted From From Proceeds of Loan a. Interest __% p.a. from _____ to ____ P_______ P_______ ( ) Simple ( ) Monthly ( ) Compound ( ) Quarterly ( ) Semi-Annual ( ) Annual b. Non Interest charges ________ ________ c. Commitment fee ________ ________ d. Guarantee fee ________ ________ e. Other charges incidental to the extension of credit (Specify): _______________________ ________ ________ _______________________ ________ ________ Total finance charges P P (B) ======= ======= 3. NON-FINANCE CHARGES a. Insurance Premium P________ P________ b. Taxes ________ ________ c. Documentary/Science Stamps ________ ________ d. Notarial fees ________ ________ e. Others (Specify): Total non-finance charges P P (C) ======= ======= 4. TOTAL DEDUCTIONS FROM PROCEEDS OF LOAN (B plus C) P____ (D) 5. NET PROCEEDS OF LOAN (A less D) P 6. PERCENTAGE OF FINANCE CHARGES TO TOTAL ===== AMOUNT FINANCED (Computed in accordance with Sec. 2(i) of CB Circular 158) ________% 7. EFFECTIVE INTEREST RATE ________% p.a. (Method of computation attached) 8. SCHEDULE OF PAYMENT a. Single payment due on __________ P (Date) ======== b. Total Installment Payments P Payable in ______________ months/year ======== (no. of payments) at P ________ each installment. 9. COLLATERAL This loan is wholly/partly secured by (check) real estate chattels government securities UNSECURED 10. ADDITIONAL CHARGES IN CASE CERTAIN STIPULATIONS ARE NOT MET BY THE BORROWER Nature Amount _______________________________ _______________________ _______________________________ _______________________ _______________________________ _______________________ CERTIFIED CORRECT: ________________________________ (Signature of Creditor/Authorized Representative Over Printed Name) ________________________________ Position I ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT PRIOR TO THE CONSUMMATION OF THE CREDIT TRANSACTION AND THAT I UNDERSTAND AND FULLY AGREE TO THE TERMS AND CONDITIONS THEREOF. ____________________________ (Signature of Borrower over Printed Name) DATE ______________ NOTICE TO BORROWER: YOU ARE ENTITLED TO A COPY OF THIS PAPER WHICH YOU SHALL SIGN. [Source: Circular 485 dated 10-30-75] APPENDIX E (Book I, Part 3) FORMAT OF ABSTRACT OF "TRUTH IN LENDING ACT" (Republic Act No. 3765) SECTION 1. This Act shall be known as the "Truth in Lending Act." SECTION 2. Declaration of Policy . It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy. xxx xxx xxx SECTION 3. As used in this Act, the term xxx xxx xxx (3) "Finance charge" includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may be 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 (e) Any final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated this Act shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto. SECTION 7. This Act shall become effective upon approval. Approved, June 22, 1963. [Source: Circular 485 dated 10-30-75] APPENDIX F (Book I, Part 3) RULES AND REGULATIONS GOVERNING THE IMPLEMENTATION OF THE INDUSTRIAL GUARANTEE AND LOAN FUND ACCREDITATION SYSTEM A. General Procedure 1. Commercial banks may apply for accreditation with the Industrial Guarantee and Loan Fund (IGLF). 2. All applications for accreditation shall be in the prescribed form and shall be filed in quadruplicate with the Department of Loans and Credit, Central Bank of the Philippines. 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 the action taken by the Governor/Senior Deputy Governor on its application for accreditation copy furnished NEDA. B. Accreditation Criteria for Commercial 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: 1. Minimum paid-in capital; 2. Sound and efficient management and an adequate number of qualified staff to carry out the institution's normal business; 3. 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; 4. 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; and 5. Non-arrearages with the Central Bank/IGLF. It is understood that a duly accredited bank shall at all times meet the foregoing criteria. C. Guidelines for Loan Evaluation The accredited sponsoring banks 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, an initial 50% of the total amounts for approved project(s) shall be released in the form of Special Time Deposit by the Central Bank. The remaining 50% shall be released to the accredited bank 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 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 shall see to it that the Special Time Deposit 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 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 shall channel to rural areas (outside Metro Manila) a minimum of 60% of the total amount of approved applications. [Source: Memorandum Circular to All Commercial and Thrift Banks and Non-Bank Financial Intermediaries dated 8-10-76] APPENDIX G (Book I, Part 3) RULES AND REGULATIONS GOVERNING THE FINANCING OF SMALL INDUSTRIES UNDER THE INDUSTRIAL GUARANTEE AND LOAN FUND (IGLF) PROGRAM The following rules and regulations shall govern the availment by duly accredited commercial banks of special time deposits under the IGLF Program: A. Eligible Projects Projects eligible for IGLF financing shall include: 1. Projects of manufacturing industries enumerated in Attachment 1, and 2. 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. 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; 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 of an accredited bank 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 have been processed/evaluated in accordance with IGLF rules and regulations. b) Original and two (2) copies of Deed of Undertaking (assurance of Peso Payment) 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 insurance requirement is 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 certifications 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 corresponding to the amount released signed by authorized officers(s) of the financial institution. Separate certificates shall be submitted for the working capital and fixed asset portion of the approved loan; 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 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. 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 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 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 shall have maturities not exceeding three (3) years for working capital and ten (10) years for fixed assets. For new projects, special time deposit 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 Rate IGLF Special Time Deposits in favor of financial institutions shall be assessed interest at seven per cent (7%) per annum with a maximum spread of five per cent (5%) per annum, such that the interest which shall be charged by the lending bank for IGLF loans to its borrowers shall not exceed twelve per cent (12%) per annum and shall not be discounted. H. Guarantee Coverage 1. All IGLF Special Time Deposits 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 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. 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: 1. Charges on the loan principal which shall be collected only once and only upon the full releases of the loan shall not exceed the following rates: Over P250,000 1-% P250,000 and below 1% 2. 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 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 within (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. [Source: Memorandum Circular dated 10-25-76, as amended by Memorandum Circular dated 10-28-77] ATTACHMENT 1 (Book I, Part 3) LIST OF POTENTIAL SMALL INDUSTRIES FOR IGLF FINANCING Food Products 1. Processed meat and seafoods including canned or packaged, dehydrated 2. Processed fruits and vegetables including juices, canned, dehydrated 3. Coffee, processed 4. Spices such as processed ginger, pepper, onion, garlic 5. Cereal preparations 6. Starches 7. Processed seaweeds 8. Sauces and salad dressings 9. Processed cheese 10. Confectionery 11. Cocoa and cocoa preparations such as cocoa butter 12. Chocolate and chocolate preparations 13. Noodles 14. Catsup 15. Baking powder 16. Peanut butter 17. Coco products 18. Fruits and flower wine 19. Castor oil Wood Products 1. Parquet tiles 2. Mouldings 3. Doors and fixtures 4. Shelves and cabinets 5. Caskets 6. Carvings and lattice works 7. Pallets 8. Bamboo products 9. Sandals and shoes 10. Gun stocks 11. Furniture, complete or knocked down parts 12. Toys and sporting goods 13. Household utensils of wood Paper Products 1. Boxes and packaging materials 2. Carbon paper including diazo paper, electrostatic copy papers 3. Pulp from indigenous raw materials Fiber Products 1. Coconut coir 2. Carpets and rugs 3. Cordage, twines, rope, fishing nets, abaca and synthetic Processed Rubber Products 1. Adhesives 2. Rubber latex 3. Crumb rubber 4. Camel back 5. Gums 6. Rubber tiles 7. Tubes and hoses 8. Rubber gloves 9. Rubber tires and inner tubes 10. Curing tube and sectional air bag 11. Rubber automotive parts such as vibration dampers caps; weather strips, handles and pedals, carpet underlay made of rubber 12. Rubber toys and sporting goods 13. Rubber belts Chemicals and Chemical Products 1. Almaciga resin (processed) 2. Silica gel 3. Iron oxide 4. Enzymes (from substantially domestic sources) 5. Glazing putty 6. Ink 7. Cosmetics, perfumery 8. Wax and wax products 9. Glues 10. Photographic chemicals 11. Mosquito coils 12. Modified hard resins 13. Chemical solvents 14. Charcoal 15. Refined glycerine 16. Alcohol 17. Blowing agents from rubber and plastic compound 18. Essential oils 19. Disposable hypodermic needle and syringe 20. Fiber-tipped pens 21. Chemical gypsum 22. Organic fertilizer Pharmaceutical Products 1. Pharmaceuticals 2. Wadding, gauze, bandages, adhesive, similar articles 3. Dentures and fillings Textile Products 1. Fabrics of abaca, sinamay, burlap, jusi, pineapple and other base fibers 2. Specialty garments such as laces, garters, band, towels 3. Embroideries 4. Non-woven fabrics and articles thereof 5. Other made-up articles of textiles, plastic, rubber and leather 6. Garments (at least 70% of production must be exported) only for Mindanao 7. Tablecloths 8. Mosquito nets 9. Processed abaca fiber Non-Metallic Products 1. Marble slabs, tile chips and curios 2. Cement additives 3. Asphalt batching 4. Reinforced fiber glass products 5. Processed marble blocks 6. Cement floor tiles 7. Asbestos tiles 8. Pipes and tubes, asbestos cement 9. Roofing tiles and fire bricks 10. Clay products such as pottery roofing tiled and paste frits 11. Ceramic products such as tiles (glazed, vitrified), sanitary ware sinks, bidets, etc., except dinnerware 12. Safety glass 13. Asbestos fibers 14. Coal, limestone, clay, marble 15. Silicon metal 16. Silicon carbide 17. Hollow block Metallic Products 1. Pyrite (roasted and unroasted) 2. Pyrite cinders or iron sulfite 3. Manganese concentrates 4. Silver concentrates and bars 5. Prefabricated and fabricated structural products made of iron and steel and cement and other materials (except ordinary hollow blocks) 6. Steel drums 7. Pails 8. Bolts and nuts 9. Household utensils made of metal including enamelled utensils 10. Kitchen appliances and tools hand-operated such as meat grinders, coconut graters 11. Cutlery such as scissors, blades, tailor's shears, shovels, spades, rakes, saws, knives 12. Razor blades 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. Welding 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 prll 13. Zippers 14. School and office supplies such as fasteners, pencils, folders, paper clips, pens and holders, bookbinders, rulers, desk pieces, etc. 15. Wastes recycling 16. Threads of cotton or synthetic fiber 17. Cufflinks 18. Plaques and trophies [Source: Memorandum Circular to All Commercial and Thrift Banks and Non-Bank Financial Intermediaries and Rural Banks dated 10-25-76] APPENDIX I (Book I, Part 3) GUIDELINES GOVERNING THE AGRICULTURAL SUPERVISED CREDIT OPERATIONS OF COMMERCIAL BANKS FOR MASAGANA 99 AND MASAGANANG MAISAN LOANS The following guidelines shall be observed in the granting of loans to farmer-borrowers under the supervised credit scheme: I. The Supervised Credit System A. Definition Supervised credit is the timely extension of adequate credit accompanied by competent technical assistance. B. Concept Under the supervised credit system, the farmer-borrower agrees in writing that he will apply proven farm practices necessary to conserve the land, improve its fertility and increase its production, and abide by the approved farm plan and budget jointly prepared by him and a duly accredited supervised credit technician. It is a system of lending which combines adequate and timely credit with farm and home management guidance under a trained technician. C. Steps in Supervised Credit The steps involved in the supervised credit system of lending are the following: 1. Analysis of the project to be financed to determine the resources of the farm project, the necessary changes which must be made to make the farmer-borrower more productive and efficient, and the additional facilities and/or financing required to improve his operations; 2. Preparation of a farm plan and budget which shall include a farm schedule which sets down in specific terms the day-to-day farming activities of the farmer-borrower under modern cultural practices; 3. Releases of loan in accordance with the approved farm plan and budget; 4. Periodic inspection and follow-up of the project by the technician of the bank and/or of the government technician assigned to the bank to see to it that the farmer is operating strictly in accordance with the farm plan and budget and to provide the necessary technical assistance; and 5. Evaluation of the farm project at the end of the crop season or when such project has been completed to identify any problem that the farmer-borrower may have encountered during his operations to see to it that such problem is avoided in the next project. D. Requirement for Supervised Credit Technician The bank must hire as a member of its regular staff an agricultural credit production technician trained and duly accredited by the Central Bank, who shall be responsible in providing technical services to farmer-borrowers. However, the services of government production technicians may be temporarily utilized by the bank in case one of its own is not available. A trained agricultural credit production technician is authorized to supervise a maximum of 150 farmer-borrowers. II. Coordinating Masagana Program Agencies A. National Level The Masagana program is coordinated by the NFAC National Management Committee (NMC) composed of representatives from government and private entities. This Committee takes charge of designing operational strategies to be adopted and formulates guidelines in solving major problems in the process of program implementation. B. Provincial Level At the provincial level, Masagana program is coordinated through the Provincial Action Committee (PAC) headed by the Provincial Governor. The Vice-Chairman is the Provincial Program Officer (PPO) who is responsible in monitoring the provincial program. The members are the PC Commander, provincial heads of BPI/BAEx, ACA, DLGCD, NGA, PNB, representatives from the banks, millers, traders, fertilizer/pesticide suppliers, Central Bank, DAR. etc. C. Municipal Level At the municipal level, the Masagana program is coordinated by the Municipal Action Committee (MAC) headed by the Major and Agricultural Credit Production Technician as Co-Chairman. The members are representatives from the banks, barangay captains and production groups' leaders. III. Lending Policies and Procedures A. Lending Policies 1. Eligible borrowers A farmer with a leasehold contract, a farmer who is a member of a cooperative, samahang nayon, selda/damayan, a beneficiary of agrarian reform or a landowner-cultivator. 2. Purpose of the loan The kinds of loans which may be granted under the short term supervised credit program that are rediscountable at preferential terms, are as follows: a. Rice production b. White corn and feed gains production 3. Amount and size of loan The amount and size of loan depends on the actual needs and viability of the project to be financed and capacity of the borrowers to repay the loan. However, if the farmer-borrower is a member of the samahang nayon, an amount equivalent to three per cent (3%) of his total loan shall be deducted by the bank to cover his contribution to the Barrio Savings Fund. 4. Security of the loan The loans granted may be secured by any or a combination of the following: a. Real estate if available; b. Chattel mortgage on standing crops, existing poultry or livestock or the object of financing; c. Stored crops in bonded warehouses; d. Co-makers acceptable to the bank; e. Selda/damayan members as co-makers; and f. Other collateral acceptable to the bank, such as, but not limited to machinery or work animals, etc. 5. Interest rate to end-users Production loans shall be charged at maturity an interest rate not exceeding twelve (12%) per cent per annum, excluding service fees and other charges shall be collected from agrarian reform beneficiaries except a service charge of two per cent (2%) per annum or P150 whichever is lower upon release of the loan. 6. Repayment of loans After threshing and cleaning of the crop financed by the loan, the borrower shall deposit at his expense with the warehouse designated by the bank (which may be an NGA-designated collection center or an NGA-operated or designated warehouse) that portion of the harvest in payment of his obligation in the name of the bank but for the borrower's account. The computation of the portion of the harvest equivalent to pay the borrower's loan obligation shall be based on the current market price or government-support price, whichever is higher. Between the date of harvest and the date of maturity of the borrower's promissory note, the borrower shall have the authority to sell or otherwise dispose of the portion of the borrower's harvest belonging to the bank (whether in his possession or deposited in a warehouse as provided for above) at the price acceptable to the bank and to turn over to said bank all proceeds of such sale to the extent of the amount due the bank under the loan; any excess from said sale shall belong to the borrower but any deficiency shall likewise continue to be the borrower's obligation to the bank; should no sale or other disposition materialize on the date of maturity of the note, the bank may sell said produce deposited in the warehouse and apply the proceeds of the payment to the borrower's loan account, the consequences of excess or deficiency being as provided for above. 7. Guarantee feature For a premium of one (1) per cent (1%) of the loan amount, the Land Bank of the Philippines guarantees any loss that may be incurred by a participating lending institution due to non-collection of the loans granted to farmer-borrowers under Masagana 99 and Masaganang Maisan as a result of destruction of the crops financed due to or as a result of force majeure . The provisions and procedures on loan guarantee are prescribed in the implementing guidelines set forth by the Land Bank of the Philippines. B. Lending Procedure 1. Individual or group lending a. Individual borrowers who can put up the necessary collateral may be granted loans without co-makers. In case of borrowers who have no acceptable collaterals, a group of closely-knit farmers within a samahang nayon may form themselves into a selda/damayan with one of them acting as production leader. The number of members to compose the selda will be left to the discretion of the Bank manager and the agricultural credit production technician but should not be less than two (2) and not more than fifteen (15) farmer-borrowers. This production leader acts in behalf of the members in transacting with the bank and other parties concerned. The selda/damayan members are jointly and severally liable for any loan obtained by anyone member from the participating bank. b. A farmer gets a Certification of Identity from the barangay captain. c. A farmer with the assistance of the production technician prepares his farm plan and budget according to his actual credit needs. d. The farmer applies for a loan with the bank bringing with him the accomplished application form, farm plan and budget, purchase order or chit issued by the technician for the input portion of the loan, together with the Certification of Identity issued by the barangay captain leader. 2. Release of loans . To facilitate loan documentation in case of non-collateralized group lending, only one set of promissory note is executed by the selda/damayan members. The proceeds of the loan is released to the borrowers on staggered basis in accordance with the farm plan and budget. 3. Supervision of projects by the agricultural credit production technician a. The technician shall supervise the project from the time the loan was released until maturity date. b. The production technician checks with the bank the obligations of farmer-borrowers under his supervision and reminds them of the due dates of their loans. c. The technician reports to the bank the harvesting activities of farmer-borrowers under his coverage. Immediately after threshing, the technician shall again report to the bank the value of harvest of individual borrowers. 4. Evaluation of farm projects after the end of the crop season . The technician evaluates the projects after the end of the crop season to determine the problems encountered by the farmer-borrowers in order to formulate recommendations and solutions to improve the borrower's farming operation. IV. Incentive Allowance to Government Agricultural Credit Production Technician by the Lending Institutions In case government technicians are detailed with the lending institutions to supervise the farm projects of farmer-borrowers, they shall be allowed to receive from the banks additional incentive allowance for services rendered under the following conditions: a) For the duration of the loan fifty centavos (P0.50) per month or a maximum of P3.00 for every farmer supervised under the Masagana 99 program and P2.50 for Masaganang Maisan. b) Six pesos (P6.00) upon full payment of the Masagana 99 loan on or before maturity date; six pesos and fifty centavos (P6.50) upon full payment of Masaganang Maisan loan on or before maturity date. c) There shall be a one-peso (P1.00) deduction from the six pesos (P6.00) under item (b) for every month the loan is past due. d) In no case, however, shall the technicians receive less than three pesos (P3.00) on the fourth month that the loan is past due or thereafter when the loan is fully paid. This also covers restructured loans. LLjur V. Use of Purchase Orders or Chits for the Inputs Portion of the Loan to be Extended to Farmer-Borrowers A. Purchase Orders or Chits The bank shall print sufficient copies of purchase orders or chits according to target area assigned to it. B. Routing of the Purchase Order or Chits 1. The technician fills out and issue chits to farmer and retain technician's copy of the chit. The farmer submits the chits together with the application, farm plan and budget and certificate of identity to the bank for approval. 2. The bank processes and approves/disapproves the loan application. The bank stamps seal on signed chits and gives the bank's and dealer's portions of the chits to the farmer. 3. The farmer takes the dealer's and bank's portion of the chit to the dealer. 4. The dealer issues inputs and the borrower sign dealer's copy of the chit. The dealer keeps copy of the sales invoice and chit. The dealer presents the bank's and dealer's portion of chit and sales invoice to the bank and keeps dealer's copy for audit purposes. C. Liquidation of Serviced Chits 1. The accredited dealers for fertilizers and chemicals and also the Bureau of Plant Industry Seed Inspector summarizes weekly their respective chits served during the week. The summary together with the invoice and delivery receipts should be submitted to the bank for payment. 2. The chits, invoice and/or delivery receipt shall be retained and filed by the bank for audit purposes. [Source: Circular Letter dated 3-28-77] APPENDIX J (Book I, Part 3) GUIDELINES IN THE SETTING UP OF VALUATION RESERVES FOR DOUBTFUL AND LOSS LOAN ACCOUNTS UNDER THE MASAGANA 99 AND OTHER SIMILAR SUPERVISED CREDIT PROGRAMS 1. Valuation reserves equivalent to fifty per cent (50%) of loan accounts considered as "doubtful" of collection shall be set up subject to adjustment at the end of each year and/or prior to any declaration of dividends. Loan accounts which on the basis of existing circumstances render their collection or liquidation in full highly improbable shall be classified as "doubtful". These types of loans may include, among others, any of the following: a. Loans under litigation (excluding portion covered by Land Bank guarantee); b. Loans which are past due for six (6) months and efforts to collect even the interest due have failed; c. Restructured loans which have matured and have not been renewed, and efforts to collect even the interest due have failed; d. Past due loans secured by collaterals which have declined in value without the borrower offering sufficient additional collateral for the loans, coupled with the weakened financial condition of the borrower; e. Past due loans secured by mortgage on real estate, the title to which is subject to an adverse claim rendering settlement of the loans through foreclosure doubtful; and f. Other loans which are current but have become doubtful of collection due to crop failure/unfavorable results of operations of the project financed. 2. Valuation reserves equivalent to one hundred per cent (100%) of loan accounts considered "uncollectible or worthless or loss" shall be set up and adjusted at the end of each year and/or prior to any declaration of dividends. These types of loans may include, among others, any of the following: a. Loans which are past due, the interest of which are unpaid for a period of six (6) months and not in process of collection; b. Loans previously categorized for the past six (6) months as "doubtful" of collection and without any payment of interest and/or reduction of principal; or c. Loans wherein the borrower and/or his co-maker(s) are insolvent, and if secured, the collaterals thereof are considered worthless. [Source: Circular Letter dated 4-21-77] APPENDIX K (Book I, Part 3) GUIDELINES ON DOMESTIC BORROWINGS BY FOREIGN FIRMS 1. Peso Borrowing by Foreign Firms a) 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 Attachment 1. b) The debt-to-equity ratio shall be maintained by the foreign firm as long as it has outstanding peso borrowings. c) 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 Attachment 2. 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 Attachment 2 as provided in the preceding paragraphs) shall be issued certificates for peso borrowings provided that such foreign firm 1) has not declared/distributed dividends or profits and/or has not partially withdrawn capital after July 1, 1978 and 2) undertake or commit themselves 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. d) Export-oriented firms' total debt shall be net of an amount equivalent to one hundred per cent (100%) of the two (2) months average export earnings from non-traditional products during the six (6) months immediately preceding the date of application. e) 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. 2. Exemptions a) The provisions of Sec. 135.9 and these guidelines shall not apply to foreign banks and foreign-owned non-bank financial intermediaries with respect to their peso borrowings. b) The Monetary Board, upon recommendation of the Inter-Agency Committee, may exempt other foreign firms from the requirements of Sec. 135.9 and these guidelines in meritorious cases. 3. Definition of Terms The terms used in these guidelines shall be understood as follows: a) "Foreign firms" shall refer to (1) single proprietorships owned by non-Filipino citizens, (2) partnerships, more than forty per cent (40%) of whose total capital is owned by non-Filipino citizens, and (3) 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 borrowings" 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 Subsec. 135.9 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 Central Bank regulations. g) "Non-traditional products" shall refer to export products identified as such by the Board of Investments. 4. Procedural Requirements a) A foreign firm shall obtain a certification from the Inter-Agency Committee prior to obtaining peso borrowings, as provided for in Sec. 135.9 and these guidelines. b) 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. 135.9 and these guidelines. c) 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 Subsec. 139.5 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. d) For purposes of securing a certification, the documentary requirements shall include, but need not be limited to, the following: 1) Extent of foreign equity; 2) Statement of economic activity; 3) Latest financial statements; 4) Statement as to the amount of outstanding peso borrowings, if any, at the time of application; 5) In the case of branches, Central Bank certificate of assigned capital. 6) In the case of foreign firms whose total debt/equity ratio exceeds the ratio prescribed by the Inter-Agency Committee: (i) evidence that applicant firm has not distributed profits/earnings, declared dividends and/or has not withdrawn capital after July 1, 1978; and (ii) 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. e) The Inter-Agency Committee may collect reasonable fees for every application filed. In the case of firms with cancelled certifications re-applying for new 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. [Source: Implementing Guidelines of Circular 572 dated 7-27-77, as amended by Circular 582 dated 11-3-78, Circular 601 dated 3-31-78, Circular 616 dated 7-5-78, Circular 686 dated 7-18-79 and Circular 709 dated 12-18-79] ATTACHMENT 1 (Book I, Part 3) SUGGESTED DEBT-TO-EQUITY RATIO OF BORROWING FOREIGN FIRMS 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) Vital industries as defined in LOI No. 368 implementing P.D. No. 823, as amended by P.D. No. 849. GROUP B 55:45 Firms engaged in other manufacturing activities. GROUP C 50:50 Firms engaged in non-manufacturing activities. [Source: Implementing Guidelines of Circular 572 7-27-77, as amended by Circular 582 11-3-77] ATTACHMENT 2 (Book I, Part 3) SUGGESTED ANNUAL BUILD-UP PROGRAM OF BORROWING FOREIGN FIRMS CATEGORY (AS CLASSIFIED AT THE END AT THE END AT THE END IN ANNEX "I") OF 1ST YEAR OF 2ND YEAR OF 3rd YEAR Group A Total debt-to- equity ratio of 80:20 70:30 60:40 Group B Total debt-to- equity ratio of 75:25 65:35 55:45 Group C Total debt-to- equity ratio of 70:30 60:40 50:50 [Source: Implementing Guidelines of Circular 572 dated 7-27-77, as amended by Circular 582 11-3-77] APPENDIX L (Book I, Part 3) PALAY MARKETING CREDIT PROGRAM I. Terms of Reference A. Objectives The palay marketing credit tie-up between palay traders (bonded and non-bonded warehousemen/millers/wholesalers/Area Marketing Cooperatives) and lending institutions has the following objectives: 1. To finance the working capital requirements of palay traders (bonded and non-bonded warehousemen/millers/wholesalers) and Area Marketing Cooperatives. 2. To support the payment in kind scheme under LOI 372 and facilitate collection of Masagana 99 loans. 3. To establish the credibility of the palay quedan system. 4. To increase the direct involvement of private commercial banks in agricultural credit in compliance with PD 717. 5. To strengthen the linkage between the production and marketing programs through the adequate provision of credit. 6. To complement the grain price stabilization program of the NGA. B. Basis 1. The President's instruction during the 22nd and 23rd CONFED Convention. 2. The President's reiteration during the 2nd National Business Conference of Philippine Chamber of Commerce. 3. BAP Circular, Letter No. 1.77 dated March 23, 1977. 4. Presidential Decree No. 4. 5. Letter of Instruction No. 372. 6. NGA Rules and Regulations affecting Individual/Partnership/ Cooperative/Corporation engaged or intending to engage in bonded warehousing. 7. PCAC Resolution No. 20-76 dated September 1, 1976 creating the Sub-Committee on Rice Marketing Credit to study and submit recommendations on the financial requirements of rice millers, and warehousemen. C. Scope Coverage shall include a general statement of policies on the special palay marketing credit programs identification of responsibilities of all participating agencies and operating procedures to implement the whole financing and procurement scheme. D. Terminology The common terms to be used in this SOP hereunder enumerated are understood to mean the following: 1. Trader-Borrower (TB) shall refer to NGA accredited (a) bonded warehousemen/miller/wholesaler of good standing who has been in the grains business for at least one year on the date of filing of the loan application with the lending institution; (b) bonded warehousemen/wholesaler of good standing who has been in the grain business for at least one year on the date of filing of the loan application with the lending institution; (c) non-bonded warehousemen/wholesaler of good standing who has been in the grains business for at least one year on the date of filing of the loan application with the lending institution; and (d) Area Marketing Cooperatives (AMCs) endorsed by the Bureau of Cooperative's Development (BCOD) of the Department of Local Government and Community Development (DLGCD) and duly licensed by the NGA. 2. Lending Institution (LI) shall refer to the institutions which are the sources of credit. It refers to a Rural Bank (RB), a Private Commercial Bank (KB), a Savings and Loans Association (SLA), Land Bank of the Philippines (LBP), a Savings and Mortgage Bank (SMB) and a Private Development Bank (PDB). 3. Masagana Creditor (MC) shall refer to the financial institutions (PNB/RB/ACA) which granted production loans to farmer-borrowers under the Masagana 99 program. 4. Memorandum of Agreement (MOA) shall refer to the agreement among the trader-borrower, the LI and Masagana Creditor. Said trader-borrower shall, in consideration of the loan granted by the LI assist in the collection of the production loans granted by the Masagana Creditor to Masagana farmers. 5. Certificate of Authority (CA) shall refer to a certification by Masagana Creditor that the trader-borrower is duly authorized to collect from named Masagana farmers. Such Certificate of Authority shall specify the arrangement between the MC and TB regarding the latter's assistance in the collection of M-99 loans. 6. Negotiable Palay Quedan shall refer to a warehouse receipt issued by a trader-borrower in his favor attesting to the ownership of the procured palay. 7. Masagana 99 financed palay stock shall refer to palay stock encumbered by M-99 loan. 8. Masagana 99 Program shall refer to the government sponsored nationwide rice production program designed primarily to increase per hectare yield and total output. 9. Masagana 99 loans shall refer to the loans granted to farmers under the Masagana 99 Program. 10. Masagana 99 Farmer shall refer to any bona-fide farmer engaged in the Masagana 99 program who have availed of Masagana 99 loans. 11. Bonded stocks shall refer to palay stocks covered by 100 per cent surety bond. II. Statement of Policies A. Purpose of Loan 1. The loan shall be limited to palay procurement and other incidental expenses necessary for such procurement such as trucking, handling and sacks used. 2. An amount equivalent to 50 per cent of the loan proceeds shall be used in the procurement of M-99 financed palay stocks. Said financed stocks shall be procured within the area coverage of Masagana Creditor(s) concerned in the identified provinces. B. Eligible Borrowers 1. Bonded warehousemen/miller/wholesaler certified by NGA to be of good standing who has been in the grains business for at least one year on the date of filing of the loan application with the lending institution. 2. Bonded warehousemen/wholesaler certified by NGA to be of good standing who has been in the grains business for at least one year on the date of filing of the loan application with the lending institution. 3. Non-bonded warehousemen/wholesaler certified by NGA to be of good standing who has been in the grains business for at least one year on the date of filing of the loan application with the lending institution. 4. AMCs duly endorsed by the Bureau of Cooperatives Development (BCOD) of the Department of Local Government and Community Development (DLGCD) and licensed by the NGA. 5. CONFED members and AMCs shall be given preferences in the availment of loan. C. Terms and Conditions 1. Acceptable Collateral a. First mortgage on real estate properties and acceptable chattels, and/or b. Deed of Pledge on the palay quedan issued by the Trader-Borrower in his own name in accordance with NGA Rules and Regulations and covered by surety bond equivalent to the full value of palay stocks computed at the prevailing government support price. 2. Loan Ceiling The loan value shall be as prescribed under existing rules and regulations but not to exceed the statutory ceiling for individual borrowers or P500,000 per borrower whichever is lower. 3. Term of Loan The term of loan shall be 120 days subject to extension for another 60 days on a case to case basis. 4. Interest Rate Interest rate shall be 12 per cent per annum exclusive of service charges. In cases where lending institutions do not rediscount and/or the loans are not secured by real estate collateral, they shall be allowed to charge 14 per cent interest per annum exclusive of service charges. 5. Rediscounting Promissory notes generated under this credit program can be rediscounted up to 80 per cent at the prevailing rate. D. Other Conditions 1. Fire Insurance Coverage For real estate collaterals, the improvements existing on the property should be fully insured at bank's appraised value against fire and for quedans, stocks covered by said quedan should likewise be insured at full value computed at government support price. 2. Use of Loan Eligible borrowers participating in this program are enjoined to use 50% of the loan proceeds availed of under this scheme to collect payment of loans of farmers under Masagana 99 as per list of M-99 borrowers provided by the Masagana Creditor. 3. Memorandum of Agreement Traders, millers, warehousemen and AMCs shall enter into a Memorandum of Agreement to assist in the collection of Masagana 99 production loans. III. Responsibilities of Participating Agencies A. Central Bank(CB) 1. To disseminate and circularize the terms and conditions of the program to eligible banking institutions. 2. To extend rediscounting facilities to all eligible papers under this special palay procurement programs. 3. To design a standard reporting format which participating banking offices shall accomplish and submit monthly to institutions concerned for purposes of monitoring the volume, utilization and dispersal of credit. (A copy of the report shall be furnished to the PCAC Sub-committee on Rice Marketing Credit c/o Technical Board for Agricultural Credit Staff.) B. Land Bank of the Philippines (LBP) 1. To disseminate and circularize the terms of loans as well as requirements to its branch offices including the list of viable AMCs to be provided by the Department of Local Government and Community Development (DLGCD). 2. To send out mobile teams to process and evaluate loan applications. 3. To extend loans, supervise accounts and monitor the volume dispersal and collection of loans granted under the program. 4. To report to the appropriate department of the Central Bank the volume and utilization of the credit extended. A copy of the report shall be furnished to the PCAC Sub-committee on Rice Marketing Credit (c/o Technical Board for Agricultural Credit Staff). C. Commercial Banks/Savings and Loans Associations/Rural Banks/Savings and Mortgage Banks/Private Development Banks (KBs/SLAs/RBs/SMBs/PDBs) 1. To evaluate, process and extend loans under this program pursuant to PD 717 allocating 25% of their loanable funds for agricultural credit. 2. To report to the appropriate department of the CB the volume and utilization of the credit extended. A copy of the report shall be furnished to the PCAC Subcommittee on Rice Marketing Credit. 3. To enter into a Memorandum of Agreement with the Trader-Borrower/ PNB/RB/ACA and transmit the same to the NGA through its duly authorized representatives. D. National Grains Authority (NGA) 1. To take the lead in the effective implementation of this marketing tie-up and the execution of the agreement among the participating traders/millers/warehousemen, financial institutions, and Masagana Creditors. 2. To certify to lending institutions that the prospective borrower is of good standing with respect to compliance on their licensing, bond and insurance requirements. 3. To monitor movement and volume of stocks per existing NGA inventory reporting system. 4. To assist in the collection against a surety bond or fire insurance in case of claims made by financial institutions. 5. To issue, control and monitor quedans (printed in security paper) to be used in the stock procurement transaction of trader-borrower. E. RBs, PNB, ACA as Masagana Creditor (MC) 1. To enter into a Memorandum of Agreement with the TBs and LIs. 2. To issue a Certificate of Authority to TBs specifying the arrangements for the TBs' assistance in loan collection of M-99. 3. To provide the TBs and LIs through the PPOs, list of Masagana borrowers who have outstanding obligations to their respective banks. 4. To receive the amount representing collections turned-over by the duly authorized TB for the payment of Masagana loans of farmer-borrowers, in accordance with the Certificate of Authority issued by the Masagana creditor to the trader-borrower. F. Bankers Association of the Philippines (BAP) and Rural Bankers Association of the Philippines (RBAP) to circularize among member banks the implementing rules and regulations of this financing program and enjoin them to participate in said program. G. Confederation of Filipino Rice and Corn Association, Inc . (CONFED) 1. To recommend, (through NGA) to participating banks eligible traders, millers and warehousemen. 2. To assist in the collection of the loans granted to its recommended members. 3. To circularize among members the mechanics of the program and enjoin them to participate. H. Philippine National Bank (PNB) Development Bank of the Philippines (DBP) to rehabilitate temporarily distressed but essentially viable accounts. I. Department of Local Government and Community Development (DLGCD) 1. To certify and endorse eligible AMCs. 2. To assist the financial institutions in the collections of loans extended to AMCs. 3. To assist LBP mobile teams and branch officers in the evaluation of loan application. J. National Food and Agriculture Council (NFAC) Provincial Program Officers (PPOs) of Masagana 99 will secure from MC list of Masagana 99 borrowers to be given to private traders, millers, warehousemen and lending institutions ( LIs). K. PCAC Sub-Committee on Palay Marketing Credit (PCAC Sub-Com) 1. To monitor the implementation of the special marketing credit program, evaluate the progress of the same and report to the PCAC, the results of any evaluation. 2. To recommend additional implementing guidelines/and/or revisions of the program to PCAC whenever necessary. IV. Operating Procedures A. If collateral offered is Real Estate/Chattels 1. Trader-Borrower (TB) advises Lending Institutions (LI) of intention by filing loan application. Submits Transfer Certificate of Title (TCT) and other papers evidencing ownership of the properties to be mortgaged to LI. Requests nearest NGA office to issue certification to the effect that the TB is: (a) a duly licensed bonded warehouseman/miller/wholesaler or bonded warehouseman/wholesaler or non-bonded warehouseman/wholesaler as the case may be, (b) that the aforementioned is of good standing in so far as grains business is concerned per NGA records, and (c) that as of date of filing of loan application the loan applicant has been in the grains business for at least one year. (Prior to the issuance of such certification, the prospective TB shall secure letter or recommendation from CONFED or its local branches to the effect that the TB is an eligible borrowers and submits the same to NGA. 2. NGA/BCOD of DLGCD issues Certification to TB. If TB is an AMC, a certification shall be secured from BCOD of DLGCD prior to NGA's certification. 3. Lending Institution (LI) processes loan application and determines the maximum credit ceiling to be granted to TB. Requires TB to submit the required certification from NGA. 4. LI approves/disapproves loan application. If approved, advises TB of approval. 5. LI, TB, MC enters into Memorandum of Agreement. 6. TB secures Certificate of Authority from Masagana creditor (MC) that the TB is duly authorized to collect from the named Masagana farmers. Such certificate of authority shall further show the following: a. official receipt pad(s) to be used by TB showing the inclusive serial numbers; b. procedures on how the collections shall be turned over by TB to MC, within what period or vice versa; and c. incentives, if any, given by MC to TB. Furthermore, TB secures list of farmer-borrowers from PNB/RB/ACA concerned thru Provincial Program Officers (PPOs). Said list shall be used as a basis in collecting loans from Masagana 99 farmer-borrowers. 7. LI releases loan proceeds to TB. 8. TB acknowledges receipt of loan proceeds from LI and buys palay from farmers. Fifty per cent (50%) of the loan availed of from LI shall be used for collection of M-99 outstanding loans. (a) If the farmer has an outstanding obligation with the Masagana Creditor, issues own Official receipt (duly authorized in the certificate of authority) to farmer-borrower indicating therein equivalent peso value (not lower than the government support price) of the stock applied to loan: Provided, however, That the current outstanding loan with M-99 program is first paid in full and the past due obligations from previous phases, if any, amortized in accordance with arrangements between MC and M-99 farmers. (b) If farmer has no outstanding obligation with MC or is a non-Masagana 99 borrower, pays the farmer in cash the corresponding equivalent amount of palay procured (not lower than the government support price). TB stores procured palay. If bonded warehouseman/miller/wholesaler, issues negotiable quedan in his own name in accordance with NGA Rules and Regulations. Distributes quedan parts as follows: Quedan Proper TB Control Portion NGA Stub TB Note: The Countersignature portion on the quedan proper shall be dispensed with in lieu of the 100 per cent bond coverage. 9. Masagana Creditor receives the amount due from TB (in accordance with the certificate of authority) representing payments of Masagana borrowers for outstanding obligations of said borrowers. Reconciles collections of said borrowers. Reconciles collection as against the TB-issued official receipts to the trader-borrowers. He also acknowledges collections turned-over by the TB; issues official receipt to TB giving reference to the official receipt issued by said TB to the Masagana Borrower (OR No., date of stock purchase and said name of Masagana borrower); credits the amount of the Masagana farmer-borrower concerned effective on the date of the TB official receipt i.e., date when palay was purchased. 10. TB submits every Friday control portion of the quedan to the nearest NGA office together with the Weekly Report on Palay Marketing tie-up. Submits also to concerned PNB/RB/ACA copy of such report, copy furnished the LI. 11. NGA checks and reconciles at the end of the month or as often as necessary, weekly stock report submitted by the TB against the issued quedan and conducts inventory count and examination of the journal books and Individual Stock Cards of the TB using the reconciliation statements aforementioned as basis; verifies the authenticity of the quedans and with the help of a grains classifier, determines conditions and ownership of stock procured. 12. LI prepares Monthly Report based on the trader-borrower's weekly statement of stocks procured and collections/remittances mentioned in No. 10; prepares Monthly Report to be distributed as follows: Copy 1 PCAC (thru TBAC staff) Copy 2 PNB/RB/ACA Copy 3 NGA Copy 4 File copy Also prepares monthly report on the volume and utilization of credit based on a CB-prepared reporting form. 13. TB undertakes the liquidation of all outstanding obligations as a debtor of the LI and as collecting agent of PNB/RB/ACA on or before the maturity date of the loan. B. If collateral offered is Quedan (Quedan may be used as collateral in the initial loan availment or in reavailment of a loan ) 1. TB advises LI of intention by filing loan application. 2. NGA/BCOD of DLGCD issues the Certification upon request of TB to the effect that the TB is (a) a duly licensed bonded warehouseman/miller/wholesaler or non-bonded warehouseman/wholesaler, as the case may be; (b) that the aforementioned is of good standing insofar as the grains business is concerned per NGA records; (c) that as of date of filing of loan application, the loan applicant has been in the grains business for at least one year. (Prior to the issuance of such certification, the prospective TB shall secure letter of recommendation from CONFED or its local branches to the effect that the TB is an eligible borrower and submits the same to NGA). NGA/BCOD of DLGCD also issues certification to TB. If TB is an AMC, a certification shall be secured from BCOD of DLGCD prior to NGA's certification. It shall likewise certify authenticity of the palay quedan by providing LI with specification e.g. specific location, volume, variety and value of palay stocks covered by the quedan as supported by warehouse floor plan. 3. LI processes loan application if No. 2 is met. Processes loan application based on the TB's capacity to pay and character references. If in proper order, requires TB to submit the Deed of Pledge together with the corresponding quedans to be used as collateral. 4. TB submits Deed of Pledge to LI together with the quedan proper. 5. LI approves/disapproves loan. 6. TB and LI enters into a Memo agreement if loan is approved. Secures certificate of authority from Masagana Creditor (MC) that the TB is duly authorized to collect from the named Masagana farmers. Such certificate of authority shall further show the following: a) official receipt stub to be used by TB showing the inclusive serial numbers; b) procedures on how the collections shall be turned over by TB to MC within what period; and c) incentives, if any, given by MC to TB. Furthermore, TB secures list of farmer borrowers from PNB/RB/ACA concerned thru Provincial Program Officer (PPOs). Said list shall be used as a basis in collecting loans from Masagana 99 farmer-borrowers. LibLex 7. LI releases loan proceeds to TB. 8. TB acknowledges receipt of loan proceeds from LI and buys palay from farmers. Fifty per cent (50%) of the loan availed of from LI shall be used for collection of M-99 outstanding loan. (a) If the farmer has an outstanding loan with the MC, issues own Official Receipt (duly authorized in the certificate of authority) to farmer borrower indicating therein equivalent peso value (not lower than the government support price) of the stock applied to loan: Provided, however, That the current outstanding loan with M-99 Program is first paid in full and the past due obligations from previous phases, if any, amortized in accordance with arrangements between MC and M-99 farmers. (b) If farmer has no outstanding loan with MC or is a non-Masagana 99 farmer, pays the farmer in cash the corresponding equivalent amount of palay procured (not lower than the government support price). TB stores palay procured. If bonded warehouseman/miller/wholesaler or bonded warehouseman/wholesaler, issues negotiable quedan in his own name in accordance with NGA Rules and Regulations. Distributes quedan parts as follows: Quedan Proper TB Control Portion NGA Stub TB If TB is non-bonded warehouseman/wholesaler, said TB is not authorized to issue Quedan. Note: The counter signature portion on the quedan proper shall be dispensed with in lieu of the 100 per cent bond coverage. 9. Masagana Creditor receives the amount due from TB (in accordance with the certificate of authority) following a pre-arranged schedule with the TB representing payments of Masagana borrowers for outstanding obligations of said borrowers, reconciles collections as against the TB issued official receipts to the trader-borrower. He also acknowledges collections turned-over by the TB; issues official receipt issued by said TB to the Masagana borrower (OR No., Date of stock purchase and said name of Masagana borrower), credits the account of the Masagana farmer-borrower concerned effective on the date of the TB's official receipt, i.e., date palay was purchased. 10. TB submits every Friday Control Portion of the Quedan to the nearest NGA Office together with the Weekly Report on Palay Marketing Tie-up, copy furnished the LI. 11. NGA checks and reconciles Weekly Stock Report submitted by the TB against the issued Quedans at the end of the month or as often as necessary. Also conducts inventory count and examination of the journal books and individual stock cards of the TB using the reconciliation statements aforementioned as basis; verifies the authenticity of the quedans and with the help of a grains classifier, determines conditions and ownership of stocks procured. 12. LI prepares Monthly Report based on the TB's Weekly Statement of Stocks procured and collection/remittances mentioned in No. 10 to be distributed as follows: Copy 1 PCAC thru TBAC Staff 2 PNB/RB/ACA 3 NGA 4 File copy Also prepares monthly report on the volume and utilization of credit based on a CB-prepared reporting form. 13. TB undertakes the liquidation of all outstanding obligations as a debtor of the LI and as collecting agent or PNB/RB/ACA on or before the maturity date of the loan. Note: In case trader-borrower opts to secure additional financing from the lending institution, Trader-Borrower secure additional bond and insurance coverage, then follow procedure No. 1 to 13 of Section IV(b) if collateral is Quedan. [Source: Circular Letter 8-12-77] APPENDIX M (Book I, Part 3) GUIDELINES IN GRANTING IGLF LOANS TO MEDIUM SCALE INDUSTRIES All duly accredited commercial banks 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); and 3. The project is a labor-intensive enterprise that employs at a ratio of one (1) worker for every thirty thousand (P30,000) pesos or less of its total asset. 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; 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 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 have been processed/evaluated in accordance with IGLF rules and regulations; b. Original and two (2) copies of Deed of Undertaking (assurance of Peso Payment) 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. 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 (CB-DLC-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; 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; 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; 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 Deposit 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 Rate IGLF Special Time Deposits in favor of financial institutions shall be assessed interest at seven per cent (7%) per annum with a maximum spread of five per cent (5%) per annum, such that the interest which shall be charged by the lending bank for IGLF loans to its borrowers shall not exceed twelve per cent (12%) per annum. Discounting of interest is not allowed. H. Guarantee Coverage 1. All IGLF Special Time Deposits 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 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. 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: 1. Charges on the loan principal which shall be collected only once and only upon the full releases of the loan shall not exceed the following rates: Over P250,000 1-% P250,000 and below 1% 2. 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 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 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. [Source: Memorandum Circular dated 10-28-77] APPENDIX N (Book I, Part 3) GRAINS QUEDAN FINANCING PROGRAM In accordance with the pertinent provisions of LOI No. 704 dated June 9, 1978, the following guidelines on Grains Quedan Financing Program are hereby issued for the guidance of all concerned, to take effect immediately. I. OBJECTIVES OF THE PROGRAM 1. To augment the operating capital of grains businessmen and Area Marketing Cooperatives and encourage their active participation in the local procurement of grains; 2. To increase the direct involvement of private commercial banks in agricultural credit in compliance with PD 717; 3. To strengthen further the integrity and acceptability of the grains quedan as collateral for loan availment; 4. To enhance further the grains price stabilization program of the government; and 5. To support the Masagana 99 Program. II. LEGAL BASES 1. Letter of Instruction No. 696, dated May 24, 1978, making funds available to the NGA and the Central Bank for release to qualified rural banks in the form of special time deposits; 2. Letter of Instruction No. 704, dated June 9, 1978, establishing a Quedan Guarantee Fund and constituting the Quedan Guarantee Fund Board; 3. Presidential Decree No. 4 dated September 26, 1972, as amended by PD 1485 dated June 11, 1978 creating the NGA and prescribing its functions, powers and authorities. III. TERMINOLOGY 1. Grains Businessman (GB) a warehouseman, miller, and/or retailer duly licensed and accredited by NGA or an Area Marketing Cooperative (AMC) endorsed by the Bureau of Cooperatives Development (BCOD) and likewise licensed by NGA. 2. Lending Bank (LB) Any banking institution organized and existing under the laws of the Republic of the Philippines and duly authorized by the Central Bank of the Philippines to participate in the Grains Quedan Financing Program. 3. Grains Quedan (GQ) Simply known otherwise as Quedan, is a negotiable warehouse receipt by the terms of which the palay deposit in a bonded warehouse, duly licensed by NGA, shall be delivered to the depositor upon his order, or to bearer or holder in due course for value of the said receipt. 4. Bonded Stocks shall refer to palay stocks stored in a bonded warehouse. 5. Special Time Deposit (STD) shall refer to the amount deposited by the Central Bank with eligible rural banks pursuant to LOI No. 696 and its implementing guidelines. 6. Board a group of officials, otherwise known as the Quedan Guarantee Fund Board (QGFB), which is empowered to administer the Fund and is composed of the NGA Administrator as Chairman with the Central Bank Governor and the Minister of the Budget or their duly authorized representatives as members. 7. Fund the Quedan Guarantee Fund established under LOI No. 704 to guarantee the existence of palay deposit covered by grains quedan up to 66-2/3% of the outstanding loan. 8. National Grains Authority (NGA) a body corporate organized and existing under and by virtue of P.D. No. 4, as amended, for the integrated growth and development of the grains industry. 9. CONFED Confederation of Filipino Rice and Corn Association, Inc. 10. Masagana Creditor (MC) shall refer to the financial institutions which granted production loans to farmer-borrowers under the Masagana 99 program. 11. Collection Agreement (CA) shall refer to the Agreement between the GB and MC stipulating that said GB shall assist in the collection of the production loan granted to Masagana farmers. 12. Authority to Collect (AC) is a certification by MC that the GB is duly authorized to collect from named Masagana farmers. IV. STATEMENT OF POLICIES A. Purpose of Loan To finance the palay procurement of a grains businessman and other incidental expenses such as for sacks, drying, milling, cleaning, trucking and handling of palay. B. Eligibility Requirement of Grains Businessmen 1. He must be licensed and accredited by NGA; 2. He must be a holder in due course of a negotiable palay quedan; 3. In the case of AMCs, it must be duly endorsed by the Bureau of Cooperatives Development (BCOD), of the Ministry of Local Governments and Community Development (MLGCD) and likewise licensed by NGA; casia 4. In the case of individual GB, preference shall be given to those duly endorsed by CONFED; and 5. If borrowing from a rural bank, he must have a net worth not exceeding P100,000. (This requirement does not apply to those borrowing from other types of banks.) C. Terms and Conditions 1. Collateral Deed of Pledge on the negotiable palay quedan issued by a bonded warehouseman in accordance with NGA rules and regulations. 2. Loan Ceiling The loan ceiling shall be as prescribed under Section 23 of General Banking Act, as amended. 3. Loan Value The loan value shall be 70 percent of the face value of the quedan computed at the prevailing government support price. 4. Types and Term of Loan Straight loan for 180 days; or one year credit line made available in notes not exceeding 180 days. 5. Maximum Lending Bank Rates Per annum interest rate of 9% plus 1% service and other charges. 6. Rediscount Rate, Value and Maturity Promissory notes generated under this credit program may be rediscounted with CB up to 100% of the loan at the rate of 4% per annum with maturity not exceeding 180 days per the bank's existing ceiling. 7. Quedan Guaranty Fund The Fund shall guarantee the existence of palay deposits covered by quedan up to an amount equivalent to 66-2/3% of the outstanding loan, as provided for in the rules and regulations governing the guarantee coverage of grains quedan (see Attachment N.1). The QGFB shall collect from the LB a guarantee fee of 1% per annum based on the amount of loan which shall not be passed on to the GB. 8. Purchase Guaranty At the option of the lending bank, the NGA shall undertake the purchase of palay deposit equivalent to the outstanding loan covered by quedan upon the maturity of the loan. 9. Collection Agreement The GBs are encouraged to enter into an Agreement with Masagana Creditors to assist in the collection of outstanding Masagana 99 production loans. V. RESPONSIBILITIES OF PARTICIPATING AGENCIES A. Central Bank (CB) 1. To disseminate the terms and conditions of the program to eligible Lending Bank; 2. To administer the funds made available under LOI 696 and to grant STDs to eligible rural banks; and 3. Within the bank's existing ceiling to extend rediscounting facilities to all eligible papers under this Grains Quedan Financing Program. B. Lending Banks (LB) 1. To disseminate the terms of loans as well as requirements to its branch offices; and 2. To evaluate, process and extend loans under this program. C. National Grains Authority (NGA) 1. To accredit the prospective borrowers; 2. To periodically inspect and monitor bonded stocks per existing NGA inventory reporting system; 3. To supervise, control and monitor quedans issued by bonded warehousemen; 4. To conduct joint inspection of stocks with authorized representative of lending banks; and 5. To purchase the palay stocks equivalent to the outstanding loan covered by quedan at the option of lending bank upon maturity of the loans. D. Quedan Guarantee Fund Board (QGFB) 1. To administer the grains quedan guarantee fund; 2. To execute a guarantee agreement with eligible LBs; 3. To pay legitimate claims by LBs against the Fund; and 4. To oversee the implementation of LOI 704 and its implementing rules and regulations. E. RBs, PNB, ACA as Masagana Creditor (MC) (Optional) 1. To enter into a Collection Agreement with GBs and LBs; 2. To issue an Authority to Collect to GBs specifying the arrangements for the GBs' assistance in loan collection of M-99; 3. To provide the GBs and LBs through Provincial Program Officers (PPOs) a list of Masagana borrowers who have outstanding obligations with their respective banks; and 4. To receive the amount representing collections turned over by the duly authorized GB for the payment of Masagana loans of farmer-borrowers, in accordance with the Authority to Collect issued by the MC to the Grains Businessman. F. Bankers Associations To circularize among member banks the implementing rules and regulations of this financing program and encourage them to participate in said program. G. Confederation of Filipino Rice and Corn Association, Inc . (CONFED) 1. To recommend to participating banks eligible Grains Businessmen; 2. To assist in the collection of the loans granted to its recommended members; and 3. To circularize among its members the mechanics of the program. H. Bureau of Cooperative Development (BCOD) 1. To certify and endorse eligible AMCs; and 2. To assist the Lending Banks in the collection of loans extended to AMCs. I. National Food and Agriculture Council (NFAC) Provincial Program Officers (PPOs) of Masagana 99 to secure from MC the list of Masagana 99 borrowers to be given to Grains Businessmen and Lending Banks (LBs). [Source: Circular 624 dated 8-11-78, as amended by Circular 680 dated 6-4-79] ATTACHMENT 1 (Book I, Part 3) RULES AND REGULATIONS GOVERNING THE GUARANTEE COVERAGE OF GRAINS QUEDAN PURSUANT TO LETTER OF INSTRUCTION NO. 704 The following rules and regulations governing the operations of the guarantee coverage of grains quedan are hereby promulgated: SECTION 1. Definition of Terms . Unless otherwise specified, the following terms used in these rules and regulations shall mean 1.1 Fund the Quedan Guarantee Fund established under LOI No. 704 to guarantee the existence of palay deposit covered by grains quedan up to 66 2/3% of the outstanding loan; 1.2 Grains Quedan (GQ) simply known otherwise as quedan, is a negotiable warehouse receipt by the terms of which the palay deposit in a bonded warehouse, duly licensed by NGA, shall be delivered to the depositor or upon his order, or to bearer or holder in due course for value of the said receipt upon demand. 1.3 Palay Deposit a quantity of unhulled or unhusked grain of rice delivered to and accepted by a bonded warehouseman for the purpose of storage and for which a quedan is issued; or a quantity of palay owned by a bonded warehouseman stored in his warehouse and for which a quedan is issued in his own name subject to NGA's requirements as to previous inspection and affidavit of ownership of the commodity. 1.4 NGA the National Grains Authority, a body corporate organized and existing under and by virtue of Presidential Decree No. 4, as amended. 1.5 Board a group of officials, otherwise known as the Quedan Guarantee Fund Board, which is empowered to administer the Fund and is composed of the NGA Administrator as Chairman with the Central Bank Governor and the Minister of Budget or their duly authorized representatives as Members. 1.6 Grains Businessman (GB) a warehouseman, miller, wholesaler and/or retailer duly licensed and accredited by NGA or an Area Marketing Cooperative (AMC) endorsed by the Bureau of Cooperatives Development (BCOD) and likewise licensed by NGA. 1.7 Borrower A Grains Businessman who intends to secure or in fact has secured a loan from a Lending Bank by pledging grains quedans. 1.8 Lending Bank any banking institution organized and existing under the laws of the Republic of the Philippines and duly authorized by the Central Bank of the Philippines to participate in the grains quedan financing program. 1.9 Maturity of the Loan the due date for the full payment of the loan granted by a Lending Bank to a Grains Businessman as appearing in the promissory note and/or other legal document; or an earlier date than as above specified brought about by confirmed findings in a joint inspection that the palay deposit is wholly or partially non-existent. 2.0 Bond an undertaking conditioned to respond or answer for the value of the palay actually delivered and received at any time the warehouseman is unable to return said palay deposit or to pay for its value. SECTION 2. Purpose of the Fund . The Fund has been established to further strengthen the integrity and acceptability of grains quedan by undertaking to guaranty the existence of palay deposit when said quedan is pledged by a Grains Businessman with a Lending Bank and thereby develop the quedan as a convenient credit instrument for channelling the banking sector's loanable funds for the augmentation of the working capital of Grains Businessmen in their palay procurement operation and enhance the stabilization of palay farm price. SECTION 3. Administration of the Fund . the Fund shall be administered as hereunder outlined: 3.1 The Fund and monies accruing to it shall be administered by the Board. 3.2 The Board shall adopt such policies, rules and regulations as may be necessary to administer the Fund and to effectively achieve the objective of the Grains Quedan Financing Program. 3.3 The Board shall create a staff which shall assist in the processing of applications for guarantee coverage, claims for guarantee payments of lending bank and in other matters pertaining to the administration of the Fund. SECTION 4. Eligible Quedan for Guarantee Coverage . only quedans covering palay deposit pledged by a Grains Businessman for the purpose of securing commodity loan from a Lending Bank shall be eligible for guarantee coverage. SECTION 5. Extent of the Coverage . the Fund shall guaranty the existence of palay deposit covered by quedan up to an amount equivalent to 66 2/3% of outstanding loan. SECTION 6. Extent of Liability of the Fund . the liability of the Fund to the Lending Bank shall be up to 66 2/3% of the outstanding loan, exclusive of interest and other charges, after deducting the sales proceeds of existing palay deposits, if any: Provided , That the non-payment of said loan is due to the non-existence of palay deposit covered by the pledged quedan. SECTION 7. Requirements for Guarantee Coverage . a Lending Bank desiring to avail of the guarantee coverage on quedans pledged for commodity loans by Grains Businessman must comply with the following requirements: 7.1 The execution of a Guarantee Agreement with the Board in a prescribed form; 7.2 After the execution of the Guarantee Agreement and for as long as it is in full force and effect, the Lending Bank shall submit to the Board within fifteen (15) calendar days from the date of loans a List of Quedans for guarantee coverage in a prescribed form. The list shall be submitted directly to the Board either through personal delivery or through registered mails. In the first case, the date of acknowledgment by any authorized representative of the Board on the copies of List filed or submitted and in the second case, the date of mailing postmarked on the envelope or the registry receipt shall be considered as the date of filing or submission; and 7.3 The remittance of the guaranty fee to the Board together with the List of Quedans for Guaranty Coverage. SECTION 8. Effectivity of Guarantee Coverage . After the List of Quedans for Guarantee Coverage shall have been submitted by the Lending Bank and consequently approved by the Board, the effectivity of the guarantee coverage shall retroact to the date of the submission of the said List as provided for in Section 7.2. SECTION 9. Guarantee Fee . a guarantee fee of one (1%) percent per annum of the amount of every loan extended to Grains Businessmen shall be paid by the Lending Bank to the Board. Said fee shall not be passed on to the Borrower and non-refundable in case of cancellation of the guarantee coverage due to any of the grounds enumerated in Section 15. SECTION 10. Joint Inspection of Stocks . In the event of failure of Grains Businessman to pay wholly or in part his loan upon maturity, the Lending Bank shall within fifteen (15) calendar days notify the Board after which a joint inspection by authorized representatives of the Lending Bank and NGA (acting on behalf of the Board) shall be conducted for the purpose of assessing the quality and quantity of the palay deposit covered by the quedan. A joint inspection may likewise be conducted even before the maturity of the loan at the instance of the Lending Bank or NGA. After the joint inspection, a report in a standard NGA format shall immediately be submitted to the Board. SECTION 11. Purchase Guarantee of Palay Deposit . At the option of the Lending Bank, NGA shall purchase the existing palay deposit equivalent to the outstanding loan covered by grains quedan at the prevailing government support price upon maturity of the loan. SECTION 12. Conditions for Claim Against the Fund . Before filing any claim against the Fund, the Lending Bank shall first exhaust the following courses of action to collect payment of outstanding loan depending on the findings of the joint inspection. 12.1 If the value of the existing palay deposit is sufficient to satisfy the outstanding loan, the Lending Bank must sell the said deposit either to a third party or to NGA as provided for in Section 11. In either case, the proceeds of the sale shall be applied to the outstanding loan. 12.2 If the value of the existing palay deposit is not sufficient to satisfy the outstanding loan, the Lending Bank shall likewise sell the said deposit as outlined above and the proceeds of sale shall be applied to the outstanding loan and, thereafter, only the remaining unpaid loan shall be subject for claim against the Fund to the extent provided for in Section 6. 12.3 If the palay deposit is non-existent, the Lending Bank shall proceed to claim against the Fund, likewise to the extent provided for in Section 6. SECTION 13. Payment of Claim . The Board shall pay the guarantee claim to the extent allowed under Section 6, subject to the conditions set forth in Section 12 and after the Lending Bank shall have filed a Claim for Guarantee Payment in the prescribed form: Provided , That the guarantee coverage shall not have been cancelled or nullified under any of the grounds enumerated in Section 15. SECTION 14. Application and Remittance of Recoveries . Any amount recovered or collected from the Borrower and/or the Bonds subsequent to the payment of claim against the Fund shall be applied to the unpaid loan on a pro rata basis of 66 2/3% to the Fund and 33 1/3% to the Lending Bank. The collected amount due the Fund shall, without necessity of demand, be remitted to the Board within fifteen (15) calendar days from date of collection; otherwise, the Lending Bank shall pay an amount equivalent to one (1%) percent per month on the amount due as liquidated damages and another one (1%) percent per month as interest thereon computed from the date of collection up to the date of remittance. In addition, such violation shall constitute a ground for disapproval of future application for guarantee coverage. SECTION 15. Grounds for Cancellation or Nullification of Guarantee Coverage . Any of the following shall be a ground for cancellation or nullification of guarantee coverage and/or non-payment of guarantee claims: 15.1 Where there is collusion between the Borrower and the Lending Bank in the extension of credit to the prejudice of the Fund. Collusion exists when the Borrower and the official(s) and/or employee(s) of the Lending Bank enter into an agreement for fraudulent purposes or whenever said parties conspire to defraud the Fund; 15.2 Where the Lending Bank made false statements, misrepresentation, omission or concealment in the reports submitted to, and/or in the claims filed with the Board; and/or 15.3 Where the Lending Bank violates any of the provisions of these Rules and Regulations. The aforementioned statements shall not preclude the Board from cancelling or nullifying its guarantee coverage for other causes concerning fraud, bad faith or other machinations. SECTION 16. Applicability of Other Penalties . The penalties provided for in these Rules and Regulations shall be without prejudice to the imposition of other administrative sanctions as well as the filing of civil and/or criminal cases as may be warranted by circumstances. SECTION 17. Amendments . These Rules and Regulations may be amended motu proprio by the Board. SECTION 18. Effectivity . These Rules and Regulations shall take effect upon approval. [Source: Circular 624 dated 8-11-78] APPENDIX O (Book I, Part 3) RULES AND REGULATIONS GOVERNING THE OPERATIONS OF THE COOPERATIVE FINANCE SYSTEM The Cooperative Finance System (CFS) is specially designed to effectively lend and invest the Cooperative Marketing Project (CMP) loan and trust funds with well-managed and credit-deserving Area Marketing Cooperatives (AMCs) and the Cooperative Marketing System of the Philippines (CMSP) so that they could in turn efficiently serve the input and marketing needs of their members. The following rules and regulations are hereby promulgated to govern the operations of the CFS, particularly, the Cooperative Finance Group when it lends and invest the CMP funds to AMCs thru Cooperative Rural Banks (CRBs). SECTION 1. Definition of Terms Unless otherwise specified, the following terms used in these rules and regulations shall mean: 1.01 Cooperative Shall mean only organizations composed primarily of small producers and of consumers who voluntarily join together to form business enterprises which they themselves own, control or patronize. A small producer shall mean a self-employed individual who, by himself or with his family provides the primary labor requirements of his business enterprise or one who earns at least fifty per cent (50%) of his gross income from the payment, proceeds or income of the labor he provides. 1.02 Samahang Nayon A body corporate composed primarily of small farmers residing and/or farming within the geographical limits of a barrio for the purpose of improving the quality of life of the barrio people. 1.03 Area Marketing Cooperative (AMC) A voluntary business association of at least ten (10) Samahang Nayons and pre-cooperatives engaged primarily in the marketing of the produce of its members as well as in the supply of their production inputs and other requirements. 1.04 Cooperative Rural Bank (CRB) A rural bank organized by duly established cooperatives and samahang nayons, registered with BCOD and approved by the Central Bank under the Rural Banks Act, as amended (R.A. No. 720). 1.05 Loan Fund That portion of USAID loan and Philippine Government Counterpart funds earmarked for lending to AMCs and CMSP. 1.06 Trust Fund for AMCs That portion of USAID loan earmarked for the purpose of expanding the equity base of AMCs. 1.07 Guarantee Fund A fund established to cover possible losses arising from uncollected loans which cannot be covered by the liquidation of collaterals in accordance with pertinent provisions in these guidelines. 1.08 Cooperative Finance Group (CFG) A special unit in the Central Bank under the administration of the Department of Rural Banks and Savings and Loan Associations, created for the purpose of providing specialized handling, monitoring, supervision and servicing of loans to cooperatives made through CRB/Lenders. 1.09 Debt-Equity Ratio Refers to the ratio of liability to the net worth. 1.10 Special Time Deposit (STD) Funds made available to accredited CRB/Lender to backstop the financial assistance extended to a cooperative by CFG. 1.11 Disposable Earnings Refers to the balance of net income plus non-cash expense items, after setting aside (a) 10% of net income each for cooperative education/training and General Reserve Fund, and (b) 1% of gross income as Kilusang Bayan Guarantee Fund. SECTION 2. General Credit Policies 2.01 The extension of credit shall be consistent with sound lending and business principles so that the agricultural cooperatives may prosper and grow in size, scope and quality of service to their members. 2.02 A loan to an eligible cooperative shall be based upon sound credit factors. It should be in an amount sufficient to accomplish the purpose for which it is intended and provide terms and conditions which reasonably assure repayment and protect the cooperative's credit base. 2.03 Applicant cooperative must have capital contributions sufficient to meet the debt-equity ratio prescribed under this guidelines. 2.04 Term loans that may be granted to an eligible cooperative shall be such that its total outstanding term liabilities would not exceed a debt-equity ratio of two is to one. 2.05 The Cooperative Finance System shall pursue a policy of a total financing package for eligible cooperatives subject to a loan and capital package provided that: (a) The amortizations of the term loan component must be repaid from disposable earnings of the cooperative; and (b) The retirement of the capital assistance component must be paid from a capital build-up agreed to by the cooperative members and made a part of the loan agreement. 2.06 Each borrower shall be required to invest 5% out of advances on term loans and 3.75% out of advances on seasonal loans (except re-advances made within the year) in a Guarantee Fund established to cover losses arising from uncollected loans which cannot be covered by the liquidation of collaterals. Each borrower is to make investments at the above rates until such time as the amount of investment in the Guarantee Fund equals 10% of the borrower's maximum combined loans outstanding in the previous year. The funds are to be invested in prime securities by the CFG and the interest income shall accrue to the benefit of each borrower. Any net loss suffered from uncollected loans granted under this program shall be chargeable up to eighty five per cent (85%) against the Guarantee Fund and the balance of fifteen per cent (15%) against the CRB/Lender. Losses shall first be charged against the investment of the delinquent borrower in the guarantee fund. Any remaining losses will be charged against the investment of other borrowers. SECTION 3. Types of Financing Loan and capital funds made available utilizing USAID Loan and Philippine Government Counterpart funds of the CMP may be utilized for any or a combination of the following types of financing: 3.01 Loans, Purposes (a) Seasonal operating capital and commodity loans may be extended to finance increase in inventories and receivables within a period of twelve months. (b) Term loans may be granted for long term or permanent working capital, for facilities and other non-current assets payable on amortization basis within a period of six to ten years. (c) Special term loans may be extended to supplement equity capital under unusual and compelling circumstances where trust fund investment in equities may not be desirable or feasible. Such loans shall be paid normally out of proceeds from equity investment by members under a scheduled or budgeted equity building program that is additional to other loan repayment programs. The term shall not exceed ten years. 3.02 Joint or Split Financing A number of cooperatives which have loans outstanding to the Cooperative Development Loan Fund (CLDF) and the Agricultural Credit Administration (ACA) may need additional credit. Loans may be made to these cooperatives provided satisfactory arrangements can be made with the other lenders; for dividing collaterals, deferrals where necessary, appropriate repayment programs, etc. so that loans made under this authority can be granted on a sound basis. In some cases, cooperatives rent operating facilities owned by ACA. In the event that it is determined to be desirable, arrangements might be made whereby the borrower may acquire such facilities by issuing preferred stocks for the purchase cost or that ACA may be willing to sell the facilities under a long term purchase contract to be paid out of a separate program for repaying regular loans, or on a long term loan purchase contract. Split financing will be involved and should be allowed on the condition that satisfactory arrangements can be worked out with ACA and/or CDLF. 3.03 Trust Fund Investment Investment in preferred stocks of cooperatives not to exceed 100% of their paid-up capital or P1,000,000, may be made to supplement equity capital owned by members in order to provide an adequate capital base to support the regular term and seasonal loans that may be granted. Preferred stocks shall be preferred as to assets but not as to interests and shall earn interests only when interests are declared for common stocks and shall earn at a rate equal to 1/5 of the rate declared for common stocks. The preferred shares representing Trust Fund Investment in the capital stock of a cooperative shall be retired within a period of ten (10) years in accordance with the capital build-up program of the AMCs to be reckoned from the date of each release of capital assistance. SECTION 4. Authorized Lenders Any cooperative rural bank/lender that meets all the following requirements may be allowed to participate under this program: 4.01 Cooperative Rural Bank (a) It must be operating substantially in accordance with laws, rules and regulations and directives of the Monetary Board; (b) Its ratio of past due loans to total loans outstanding does not exceed 25% at the time of application; (c) Its risk asset ratio should not fall below the 10% minimum requirement with the grant of the AMC loan being applied for; (d) There must be no directive either from the Governor/Monetary Board prohibiting it from receiving financial assistance from the Central Bank. 4.02 Other financing institution not under the supervision of the Department of Rural Banks & Savings and Loan Associations (a) Those certified by the appropriate Departments in the Central Bank supervising the same as operating substantially in accordance with laws, rules and regulations and directives of the Monetary Board; (b) The applicable requirements under 4.01 (b), (c) and (d). SECTION 5. Eligible Borrowers Cooperatives eligible to avail of loans and capital assistance from the CB-CFG through participating CRBs/Lenders under this program are the following: 5.01 Cooperatives, particularly AMCs (as defined in Section 1), which meets/agrees to meet all the following requirements: (a) Those registered or re-registered with the Bureau of Cooperative Development; (b) The main business activities are i. The supply of certified seeds, fertilizers, farm inputs to members; ii. The buying, storing, transporting, processing and marketing the produce of their cooperative members; and iii. A combination of the supply of farm inputs and the marketing of the produce of members; (c) At least 50% of the total business of the AMC must be with its members; (d) Share capital shall earn interest at rates prescribed by the Ministry of Local Government and Community Development; (e) All declaration of cash interests on share capital and patronage refunds shall be made only after prior approval by the CFG. 5.02 The Cooperative Marketing System of the Philippines (CMSP) subject to the following: (a) The purpose of the loan shall be to further improve the facilities and/or capabilities of the CMSP in supplying farm inputs to AMCs and in the transporting, storing, processing and marketing of the produce of the AMC's farmer/poultry and livestock raiser/fishermen members. (b) Total loan availments will not exceed the limitation provided in the CMP Loan Agreement. SECTION 6. Credit Requirements The Cooperative Finance Group may grant credit on the basis of careful analysis of, but not limited to, the following major credit factors: 6.01 Management A cooperative seeking or obtaining credit should have responsible, competent and cooperative management and board of directors. 6.02 Loan Purpose and Terms The purpose shall be for a constructive use, as those defined in Section 3.01, to further improve the cooperative's services to its members and patrons. The terms shall be in accordance with those prescribed under Section 8.01. 6.03 Repayment Ability (a) Term loans The determination of repayment ability requires thorough analysis of the adequacy of historic and projected cash flows arising from operating margins, or retains out of payment for products, or from scheduled investments by members that will be available to meet loan repayments and build net worth. (b) Seasonal loans The determination of the repayment ability of seasonal loans requires an analysis of the cooperative's ability to properly utilize the loan and revolve its current assets. A seasonal loan should be related to the value of the current assets being financed or to the net working position margining or supporting the loan. cdpr 6.04 Financial Condition and Operations Sound financial condition and operations require the ability of the borrowing cooperative to honor obligations, to continue as an effective business organization and to protect the lender from undue risk in case of adversity. Financial analysis includes the evaluation of the assets and their composition, the quantity and quality of net working capital, currency of liabilities and make-up of the net worth as evidence by balance sheets and supporting schedules. Operational analysis includes the evaluation of the type and volume of business, operating efficiency and net earnings as represented by profit and loss statements together with related schedules. 6.05 Economic Environment An analysis of the economic environment should be made of the need for the cooperative and its ability to provide goods or services to its members at competitive prices. The report should include an analysis of member support, either direct or through the SN, an analysis of competition, industry trend, any changes in the type of agricultural production, government policies and the legal climate in which the operations are conducted. SECTION 7. Amount of Loan The amount or size of loan/financial assistance is determined according to the corporate needs of an applicant based on the feasibility study submitted which should be within the debt-equity ratio provided in this guidelines, but such loan shall be granted only to the extent of the amount needed which should be within the applicant's capacity to pay and the loan value of his collateral securities. SECTION 8. Loan Periods, Extension Periods 8.01 The loan periods shall be adopted to the kind of loan applied for (a) Seasonal commodity loan shall have a term of not exceeding 180 days. (b) Seasonal operating loan shall have a term of not exceeding one year. (c) Term loan shall have a term of not exceeding six to ten years. (d) Special term loan shall have a term of not exceeding ten years. 8.02 In cases of default by a borrower arising from fortuitous events or force majeure , the CRB or other lender may, with prior approval of the CFG Loan Committee, allow restructuring of the loans. SECTION 9. Collateral Security, Loan Value The type and amount of collateral required should be governed by the relative strengths and weaknesses of the cooperative's/AMC's credit factors. Collateral should not be used as a sole basis for extending credit, it should nevertheless be sufficient to provide the lender reasonable protection from loss in the case of adversity. 9.01 Whenever necessary and to assure reasonable safety, loans shall be granted with collateral security, such as: (a) Seasonal commodity loans shall be secured by eligible commodities or products pledged under satisfactory warehouse receipts or other title documents or lien and by assigned current accounts receivable when arising from sale of pledged commodities. (b) Seasonal operating capital loans shall be secured by chattel mortgage or other first lien on revolving receivables and inventories. (c) Term loans shall be secured by real estate and chattel mortgage on fixed assets such as land, building, machinery and equipment including rolling stocks. 9.02 Loan Value (a) Loans against real estate security shall not exceed seventy per cent (70%) of the appraised value of the respective real estate security, plus seventy per cent (70%) of the appraised value of insured improvements, and such loans shall not be made unless title to the real estate, free from all encumbrances, shall be in the mortgagor. (b) Similarly, loans on the security of chattels shall not exceed fifty per cent (50%) of the appraised value (cost if new) of the security, and such loans shall not be made unless title to the chattels, free from all encumbrances, shall be in the mortgagor. (c) Where the CRB/Lender has effective control of the agricultural products given as security, the amount of loan may be increased to the extent of seventy per cent (70%) of their marketable value in the case of rice, corn and sugar, and sixty per cent (60%) of the marketable value of other stored non-perishable crops. (d) Where the assigned accounts receivable arose from sale of pledged commodities to government agencies/instrumentalities and responsible private corporations/entities, the amount of loan shall not exceed seventy per cent (70%) of such assigned receivables. SECTION 10. Interest Rates 10.01 Interest shall be charged the borrowers at a rate of nine per cent (9%) per annum for seasonal operating and commodity loans and eight per cent (8%) per annum for term and special term loans. No interest shall be collected in advance and no service charges are allowed to be collected. 10.02 Interest to be charged CRBs or other lenders on Special Time Deposits shall be at four per cent (4%) per annum on seasonal operating and commodity loans and at five per cent (5%) per annum on term and special term loans. SECTION 11. Loan Repayment Schedule Repayment shall be scheduled in approximately equal installments of principal and interest, monthly, quarterly or semi-annually, except in cases where payment plans have been granted so arranged as to fall due on the approximate periods of borrower's highest income or when the principal income of the borrower is available. SECTION 12. Lending Procedures 12.01 Application for Financial Assistance (a) Any eligible cooperative seeking financial assistance under this program must file with the nearest authorized CRB/Lender the following: i. Duly accomplished application form for loan and/or capital assistance; ii. Project feasibility study on the object of financing; iii. Certificate of incumbency, listing of officers of the cooperative, their addresses, signatures and expiration of term; iv. Board resolution authorizing certain officer to negotiate and contract for financial assistance; v. Latest audited financial statement and operations; vi. Comparative financial statement and operations for the last three years; vii. Certified copy of by-laws and articles of incorporation together with all amendments thereto. (b) Upon proper positive evaluation of the application for loan and/or capital assistance submitted by a borrowing cooperative, the CRB/Lender shall forward the application to the CB-CFG together with the following: i. CRB's/Lender's board resolution endorsing the cooperative's application for financial assistance; ii. CRB's/Lender's application for Special Time Deposits for the loan component; iii. CRB's/Lender's latest financial statements. 12.02 Processing and Evaluation CB-CFG shall review and evaluate the application for loan and/or capital assistance. Field investigation shall be conducted to determine the actual purpose of loan and/or capital assistance, the eligibility of the applicant, the existence and condition of the securities offered and gather facts necessary to determine the viability and feasibility of the project. Recommendations made in the Business Analyst's report shall be the basis for the action of CFG-Loan Committee on the loan application. 12.03 Approval/Notice of Final Action (a) The CFG Loan Committee shall take appropriate action on all application for loans and/or capital assistance together with the CRB's/Lender's application for STD and shall prescribe the terms and conditions of the covering loan agreements. Pursuant to Monetary Board Resolution No. 657, dated April 12, 1978, all loans exceeding 15% of the net worth of the sponsoring lender, shall be subject to the approval of the Director of the DRBSLA and the confirmation by the Monetary Board. (b) Upon confirmation by the Monetary Board, the CFG shall inform: i. The applicant cooperative and lender of the final action taken thereon so that they could complete the required documentation. ii. The BCOD, NEDA and USAID so that funds therefor could be released to CB-CFG. 12.04 Release of Loan Proceeds Upon receipt of fund from USAID through NEDA, the CFG shall release the proceeds of STD to the CRB/Lender and/or subscribe to the preferred shares of the applicant cooperative thru the CRB. The CRB/Lender shall then deposit the proceeds of STD in a separate bank account and release the same to a special savings account in the name of borrowing cooperative upon the completion of the loan documents such as promissory notes, loan agreements, etc. are accomplished. Withdrawal from the SSD shall be subject to actual need and approval by the CRB/Lender manager/loan officer. SECTION 13. Use of Funds Borrowed, Diversion The proceeds of a loan shall be used only for the purposes for which it was granted; if used for other purposes, the contract of loan shall be deemed cancelled and the lending institution shall immediately demand repayment of the amounts released, without prejudice to the criminal prosecution of the borrower under the law. SECTION 14. Application of Payments, Remittance to CB-CFG 14.01 Any payment made by a borrower to CRB/Lender shall first be applied to the interest due and payable; the balance, to the principal of the loan. 14.02 Collections from the borrowing cooperative shall be remitted to CB-CFG within five (5) days from date of receipt, otherwise, the CRB/Lender shall pay an amount equivalent to one percent (1%) per month on the amount due as liquidated damages in addition to the interest rates prescribed under Section 10. SECTION 15. Default, Foreclosure In cases where diligent collection procedures fail and where forbearance is not deemed advisable, the lender and CFG shall take immediate action deemed appropriate under the circumstances. The right to foreclose real/chattel mortgages, pledged commodities and assigned assets arises from the time the borrower defaults in the payment of the loan/amortizations or violates any condition of the loan agreement. SECTION 16. Effectivity, Amendments These rules and regulations shall take effect upon approval of the Monetary Board. [Source: Circular 674 dated 5-11-79] APPENDIX P (Book I, Part 3) ILLUSTRATIVE EXAMPLES/FORMULAS FOR THE COMPUTATION OF PROCEEDS/DISCOUNT RATES OF LOANS I. COMPUTATION OF PROCEEDS/DISCOUNT RATES OF A LOAN FOR DIFFERENT PERIODS OF THE EFFECTIVE RATES OF 12 AND 14 PERCENT BASIS: 365-DAY YEAR A. FORMULA: (For the computation of A. FORMULA: (For the computation of d, proceeds of a loan): discount rate): L L - P P = d = x 100 n n 1 + (i) L ( ) 365 365 Where P Proceeds of the loan L Face Value of the loan i Effective rate of interest n Term in days EXAMPLE I A loan of P1,000 discounted at an effective rate of interest of 12% per annum. A. Proceeds B. Discount Rate P1,000 P1,000 - P892.86 n = 365 days P = = P892.86 d = x 100 = 10.714% 365 365 1 + (.12) P1,000 ( ) 365 365 P1,000 P1,000 - P894.17 n = 360 days P = = P894.17 d = x 100 = 10.730% 360 360 1 + (.12) P1,000 ( ) 365 365 P1,000 P1,000 - P918.47 n = 270 days P = = P918.47 d = x 100 = 11.022% 270 270 1 + (.12) P1,000 ( ) 365 365 P1,000 P1,000 - P926.87 n = 240 days P = = P926.87 d = x 100 = 11.122% 240 240 1 + (.12) P1,000 ( ) 365 365 P1,000 P1,000 - P935.42 n = 210 days P = = P935.42 d = x 100 = 11.225% 210 210 1 + (.12) P1,000 ( ) 365 365 P1,000 P1,000 - P944.13 n = 180 days P = = P944.13 d = x 100 = 11.329% 180 180 1 + (.12) P1,000 ( ) 365 365 P1,000 P1,000 - P953.00 n = 150 days P = = P953.00 d = x 100 = 11.437% 150 150 1 + (.12) P1,000 ( ) 365 365 P1,000 P1,000 - P962.05 n = 120 days P = = P962.05 d = x 100 = 11.543% 120 120 1 + (.12) P1,000 ( ) 365 365 P1,000 P1,000 - P971.26 n = 90 days P = = P971.26 d = x 100 = 11.655% 90 90 1 + (.12) P1,000 ( ) 365 365 EXAMPLE II A loan of P1,000 discounted at an effective rate of interest of 14% per annum. A. Proceeds B. Discount Rate P1,000 P1,000 - P877.19 n = 360 days P = = P877.19 d = x 100 = 12.281% 360 360 1 + (.14) P1,000 ( ) 360 360 P1,000 P1,000 - P804.98 n = 270 days P = = P804.98 d = x 100 = 12.669% 270 270 1 + (.12) P1,000 ( ) 360 360 P1,000 P1,000 - P914.64 n = 240 days P = = P914.64 d = x 100 = 12.804% 240 240 1 + (.14) P1,000 ( ) 360 360 P1,000 P1,000 - P924.50 n = 210 days P = = P924.50 d = x 100 = 12.943% 210 210 1 + (.14) P1,000 ( ) 360 360 P1,000 P1,000 - P934.58 n = 180 days P = = P934.58 d = x 100 = 13.084% 180 180 1 + (.14) P1,000 ( ) 360 360 P1,000 P1,000 - P944.88 n = 150 days P = = P944.88 d = x 100 = 13.229% 150 150 1 + (.14) P1,000 ( ) 360 360 P1,000 P1,000 - P955.41 n = 120 days P = = P955.41 d = x 100 = 13.377% 120 120 1 + (.14) P1,000 ( ) 360 360 P1,000 P1,000 - P966.18 n = 90 days P = = P966.18 d = x 100 = 13.528% 90 90 1 + (.14) P1,000 ( ) 360 360 CASE I. If a loan of P1,000 with a term of 360 days is discounted and it is to be paid in equal quarterly installments, the proceeds can be computed as follows if the effective rate is 12%: 250 250 250 250 P = + + + = P929.28 1 1 2 1 3 1 4 1 + (12) [1 + (.12) ] [1 + (.12) ] [1 + (.12) ] 4 4 4 4 P1,000 - 929.28 Therefore d = x 100 = 7.072% 360 1,000 ( ) 360 7.072 360 and P = 1,000 (1 - x ) = P929.28 100 360 To check the results of the above computations: Outstanding Installment Payments to cover Principal Interest Principal Q1 929.28 27.88 222.12 Q2 707.16 21.21 228.79 Q3 478.37 14.35 235.65 Q4 242.72 7.28 242.72 CASE II. If the loan is to be paid in equal monthly installments, the proceeds from the loan are computed as follows if the effective rate is 12%: 1,000/12 1,000/12 1,000/12 P = + + . . . = P937.92 1 1 2 1 12 1 + (.12) [1 + (.12) ] [1 + (.12) ] 12 12 12 P1,000 - 937.92 Therefore d = x 100 = 6.208% 360 1,000 ( ) 360 6.208 360 also P = 1,000 (1 - x ) = P937.92 100 360 I. COMPUTATION OF PROCEEDS/DISCOUNT RATES OF A LOAN FOR DIFFERENT PERIODS AT THE EFFECTIVE RATES OF 12 AND 14 PERCENT BASIS: 360-DAY YEAR A. FORMULA: (For the computation of A. FORMULA: (For the computation of d, proceeds of a loan): discount rate): L L - P P = d = x 100 n n 1 + (i) L ( ) 360 360 Where P Proceeds of the loan L Face Value of the loan i Effective rate of interest n Term in days EXAMPLE I A loan of P1,000 discounted at an effective rate of interest of 12% per annum. A. Proceeds B. Discount Rate P1,000 P1,000 - P892.86 n = 360 days P = = P892.86 d = x 100 = 10.714% 360 360 1 + (.12) P1,000 ( ) 360 360 P1,000 P1,000 - P917.43 n = 270 days P = = P917.43 d = x 100 = 11.009% 270 270 1 + (.12) P1,000 ( ) 360 360 P1,000 P1,000 - P925.93 n = 240 days P = = P925.93 d = x 100 = 11.110% 240 240 1 + (.12) P1,000 ( ) 360 360 P1,000 P1,000 - P934.58 n = 210 days P = = P934.58 d = x 100 = 11.215% 210 210 1 + (.12) P1,000 ( ) 360 360 P1,000 P1,000 - P943.40 n = 180 days P = = P943.40 d = x 100 = 11.320% 180 180 1 + (.12) P1,000 ( ) 360 360 P1,000 P1,000 - P952.38 n = 150 days P = = P952.38 d = x 100 = 11.429% 150 150 1 + (.12) P1,000 ( ) 360 360 P1,000 P1,000 - P961.54 n = 120 days P = = P961.54 d = x 100 = 11.538% 120 120 1 + (.12) P1,000 ( ) 360 360 P1,000 P1,000 - P970.87 n = 90 days P = = P970.87 d = x 100 = 11.652% 90 90 1 + (.12) P1,000 ( ) 360 360 EXAMPLE II A loan of P1,000 discounted at an effective rate of interest of 14% per annum. A. Proceeds B. Discount Rate P1,000 P1,000 - P877.19 n = 365 days P = = P877.19 d = x 100 = 12.281% 365 365 1 + (.14) P1,000 ( ) 365 365 P1,000 P1,000 - P878.67 n = 360 days P = = P878.67 d = x 100 = 12.302% 360 360 1 + (.14) P1,000 ( ) 365 365 P1,000 P1,000 - P906.16 n = 270 days P = = P906.16 d = x 100 = 12.686% 270 270 1 + (.14) P1,000 ( ) 365 365 P1,000 P1,000 - P915.71 n = 240 days P = = P915.71 d = x 100 = 12.819% 240 240 1 + (.14) P1,000 ( ) 365 365 P1,000 P1,000 - P925.46 n = 210 days P = = P925.45 d = x 100 = 12.956% 210 210 1 + (.14) P1,000 ( ) 365 365 P1,000 P1,000 - P935.42 n = 180 days P = = P935.42 d = x 100 = 13.095% 180 180 1 + (.14) P1,000 ( ) 365 365 P1,000 P1,000 - P945.60 n = 150 days P = = P945.60 d = x 100 = 13.237% 150 150 1 + (.14) P1,000 ( ) 365 365 P1,000 P1,000 - P956.00 n = 120 days P = = P956.00 d = x 100 = 13.383% 120 120 1 + (.14) P1,000 ( ) 365 365 P1,000 P1,000 - P966.63 n = 90 days P = = P966.63 d = x 100 = 13.533% 90 90 1 + (.14) P1,000 ( ) 365 365 CASE I. If a loan of P1,000 with a term of 360 days is discounted and it is to be paid in equal quarterly installments, the proceeds can be computed as follows if the effective rate is 14%: 250 250 250 250 P = + + + = P918.27 1 1 2 1 3 1 4 1 + (.14) [1 + (.14) ] [1 + (.14) ] [1 + (.14) ] 4 4 4 4 P1,000 - 918.27 Therefore d = x 100 = 8.173% 360 1,000 ( ) 360 8.173 360 and P = 1,000 (1 - x ) = P918.27 100 360 To check the results of the above computations: Outstanding Installment Payments to cover Principal Interest Principal Q1 918.27 32.14 217.86 Q2 700.41 24.51 225.49 Q3 474.92 16.62 233.38 Q4 241.54 8.46 241.54 CASE II. If the loan is to be paid in equal monthly installments, the proceeds from the loan are computed as follows if the effective rate is 14%: 1,000/12 1,000/12 1,000/12 P = + + . . . = P928.17 1 1 2 1 12 1 + (.14) [1 + (.14) ] [1 + (.14) ] 12 12 12 P1,000 - 928.17 Therefore d = x 100 = 7.183% 360 1,000 ( ) 360 7.183 360 also P = 1,000 (1 - x ) = P928.17 100 360 APPENDIX Q (Book I, Part 3) REVISED RULES AND REGULATIONS GOVERNING THE LENDING PROGRAM UNDER AROMATIC TOBACCO TRADING LOAN FUND FOR AUTHORIZED COMMERCIAL BANKS These rules and regulations shall govern the lending program of authorized commercial banks in connection with the Aromatic Tobacco Trading Loan Fund (ATTLF) and the availment of the Special Time Deposit/Rediscounting facilities from the Central Bank, as follows: cdtech SECTION 1. Authorized Commercial Banks . Commercial banks that meet all the following requirements shall be allowed to participate in the lending program under the Aromatic Tobacco Trading Loan Fund (ATTLF): a. Those certified by the CB-DCSB as having no serious exceptions or deficiencies in their operations. b. Those eligible to rediscount with CB-DLC under existing rules and regulations and with unused rediscount ceiling at the time of application for STD/Rediscounting. SECTION 2. Eligible Borrowers 2.1 Borrowers eligible to avail of trading loans from participating commercial banks under the lending program of the ATTLF shall be the following: a. Trading Centers authorized by PVTA to purchase from Aromatic tobacco farmers and whose previous/current year's tobacco purchases are certified by PVTA. b. Exporters/cigarette manufacturers of Aromatic tobacco who have commitments with the PVTA to purchase specified quantities of flue-cured Virginia or Burley and Turkish tobacco from authorized trading centers, whose previous/current year's tobacco purchases are certified by PVTA. 2.2 The borrowers under Section 2.1a and 2.1b above must offer collaterals acceptable to the banks. In the event that the collaterals offered consist of stored redried Virginia tobacco in hogsheads or Burley and Turkish tobacco, the corresponding servicing receipts/quedans evidencing the same should be covered by a deed of assignment with undertaking to notify the bank whenever the stocks are moved. SECTION 3. Eligible Loan 3.1 The trading loans that may be financed through Special Time Deposits (STDs) from the ATTLF may be granted for a term not exceeding 180 days to be utilized exclusively for the purchase of flue-cured Virginia or Burley and Turkish tobacco from farmers/trading centers. 3.2 The aggregate amount of the loans to be granted OR THE OUTSTANDING BALANCE OF SUCH LOANS AT ANY ONE TIME shall be as follows: a. Not more than the loan value of the collateral offered or P500,000 whichever is lower for trading centers. b. Not more than 50% of the total value of tobacco already procured or P5 M whichever is lower for exporter/cigarette manufacturers. SECTION 4. Special Time Deposits 4.1 At any time from FEBRUARY 15 to JULY 31 of each year, a participating commercial bank may submit to the CB-DLC its application for a Special Time Deposit (STD) supported by the following documents: a. A list of eligible applicant-borrowers and the corresponding amounts of loans applied for. b. A certification from the PVTA showing previous and current year's purchases of the borrowers. 4.2 If the application and its supporting documents submitted under Section 4.1 are found in order, the STD to be approved shall not exceed 80% of the loans to be granted by the commercial bank to its borrowers, provided that said loans shall not exceed 50% of the actual tobacco procured as of date of application, subject to the limitations under Section 3.2 hereof. 4.3 The STD shall be issued NOT EARLIER THAN APRIL 1 OF EACH YEAR for a term of 45 days at 5% per annum upon submission by the commercial bank of a duly signed certificate of time deposit. ANY PORTION OF THE STDS THAT ARE NOT RELEASED OR COMMITTED WITHIN 30 DAYS FROM DATE OF GRANT SHOULD BE IMMEDIATELY REMITTED TO THE CB-DLC. 4.4 On the 31st day of the term of the STD, the commercial bank shall furnish CB-DLC a report of STDs released, uncommitted or committed, but not released within the 30-day period from date of grant. 4.5 CB-DLC shall furnish PVTA a copy of every approved STD application. 4.6 Upon maturity of the STD, the unpaid balance thereof shall automatically be debited against the demand deposit (D/D) account of the commercial bank concerned with the Central Bank. If the balance of its D/D account is insufficient to cover the aforementioned debit, the bank concerned shall remit IMMEDIATELY to the Central Bank the amount equivalent to the difference thereon, together with the accrued interest. SECTION 5. Lending Procedures of Commercial Banks 5.1 The funding of loans under this program shall be 80% from the STD proceeds and 20% from the commercial bank's own fund. 5.2 The commercial bank shall release the loan proceeds as follows: a. Trading Centers Directly to the borrower and in lump sum. b. Exporters/Cigarette Manufacturers In staggered amounts to be released only to trading centers which will present promissory notes of the borrowers (exporters/cigarette manufacturers) in favor of the bank. The amount of the promissory notes shall equal the value of unpaid original Tally-in-Sheets, to be attached thereto, representing tobacco actually delivered to the borrowers. 5.3 Loans granted under this programs shall bear interest of not more than 9% per annum PLUS BANK CHARGE NOT EXCEEDING 1% SECTION 6. Rediscounting 6.1 The participating commercial bank must rediscount the loan granted under this program with the CB-DLC within the 45-day term of the STD granted to finance said loan. 6.2 The loan value of promissory notes rediscounted under this program shall be 80% of the face amount/outstanding balance of such promissory notes as of date of rediscounting. Interest shall be at the preferential rate of 4% per annum for a period not exceeding 180 days. 6.3 In addition to the usual rediscounting requirements, the loan application must also be supported by the commercial bank's advice to the CB-DLC to apply the rediscounting proceeds to the STD, together with the promissory note(s) of the applicant bank, duly signed by its authorized officers, in favor of the Central Bank. 6.4 Proceeds of rediscounting shall first be applied to the outstanding balance of the STD. However, where the STD has already been fully paid, the rediscounting proceeds shall be credited to the bank's demand deposit account with the Central Bank. 6.5 Upon maturity of the loan, the bank's D/D account with the Central Bank shall automatically be debited for the principal amount or outstanding balance thereof, plus accrued interest. If the balance of its D/D account is insufficient to cover the aforementioned debit, the bank concerned shall remit IMMEDIATELY to the Central Bank the amount equivalent to the difference thereon, together with the accrued interest. Likewise, the loan value, together with the accrued interest, of collections received before maturity of the collaterals or of maturing collaterals shall immediately be remitted to the Central Bank. SECTION 7. Liquidated Damages 7.1. Liquidated damages of 5% per annum, over and above the preferential rate of 5%/4% per annum shall be imposed on past due STD/rediscounting obligations for the period that said obligations are overdue. 7.2. Likewise, a penalty rate of 10% per annum, over and above the preferential rate of 5% per annum, shall be imposed on the unremitted portion of the STDs that are not committed or that have been committed but not released within the 30-day period without valid justification. [Source: Circular 715 dated 2-1-80] APPENDIX R (Book I, Part 3) FINANCING OF DIRECT SEEDING SCHEME FOR RAINFED AREAS UNDER THE MASAGANA 99 FINANCING PROGRAM The Scheme Essentially, this scheme (1) involves land preparation starting as early as November, December or January while the soil is still moist (2) planting thru direct broadcast of seeds in lieu of transplanting the seedlings immediately after the first rains in May or June. This project would cover rainfed areas involving around 50,000 hectares in eleven selected provinces (Ilocos Norte, Ilocos Sur, La Union, Pangasinan, Tarlac, Nueva Ecija, Pampanga, Bulacan, Camarines Norte, Camarines Sur, and Iloilo). Harvests are expected to coincide with the lean months of July, August and September. As usual, the scheme will follow the recommended package of technology in rice production consisting of high yielding seed varieties, fertilizer, pesticides, herbicides and credit to be made available to selected farmer-cooperators who would be closely supervised by the production technicians of the government and lending institutions who are in turn supervised by the Central Bank Technicians. Specific areas and technicians will be designated by NFAC's Provincial Program Officers. Financing The amount required to finance the first phase of the scheme shall be released to farmer-borrowers at P200 per hectare from November or December up to the early part of February for the preparation of the land. The promissory notes for this initial release will have a maturity period of nine to ten months. Special Time Deposits (STDs) may be granted to rural banks for this purpose with a maturity of three months to be repaid out of the rediscounting of the aforementioned promissory notes. The amount to be utilized exclusively for direct rice seeding and the corollary needs during the months of May and June shall be released to cooperators at P700 per hectare in the form of loans whose maturity will be co-terminus with the initial release for land preparation. Special time deposits may also be granted to rural banks which again would be repaid out of rediscounting of the loans generated from said STDs provided the STDs for land preparation are already repaid. The Philippine National Bank may use its own funds or rediscount with the Central Bank to generate funds for this purpose subject to existing rules and regulations on rediscounting. [MCARB and PNB 1-29-74] Banks participating in the Sabog-Tanim shall release, beginning January 1975, the required loans to farmers in an amount not exceeding P1,600 per hectare. [MAB 1-31-75] PART 4 Investment Operations SECTION 141. Investment in Equities of Allied Undertakings . Commercial banks may invest in equities of approved allied undertakings: Provided, That the investment of any bank in a particular business undertaking shall be subject to prior approval by the Monetary Board/Governor on a case-by-case basis. The investing bank shall make a full disclosure of the operational, functional and financial details of the company or firm in which it wishes to make an equity investment. SUBSECTION 141.1 Approved allied undertakings . Except as provided in Subsec. 141.2 below, any commercial bank may invest in equities of the following allied undertakings or enterprises: a. Warehousing companies; b. Leasing companies; c. Storage companies; d. Safe deposit box companies; e. Companies engaged in the management of mutual funds but not in the mutual funds themselves; f. Banks other than rural banks; g. Investment banks; [CL 1-4-74] h. Finance companies; [MB Res. 2441 11-8-74] i. Management corporations engaged or to be engaged in activity similar to the management of mutual funds; and [MB Res. No. 6 1-3-75] j. Credit card operations [MB Res. 2123 10-10-75] Provided, That such undertaking is the primary purpose for which a particular enterprise was established and the volume of its business indicates that it is principally engaged in such undertaking. SUBSECTION 141.2 Banks disqualified from investing in allied undertakings . The following shall not be allowed to invest in equities of allied undertakings: a. Bank with capital impaired, whether by actual losses or valuation reserves recommended by the Central Bank; b. Bank whose lending operations had been suspended on account of reserve or capital deficiency at any time, until such suspension shall have been lifted for at least one year and sufficient reserves or capital shall have been maintained; c. Bank which incurred losses from its operation during the preceding year; d. Bank which has not fully booked the required valuation reserves as recommended by the Central Bank; e Bank which has exceeded the individual and aggregate ceiling on credit accommodations to directors, officers and/or stockholders under Subsec. 134.4; and/or f. Bank which has past due loans in excess of a reasonable or acceptable level. SUBSECTION 141.3 Ceilings on equity investments in allied undertakings . The amount of investment by banks in equities of allied undertakings shall be as follows: a. When the company or firm in which the bank intends to make equity investment has an outstanding loan(s) with the bank, the total investment which the bank may make in equities of such borrower company or firm shall, unless otherwise allowed by the Monetary Board, be limited to an amount equal to fifteen per cent (15%) of the bank's net worth less the total loans outstanding with the bank of such company or firm. [CL 1-4-74] It is hereby clarified that the following shall be excluded for the purpose of determining compliance with said ceiling on loans to allied undertakings: 1) Loans secured by obligations of the Central Bank or of the Philippine Government; 2) Loans fully guaranteed by the Government as to the payment of principal and interest; 3) Loans to the extent covered by hold-out on, or assignment of, deposits maintained in the lending bank and held in the Philippines; 4) Loans and acceptances under letter of credit to the extent covered by margin deposits; and 5) Other loans or credits specified by the Monetary Board as non-risk assets for purposes of the single borrower loan limit. [Supervision Guideline 78-1 3-27-78] b. Equity investment of the banks in any single enterprise shall not be more than forty per cent (40%) of the outstanding stock of such company, except as otherwise provided for in Sec. 542, Book V of this Manual: Provided , That such equity investment shall not exceed fifteen per cent (15%) of the investing bank's net worth. [CL 1-4-74, as amended by CL 2-3-75] c. The Monetary Board may require, upon reasonable notice, any bank which has equity investment in allied undertakings to reduce or dispose of its stockholdings in subject entities should its financial position become precarious. SUBSECTION 141.4 Interlocking directorates and officerships in banks and allied undertakings . The following regulations shall govern inter-locking directorates and officerships between banks and their allied undertakings: a. Except as may be authorized by the Monetary Board, no person shall concurrently be a director and/or officer of a bank and an allied undertaking in which the bank has equity. b. Directors or officers for the purpose, shall be those as defined in Subsecs. 121.1(a) and 122.1(a): Provided , That members of a sub-body, group or committee, except those of sub-bodies, groups or committees, the functions of which are purely recommendatory or advisory, shall be subject to this subsection as officers: and Provided , further , That for purposes of the prohibition against interlocks among directors, a husband and his wife shall be considered as one person. c. Incumbent directors and officers as of January 18, 1978 who are disqualified herein shall be allowed to serve until the end of their term of office or one year, whichever is shorter. [Circular 592 1-18-78] [This provision also appears in 121.51] SECTION 142. Other Investment Operations . SUBSECTION 142.1 Security dealership . A bank may be accredited as a government security dealer and can have access to the Central Bank open market operations * under the rules and regulations prescribed in 4.Appendix A. [Circular 576 8-22-77] SUBSECTION 142.2 Investment in subsidiaries/affiliates SUBSECTION 142.21 Submission of periodic reports . The following revised guidelines shall be observed by all domestic banks governing the submission of periodic reports by their foreign subsidiary/affiliate or non-bank entities: a. For foreign subsidiary firms wholly or majority-owned by domestic banks, the local investor bank(s) concerned shall regularly submit to the appropriate supervising and examining department of the Central Bank a quarterly statement of condition and semestral report of income and expenses concerning the operations of the foreign subsidiaries, including such other periodic reports which may be required from time to time in the forms prescribed by the Central Bank for domestic financial intermediaries to the extent that their operations are applicable; b. For foreign affiliates which are minority owned by domestic banks, the appropriate supervising and examining department shall be furnished by said domestic banks copies of the annual report prescribed by any of the regulatory authorities in the country of operations, such as the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Comptroller of the Currency and other agencies performing similar functions; and c. When material changes noted in the annual financial statements warrant an interim comprehensive evaluation, the foreign affiliate concerned shall be requested to submit to the appropriate supervising and examining department thru its domestic investor bank copies of its quarterly/interim reports to stockholders or the call reports in the case of U.S. banks. [MAB 7-18-79] SUBSECTION 142.3 Investment in venture capital corporations (VCC) . The following rules and regulations shall implement Presidential Decree No. 1688 "Authorizing Banks to Invest in the Equity of Venture Capital Corporations to Assist Small and Medium Scale Enterprises". SUBSECTION 142.31 Requirements for investors . Banks may invest in a venture capital corporation (VCC) organized to assist small and medium-scale enterprises, subject to the following conditions: a. The bank's unimpaired paid-in capital plus paid-in surplus, if any, net of its aggregate direct and indirect unsecured loans to directors, officers, stockholders and related interests (DOSRI), covered by the ceiling on aggregate loans to DOSRI mentioned in Subsec. 134.4, shall at least be P100 million. Accumulated losses of the bank and/or unbooked valuation reserves and other capital adjustments recommended by the Central Bank shall be considered in computing the unimpaired paid-in capital of the bank. b. Banks, singly or with other eligible banks, may own up to sixty per cent (60%) of the total voting equity and of the total equity of a VCC: Provided, That a bank shall not be allowed to invest in the equity of more than one VCC. c. The initial paid-in capital of a VCC shall not exceed five million pesos (P5,000,000.00). Any subsequent increase in paid-in capital of the VCC in which a bank owns equity shall be subject to prior approval of the Monetary Board. d. Loans which the investor-bank may grant to a VCC shall be limited to such amounts as would enable the VCC to promote equity financing to viable small and medium-scale enterprises: Provided , however , That unless otherwise authorized by the Monetary Board, the aggregate outstanding loans of such bank to a VCC shall not exceed twice the amount of its equity investment in the VCC: Provided , further , That loans to the VCC or the small and medium-scale enterprises shall not be subject to the ceilings on DOSRI, except where bank DOSRI are likewise stockholders in the VCC or in the small and medium-scale enterprise. e. The combined equity investments in, and loans of, the bank to its VCC shall not exceed 15% of the bank's net worth. f. The aggregate investments in equities by a bank, including equity investments in a VCC, shall not exceed the prescribed ceiling of 25% of the bank's net worth. LLjur For purposes of this subsection, a venture capital corporation shall refer to an entity organized jointly by private banks, the National Development Corporation and the Technology Resource Center and/or such other government agency as may be authorized by the appropriate authority, the primary purpose of which is to develop, promote and assist, thru debt or equity financing or any other means, any small and medium-scale enterprise in the country. SUBSECTION 142.32 Authorized investment of VCCs . Equity investments of a VCC in small and medium-scale enterprises shall be subject to the following conditions: a. Equity financing by a VCC may be extended to a "small and medium-scale enterprise" engaged in an industry certified as desirable by the Ministry of Industry. b. The total assets of the enterprise shall not exceed P4 million, including VCC's equity investment. Should the total assets of the small and medium-scale enterprise subsequently exceed the prescribed P4 million maximum, the VCC equity investment therein made before the total assets of the enterprise exceeded P4 million, may be maintained but shall not be increased. SUBSECTION 142.33 Business name of VCC . A VCC shall be known by any name not otherwise appropriated: Provided , however , That the words "venture capital corporation" are made a part thereof. SUBSECTION 142.34 Reportorial requirements ; examination by Central Bank . A VCC in which a bank owns equity shall be subject to Central Bank reportorial requirements prescribed for non-bank financial intermediaries and may be subject to examination by the Central Bank. SUBSECTION 142.35 Interlocks . Subject to prior approval of the Monetary Board, a person may concurrently hold the position of director or officer in a bank and a VCC. SUBSECTION 142.36 Sanctions . Violation of this sub-section shall be subject to the sanctions provided for in Sections 34 and 34-A of R.A. No. 265, as amended. [Circular 733 5-9-80] Copied verbatim from documents directly obtained from the Bangko Sentral ng Pilipinas . Footnotes * Implementation deferred by M. B. Resolution No. 2157 dated 11-11-77. APPENDIX A (Book I, Part 4) RULES AND REGULATIONS GOVERNING THE BUYING AND SELLING OF GOVERNMENT SECURITIES IN THE OPEN MARKET The following rules and regulations were promulgated by the Monetary Board governing the buying and selling of government securities in the open market: 1. 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. 2. 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: a. Evidences of indebtedness issued directly by the Government or its political subdivisions; and b. 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. 3. 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. 4. 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. 5. Repurchase (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: a. The amount of the R/P shall in no case exceed 50% of the face amount of the inventory to be financed; b. Collateral to be lodged with the Central Bank must have a value of not less than 100% of the accommodation applied for; c. The repurchase agreement may be paid at any time before maturity at the option of the dealer; d. 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 Central Bank Portfolio or the Securities Stabilization Fund; and e. 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 Central Bank shall proceed to collect said amount in accordance with the preceding section. 6. In order to qualify for an R/P availment, a duly accredited dealer must have: a. Posted daily quotations for the last three (3) weeks on the particular type of government securities for which financing is being applied for; b. 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 c. No record of default or delay in the settlement of any repurchase agreement. 7. Reverse repurchase agreements covering the sale of portions of the security holdings of the Central Bank 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. 8. Swaps of CBCIs and other government securities of different maturities shall be made only after taking into account appropriate price adjustments. Source: Circular 576 dated 8-22-77 PART 5 Deposit Operations SECTION 151. Savings Deposits . SUBSECTION 151.1 Interest on savings deposits . The maximum rate of interest on savings deposits in banks authorized to accept demand deposits shall be nine per cent (9%) per annum, which may be compounded daily, monthly or quarterly, on the basis of either the average or actual daily balance. [Circular 679 5-28-79, as amended by Circular 706 12-1-79] SUBSECTION 151.2 Required reserves against savings deposits . The required reserves against savings deposit liabilities in local currency of commercial banks shall be twenty per cent (20%) of such deposit liabilities. The required reserves against savings deposit liabilities of the Development Bank of the Philippines shall be eight per cent (8%) of such deposit liabilities. The required reserves against all foreign currency deposit liabilities not falling under the provisions of Circular No. 343 is ten per cent (10%) of the total amount of such liabilities. (See also Section 155.) [Circular 552 1-17-77, as amended by Circular 628 8-21-78 and Circular 697 9-26-79] SUBSECTION 151.3 Receiving and paying deposits outside bank premises . Upon application, banks may be authorized to solicit and accept deposits outside their bank premises, subject to the following conditions: a. The proposed area where applicant bank intends to solicit should be clearly defined; b. Solicitation of deposits should only be confined within a locality where there are no other banks in operation, except applicant bank, or where it can be clearly established that the deposit potentials of the said locality are still untapped; c. Applicant bank shall institute and maintain minimum safeguards enumerated in 5. Appendix A; and d. The Department of Commercial and Savings Banks shall certify that the financial condition of the bank applying for authority to solicit and collect savings deposits outside its bank premises is sound and that the operations and the quality of the management thereof could reasonably assure the safety of the funds which may be entrusted to its deposit collectors and/or solicitors. (MB Res. 1177 6-29-73] SUBSECTION 151.31 Solicitation of deposits under the TIPID Movement . The revised TIPID Movement Manual shown in 5. Appendix B shall be used as the official procedural guideline in the implementation of the TIPID Movement by all participating banks. [CL 5-11-77] a. Segregation of TIPID Accounts . To effectively monitor the growth in savings and time deposits under the TIPID Movement the school savings project of the National Commission on Savings banks are hereby required to identify and segregate TIPID accounts from other accounts. TIPID accounts shall refer to savings and time deposit accounts of elementary and high school students. Accounts of schoolchildren held in trust or opened by parents or guardians, however, shall be treated as regular deposit accounts. To facilitate identification of TIPID accounts, banks shall require new depositors to indicate on the signature card, among other information, the date of birth, whether or not a student; and grade level if a student. To avoid including in the TIPID accounts the savings and time deposits of high school graduates, age eighteen (18) years shall be presumed the age at which students finish high school. Savings or time deposit accounts, therefore, of students who are 18 years old and above shall not be considered as TIPID accounts, but treated as regular deposit accounts. In the case of old accounts, banks shall exert efforts to identify and segregate TIPID accounts from regular deposit accounts until all TIPID accounts shall have been brought up-to-date. Bank shall submit their report on TIPID accounts to the Central Bank supervising department concerned in the pertinent page/attachment of the appropriate report forms (CBP 7-16-02 KB.2, Page 7 for commercial banks). In the report, banks should ensure that the totals of the number and amount tally (a) under Savings Deposits as to size and source; and (b) under Time Certificates of Deposits as to size, source and maturity. SUBSECTION 151.32 Solicitation of deposits under the Barangay Savings Movement . Banks in the provinces of Batangas, Negros Occidental and other provinces where the Barangay Savings Movement may henceforth be implemented may be authorized, on a case-to-case basis, to solicit deposits in designated places outside their premises on certain specific days, subject to the rules and regulations embodied in 5. Appendix C. [CL 1-11-79 and CL 7-25-79] SUBSECTION 151.4 Deposits to/withdrawals from savings account SUBSECTION 151.41 Withdrawal authority slips Banks are prohibited from issuing/accepting "withdrawal authority slips" or any other similar instruments designed to effect withdrawals of savings deposits without following the usual practice of requiring the depositors concerned to present their passbooks and accomplishing the necessary withdrawal slips. [MAB-DSE 6-25-65] SUBSECTION 151.42 Special savings deposits of farmer-borrowers . Only the balance of loans granted under the supervised credit program shall be deposited in the special savings deposits of farmer-borrowers, as an exception to the provisions of Subsec. 131.21. Withdrawals against such special savings deposit accounts shall be allowed only (a) in amounts specified in the approved farm plan and budget, and (b) upon certification by the technician either of the Central Bank and/or banking institution that previous releases were used in accordance with the farm plan. The special savings deposit shall earn interest at the same rate that the banking institution charges the borrower for such loans, as an exception to Subsec. 151.1. [MB Res. 775 5-4-73] SUBSECTION 151.43 Booking of deposits/withdrawals made after banking hours . Commercial banks, including their branches, agencies and extension offices operating in the Philippines are hereby instructed to book, as real accounts, on the date of receipt or payment, all deposits and withdrawals regardless of whether they were serviced after regular banking hours (beyond the minimum six banking hours) or during Saturdays, Sundays or holidays, with prior authority of the Central Bank: Provided, however , That banks which opted to have a cut-off time shall be allowed to do so at 5:00 P.M. and all deposits and withdrawals after the cut-off time shall be booked the next banking day, and: Provided, further That for record and control purposes, a daily abstract of such transactions to be booked on the next banking day shall be prepared before closing time. prcd [Circular 384 10-29-73] SUBSECTION 151.5 Service of maintenance fees on dormant or inactive savings account . Commercial banks may impose service or maintenance fees on dormant or inactive savings accounts subject to the following conditions: a. The charge shall be imposed only pursuant to an appropriate provision in the contract between the bank and the depositor; b. The charge shall not exceed P12.00 per 5 year (or P1.00 per month); c. The charge shall be applicable only to balances of P10.00 or less; d. The period of inactivity (no deposit or withdrawal transactions) before imposition of a charge shall be at least three (3) years (or 36 months); and e. A notice shall be sent to the depositor at his last known address approximately 30 days in advance before any such charge is levied. [MAB 3-29-76, as amended by Memorandum 9-10-79] SUBSECTION 151.6 Rental deposits of lessees . The following guidelines shall govern the opening and handling by banking institutions of deposits made by lessees pursuant to Sec. 5(b) of Batas Pambansa Blg. 25, otherwise known as the Rental Control Law: a. The deposit made by the lessee shall only be accepted by the bank under a special savings account in the name of the lessor; b. The bank shall require the lessee to submit a copy of the written notice sent to the lessor for the deposit made, stating, among others, the date and amount of the deposit and the name and address of the lessor; c. The bank, at its option, may require the lessee to submit any supporting document, such as the lease contract or official receipt of previous rentals paid, which will show the specimen signatures of the lessor, or other papers to identify the lessor; d. The bank shall segregate from its regular savings deposit accounts, and maintain a separate subsidiary control ledger for, deposits made under Section 5(b) of Batas Pambansa Blg. 25; e. Any withdrawal against these special savings deposit accounts may only be allowed in favor of the lessee concerned before the amount deposited under consignation has been accepted by the lessor, or when authorized by the lessor; f. The expenses which may be incurred by the bank with respect to such rental deposits shall be charged against the lessor; g. All the minimum internal control standards applicable to savings deposit accounts prescribed in 2.Appendix I shall be complied with; and h. The acceptance of such rental deposits, however, shall be optional or discretionary only upon the bank concerned. [Memorandum to All Banks 5-26-80] SECTION 152. Time Deposits . SUBSECTION 152.1 Interest on time deposits . The maximum rates of interest on time deposits with maturity of 730 days or less for banks authorized to accept demand deposits shall be according to the schedule shown in Subsec. 157.13. [Circular 679 5-28-79, as amended by Circular 706 12-1-79] A certificate of time deposit issued by a banking institution with a maturity of more than seven hundred thirty (730) days shall not be subject to the interest rate ceilings prescribed in the Usury Law, as amended. A time deposit of more than seven hundred thirty (730) days opened prior to, and outstanding as of January 1, 1978, need no longer be subject to the prohibition against withdrawal or pretermination before maturity date, or the use thereof as collateral for a loan from the depository banking institution concerned. [Circular 585 12-24-77] SUBSECTION 152.2 Required reserves against time deposits . The required reserves against time deposit liabilities in local currency of commercial banks shall be twenty per cent (20%) of such deposit liabilities. Deposits/deposit substitutes with remaining maturities of more than 730 days shall be exempt from reserve requirements. The required reserves against time deposit liabilities of the Development Bank of the Philippines shall be eight per cent (8%) of such deposit liabilities. The required reserves against all foreign currency deposit liabilities not falling under the provisions of Circular No. 343 is ten per cent (10%) of the total amount of such liabilities (See also Section 155.) [Circular 552 1-17-77, as amended by Circular 628 8-21-78 and Circular 697 9-26-79] SUBSECTION 152.3 Term of time deposits . No time deposits shall be accepted for a term of less than ninety (90) days. SUBSECTION 152.4 Minimum size of deposit . Banks should not impose a minimum amount of time deposit greater than P100.00. [Circular 679 5-28-79] SUBSECTION 152.5 Special time deposits from the Agrarian Reform Fund Commission . Interest on special time deposits from the Agrarian Reform Fund Commission shall be lower than the rate allowed on time deposits accepted from the general public. [MB Res. 775 5-4-73] SECTION 153. Demand Deposits . SUBSECTION 153.1 Interest on demand deposits . No interest shall be paid on these deposits. [Circular 679 5-28-79] SUBSECTION 153.2 Required reserves against demand deposits . The required reserves against demand deposit liabilities in local currency of commercial banks shall be twenty per cent (20%) of such deposit liabilities. The required reserves against all foreign currency deposit liabilities not falling under the provisions of Circular No. 343 is ten per cent (10%) of the total of such liabilities. (See also Section 155.) [Circular 552 1-17-77, as amended by Circular 628 8-21-78 and Circular 697 9-26-79] SUBSECTION 153.3 Temporary overdrawings in current accounts (TOD) . Temporary overdrawings against current accounts shall not be allowed, unless caused by normal bank charges and other fees incidental to handling such accounts, which in no case shall exceed Two Hundred Pesos (P200.00). Banks which violate these regulations shall be subject to a fine of one tenth of one per cent per day of violation, computed on the basis of the amount of overdrawing, without prejudice to the provisions of Sections 34 and 34-A of Republic Act No. 265, as amended. Effective immediately, overdrafts shall not be allowed on accounts with positive balances and existing overdraft balances in individual accounts shall be eliminated within six (6) months from November 15, 1976. [MAB 11-15-76] Fines for violations of this subsection shall be immediately debited by the Accounting Department against the deposit account of the bank concerned upon receipt of notice from the appropriate supervising and examining department. [Memorandum 8-3-79] Technical overdrawings arising out of "force-posting" in-clearing checks shall be debited by banks under "Returned Checks and Other Cash Items not in Process of Collection" which is part of "Other Assets" in the Statement of Condition. Items to be lodged under this account shall consist only of in-clearing checks which may result in "technically overdrawn" accounts and shall be immediately reversed the following day. The checks lodged under "Returned Checks, etc." shall either be returned or honored the following day before Central Bank clearing. The items to be used as cover for the honored checks should only consist of any of the following: a. Cash b. Cashier's, Manager's or Certified Checks c. Bank Drafts d. Postal Money Orders e. Treasury Warrants f. Duly funded "On Us" Checks g. Fund transfers/credit memos within the same bank representing proceeds of loans granted under existing regulations. [MAB 4-26-78] Peso demand deposit accounts maintained by foreign correspondent banks with commercial banks shall not be subject to the abovementioned regulations: Provided , That: a. The maintenance of non-resident correspondent banks' peso checking accounts and overdrawings therefrom are covered by reciprocal arrangements; b. The temporary overdrawings are covered within fifteen (15) days from the date the overdrawings are incurred; and c. Such accounts are credited only through foreign exchange inward remittances. (See also Subsecs. 131.42(b) and 135.4) [MAB 1-24-77] SUBSECTION 153.4 Prohibited demand deposits by certain officers and employees . The following officers and employees of commercial banks are prohibited from maintaining demand deposits or current accounts with the banking office, such as the head office or branch, in which they are assigned: a. Officers and employees of the cash department; b. Officers of banking offices other than head offices, such as branches, extension offices and money shops; and c. Other officers and employees who have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits or current accounts. The abovementioned prohibition shall include the spouses and minor children under the parental authority of the officers and employees covered by the prohibition, and the business interests of such officers and employees, their spouses and minor children under their parental authority, in single proprietorships, or partnerships or corporations in which such officers and employees, individually or as a group, own or control at least a majority of the capital of the partnership or the outstanding subscribed capital stock (voting and non-voting) of the corporation. Officers and employees of commercial banks who do not have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits or current accounts, including their spouses and minor children under their parental authority, and the business interests of such officers and employees, their spouses and minor children under their parental authority, in single proprietorships or partnerships or corporations in which such officers and employees, individually or as a group, own or control at least a majority of the capital of the partnership or the outstanding subscribed capital stock (voting and non-voting) of the corporation, may maintain such deposits or accounts in any office of the banking institution where they are employed as such, including the offices in which they are assigned; officers and employees who are so responsible and those mentioned in the second paragraph of this subsection may maintain such deposits or accounts only in offices in which the officers and employees are not assigned. Any person or entity violating this subsection shall be subject to the penalties provided in Sections 34 and 34-A of Republic Act No. 265, as amended. (These provisions also appear in Subsec. 122.7). [Circular 549 12-6-76] SUBSECTION 153.5 Issuance of checks without sufficient funds or credit . To complement the provisions of Batas Pambansa Blg. 22, an Act penalizing the making or drawing and issuance of a check without sufficient funds or credit, the following regulations shall govern: a. The drawee bank shall stamp, write or print on a dishonored check or on a paper attached thereto the date the check is presented for payment and the reason for the refusal to pay the same to the holder thereof. b. Where the reason for the dishonor of a check is stamped, written or printed on a paper attached to the check, the drawee bank shall indicate the pertinent details, such as the names of the drawer, the payee and the drawee bank, the date and amount of the check, the check number and the date of dishonor. c. The drawee bank shall use only the remark or notation "Drawn Against Insufficient Funds", "No Sufficient Funds", or "Insufficient Funds" stamped, written, or printed on, or attached to the check dishonored or returned by reason of insufficiency of funds or credit. d. Notwithstanding receipt of an order to stop payment, the drawee bank shall likewise stamp, write, or print on or attach to the check any of the remarks or notations mentioned in Item (c) hereof indicating that there were no sufficient funds in or credit with such bank for the payment in full of such check, if such be the fact. The bank shall also indicate receipt of a stop payment order. c. For local exchanges, a check dishonored by reason of insufficiency of funds or credit shall be returned by the drawee bank to the negotiating bank not later than the next regular clearing. For out-of-town exchanges, a check so dishonored shall be returned by the drawee bank to the negotiating bank within the period specified announcing the opening of clearing facilities in each of the authorized regional clearing centers. A check dishonored by reason of insufficiency of funds or credit which was not coursed through the Central Bank clearing system shall be returned by the drawee bank to the holder or the negotiating bank, as the case may be, not later than the business day following the date the check is presented for payment with the drawee bank. The negotiating bank shall, in turn, return a check dishonored by reason of insufficiency of funds or credit to the holder not later than the business day following its receipt of the dishonored check from the drawee bank. f. This subsection shall not be deemed or construed to modify or amend the provisions of the Negotiable Instruments Law. g. Any bank and any of its officers and employees who violates or fails to comply with the provisions of this subsection shall be subject to the penalties provided in Sections 34 and 34-A of Republic Act No. 265, as amended. [Circular 693 9-14-79] For purposes of compliance with Item (b) of this subsection, the details on the check number, the date of the dishonor of the check and the reason for such dishonor shall be considered sufficient compliance with the provisions of said Item. [Memorandum 10-9-79] SUBSECTION 153.6 Drawings against uncollected deposits . As a matter of policy, drawings against uncollected deposits effective July 1, 1980 shall be prohibited except when the drawings are made against uncollected deposits representing manager's/cashier's/treasurer's checks, treasury warrants, postal money orders and duly funded "on us" checks which may be permitted at the discretion of each bank. [Memorandum (All Banks Authorized to Accept Demand Deposits) 6-27-80] SECTION 154. Government Deposits . SUBSECTION 154.1 General prohibition . Without the prior approval of the Monetary Board, no private bank shall accept demand, savings or time deposits from the Government, its branches, political subdivisions or instrumentalities or from Government-owned or controlled corporations, hereinafter referred to as "Government and government entities". No private bank or 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. SUBSECTION 154.2 Banks which may be authorized to accept government deposits/funds . A private bank incorporated in the Philippines or any of its branches, agencies or extension offices operating in municipalities or cities where there are no existing branches, agencies or extension offices of the Philippine National Bank (PNB), the Development Bank of the Philippines (DBP), the Land Bank of the Philippines (LBP) or the Philippine Amanah Bank (PAB) may, upon application, be authorized to accept deposits of the Government and government entities: Provided, however , That the Philippine Veterans Bank (PVB), a private bank which by its charter is a depository of government funds, need not secure prior approval of the Monetary Board with respect to its acceptance of deposits of, and/or borrowings from, the Government and government entities. SUBSECTION 154.3 Liquidity floor . Unless otherwise provided by the Monetary Board, private banks and non-bank financial intermediaries shall, in addition to the required reserves against deposits and/or deposit substitutes, maintain a thirty per cent (30%) liquidity floor with respect to deposits of, and/or borrowings from, the government and government entities in the form of Central Bank-supported securities, separate and distinct from those used by them for other specific purposes required by law/rules and regulations. PVB shall be subject to such liquidity floor requirements as may be determined by the Monetary Board. SUBSECTION 154.4 Exempt transactions . Compliance with provisions of Subsecs. 154.1 to 154.3 is not required with respect to the following deposits and/or borrowings: a. Deposits of, and/or borrowings from PNB, DBP, LBP and PAB; b. Deposits of the National Grains Authority (NGA) with banks incident to the credit lines extended by them to NGA 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. 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; f. National internal revenue taxes, customs and tariff duties and export-premium duties collected by authorized agent banks; g. Deposits and/or borrowings from the Central Bank for purposes of relending in connection with CB-administered funds; h. Proceeds of rediscounting, repurchase agreements and other credit facilities with the Central Bank; i. All collections of fees and charges on exports and credited to the special account "Due to the Central Bank Fees and Charges on Exports"; and j. Any other form of deposits and/or borrowings specifically authorized by law or exempted by the Monetary Board. SUBSECTION 154.5 Application for authority . Private banks may file an application for authority to accept deposits from the Government and government entities with the appropriate supervising and examining department of the Central Bank, stating among other particulars, the Government office or entity concerned, its location, the type/s of deposits to be accepted and the amount thereof which shall be limited primarily to the payroll requirements of said Government office or entity. The letter of authority shall fix the terms and conditions for the acceptance of such Government deposits. All existing authorities shall remain valid subject to the conditions of the authority. SUBSECTION 154.6 Sanctions . Any violation of this section shall be a ground for the imposition of the following sanctions: a. The deposit account with the Central Bank of the bank concerned shall be debited by the Accounting Department of the Central Bank in the amount of the unauthorized deposit or borrowing upon receipt of a report or notice from the appropriate supervising and examining department of the Central Bank and the deposit account of the PNB with the Central Bank shall be credited for the same amount. A copy of said report or notice of the supervising and examining department shall be furnished each to the bank concerned and the PNB; b. Any bank with deficiency in the required liquidity floor against deposits of, and/or borrowings from, the Government and government entities or with excess holdings of such deposits shall (1) be denied the credit facilities of the Central Bank; and (2) if the deficiency lasts for four (4) consecutive weeks, the bank shall be prohibited from declaring cash dividends and making new loans and investments, except investments in government securities. The prohibition shall be lifted by the Governor or the Senior Deputy Governor upon certification by the appropriate supervising and examining department that the bank has had no deficiency in its liquidity floor and no excess holdings of government deposits for at least four (4) consecutive weeks; c. In the case of non-bank financial intermediaries, the authority to engage in quasi-banking functions by the entity concerned may be suspended for a certain period of time as may be determined by the Monetary Board, but in no case shall the period of suspension be less than thirty (30) calendar days from receipt of advice to this effect; and d. The withdrawal of previously granted authority to accept government funds. The foregoing sanctions shall be without prejudice to the imposition of other administrative sanctions prescribed under Section 34-A of Republic Act No. 265, as amended, and the penalties as prescribed under Section 34 of the same Act. [Circular 673 4-17-79 and Circular 694 9-14-79] SECTION 155. Reserves on Deposit Liabilities of Banks, Including Specialized and Unique Government Banks . SUBSECTION 155.1 Reserves against deposit liabilities SUBSECTION 155.11 Deposit liabilities in local currency . The required reserves against deposit liabilities in local currency of banks shall be as follows: Commercial Banks, Land Bank of the Philippines and the Philippine Amanah Bank (against demand, time and savings deposits) twenty per cent (20%) of each type of deposit liability. Development Bank of the Philippines (against time and savings deposits) eight per cent (8%) of each type of deposit liability. SUBSECTION 155.12 Deposit liabilities in foreign currencies . The required reserve against all foreign currency deposit liabilities not falling under the provisions of Circular No. 343 regardless of whether such deposits are classified as demand, time, or savings deposits, is ten per cent (10%) of the total amount of such liabilities. SUBSECTION 155.2 Form of reserves against deposit liabilities SUBSECTION 155.21 Deposit liabilities in local currency . The form in which required reserves against deposit liabilities in local currency will be held shall be as follows: a. Deposits with the Central Bank Minimum Allowable as Per Cent of Required Reserves Commercial banks, Land 25% Bank of the Philippines and the Philippine Amanah Bank Development Bank of 10% the Philippines In areas where the Central Bank has no regional offices, deposit balances of the required reserves of banks with the Central Bank shall be deposited with branches of the Philippine National Bank authorized to accept such deposits in trust for the Central Bank. The balance of the "Due from Central Bank of the Philippines" account when used in the computation of a. available reserves against 1) marginal deposits on import letters of credit, 2) deposit substitutes/interbank loans and 3) deposit liabilities; and b. penalty on reserve deficiencies shall be based on the books of the Accounting Department of the Central Bank, net of returned checks delivered to/received from the Central Bank clearing as shown in the Schedule CPB 7-16-01.3 (Supporting Schedule of Item 3.a in CBP 7-16-01). To implement this policy, the following guidelines for reporting shall be observed: a. Banks which have adopted the Consolidated Daily Report of Condition (CDRC) shall continue to report their book balances of "Due from the Central Bank of the Philippines" account in this report. The Central Bank shall observe the aforementioned policy in computing available reserves from the CDRC. b. Banks which have not yet adopted the CDRC shall use the Central Bank book's balance of their "Due from Central Bank of the Philippines" account in the following report forms: 1) Consolidated Report of Required and Available Reserves Against Deposit Liabilities (CBP 7-16-01) for commercial and specialized government banks). 2) Marginal Deposits on Import Letters of Credit and Reserves Against Them (CBP 7-16-14 for commercial banks only) 3) Consolidated Report on Required and Available Reserves Against Deposit Substitutes (CBP 7-16-22 for commercial and specialized government banks authorized to engage in quasi-banking functions) c. The Accounting Department of the Central Bank shall furnish banks with the periodic balances of their demand deposit accounts in accordance with the schedule and frequency to be mutually agreed upon with the banks concerned. Violations of this subsection shall be subject to the sanctions provided for in Section 34-A of Republic Act No. 265, as amended. [Memorandum 3-26-80] b. Government securities and cash in vault . The remaining portion of the required reserves may be held by all banks in the form of cash in vault and/or government securities or evidences of indebtedness of the Republic of the Philippines and/or its instrumentalities and subdivisions as specified in the immediately succeeding paragraph. Government securities eligible as reserves against deposit liabilities of banks 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 4 per cent per annum, and must be non-negotiable: Provided , That they 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. Securities held as reserves shall be valued at cost of acquisition and the bank may keep physical possession of such securities. It may freely alter its composition: Provided , That any substitution or acquisition satisfies the eligibility requirements prescribed in the second paragraph of this subsection: Provided, further , That the bank notifies the Central Bank of any such change in the prescribed forms not later than the reporting day following the change as provided in Subsec. 155.8. 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 155.22 Deposit liabilities in foreign currencies The required reserve may be held in the form of deposit balances with the Central Bank and/or freely disposable foreign balances in the currency in which the deposit liabilities are denominated. In case of deposit liabilities in United States dollars, all or part of the required reserve may be held in the form of United States Government obligations having maturities, in each instance, of not more than five years from the date of acquisition of the security of the bank. The holding of such securities as reserves shall be subject to the same rules and regulations as those prescribed in the last paragraph of Subsec. 155.21. SUBSECTION 155.3 Computation of reserve position . At the close of each banking day, each bank shall calculate its reserve position on the basis of the amount of its reserves and its deposit/deposit substitute liabilities against which said reserves are required to be maintained. For this purpose, the principal office in the Philippines and all branches and agencies located therein shall be treated as a single unit. Included among deposits (demand, savings and time) subject to reserve requirements are (1) proceeds from sales of DBP Progress Bonds; (2) collection of premium contributions from the Social Security System; and (3) tax and loan accounts established in designated commercial banks in connection with the issuance and sale of Treasury Bills (Tax Anticipation series) which shall be treated as demand deposits. Exempt from reserve requirements are: (1) retained proceeds (20%) of sale of CBCIs which shall be held for the Central Bank in the special account not considered a deposit; (2) all collection credited to the special account "Due to Central Bank Internal Revenue Account (Other Cities and Municipalities)"; (3) special time deposits from the Agrarian Reform Fund Commission and special savings deposits from farmer-borrowers; (4) deposits/deposit substitutes with remaining maturities of more than 730 days; (5) unclaimed balances of deposit liabilities already reported to the Treasurer of the Philippines in accordance with the Unclaimed Balances Act (Act No. 3936, as amended by Presidential Decree No. 679) and transferred/reclassified from the deposit liability/other credit accounts to the liability account "Due to the Treasurer of the Philippines;" (6) banks which open on Saturdays/Sundays or public holidays for servicing deposits and withdrawals and when there is no Central Bank clearing; (7) special time deposits under the Aromatic Tobacco Trading Loan Fund Program for authorized commercial banks; and (8) all collection of fees and changes on exports and credited to the special account "Due to the Central Bank Fees and Charges on Exports". Local banks may deduct from the amount of their "gross demand deposits" the balances of demand deposits lodged in " Due from other local banks" which are subject to immediate withdrawal. As used herein, the term "gross demand deposits" shall mean the sum of all individual deposits, including deposits made by other local banks, Philippine Government, its political subdivisions and instrumentalities, and government-owned or controlled corporations. SUBSECTION 155.4 Reserve deficiencies . Whenever the reserve position of any bank computed in the manner specified in Subsec. 155.3 is below the required minimum, it shall pay the Central Bank one-tenth of one per cent (1/10 of 1%) per day on the amount of the deficiency: Provided, however , That a bank shall be permitted to offset any reserve deficiency occurring one or more days of the week covered by the report against excess reserves which it may hold on other days of the same week, and shall be required to pay the penalty only on the average daily net deficiency during the week. In case of abuse, a bank shall automatically lose the privilege of offsetting reserve deficiency in the aforesaid manner until such time that it maintains its daily reserve position at the required minimum for at least four consecutive weeks. As used in this subsection, "abuse" in the privilege of offsetting reserve deficiencies against excess reserves shall mean having reserve deficiencies occurring three or more times during any given week for four consecutive weeks, whether or not resulting in net weekly deficiencies. SUBSECTION 155.5 Chronic reserve deficiency; penalties . In cases where the bank chronically has reserve deficiency in deposit/deposit substitute liabilities, the bank shall be denied the credit facilities of the Central Bank; and the Monetary Board may: (a) limit or prohibit the making of new loans of investments by the bank; and (b) require that all or part of the net profit of the bank be assigned to surplus. The Board of Directors of said bank shall be notified of such chronic reserve deficiency and the penalties therefor, and be required to immediately correct the reserve position of the bank. Penalties herein specified shall be lifted by the appropriate supervising and examining department of the Central Bank after the bank shall have maintained a daily reserve position at the required minimum for at least four consecutive weeks. As used in the subsection, "chronic reserve deficiency" shall mean having a net reserve deficiency for four consecutive weeks. SUBSECTION 155.6 Failure to cover overdrawings with Central Bank . In case a commercial bank fails to cover any overdrawings in its deposit account with the Central Bank not later than the next clearing day, it shall be excluded from such clearing, and it shall also be denied the credit facilities of the Central Bank. Such exclusion from clearing shall continue for as long as it has not maintained credit balances with the Central Bank for at least five consecutive banking days; if its clearing account is overdrawn for five consecutive banking days, it shall be prohibited from (a) making new loans or investments except investments in government securities with Central Bank support, and (b) declaring cash dividends until it has maintained credit balances in its Central Bank clearing account for at least fifteen consecutive banking days. The denial from availment of credit facilities of the Central Bank shall continue for as long as the bank has not maintained credit balances with the Central Bank for at least fifteen consecutive banking days. For purposes of computing the total available reserves against deposit/deposit substitute liabilities, the total amount of overdrawing in the clearing account with the Central Bank shall be deducted from available reserves after the required reserves against marginal deposits and deposit substitute liabilities shall have been satisfied. Where the overdrawing is in excess of available reserves, interest at twelve per cent (12%) per annum shall be collected on the excess. SUBSECTION 155.7 Unpaid fines . The manner of payment or collections of fines as enumerated under Item (b) (3) of Subsec. 124.21 shall apply. SUBSECTION 155.8 Report on compliance . Every bank shall make a weekly report to the Central Bank of its daily required and available reserves on deposit/deposit substitute liabilities to be submitted not later than the close of the fourth banking day following the reference week. This report shall be accomplished in the prescribed forms. SUBSECTION 155.9 Penal sanctions . Without prejudice to the sanctions that may be imposed under the preceding subsections, whenever a banking institution fails to comply with or violates any of the provisions of this section, such institution and the persons responsible therefor shall be subject to the provisions of Section 34 of Republic Act No. 265, as amended. LLphil [Circular 552 1-17-77, as amended by Circular 628 8-21-78, Circular 638 11-8-78, Circular 669 3-20-79, Circular 697 9-26-79 and Circular 728 4-10-80; Circular 694 9-14-79] SECTION 156. Schemes to Attract Deposits . Commercial banks shall observe the rules embodied in this Section in their promotional and other campaigns to attract deposits. SUBSECTION 156.1 Raffles and lotteries . Any raffle or lottery conducted by any commercial bank shall conform with the following guidelines: (a) The raffle/lottery can be offered only once every quarter; (b) All savings accounts, except those in which no deposits or withdrawals have been made for a period of at least two years as of the week before the holding of the raffle/lottery, and time deposits shall qualify; The disqualification of savings accounts inactive for two years shall be clearly indicated in all announcements, promotions or advertising concerning the raffle/lottery; (c) Each deposit account shall be entitled to only one prize; (d) Accounts of personnel of the bank holding the raffle/lottery and those of their relatives within the first degree of consanguinity or affinity shall be disqualified; (e) The total value of prizes, including donated prizes, in the raffle/lottery of each banking unit shall not exceed P10,000.00 for banks in cities and Metropolitan Manila, and P5,000.00 for banks in all other areas; (f) The result of the raffle/lottery shall be appropriately announced; the list of winners and the corresponding prizes shall be posted in a conspicuous place within the bank premises and the winners shall be duly notified; and (g) The result of such raffle/lottery shall be attested to by two authorized bank officers and reported to the Department of Commercial and Savings Banks of the Central Bank within 30 days from the date of the raffle/lottery. No promotional plan involving raffles/lotteries shall be advertised, promoted, or implemented unless notification thereof has been submitted to the Central Bank at least 15 days prior to the holding of the raffle/lottery. The said notification shall contain the following minimum information: (1) The date and place of the raffle/lottery (2) The list and value of each prize (3) Other essential features (requirements for qualification, the determination of the winners, etc.) of the raffle/lottery. [Circular 512 3-16-76] SUBSECTION 156.2 Gifts or "Giveaways" As used in this Subsection, the term "gift" or "giveaway" shall mean anything of value given at no charge to a depositor by the depository bank as an inducement for the opening of a new, or the maintenance of an existing deposit account. The distribution of gifts or "giveaways" by commercial banks shall conform with the following guidelines: (a) The period for the distribution of gifts or "giveaways" shall not exceed thirty (30) days and may be allowed only in connection with (i) the inauguration or transfer of office, (ii) a bank anniversary celebration, and (iii) the Christmas season. The distribution of gifts or "giveaways" on any occasion other than in (i), (ii), or (iii) shall require prior Central Bank approval. (b) No cash, or check, certificate, or instrument (except government securities) which can be exchanged for cash, shall be allowed as gift or "giveaway". (c) The cost of each gift or "giveaway" shall not exceed twenty pesos (P20.00), including donations. (d) In no case shall the money value of the gift or "giveaway" be credited to the deposit account. (e) Each deposit account shall be entitled to only one gift or "giveaway". No promotional plan involving the distribution of gifts or "giveaways" shall be advertised, promoted, or implemented unless notification thereof has been submitted to the Central Bank at least 15 days prior to the start of the distribution of the gifts or giveaways. The said notification shall contain the following minimum information: (1) The period and manner of distribution (2) The value and type, or form, of the gift or "giveaway" (3) The occasion for the distribution of the gift or "giveaway". [Circular 512 3-16-76] With regard to the adoption of plans, schemes, or campaigns designed to promote the TIPID Movement and attract deposits in connection therewith, authorized banks are exempted from Subsec. 156.2(a) provided, however, that all the other requirements of Sec. 156 shall be complied with. [CL 4-30-76] SUBSECTION 156.3 Other promotional schemes Other plans, contests, or campaigns designed to attract deposits not falling under the provisions of Subsecs. 156.1 and 156.2 shall be subject to prior approval of the Central Bank. To provide sufficient time for consideration thereof, such campaign proposals shall be submitted to the Department of Commercial and Savings Banks of the Central Bank at least thirty (30) days before the intended date of implementation by banks in Metropolitan Manila, and at least forty (40) days by banks situated outside this area. [Circular 512 3-16-76] SUBSECTION 156.4 Sanctions Non-compliance with the provisions of this Section shall constitute sufficient grounds for the immediate suspension of the promotional activity and/or subject the bank concerned to administrative sanctions by the Central Bank. [Circular 512 3-16-76] SECTION 157. Interest on Bank Deposits . SUBSECTION 157.1 Maximum interest rate on bank deposits . The following regulations shall govern the payment of interest on deposits in all banking institutions. SUBSECTION 157.11 Demand deposits . No interest shall be paid on demand deposits. SUBSECTION 157.12 Savings deposits a. The maximum rate of interest on savings deposits in banks authorized to accept demand deposits shall be nine per cent (9%) per annum, which may be compounded daily, monthly or quarterly, on the basis of either the average or actual daily balance. b. Banks are not allowed to compute interest on savings deposits on the basis of the lowest monthly balance or any other method not mentioned above. c. Where interests are computed daily/monthly/quarterly, banks shall use a 360-day year. SUBSECTION 157.13 Time deposits a. 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 year. Time deposits having a maturity period of more than 360 days or twelve (12) months from date of deposit may be paid interest thereon at the end of every 12 months and at maturity. b. Schedule of interest rates The maximum rates of interest on time deposits in banks authorized to accept demand deposits shall be according to the following schedule: 90-179 days 10-% 180-359 days 11% 360-539 days 12% 540-729 days 13% 730 days 14% c. Treatment of matured time deposits A time deposit not withdrawn or renewed on its due date shall be treated as a savings deposit and shall earn interest as such from date of maturity to date of actual withdrawal or renewal. d. Withdrawal before maturity date The interest of a time deposit withdrawn before the maturity date fixed in the Certificate of Time Deposit shall be as follows: 1) For a time deposit with original maturity of seven hundred thirty (730) days or less, the maximum interest for commercial banks, the Development Bank of the Philippines and the Land Bank of the Philippines shall be as follows: Original Interest Rate Per Annum Based on Maturity Holding Period after Placement Period 1-89 90-179 180-359 360-539 540-729 90-179 days 5-% 6% 180-359 days 5-% 6% 7% 360-539 days 5-% 6% 7% 8% 540-729 days 5-% 6% 7% 8% 9% 730 days 5-% 6% 7% 8% 9% 2) For a time deposit with original maturity of over seven hundred thirty (730) days, interest shall not be lower than the rates prescribed below: Interest Rate Per Annum Based on Holding Period after Placement 1-89 90-179 180-359 360-539 540-729 730 or over Commercial Banks, the Development Bank of the Philippines and the Land Bank of the Philippines 5% 6% 7% 8% 9% 10% Provided , That if interest has been paid in advance, the corresponding rebate shall be charged against the principal of the time deposit. SUBSECTION 157.2 Number of days comprising a year in the computation of interest . When the term is one (1) year or more, a year shall mean 365 days. When the term is less than one (1) year, the interest shall be computed on the basis of 360 days in a year. It is understood, however that for time deposits with maturities of 361-364 days, the basis of computation of interest shall be 365 days. [Circular 679 5-28-79, as amended by Circular 706 12-1-79] SUBSECTION 157.3 Payment of interest in kind . Banking institutions shall not pay interest in kind on deposits and deposit substitutes. [Circular 460 4-21-75] SUBSECTION 157.4 Disclosure of effective rates of interest . Effective January 3, 1977, banks are required to disclose to depositors the following information on interest computation and payments: a. Type/kind of deposit; b. Nominal rate of interest and period covered; c. Manner of interest payment i.e., whether credited in advance or otherwise; d. Basis of interest payment, i.e., whether based on average daily balance compounded quarterly or otherwise; e. Effective rate of interest expressed as a simple annual rate, on the basis of the information above given and indicating the formula used to arrive at the effective rate of interest; and f. Illustration of basis of computing interest on a hypothetical deposit account. Copies of the above-mentioned information shall be made available to each and every depositor by attaching these copies to savings deposit passbooks and to time deposit certificates. Posters disclosing the above information shall also be displayed conspicuously within the bank premises. Banks are also required to disclose to depositors upon request, the effective interest rates on their deposits. Non-compliance with this subsection shall subject the banking institution concerned to such administrative sanctions as the Monetary Board shall impose. [Circular 533 7-12-76, as amended by CL 8-2-76 and CL 9-27-76] SECTION 159. Sundry Provisions on Deposit Operations . SUBSECTION 159.1 Basic provisions on opening and operations of deposit accounts . All banking institutions are required to set a minimum of three specimen signatures to be simultaneously required from each of their depositors and to update the specimen signatures of their depositors every two years or sooner, at the discretion of the bank. Banks may, at their option, require their depositors to submit ID photos together with the specimen signatures. [Circular 407 5-31-74] SUBSECTION 159.2 Employees Provident Fund Contributions . Provident fund contributions of and for the benefit of bank employees and deposited in their own banks are exempted from the provisions of regulations on interest rates on deposits. [MAB-DSE 1-10-61] SUBSECTION 159.3 Unclaimed balances . All unclaimed balances, which include credits or deposits of money, bullion, securities or other evidences of indebtedness of any kind, and interest thereon, already reported to the Treasurer of the Philippines in accordance with the Unclaimed Balances Act (Act No. 3936, as amended by Presidential Decree No. 679 dated April 2, 1975) shall be transferred/reclassified from the deposit liability/other credit accounts to the liability account, "Due to the Treasurer of the Philippines," until they are deposited with or turned over to the Treasurer of the Philippines upon order of the court that the same have been escheated in favor of the Government of the Republic of the Philippines and, as such, the unclaimed balances deposit liabilities shall no longer be covered by reserves required of deposit liabilities. [MAB-DSE 2-6-76] SUBSECTION 159.4 Certification on deposit . Banks are required to use the prescribed SEC form shown in 5.Appendix D in confirming the paid-up capital of a proposed corporation registering with the Securities and Exchange Commission. Said certificate should be signed by a responsible authorized official of the bank and must be notarized. [MAB 10-22-76] SUBSECTION 159.5 Booking of deposits and withdrawals SUBSECTION 159.51 General rule . As a general rule, all deposits and withdrawals during regular banking hours shall be booked as real accounts, i.e., credit or debit to deposit liability accounts on the date of receipt or payment thereof: Provided, however , That a bank may set a clearing cut-off time for its head office not earlier than two (2) hours before the start of clearing at the Central Bank, and not earlier than three and one half (3) hours before the start of clearing at the Central Bank, for all its branches, agencies and extension offices doing business in the Philippines, after which time, deposits received shall be booked as hereinafter provided: Provided, further , That banks which are located in areas where there are no Central Bank regional/clearing offices and which have their own clearing arrangements may set a clearing cut-off time not earlier than two (2) hours before the start of their local clearing after which time, deposits received shall be booked likewise as hereinafter provided. SUBSECTION 159.52 Definition . As used in this subsection, the following terms shall have the following meanings: a. "Regular banking hours" shall refer to the banking hours reported to the Central Bank pursuant to Section 123, including the extended banking hours reported for servicing deposits and withdrawals; and b. "Clearing cut-off time" shall mean the bank's closing time for the acceptance of deposits in the form of checks, bills and other demand items which will be cleared with the Central Bank clearing office or regional clearing units on the day of their receipt. SUBSECTION 159.53 Booking of cash deposits . Cash deposits received after the selected clearing cut-off time until the close of the regular banking hours shall be booked as deposits on the day of receipt. SUBSECTION 159.54 Booking of non-cash deposits Deposits of checks including "on us" checks, manager's/cashier's/treasurer's checks and demand drafts, which are drawn against the depository bank and all its Offices, as well as treasury warrants and postal money orders, received after the selected clearing cut-off time until the close of the regular banking hours, may at the option of the bank, be booked as deposits on the day of receipt. Other non-cash deposits received after the selected clearing cut-off time shall be treated as contingent accounts on the day of receipt and shall be booked as deposits the following banking day. SUBSECTION 159.55 Booking of deposits after regular banking hours . Deposits, whether cash or non-cash, received after the close of the regular banking hours shall be treated as contingent accounts on the day of receipt and shall be booked as deposits the following banking day. SUBSECTION 159.56 Other records required . For record and control purposes, banks shall prepare a daily abstract of deposit transactions treated as contingent accounts. SUBSECTION 159.57 Notice required . Banks shall post at a conspicuous place near each teller's window a notice to depositors indicating their selected clearing cut-off time and a statement to the effect that non-cash items deposited after said cut-off time shall be treated as transactions for the next banking day. SUBSECTION 159.58 Reports required . Banks shall submit a written notice on the second clearing cut-off time of all their offices to the appropriate supervising and examining department of the Central Bank not later than ten (10) banking days from April 18, 1980. The appropriate supervising and examining department shall be advised of any subsequent change thereon at least five (5) banking days before such change. SUBSECTION 159.59 Sanctions . Violation of any of the provisions of this subsection shall be subject to the penalties provided in Sections 34 and 34-A of Republic Act No. 265, as amended. [Circular 730 4-18-80] APPENDIX A MINIMUM SAFEGUARDS REQUIRED TO BE INSTITUTED AND MAINTAINED BY BANKS APPLYING TO SOLICIT AND ACCEPT DEPOSITS OUTSIDE THEIR BANK PREMISES Banks applying to solicit and accept deposits outside their bank premises shall institute and maintain the following minimum safeguards: 1. All deposit solicitors shall be initially bonded for at least P1,000.00, subject to the increase thereof to approximate their daily collections; 2. Deposit solicitors shall be provided with proper identification cards with photograph and signature of each respective solicitor, certified to by the appropriate officer of the bank. Said identification cards shall be worn by each solicitor at all times at the upper left breast of his outer garment when soliciting deposits; 3. Adequate insurance coverage for funds in transit (representing deposits collected outside banking premises) should be secured by applicant bank from insurance companies not included in the list of companies blacklisted by the Insurance Commissioner; 4. Deposit slips, different from that issued by tellers in the counter, shall be in booklet form, pre-numbered, in triplicate copies and in three colors, the original to be issued to the depositor, the second copy to be used for posting reference, and the third copy to be retained in the booklet; 5. All collections shall be turned over to the cashier at the end of each day, accompanied by a "Collection Summary Report" to be accomplished in duplicate which shall contain the following minimum information: a. Date of the report b. Names and addresses of the depositors c. Deposit slip numbers d. Amounts of deposit e. Savings account and passbook numbers f. Name and signature of solicitor rendering the report 6. Depositors shall always be required to accomplish "Signature Cards" when opening an account, which card shall be used always as reference in checking the genuineness/authenticity of signatures affixed on withdrawal slips or authorizations for withdrawals; 7. Deposits/withdrawals shall be recorded by the bookkeeper or any ledger clerk, except any bank solicitor, in the depositors' ledger cards and passbooks on the same day that such deposits/withdrawals are accepted/approved by the bank. Passbooks shall be returned to the depositors not later than the following business day; 8. At the end of each month, depositors shall be advised in writing of the balances of their deposits with the bank, the advise slips of which shall never be hand-carried by the solicitors themselves; and 9. Places of assignments of bank solicitors shall be rotated, at least quarterly. Source: M.B. Res. No. 1177 dated June 29, 1973 APPENDIX B (Book I, Part 5) TIPID MOVEMENT MANUAL I. Concept The TIPID Movement is a school savings project of the National Commission on Savings. The name of the movement is derived from the Tagalog word "Tipid" which means thrift. It is also an acronym for Thrift Incentives for Progress through Industry and Discipline which sums up the philosophy behind the project. Thus the title suggests the training of school children in the habit of thrift and the mobilization of their small savings through the medium of banks. Savings may come from income derived through the children's labor and industry or through postponement of present spending in favor of satisfying more important future needs. The TIPID Movement, which is being implemented by the Department of Education and Culture, the banks and the Central Bank, is aimed towards instilling in students the benefits to be gained from the good habit of saving in banks for himself in particular, and for the nation in general. II. Purpose Saving is a desirable habit and a form of discipline that ought to be developed in a person at an early age. The purpose of the TIPID Movement therefore is to inculcate in school children the habit of thrift and teach them the value and advantages of saving in banks. III. Savings Club The principal instrument of action of the TIPID Movement is the Savings Club which will be organized in all elementary and secondary schools, both private and public, in the entire country. It is, therefore, advisable that savings clubs be organized as early as possible. A. Objectives of the Club 1. To encourage the habit of thrift among school children and motivate them to save in banks. 2. To seek and develop sources of income for its members; and 3. To promote the role of the savings club as an effective savings vehicle for the students. B. Club Members Every student in the elementary and secondary schools, both public and private, is eligible to be a member of the TIPID savings club organized in his class or grade level. C. Club Officers The savings club is an organization of, by, and for the school children. As such, its officers shall be chosen exclusively from among its members. D. Responsibilities of Officers The primary responsibility of the club officers shall be to administer the affairs of the club. They shall formulate and implement measures that will help in achieving the club's objectives. The savings club shall choose its depository bank. In the case of schools where there are more than one savings club (i.e. each class or grade has a savings club), a committee consisting of their respective presidents or representatives assembled for the purpose shall choose one depository bank for the entire school. The chosen depository bank shall be advised officially by the president of the club or, as the case may be, by the chairman of the committee, of its designation, the advice to be attested to by the head or principal of the school. E. Club Adviser The teacher-in-charge of the class shall serve as adviser of the savings club and, as such, shall guide the officers of the club in the formulation and implementation of the programs and projects of the club. The moral influence of the teacher-adviser will play an important role in the accumulation of savings by the club members. Under the guidance of the teacher-adviser, the savings club shall set a savings goal on a daily, weekly, or monthly basis for the club. The adviser may, when needed, set aside for the activities of the club, a class period such as the social studies period. To enable them to gain knowledge of banking, school children shall be encouraged under the TIPID Movement to transact directly with banks or the bank's solicitors in the schools. The teacher-adviser shall foster this objective of the Movement by refraining from taking custody of, or assuming responsibility for, the money of the children. IV. Sources of Savings Under the TIPID Movement, savings, to be meaningful, should come primarily from income generated through the productive efforts of the student himself. Thus, an integral part of the TIPID Movement is the encouragement of students to engage in productive endeavors such as: 1. raising a backyard garden (vegetables, ornamental plants, flowering plants, etc.); 2. running errands and doing odd jobs; 3. making leather, wood, and other handicraft products; 4. buying and selling scrap paper, old newspapers, etc.; and 5. running other small scale or home industries. The assistance of government agencies, particularly barangay and civic organizations, may be sought in this regard. V. Participation of Banks in the Movement All banks are eligible to participate in the TIPID Movement. However, a participating bank shall have to notify the Central Bank Committee on Savings. This notification may be in the form of a letter of manifestation to be submitted by the bank together with the advice of the school savings club that it has been chosen the depository bank. A bank which is not the official depository bank of any school savings club but which services deposits of school children may also participate in the Movement by notifying the Central Bank Committee on Savings. When promoting the TIPID Movement, participating banks may distribute gifts or "giveaways" beyond the 30-day limit stipulated under Subsec. 156.2 and may be allowed to do so even on occasions other than (a) the inauguration or transfer of office; (b) a bank anniversary celebration; and (c) the Christmas season. However, all other provisions governing the distribution of gifts or "giveaways" shall be complied with. Banks are urged to encourage and support school projects which will help generate income for students. Bank officers are also encouraged to appear in symposia and other less formal gatherings inside the school premises for the purpose of motivating school children to save. A. Depository Bank 1. Any bank may be the depository of the accumulated savings of the members of the school savings club. 2. In areas where there exists only one bank, that bank shall, as a matter of course, be the depository bank. 3. In towns/cities where there is more than one bank, the depository bank shall be the one chosen by the school savings club. A. Solicitation The depository bank is authorized to solicit deposits of students within the premises of the school. Whenever practicable or within its means, therefore, the depository bank should send a solicitor to the school to service deposits and withdrawals of the students. The following shall be observed by the solicitor when servicing deposits and withdrawals: 1. The authorized solicitor who shall be properly bonded, shall present a letter of introduction addressed to the head of the school, together with the bank's prescribed identification card which the solicitor shall wear at all times during the solicitation. 2. Depositors shall be required to accomplish "Signature Cards" when opening an account. 3. Pre-numbered deposit slips, in duplicate, shall be used. The duplicate shall be given to the depositor and the original retained to serve as posting medium. 4. With proper safeguards, withdrawals may also be effected through the bank solicitor. 5. At the close of every solicitation day, a Report of Deposit Collection shall be accomplished in triplicate (original to bank, and a copy each to solicitor and school) by the solicitor. Inclusive number of used deposit slips, accomplished withdrawal and collection slips as shown in the report shall be turned over to and acknowledged by the cashier. 6. Passbooks shall be returned to the depositors not later than the following soliciting day. A copy of the Report of Deposit Collection of the last soliciting day shall be submitted to the head of the school. 7. The bank shall arrange with the school the dates, place and time of solicitation and shall post notices thereof in a conspicuous place in the school premises. C. Quarterly Report To enable the Central Bank to monitor effectively the trend of savings deposits under the TIPID Movement, banks shall submit a quarterly report form duly accomplished not later than fifteen (15) banking days from the end of the quarter covered by the report. For purposes of the quarterly report, TIPID Movement accounts shall consist of all student deposit accounts in participating banks of elementary and secondary schools. VI. Presidential Decree on Deposits of Minors Under Presidential Decree No. 734 dated June 25, 1975, minors who are at least seven (7) years of age, able to read and write, have sufficient discretion, and are not otherwise disqualified by any other incapacity, are given special capacity and power, in their own right and in their own names, to make savings or time deposits with and withdraw the same as well as receive interest thereon, from banking institutions without the assistance of their parents or guardians. Parents and guardians, however, may deposit for their minor children and wards, respectively. Source: Circular Letter dated 5-11-77 APPENDIX C (Book I, Part 5) RULES AND REGULATIONS ON THE SOLICITATION OF DEPOSITS UNDER THE BARANGAY SAVINGS MOVEMENT 1. The solicitor shall be a regular employee of the depository bank; 2. Solicitation will be allowed only in those areas or localities where the distance between the bank and barangay makes it difficult or otherwise impractical for a depositor to deal directly with the bank; 3. Banks shall make prior arrangements with barangay officials as to the dates, place, and time of solicitation and shall post notice thereof conspicuously in the agreed place of solicitation; 4. The solicitor shall be initially bonded for at least P1,000.00, subject to increase to approximate the average daily collections; 5. The solicitor shall be provided with an identification card with his photograph and signature, certified to by an officer of the bank. This identification card shall be worn by the solicitor at all times at the upper left breast of his outer garment when soliciting deposits; 6. Adequate insurance coverage for funds in transit representing deposits collected outside banking premises shall be secured by the bank concerned from insurance companies not included in the list of companies blacklisted by the Insurance Commissioner; 7. Deposit slips, different from that issued by counter tellers, shall be pre-numbered in booklet form, in triplicate and in three colors the original to be used for posting reference, the second copy to be issued to the depositor, and the third copy to be retained in the booklet; 8. All collections shall be turned over to the Cashier at the end of each day, accompanied by a "Collection Summary Report" to be accomplished in duplicate which shall contain the following minimum information: date of the report; names and addresses of the depositors; deposit slip numbers; amounts of deposits; savings account and passbook numbers; and the name and signature of the solicitor rendering the report; 9. The depositor shall be required to accomplish a "Signature Card" when opening an account. The card shall be used as reference in checking the genuineness or authenticity of the signature affixed on withdrawal slips or authorizations for withdrawals; 10. With proper safeguards, withdrawals may also be effected through the bank solicitor; 11. Deposits and withdrawals shall be recorded by the bookkeeper in the depositor's ledger cards and passbooks on the same day that such deposits or withdrawals are accepted or approved by the bank. Passbook shall be returned to the depositors not later than the next scheduled solicitation day; and 12. No bank shall avail of this solicitation facility unless previously authorized by the Central Bank. For purposes of this Appendix, banks concerned may submit their request for authority to solicit deposits to the pertinent supervising department in the Central Bank. Source: Circular Letters dated 1-11-79 and 7-25-79 APPENDIX D (Book I, Part 5) SEC PRESCRIBED FORMAT FOR CERTIFICATION ON DEPOSIT ____________________ (Date) The Securities and Exchange Commission Greetings: This is to certify that there is on deposit with this bank the sum of __________________________________ (P_____________) in the name of __________________________________________________ Treasurer-in-trust for ______________________________________ which is in the process of incorporation. The said deposit is clear and free from liens, restriction, condition or holdout and may be withdrawn in behalf of said company upon presentation of proof of due incorporation thereof. _______________________ (Bank) By: _______________________ (Designation) SUBSCRIBED AND SWORN to before me this ______________ day of ___________. 197___, at ______________________ affiant exhibiting to me his/her Residence Certificate No. A ___________________, issued at _______________ on _______________________,197___. Notary Public Until December 31, 197 _____ PTR No. ________________ Issued at _________________ On _____________________ Doc. No. ______ Page No. ______ Book No. ______ Series of 197 ____. Source: Memorandum to All Banks dated 10-22-76. PART 6 Borrowing Operations SECTION 161. Borrowings from the Government . As a corollary to the withdrawal from all previously authorized depository banks of authority to accept government deposits and to renew maturing time deposits, no bank, whether authorized to engage in quasi-banking functions or not, shall, without the prior approval of the Monetary Board, borrow funds from the Government, its branches, political subdivisions or instrumentalities; or from Government-owned-or-controlled corporations, other than the Philippine National Bank, the Development Bank of the Philippines or the Land Bank of the Philippines, through the issuance or sale of its acceptances, notes or other evidences of debt. [Circular 446 4-4-75] SECTION 162. Loans and Advances/Rediscounts from the Central Bank in General . SUBSECTION 162.1 Basic terms and conditions SUBSECTION 162.11 Ceilings . The ceiling on all loans or advances/rediscounts to domestic commercial banks shall be fifty per cent (50%) of their paid-up capital as of the end of the quarter immediately preceding the date of application for Central Bank re-financing. In the case of branches of foreign banks, the rediscount ceiling shall be twenty five per cent (25%) of the "Capital Assigned" and/or "Net Due to Head Office" as of the date of application. [Circular 442 12-12-74] Any bank that is eligible to rediscount and whose rediscount ceiling has already been saturated or fully availed of shall be entitled to an increase in its existing rediscount ceiling to the extent of 50%, which shall be used exclusively for financing non-traditional exports/small scale/cottage industries with assets not exceeding P1 million, and the production/exports/trading of sugar, rice and tobacco: Provided , That availments for the production/exports/trading of sugar, rice and tobacco shall not exceed one-half () of the 50% increase in its rediscount ceiling. (See also Subsec. 163.16.) [Circular 639 11-20-78] Commercial banks, for purposes of rediscounting their export papers with the Central Bank, may avail themselves of another additional 50% ceiling based on their existing basic rediscount ceiling, in effect increasing export financing for all commercial banks to 100% of their basic rediscount lines. It is understood, however, that availments under this authority may be allowed only where the commercial bank's basic rediscount ceiling and the additional 50% ceiling authorized under the second paragraph of this subsection shall have been fully utilized. (This provision also appears in Subsec. 163.15.) [Circular 658 3-5-79] SUBSECTION 162.12 Eligibility of papers . Credit instruments offered as collateral shall be subject to the eligibility requirements provided under Sections 87 and 88 of Republic Act No. 265, as amended. [Circular 442 2-12-74] For non-traditional exports under D/A and D/P arrangements authorized by the Central Bank, the required letter of credit shall now be dispensed with and in lieu thereof, a deed of assignment of export proceeds shall be submitted in addition to the usual shipping documents and the promissory note of the borrowing bank concerned. [Circular 555 2-7-77] Papers presented for rediscounting with the Central Bank by commercial banks pertaining to firms and/or principal stockholders and officers thereof with outstanding loans with the Development Bank of the Philippines, the Philippine National Bank, the Government Service Insurance System, the Social Security System and/or the Reparations Commission may now be accepted on the basis of a certification of the borrower/firm, duly endorsed by the commercial bank concerned that it or its stockholders and/or officers have no arrearages on their loan accounts with these government institutions. cdlex It is understood, however, that should the random examination undertaken by Central Bank examiners disclose that the papers rediscounted with the Central Bank involve loan accounts with any of the abovementioned government institutions that are with delinquencies or are in arrears, the demand deposit account with the Central Bank of the commercial bank concerned shall be automatically debited for the full amount of the loan still outstanding, plus accrued interest due thereon, without prejudice to the imposition of administrative sanctions provided for under Section 34-A of Republic Act No. 265, as amended. [MAAB 45 5-23-77] SUBSECTION 162.13. Loan values . Papers offered as collateral for loans or advances to commercial banks under Section 87 of Republic Act No. 265, as amended, shall be assigned loan values as follows: a. Eligible Paper with One Year Maturity Or Less 1) Supervised Credits: Masagana 99 Rice Production 100% & Masaganang Maisan Programs other than Agrarian Reform Agrarian Reform 100% Others 100% 2) Non-Supervised Credits: Agrarian Reform 80% Others 80% 3) Export-oriented industries with export 80% products or economic activities listed under 6 Apps. A and B excluding those mentioned in Item 7 4) Production of rice and corn, poultry 100% and piggery, fishing, feed grains and sorghum; seeds and seedlings, food production, food processing, domestic fertilizer production and food manufacturing for domestic consumption (For Masagana 99/Masaganang Maisan, Agrarian Reform and other supervised credit, the provisions of Item 1 shall apply.) 5) NGA Papers for: Local purchases and importations of 100% rice/palay Local procurement of corn, sorghum, 100% soy beans and mongo Importations of wheat and feedgrains 80% 6) Priority I-A: Grains Quedan Financing Palay 100% Economic Activities listed under 6. 80% App. A 7) Small-scale/cottage industries excluding 80% those mentioned below Export-oriented small scale/cottage in- 100% dustries involving accounts not exceeding P1 million Non-export oriented small-scale/ 80% cottage industries under Priority I-B and C (see 6. App. A) 8) Copper, chromite, nickel metal and 80% nickel and cobalt in mixed sulphides 9) Priority I-B and C (see 6. App. A) other 60% than those mentioned in Item 7 b. Eligible Paper with More Than One Year Maturity Pledge or assignment of payments, installments 70% or amortizations of long-term lending institutions SUBSECTION 162.14 Rediscount/interest rates and other charges . Rediscount rates of the Central Bank and the lending rates that may be charged by commercial banks for papers rediscounted with the Central Bank are: a. Eligible Paper with One Year Maturity or Less CB Maximum Rediscount Bank Rate Lending Rate (Per annum) (per annum) 1) Supervised Credits: Masagana 99 Rice Pro- 1% 10% (plus service duction and Masaganang and bank charges Maisan Programs other than not exceeding 3%) Agrarian Reform Agrarian Reform 1% 10% (plus service and bank charges not exceeding 2% or P150 p.a. whichever is lower) Others 1% 10% (plus service and bank charges not exceeding 2%) 2) Non-Supervised Credits Agrarian Reform 4% 12% (secured) Others 4% 4% (unsecured) 3) Export-oriented industries 6% 9% (plus bank with export products or charge not ex- economic activities listed ceeding 1%) under 6. Apps. A and B excluding those mentioned in Item 7 4) Production of 3% 9% (plus bank rice and corn, charge not ex- poultry and ceeding 1%) piggery, fishing, feed grains and sorghum; seeds and seedlings, food production, food processing, domestic fertilizer production and food manufacturing for domestic consumption (For Masagana 99/ Masaganang Maisan, Agrarian Reform and other supervised credit, the provisions of Item 1 shall apply.) 5) NGA papers for: Local purchases 3% 6% and importations of rice/palay Local procurement 3% 6% of corn, sorghum, soy beans and mongo Importations of wheat 3% 6% and feedgrains 6) Priority I-A: Grains Quedan 4% 9% (plus bank charge Financing-Palay not exceeding 1%) Economic Activities 4% 9% (plus bank charge listed under 6. not exceeding 1%) App. A 7) Small-scale/cottage 4% 9% (plus bank charge industries excluding not exceeding 1%) those mentioned below Export-oriented 3% 9% (plus bank small scale charge not ex- cottage indus- ceeding 1%) tries involving accounts not exceeding P1 million Non-export 6% 10% (plus bank oriented small charge not scale/cottage exceeding 1%) industries under Priority I-B and C (see 6. Annex A) 8) Copper, chromate, nickel 4% 6% (plus bank charge metal and nickel and not exceeding 2%) cobalt in mixed sulphides 9) Priority I-B and 11% ) 12% (secured) C (per 6. App. A) ) 14% (unsecured) excluding those mentioned in Item 7 b. Eligible Paper With More Than One Year Maturity Pledge or assignment of pay- 8% Maturity up to ments, installments or amor- 730 days: tizations of long-term lending 12% (secured) institutions 14% (unsecured) [Circular 610 5-19-78, as amended by Circular 635 10-12-78, Circular 646 12-29-78, Circular 668 3-20-79, Circular 672 4-6-79 and Circular 704 12-1-79] Central Bank rediscount rates against emergency loans availed of by commercial banks shall be determined on a case to case basis. The maximum bank lending rate shall be the effective rate, inclusive of service and other charges, except on loans indicated above wherein bank and service charges not exceeding one (1%), two (2%) or three (3%) per cent may be collected. The interest rate ceiling shall apply to the entire amount of the loan granted, and not only to the rediscounted portion thereof. Effective May 19, 1978, the grant of rebates for prompt payments under the Masagana programs shall be optional on the part of the lending banks. [Circular 442 12-12-74, as amended by Circular 543 10-26-76 and Circular 610 5-19-78] SUBSECTION 162.15 Maturities . The maturity of Central Bank loans or advances/rediscounts for commercial credit shall not exceed 180 days from the date of proceeds of such loans or advances/rediscounts are released to the applicant bank while those for production credit shall not exceed 360 days from the date the proceeds for such loans or advances/rediscounts are released to the applicant bank. Furthermore, advances against Treasury Bills shall not exceed sixty days from the date of rediscount while those advances against other government eligible securities shall not be more than 180 days from date of rediscount. [Circular 442 12-12-74] The maturity date of the loan from the Central Bank which shall be indicated in the promissory note of the applicant bank shall be the maturity date of the collateral paper with the latest maturity. Should any amount remain outstanding on that date, the Central Bank shall debit the borrowing bank's clearing account on such date for that amount plus accrued interest due. [MAAB 83 DLC 2 Revised 12-29-72] SUBSECTION 162.2 Recording and reporting procedures . The bank's liability for the discounted and/or rediscounted papers "with recourse" with the Central Bank and/or other financial intermediaries shall be recorded and shown as "Bills Payable" in all reports submitted to the Central Bank. The loans and discounts, bills purchased, acceptances and other accounts affected by such discounting and/or rediscounting transactions with the Central Bank shall remain as part of the bank's loan portfolio. A footnote in the financial statement shall indicate the outstanding balances of the discounted and/or rediscounted loans. [MAB 1-30-76] SUBSECTION 162.3 Remittance of collections a. Collections received before maturity of the collaterals for loans and advances from the Central Bank shall be remitted to the Department of Loans and Credit, Central Bank of the Philippines, not later than two (2) banking days following the date of receipt of collections by Head Office/branches located within Metro Manila and not later than four (4) banking days following the date of receipt of collections by Head office/branches located outside Metro Manila. In the case of negotiated export bills, when the bank receives the corresponding payment from its correspondent bank either through actual remittance or credit advice or through entry(ies) charging its correspondent bank before receipt of advice, the amount involved shall be remitted to the Department of Loans and Credit, Central Bank of the Philippines, not later than two (2) banking days following the date of receipt of payment and/or entry(ies) by Head Office/branches located within or outside Metro Manila. To check compliance with the above regulations, the Head Office shall require its branches to submit a report of collections duly certified by the Branch Manager. b. Whenever any collateral matures before the maturity date of the loan from the Central Bank, the corresponding loan value thereof shall be debited against the bank's demand deposit account with the Central Bank, including the accrued interest thereon. c. Substitution of collaterals on outstanding loans with the Central Bank shall not be allowed. d. In accordance with Section 92 of the Central Bank Act, the documents offered as collateral shall be endorsed by authorized officers of the applicant bank. [MAAB 83 DLC 2-Revised 12-29-72, as amended by MAAB 12 5-21-80; MAAB 82 DLC-1-Revised 12-29-72] e. The following sanctions/penalties shall be imposed on commercial banks for un-remitted collections/delayed remittances of collections in violation of Item (a) of this subsection, and for delayed recording of corresponding credit advices received from foreign banks: 1) For the first offense . The erring bank shall be assessed and charged a penalty rate equivalent to the difference between fifteen per cent (15%) and the Central Bank rediscount rate charged on such advances, with a warning that a recurrence of any of such malpractices shall be a ground to additionally impose on the bank a fine of five hundred pesos (P500) per day of delay commencing from the day immediately after the set deadline; and cdti 2) For the second offense . The erring bank shall be assessed and charged the penalty rate and fine prescribed above, with a stern warning that, for succeeding offenses, the responsible official/s involved will be subject to suspension/dismissal in accordance with the provisions of Section 34-A of R.A. No. 265, as amended, in addition to the imposition of the penalty rate and fine mentioned above. In the determination and computation of penalty as stated above, the "offense" committed by erring bank(s)/responsible official(s) shall be counted/reckoned on a per day and not on per transaction basis. Additionally, commercial banks are hereby required to support rediscount applications covering export bills with a certification to the effect that the exporter borrowers' packing credits rediscounted with the Central Bank had been liquidated by the exporters concerned and that the corresponding loan values thereof had been fully settled with the Central Bank and/or, in case of partial negotiations of letters of credit, the amounts corresponding thereto had been applied in partial payment of the exporters' packing credit advances and the proportionate loan values thereof had been remitted to the Central Bank. A sample copy of the required certification is shown in 6. Appendix H. [Circular 703 11-21-79] SUBSECTION 162.4 Grounds for suspension of rediscounting privilege SUBSECTION 162.41 Capital deficiency . In case the combined capital accounts of a commercial bank are found to be deficient continuously for a period of thirty days, the bank's rediscounting privilege shall be suspended for a period of sixty days: Provided , That if the bank's capital deficiency recurs within the final thirty days of the 60-day period, the suspension of its rediscounting privilege shall be extended for another period of sixty days. [Circular 355 1-8-73] SUBSECTION 162.42 Chronic reserve deficiency . Credit availments of commercial banks with the Central Bank shall be governed by the following regulations as regards chronic reserve deficiencies: a. A bank that has incurred net deficiencies for four consecutive weeks shall, in addition to the penalties which the Monetary Board may impose under the last paragraph of Section 106 of Republic Act No. 265, as amended, be denied the credit facilities of the Central Bank; and b. Such suspension shall be lifted only after the bank has had no net reserve deficiencies for four consecutive weeks. SUBSECTION 162.43 Overdrawings in deposit accounts with the Central Bank . In case a commercial bank fails to cover its overdrawings in its deposit account with the Central Bank not later than the next clearing day, it shall be excluded from such clearing and it shall also be denied the credit facilities of the Central Bank. Such exclusion from clearing shall continue for as long as it has not maintained credit balances with the Central Bank for at least five consecutive banking days; if its clearing account is overdrawn for five consecutive banking days, it shall be prohibited from (a) making new loans or investments, except investments in government securities with Central Bank support, and (b) declaring cash dividends until it has maintained credit balances in its Central Bank clearing account for at least fifteen consecutive banking days. The denial from availment of credit facilities of the Central Bank shall continue for as long as the bank has not maintained credit balances with the Central Bank, for at least fifteen (15) consecutive banking days. (These provisions also appear in Subsec. 191.11) [Circular 552 1-11-77] SUBSECTION 162.44 Deficiency in required liquidity floor re : government deposit . Any bank with deficiency in the required liquidity floor against deposits of, and/or borrowings from, the Government and government entities or with excess holdings of such deposits shall be denied the credit facilities of the Central Bank . . . . (See also Item (b) of Subsec. 154.6.) [Circular 673 4-17-79] SUBSECTION 162.5 Processing of applications for rediscounting/advances with the Central Bank . In order to expedite the processing of applications for rediscounting/advances with the Central Bank, all commercial banks and thrift banks using the "Consolidated Daily Report of Condition" (CDRC) for reporting reserves and capital positions may submit in lieu of the following reports which were replaced by the CDRC: a. CBP 7-16-01 Consolidated Report of Required and Available Reserves Against Deposit Liabilities b. CBP 7-16-07 Statement of Capital Required and Capital Accounts Under Section 22 or 30 of R.A. 337, as amended a certification to the effect that they did not incur deficiencies in capital and reserves within thirty (30) days and four (4) weeks, respectively, immediately preceding the date of such applications. Should the capital and reserves reports computer-generated from the CDRC show deficiencies, the Department of Loans and Credit shall a. cause the proceeds of rediscounting/loan, granted on the basis of an erroneous certification issued by applicant bank, to be automatically debited to the borrowing bank's demand deposit account with the Central Bank; and b. impose a penalty of ten (10) per cent per annum of the debited proceeds. [Memorandum (Undated) To All CBs, SMBS, PDBS, and SSLAS, Series of 1980] SECTION 163. Specific Rediscounting/Loan Transactions . SUBSECTION 163.1 Rediscounting of papers covering export products under the Export Priorities Plan of the Board of Investments SUBSECTION 163.11 Eligibility of papers . Credit instruments pertaining to firms registered with the Board of Investments as registered exporters under the provisions of Republic Act No. 6135, as well as to Central Bank certified export-oriented industries may be presented for rediscounting with the Department of Loans and Credit, Central Bank, provided they are eligible and acceptable under Section 87 of Republic Act No. 265, as amended, as well as under the second paragraph of Subsec. 162.12. The application for rediscounting shall be supported by, among others, a certification of the applicant bank to the effect that the products to be benefited by the rediscounting are actually to be exported. SUBSECTION 163.12 Loan value . Papers covering export packing credits and export production credits, supported by letters of credit, may be rediscounted up to eighty per cent (80%) of their value. SUBSECTION 163.13 Rediscount rate . The rediscount rate on credit instruments covering loans granted for export packing credits as well as for export production credits shall be four per cent (4%) per annum with a maximum spread of five per cent (5%) per annum such that the interest rate which shall be charged by the lending banks on such loans shall not exceed nine per cent (9%) per annum, plus bank charge not exceeding 1%. It can be understood that credit instruments covering any product that is delisted from the Export Priorities Plan (6. Appendix B) shall no longer be rediscountable at the preferential rate of four per cent (4%) per annum one month after the approval date of the new Plan. [MAAB 64 5-16-73, as amended by Circular 610 5-19-78] SUBSECTION 163.14 Maturities . The maturity of Central Bank rediscounts for export packing credits shall not exceed 180 days from date of credit whole that for export production credits may extend up to the expiry date of the corresponding letter of credit, but in no case beyond 360 days. [MAAB 64 5-16-73] The maturity of negotiated sight export bills shall be computed as thirty days after date of the draft; time export bills shall be computed as thirty days after date of draft plus usance. [MAAB 82 DLC 1-Revised 12-29-72] SUBSECTION 163.15 Ceilings . Commercial banks, for purposes of rediscounting their export papers with the Central Bank, may avail themselves of another additional 50% ceiling based on their existing basic rediscount ceiling, in effect increasing export financing for all commercial banks to 100% of their basic rediscount lines. It is understood, however, that availments under this authority may be allowed only where the commercial bank's basic rediscount ceiling and the additional 50% ceiling authorized under the first paragraph of Subsec. 163.16 shall have been fully utilized. (This provision also appears under Subsec. 162.11.) [Circular 658 3-5-79] SUBSECTION 163.16 Rediscounting of papers covering non-traditional exports/small-scale/cottage industries and the production/exports/trading of sugar, rice and tobacco . Any bank that is eligible to rediscount and whose rediscount ceiling has already been saturated or fully availed of shall be entitled to an increase in its existing rediscount ceiling to the extent of 50%, which shall be used exclusively for financing non-traditional exports/small scale/cottage industries with assets not exceeding P1 million, and the production/exports/trading of sugar, rice and tobacco: Provided , That availments for the production/exports/trading of sugar, rice and tobacco shall not exceed one-half () of the 50% increase in its rediscount ceiling. The proceeds of any rediscounting application covering exports/small scale/cottage industries shall be credited to the demand deposit account of the applicant bank on the same date the said application is filed with the Department of Loans and Credit, Central Bank, provided such application is received at or before 12:00 noon. If after due processing, any or all of the papers offered/rediscounted are found ineligible/unacceptable as collateral for the loan, the clearing account of the commercial bank concerned shall be debited immediately for the amount corresponding to the loan value of the ineligible/unacceptable collaterals, plus accrued interest, at a rate which shall be 2% higher than the preferential rate for loans against exports/small scale/cottage industry papers. [Circular 639 11-10-78] The rediscounting of eligible papers of export-oriented small/scale cottage industries involving accounts not exceeding P1 million shall have a loan value of 100% and a rediscount rate of 3% per annum with a maximum bank lending rate of 9%, plus bank charge not exceeding 1%. [Circular 635 10-12-78, as amended by Circular 668 3-20-79] SUBSECTION 163.17 Failure to negotiate export L/C discounted with Central Bank . The following additional requirements shall govern the rediscounting of eligible papers for export financing with the Central Bank: a. Promissory notes rediscounted with the Central Bank, which are secured by export letters of credit, shall contain a clause or rider to the effect that interest thereon shall automatically be increased in the event that the exporter fails to negotiate the export letter of credit securing the note within its life or at the maturity of the note; and b. Should the exporter fail to negotiate the aforementioned export L/C and/or P.O./S.C. up to an amount equivalent to at least the face value of the promissory note offered as collateral for CB advances, the Central Banks shall, after one month, debit the clearing account of the commercial bank concerned for additional interest based on the difference between the highest rediscount rate and the rediscount rate for export financing applied on the basis of the proportionate loan value of the difference between the face value of the promissory note and export negotiations, unless the Central Bank shall earlier receive a written notice of L/C extension from the commercial bank concerned, in which case the debiting shall be suspended accordingly. [Circular 647 1-22-79, as amended by Circular 666 3-20-79 and Circular 737 5-21-80] SUBSECTION 163.2 Rediscounting of papers pertaining to agrarian reform credit relative to Presidential Decree No . 717 SUBSECTION 163.21 Eligibility of papers . Promissory notes and other eligible credit instruments pertaining to agrarian reform credit as defined under Presidential Decree No. 717 dated May 29, 1975 extended by any banking institution to beneficiaries of agrarian reform, may be rediscounted with the Central Bank at preferential rates and loan values. [Circular 474 6-30-75] SUBSECTION 163.22 Loan values . The loan value or maximum amount that may be granted by the Central Bank against an eligible credit instrument under a supervised credit program shall be 100% of the outstanding balance or unpaid portion of such eligible credit instrument at the time of rediscounting. For eligible credit instruments not under a supervised credit program, the loan value of such credit instruments at the time of rediscounting shall not exceed eighty per cent (80%) of the outstanding balance or unpaid portion thereof. [Circular 474 6-30-75 and Circular 610 5-19-78] SUBSECTION 163.23 Rediscount/interest rates . The Central Bank shall charge rediscount or interest rates as follows: a. Eligible credit instruments under a supervised credit program one per cent (1%) per annum; and b. Other eligible credit instruments not under a supervised credit program four per cent (4%) per annum. [Circular 474 6-30-75, as amended by Circular 610 5-19-78] (The rules and regulations governing rediscounting by commercial banks under the agrarian reform credit scheme are found in 6. Appendix C. The guidelines on rediscounting privileges under the supervised credit program are embodied in 6. Appendix F.) SUBSECTION 163.3 Interbank loan transactions . Call slips or tickets may be used to evidence call loan transactions of not more than twenty-four hours maturity to cover reserve deficiencies. In all other cases, call loan transactions shall be evidenced by a promissory note containing the minimum features prescribed in Book V of this Manual. [Circular 438 11-4-74] All interbank call loan transactions shall be submitted to the Central Bank Accounting Department by means of interbank loan advice or repayment transfer tickets not later than 7:30 P.M. of the same banking day that a loan transaction is consummated. All interbank loans shall be recorded by the borrowing bank as "Bills Payable interbank Loans" and shall be subjected to reserve requirements of five per cent (5%).(See Subsec. 124.25 for computation of "Due from Central Bank of the Philippines" account.) The maximum interest/yield rate for interbank loan transactions between and among banks, between banks and non-bank financial intermediaries performing quasi-banking functions, and among non-bank financial intermediaries performing quasi-banking functions shall be eighteen per cent (18%) per annum, inclusive of commissions, premiums, fees and other charges. (See also Subsec. 135.5) (MACB 1-25-78, as amended by Circular 732 5-5-80] (Please refer to 3.Appendix B for the procedural requirements for interbank loan transactions). It is clarified that funds borrowed by banks or non-bank financial intermediaries performing quasi-banking functions from trust departments of banks or investment houses in the latter's capacity as fund managers are not considered as interbank borrowings and, therefore, are subject to: a. 20% reserve requirement on deposit substitutes under Subsec. 567.11 of Book V; b. Minimum 15-day maturity period under Subsec. 567.21 of Book V; c. Minimum trading lot rule under Subsec. 567.22 of Book V; and d. 35% transaction tax. [These provisions also appear in Subsec. 179.1] [Memorandum to All Banks and NBFIs with QBF 5-28-79] SUBSECTION 163.4 Central Bank loans to long-term lending institutions . Loan availments under Section 88-A of R.A. No. 265, as amended, shall be subject to the following terms and conditions: a. Loan value shall be computed on the basis of payments, installments, or amortizations falling due over a period not exceeding three (3) years from the date of loan or advance with the Central Bank; b. The Central Bank shall charge a 6 percent interest rate; c. It is understood that the maximum lending rate of 12 per cent (secured) and 14 per cent (unsecured) that may be charged by banks for papers with more than one year maturity under Subsec. 162.14 shall continue to be applicable. [Circular 664 3-19-79] SUBSECTION 163.5 Rediscounting regulations governing the Aromatic Tobacco Trading Loan Fund Program . The revised rules and regulations embodied in Section 6 of 3.Appendix Q shall govern applications of authorized commercial banks for STD/rediscounting with the Central Bank in connection with this program (formerly Virginia Tobacco Trading Loan Fund). [Circular 715 2-1-80] SUBSECTION 163.6 Rediscounting of papers of exporters of services and construction contracts . Papers of exporters of services and construction contracts shall be considered eligible for rediscounting under Section 87 (b-1) of Republic Act No. 265, as amended, subject to the following terms and conditions: a. The eligible papers shall be secured by at least the assignment of payments of the civil/construction/labor contracts, to be supported by the award of such contracts with approval/confirmation by an appropriate Philippine government agency or performance bond, if required, and other evidences to prove existence of said contracts; b. Rediscounting against such papers shall be under the same terms and conditions as those for export-oriented industries under Subsecs. 162.13 and 162.14, and shall have maturities not to exceed 180 days from date of availment, or not later than the expiration of the contract, whichever comes first; and c. Availments under this facility shall be chargeable against the rediscount ceiling of the banking institution concerned. [Circular 671 3-28-79] SUBSECTION 163.7 Rehabilitation program for rice producing areas in Central Luzon . The guidelines for the availment of special funds by the Philippine National Bank under the rehabilitation program for rice-producing areas in Central Luzon are embodied in 6. Appendix G. [MCARB and PNB Branches in Central Luzon 11-22-78, as amended by MCARB and PNB Branches in Central Luzon 1-8-79] SECTION 164. Additional Qualifications for Availment of Central Bank Credit Facilities . The following are additional qualifications for the continuity of availment of the privilege of access by commercial banks to the credit facilities of the Central Bank: a. The ratio of banks' past due direct and indirect loans to its stockholders, directors and officers, and related interests as defined under Section 134 to its aggregate past due loans as of the last examination by the Department of Commercial and Savings Banks must not exceed five per cent (5%). Papers covering loans to the bank's own stockholders, directors and officers, whether directly or indirectly, shall not be acceptable for rediscounting if the loans pertaining to such papers are over and above their respective equity in pursuance of Monetary Board Resolution No. 1803 dated September 19, 1967. Moreover, papers of these stockholders, directors and officers which appear as new loans but which are in reality renewed notes shall be assessed an interest rate of fourteen per cent (14%) per annum, and the full amount of the covering credit shall be automatically debited against the clearing account of the bank concerned considering that renewed loans are not acceptable for rediscounting under existing regulations. In determining the five per cent (5%) required ratio of past due direct and indirect loans to its stockholders, directors, officers and related interests to its aggregate past due loans, matured past due advances on exports shall be excluded: Provided , That: (1) such advances are past due loans for not more than thirty (30) days, and (2) the effective rate of interest to be charged by banks on their loans for financing exports shall not exceed eleven per cent (11%) per annum and for other exports, nine per cent (9%) per annum. [Circular 306 7-29-70, as amended by Circular 587 12-24-77, Circular 610 5-19-78 and Circular 706 12-1-79] b. The paid-up capital of a commercial bank applying for credit availment from the Central Bank should amount to at least P100 million at the time the application is filed, in accordance with the increased capitalization program of commercial banks; and c. The capital accounts of the commercial banks, as adjusted, to cover any valuation reserves recommended to be set up by the Central Bank to cover the doubtful and loss accounts should meet the minimum capital required under Section 22 of Republic Act No. 337, as amended. [Circular 306 7-29-70, as amended by Circular 667 3-20-79] d. Required reports must be submitted on time to the various departments and/or offices of the Central Bank. [Circular 306 7-29-70] e. Whenever the total direct accommodations of a bank to its directors, officers, stockholders and other parties mentioned in Subsec. 134.4 reach 50% of the prescribed aggregate ceiling and the bank is applying for a loan or advance with the Central Bank, the Monetary Board may, upon the recommendation of the Department of Commercial and Savings Banks, require as a condition for the extension of the credit facility the designation of a comptroller in the bank to protect the interests of the Central Bank. [Circular 568 5-4-77] f. Effective January 13, 1978, compliance with the investment deposit ratios for four consecutive quarters shall be one of the conditions for the processing and/or approval of any-application or request to avail of Central Bank credit facilities, except as may be allowed under Section 90 of Republic Act No. 265, as amended. [Circular 571 7-12-77] Whenever any person or entity violates any of the provisions of Item (a) of this section, the person or persons responsible for such violation shall be subject to the penalty prescribed in the first paragraph of Section 34 of Republic Act No. 265, as amended, and/or the penalty prescribed in Section 10 of Act No. 2655, as amended, without prejudice to any action under the provisions of the second paragraph of Section 34 of Republic Act No. 265, as amended, and the imposition of administrative sanctions under Section 34-A of said Republic Act. [Circular 589 12-24-77] SECTION 169. Sundry Provisions . SUBSECTION 169.1 Registration requirements for commercial papers . All banks 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 (See 6. Appendix D for SEC Rules on Registration). [Circular 489 12-15-75] Moreover, all banks which have outstanding issues of, or are issuing or intending to issue commercial papers with maturities of 366 days or more and bonds shall 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 (See 6.Appendix E). [Circular 545 11-22-76] When the issuance of commercial paper amounts to the performance of quasi-banking functions, the issuer shall first obtain a certificate of authority from the Central Bank in accordance with the provisions under Subsec. 519.3 of Book V of this Manual. Any bank found violating or not complying with the rules and regulations mentioned in this subsection may be subject to the following sanctions/penalties: a. Suspension or revocation of the authority to engage in quasi-banking functions; b. Penalties prescribed under Section 34 of Republic Act No. 265, as amended; c. In the case of banking institutions and their directors and officers, the administrative sanctions authorized under Section 34-A, Republic Act No. 265, as amended; and d. Such other penalties/sanctions authorized by law. [Circular 489 12-15-75 and Circular 545 11-22-76] APPENDIX A (Book I, Part 6) CREDIT PRIORITY CLASSIFICATION Priority I a. Production of agricultural, including forestry and fishery, and industrial goods which (1) possess growth potential in competitive domestic and world markets, (2) contribute most to the development of the economy, (3) provide for the satisfaction of basic wants of the population as a whole, and (4) require resources in addition to their self-financing capabilities. b. Marketing of export products, primarily those goods that contain the maximum possible domestic processing and labor content. c. Marketing in the internal market of domestic products which fall under Priority I and imported basic consumer goods by Filipino merchandisers. d. Importation and marketing of capital equipment, raw materials and supplies for the production and distribution of Priority I products. e. Public utilities which are not over-crowded and are necessary to support the production and distribution of Priority I goods or to satisfy basic wants. f. Other services which are not over-crowded and which are necessary for (1) the development of desirable knowledge and skills, (2) the support of the production and distribution of Priority I products, and (3) the promotion of tourism and cultural pursuits. g. Construction of (1) infrastructure projects, (2) physical plants necessary for the production and distribution of Priority I products and services, and (3) individual low cost housing for the lower income groups of the population. Priority II a. Production and distribution of goods and services which do not qualify under the Priority I category. b. Real estate loans (construction, acquisition, development and refinancing of real estate) other than those specified under Priority I. c. Consumption. d. Other non-productive and speculative activities. ECONOMIC ACTIVITIES FALLING UNDER PRIORITY I A. Economic Activities Eligible for Credits up to Eighty Per Cent (80%) of Loan Value of Credit Instrument 1. Agriculture, Fisheries and Forestry a. Agricultural 1) Abaca 2) Cassava 3) Cattle and dairy farms 4) Coconut 5) Coffee and cocoa 6) Corn 7) Palay or rice 8) Piggery 9) Poultry 10) Ramie 11) Rubber plantation 12) Sugar a 13) Other fruits and vegetables b. Fisheries 1) Fishponds and inland fishing 2) Marine fishing c. Forestry 1) Forest nurseries and reforestation projects 2. Mining and Quarrying a. Metal Mining 1) Chromite 2) Copper 3) Iron 4) Lead 5) Manganese 6) Mercury and quicksilver 7) Nickel 8) Zinc b. Non-Metallic Mining 1) Asbestos 2) Sulphur 3) Coal 4) Gypsum 3. Manufacturing a. Basic Metal Industries 1) Blast furnaces, steel work and rolling mills 2) Iron and steel basic industries 3) iron and steel foundries 4) Non-ferrous metal basic industries b. Chemical and Chemical Products 1) Basic chemicals 2) Drugs and other pharmaceutical preparations 3) Fertilizer c. Coconut Products and their Preparation 1) Coconut oil, edible 2) Coconut oil, inedible 3) Copra meal and cake d. Electrical Machinery, Apparatus and Appliances 1) Transmissions and distribution equipment e. Food Manufacturing 1) Canning and preserving of fish and other sea foods a) Fish canning 2) Canning and preserving of fruits and vegetables a) Canning, drying, brining, pickling or otherwise preserving or preparing vegetables b) Canning, drying or otherwise preparing and preserving fruits 3) Slaughtering, preparation and preserving of meat 4) Sugar factories and refineries a) Sugar refining plants a 5) Miscellaneous food preparation a) Prepared feeds for animals and fowls f. Furniture and Fixtures Manufacture 1) Rattan and bamboo furniture g. Leather and Leather Products 1) Tanning and finishing h. Lumber and Wood Products 1) Veneer, plywood and prefabricated products i. Machinery, Equipment, Accessories and Parts 1) Agricultural machinery 2) Engines and turbines 3) Industrial, construction and mining machinery j. Non-Metallic Products 1) Cement k. Paper and Paper Products 1) Pulp, paper and paperboard l. Petroleum and Coal Products 1) Coke m. Textile, Cordage and Twines Manufactures 1) Cordage, rope, twines and nets 2) Hemp milling, abaca stripping and baling establishments 3) Knitting mills 4) Spinning, weaving and finishing of textiles n. Transportation Equipment and Parts 1) Aircrafts and parts 2) Motor vehicles, equipment and parts 3) Motorcycles, bicycles and parts 4) Railroad equipment 5) Ships and boats o. Miscellaneous Manufacturing Industries 1) Laboratory, engineering and medical instruments 4. Construction a. Contract 1) Building construction a) Commercial and industrial projects 1 5. Public Utilities a. Ice and Ice Refrigeration Plants b. Operation of Wharves, Dry Docks, Etc. c. Warehousing d. Water Supply and Sanitary Services 1) Irrigation systems 2) Water supply systems 6. Commerce a. Export Products 1 b. Importation of Capital Goods and Raw Materials 1 c. Domestic Trade (Filipino only) Wholesale and Retail B. Economic Activities Eligible for Credits up to Sixty Per Cent (60%) of the Loan Value of the Credit Instrument * 1. Agriculture, Fisheries and Forestry a. Agricultural 1) Citrus 2) Cotton 3) Salt farming 4) Soybean 5) Other root crops 2. Mining and Quarrying a. Metal Mining 1) Gold 2) Silver b. Non-Metallic Mining 1) Asphalt 2) Marble 3. Manufacturing a. Chemical and Chemical Products 1) Dyeing and tanning materials 2) Explosives (excluding firecrackers) b. Coconut Products and their Preparations 1) Dessicated coconut c. Electrical Machinery, Apparatus and Appliances 1) Communication equipment 2) Dry cells and storage batteries d. Food Manufacturing 1) Canning and preserving of fruits and vegetables a) Fruits and vegetables, sauces and seasoning 2) Dairy products a) Milk processing 3) Miscellaneous food preparations a) Coffee roasting, grinding and/or processing e. Furniture and Fixture Manufacture 1) Wood furniture f. Lumber and Wood Products 1) Cork 2) Sashes and doors 3) Sawn and planed lumber 4) Wooden box 5) Wood chips g. Machinery, Equipment, Accessories and Parts 1) Office and store machines and devices h. Metal Industries 1) Cutlery, handtools and general products 2) Fabricated structural and metal products 3) Tin and aluminum ware i. Non-Metallic Products 1) Glass and glass products 2) Structural clay products j. Textile, Cordage and Twines Manufactures 1) jute bags and sacks k. Miscellaneous Manufacturing Industries 1) Cottage native handicraft industries 2) Footwear (other than rubber) 3) Photographic and optical, goods 4. Construction a. Contract 1) Building construction a) Commercial and industrial projects 1 2) Highway and street construction (including road building) 5. Public Utilities a. Common Carriers 1) Airlines and other air transportation 2) Motor vehicles 3) Railroad and railway companies 4) Steamboats and steamship lines b. Communication 1) Telecommunication (cable, mail and express, telegraph, telephone) c. Electricity, Gas and Steam 1) Electric, light, heat and power d. Water Supply and Sanitary Services 1) Garbage, sewerage and disposal system 6. Services a. Business and Professional Services 1) Engineering and technical services b. Educational Services 1) Private vocational and trade schools 2) Public universities and higher educational institutions 3) Public vocational and trade schools c. Medical and Other Health Services 1) Public health services d. Recreation Services 1) Theatrical production (i.e., all performing arts) e. Research and Scientific Institutions 7. Financial a. Banks 1) Private development banks 2) Rural banks 8. Commerce a. Export Products 1 b. Importation of Capital Goods and Raw Materials 1 c. Domestic Trade (Filipino only) Wholesale and Retail 1 9. Other Activities a. Loans for Other Dollar-Earning purposes Not Elsewhere Classified (included in this category are the construction, development and operations of first-class hotels which cater to the needs of the tourist industry). C. Economic Activities Eligible for Credits up to Sixty Per Cent (60%) of the Loan Value of the Credit Instrument * 1. Agriculture, Fisheries and Forestry a. Agricultural 1) Pineapple 2) Tobacco, native b. Fisheries 1) Fishery services 2) Pearl fishing and culture, shell gathering and other marine products c. Forestry 1) Forest services 2) Timber tracts 2. Mining and Quarrying a. Non-Metallic Mining 1) Mineral salt 2) Silica 3. Manufacturing a. Apparel and Other Finished Products Made from Fabrics and Similar Materials 1) Embroidery shops 2) Wearing apparel b. Chemicals and Chemical Products 1) Paints, varnishes and lacquers 2) Soaps and other cleansing preparations c. Coconut Products and their Preparation 1) Copra d. Electrical Machinery, Apparatus and Appliances 1) Electric lamp 2) Household appliances 3) Radio, television, telephone receiving sets, electronic tubes and components e. Food Manufacturing 1) Canning and preserving of fish and other sea foods a) Fish sauce (patis) manufacture b) Shellfish curing, smoking, salting or pickling, n.e.c. 2) Cocoa, chocolate and sugar confectionery a) Cocoa and chocolate processing factories 3) Grain mill products a) Corn mills b) Rice mills c) Tuber flour mills d) Wheat flour 4) Miscellaneous food preparations a) Salt manufacture b) Starch and its products c) Vegetable lard and margarine manufacture d) Vermicelli and noodles manufacture f. Lumber and Wood Products 1) Creosoting and other wood treating g. Metal Industries 1) Fabricated wire products 2) Metal stamping, coating and engraving h. Non-Metallic Products 1) Plastic products 2) Pottery, china, earthenware 3) Concrete aggregates 4) Concrete products a) Cement products light weight aggregate b) Pre-mold concrete light aggregate i. Paper and Paper Products 1) Coated and glazed paper products j. Printing, Publishing and Allied Industries 1) Book publishing and printing 2) Newspaper and periodical publishing k. Tobacco 1) Cigar and cigarette factories (native) l. Miscellaneous Manufacturing Industries 1) Oxygen, acetylene and similar products 2) Silver and gold work without precious stones 3) Musical instruments and parts a) Blank recording discs b) Metal stampers 4. Construction a. Contract 1) Building construction a) Government projects b) Commercial and industrial projects 1 2) Heavy construction (including bridges and irrigation projects) b. Personal 1) Construction (not exceeding P30,000) 2) Reconstruction (not exceeding P30,000) 5. Public Utilities a. Electricity, Gas and Steam 1) Gas manufacture and distribution 2) Steam heat and power b. Water Supply and Sanitary Services 1) Drainage system 6. Services a. Medical and Other Health Services 1) Private health services b. Recreation Services 1) Motion picture production 7. Financial a. Banks 1) Commercial banks 2) Savings and mortgage banks 8. Commerce a. Export products 1 b. Importation of Capital Goods and Raw Materials 1 c. Domestic Trade (Filipino only) Wholesale and Retail 1 Source: Circular 223 6-25-66, as amended by Circular 237 4-4-67, Circular 248 9-28-67, Circular 254 12-5-67, Circular 263 10-4-68, Circular 303 7-13-70, Circular 610 5-19-78, and Circular 672 4-6-79. Footnotes a. authorized up to December 31, 1979 (Circular 444) 1. To follow rating of economic activities included in the list. * Loan value for non-export oriented small-scale/cottage industries increased to 80%, and for the production of rice and corn, poultry and piggery, fishing, feed grains and sorghum, seeds and seedlings, food production, food processing, domestic fertilizer production and food manufacturing for domestic consumption, loan value is increased to 100%. * An enterprise applying under List B will be entitled to tax free importation of machinery only if said enterprise agrees to export at least 50% of its total production. APPENDIX B (Book I, Part 6) EXPORT PRIORITIES PLAN LIST A : EXPORTABLE PRODUCTS OF EXISTING FIRMS Food Processing 1. Processed meat including canned, chilled or frozen, dried, salted or dehydrated meat 2. Processed sea foods including canned, chilled, or frozen, dried or salted or dehydrated sea foods 3. Processed milk 4. Frozen specialties 5. Processed fruits and vegetables including juices, canned, chilled or frozen, dried, salted or dehydrated 6. Dried roots 7. Coffee, processed 8. Spices such as processed ginger, pepper, onion, garlic 9. Cereal preparations 10. Flour 11. Starches 12. Agar-agar 13. Vegetable cooking oils and lard 14. Margarine, butter, and cheese 15. Fish sauce 16. Confectionery 17. Cocoa and cocoa preparations such as cocoa butter 18. Chocolate and chocolate preparations 19. Noodles 20. Biscuits and cookies; cones 21. Catsup 22. Baking powder 23. Brewer yeast 24. Peanut butter 25. Chewing gum 26. Coconut syrup 27. Food coloring such as Atsuete 28. Soft drinks 29. Beer 30. Fruits and flower wine 31. Alcoholic products such as rum, whisky and gin 32. Vinegar, all kinds 33. Brewery spent grains 34. Processed cheese 35. Processed poultry products Processed Rubber Products 1. Crumb rubber 2. Camel back 3. Rubber tires and inner tubes 4. Rubber gloves 5. Rubber toys and sporting goods 6. Rubber tiles 7. Rubber shoes 8. Rubber sandals 9. Rubber slippers 10. Bonding cement 11. Rubber cement 12. Rubber and thread gums 13. Tube rubber 14. Rubber automotive parts such as vibration dampers caps, weather strips, handles and pedals, carpet underlay made of rubber 15. Curing tube and sectional air bag Chemicals and Chemical Products 1. Motor gas and diesel 2. Chlorine liquid and chlorine compounds 3. Carbon black 4. Acetylene black 5. Hydrochloric acid 6. Sulphuric acid 7. Acid oils, fatty acid and fatty alcohols 8. Iron oxide 9. Silica gel 10. Calcium carbide 11. Alcohol rectified and refined, distilled and denatured 12. Fertilizers; organic and inorganic 13. Paints, pigments, varnishes and related products 14. Ink 15. Cosmetic, perfumery 16. Soaps and detergents 17. Wax and wax products 18. Glues 19. Pyrotechnic explosives 20. Matches 21. Insecticides, pesticides 22. Mosquito coils 23. PVC tiles 24. Alkyd resins 25. Charcoal 26. Photographic chemicals 27. Glycerine, refined and crude Metallic Products 1. Manganese concentrates 2. Silver concentrates and bars 3. Perro-alloys 4. Metal castings; rough, finished and semi-finished 5. Metal rods, bars, angles, shapes and sections, of iron or steel (hot-rolled, forged, extruded cold-formed or cold-finished 6. Iron and steel plates, cods and sheets, including G.I. sheets 7. Steel, aluminum and copper wires 8. Pipes and tubes; B.I., G.I., spiral welded or aluminum 9. Prefabricated and fabricated structural products made of iron and steel and cement 10. Steel drums 11. Pails 12. Compressed gas cylinders and similar pressure containers of iron and steel 13. Insulated cable wires 14. Nails, bolts, nuts 15. Grinding balls 16. Aluminum sheets and foil 17. Tin plates 18. Tin cans 19. Household utensils made of metal including enamelled 20. Kitchen appliances and tools, hand-operated such as meat grinders, coconut graters 21. Cutlery such as scissors, blades, tailor's shears, shovels, spades, rakes, saws, knives 22. Razor blades 23. Metallic closures and screw caps 24. Budding hardware such as hinges, door knobs, door bolts and window rotor-operators 25. Vault doors (e.g. insulated vault doors) 26. Safes (e.g. record safes and tapeguards) 27. Strong boxes, armored and reinforced strong room doors and compartments and fittings (e.g. insulated filing cabinets) 28. Filing cabinets, racks, sorting boxes, paper trays, paper rests and similar office equipment of base metal 29. Wrought iron furniture 30. Gas lamps 31. Firearms and ammunitions 32. Toys and sporting goods 33. Pyrite cinders or iron sulfite Non-Metallic Products 1. Marble slabs, tile chips and curios 2. Processed marble blocks 3. Cement additives 4. Lime 5. Cement and clinker 6. Cement floor tiles 7. Asbestos tiles 8. Pipes and tubes, asbestos cement 9. Roofing tiles and fire bricks 10. Refractories 11. Clay products such as pottery, roofing tiles and paste frits 12. Ceramic products such as tiles (Glazed, Vitrified), sanitary ware sinks, bidets, etc., except dinnerware 13. Glass and glass containers such as sheet glass, window panes, optical glass, bottles 14. Safety glass 15. Reinforced fiber glass products 16. Pyrite (unroasted) (roasted) Machinery and Equipment and Parts 1. Agricultural equipment and components 2. Process equipment and components 3. Transport equipment and components 4. Construction equipment and components 5. Ricemills and parts thereof 6. Sewing machines 7. Tractor parts 8. Parts of trucks, passenger trucks, automobiles and other commercial vehicles 9. Bicycles Electrical Products Machines and Parts 1. Welding electrodes 2. Fire extinguishers 3. Dry cell batteries 4. Storage batteries 5. Motor control center 6. Fire alarm systems 7. Panelboard 8. Electric lamps and bulbs, incandescent and fluorescent 9. Electrical appliances such as electric fans, toasters, refrigerators, TV 10. Bus ducts 11. Light dimmers 12. Formed aluminum parts such as door shelves, food shelves, and/or parts thereof 13. Wire screens 14. Hermetic compressors 15. Evaporators 16. Condensers and heat exchangers 17. Electronic equipment, parts and components 18. Fluorescent and mercury lamp ballasts Wood Products 1. Caskets 2. Carvings and lattice works 3. Pallets 4. Shelves 5. Sandals and shoes 6. Toys and sporting goods 7. Parquet tiles 8. Bamboo products 9. Prefabricated houses and components except lumber 10. Gun stocks 11. Cabinets 12. Mouldings 13. Doors and fixtures 14. Furniture, complete or knocked down and parts 15. Boxes and crates Pharmaceutical Products 1. Drugs and other pharmaceuticals 2. Wadding, gauze, bandages, adhesives, similar articles 3. Sanitary napkins 4. Talcum powder 5. Dentures Fiber Products 1. Coconut coir 2. Bags, kenaf, jute, synthetic 3. Carpets and rugs 4. Cordage, twines, rope, fishing nets, abaca and synthetic 5. Wigs and hair pieces Textile Products 1. Textile yarns and fabrics, cotton and synthetic and their blends 2. Fabrics of abaca, sinamay, burlap, jusi, pine-apple and other bast fibers 3. Specialty garments such as laces, garters and band 4. Embroideries 5. Garments 6. Gloves 7. Hosiery 8. Tablecloths 9. Mosquito nets Paper Products 1. Cigarette paper 2. Tissue (napkin) 3. Bond 4. Carbon paper including diazo papers, electrostatic copy papers 5. Boxes and packaging materials 6. Containers of paperboard 7. Books, pamphlets, magazines and other printed matters Other Products 1. Fish Meal 2. Animal and poultry feeds 3. Cigarettes 4. Garment hangers of wood, plastics or metal 5. Advertising materials 6. Threads of cotton or synthetic fibers 7. Jewelry 8. Cultured pearls 9. Plaques and trophies 10. Cufflinks 11. Pins, safety or dressmaker's 12. Buttons 13. Zippers 14. Paintings 15. Handicrafts such as lampshades, placemats, shellcraft, hats, household utensils, toys, and sporting goods 16. Travel goods 17. Leather products such as purses, wallets, belts, straps, gloves, footwear 18. Tanned leather 19. Plastic products such as light diffusers, footwear, containers, sheets, raincoats, packaging materials, brushes, brooms, gloves, toothbrushes, toys and sporting goods, optical frames 20. School and office supplies such as fasteners, pencils, folders, paperclips, pens and holders, bookbinders, rulers, desk pieces, etc. LLpr 21. Musical instruments and parts Pianos and parts thereof Guitars and ukuleles Violins Harmonicas LIST B: EXPORTABLE PRODUCTS OF PREFERRED AREAS OF INVESTMENTS * 1. Processed fruits and vegetables (NP) 2. Glucose powder (including cassava starch production) (NP) 3. Rice bran oil (P) 4. Agar-agar (NP) 5. Refined glycerine (NP) 6. Processed shrimps and shellfish (NP) 7. Activated carbon (P) 8. Furfural (P) 9. Essential oils (NP) 10. Blackboard and blackboard cores (NP) 11. Cellulosic staples for specially pulp (P) 12. Footwear (NP) 13. Ferro-alloys (NP) 14. Hermetic compressors (P) 15. Electronic parts and components such as transistors, diodes, printed circuit boards, integrated circuits, variable resistors and rotary switches (P) 16. Electric welders (NP) 17. Pliers and wrenches (P) 18. Motor vehicle transmission (P) 19. Knitted fabrics a. Flat (NP) b. Circular (NP) Condition: At least 70% of total production must be exported. 20. Garments (NP) Condition: At least 70% of total production must be exported. Source : MAAB 64 5-16-73 APPENDIX C RULES AND REGULATIONS GOVERNING REDISCOUNTING BY COMMERCIAL BANKS UNDER THE AGRARIAN REFORM CREDIT SCHEME Rediscounting by commercial banks of eligible credit instruments pertaining to agrarian reform credit as defined in P.D. No. 717 dated May 29, 1975 and implemented by Circular No. 474, dated June 30, 1975 shall be governed by the following rules and regulations: SECTION 1. Papers required . (a) A commercial bank desiring to avail itself of the rediscounting privilege of the Central Bank against agrarian reform credit papers shall file the corresponding application indicating, among others, the following: 1) Amount applied for; 2) Term of the loan or advance applied for; 3) Purpose/s of the loan or advance; and 4) Nature of the loan or advance whether supervised credit or non-supervised credit which must be supported by the following: For Non-Supervised Credit Negotiated export bills and/or acceptances; promissory notes and government securities. [MAAB No. DLC-2 (Revised) 12-29-72] For Supervised Credit In addition to the papers mentioned in Item (a) above, the following shall also be submitted in connection with loans or advances under the supervised credit scheme; a) Duly accomplished farm plan and budget, which shall be prepared by an accredited technician who should be knowledgeable about the project being financed; and b) Certification by a Government Technician that the papers being rediscounted cover loans granted to beneficiaries of agrarian reform. SECTION 2. Eligible papers ; maturities . Credit instruments offered as collateral for a loan or advance shall be subject to the eligibility requirements provided under Section 87 of R.A. No. 265, as amended, for commercial banks. For papers covering loans under the Masagana 99 and Masaganang Maisan and Feed-grains Programs, the maximum loan amount per hectare shall be P1,600.00 for Masagana 99; P500.00 for corn and sorghum and P650.00 for soybeans. As regards commercial credits, the maturity date of said instruments shall not exceed 180 days from date of rediscount, while for production credits, it shall not exceed 360 days also from the date of rediscount or acquisition by the Central Bank. SECTION 3. Loan values a) The loan value or maximum amount that may be granted by the Central Bank against an eligible credit instrument under a supervised credit program shall be one hundred percent (100%) of the outstanding balance or unpaid portion of such eligible credit instrument at the time of rediscounting. b) For eligible credit instruments not under a supervised credit program, the loan value of such credit instruments at the time of rediscounting shall not exceed eighty per cent (80%) of the outstanding balance or unpaid portion thereof. SECTION 4. Rediscount/Interest rates . The rates of interest to be assessed on loans and advances covering agrarian reform credit shall be as follows: a) Eligible credit instruments under a supervised credit program 1% per annum; and b) Other eligible credit instruments not under a supervised credit program 5% per annum. All unsecured loans to beneficiaries of agrarian reform under the "Masagana 99" and "Masaganang Maisan" financing programs shall have an Agricultural Guarantee Fund coverage in order to be eligible for rediscounting at the preferential rate of 1%. SECTION 5. Maturity period ; repayments . The maximum periods for rediscounting of advances against eligible papers shall be as follows: (a) For loans secured by agricultural papers for the production of rice not exceeding 270 days; and for corn and commercial papers not exceeding 180 days. (b) For loans secured by other production credit papers not exceeding 360 days. The terms of the loans granted by institutional borrowers shall be synchronized with the maximum maturities of their own loans from the Central Bank as outlined in Attachment 1. The loan value, plus accrued interest, on collections received before maturity of the collaterals or of maturing collaterals shall be immediately remitted to the Central Bank. SECTION 6. Credit limit . Borrowings secured by agrarian reform credit papers shall be chargeable against the rediscount ceding of commercial banks. [MC-CRTB DLC-3 9-5-75] APPENDIX D (Book I, Part 6) SEC RULES ON REGISTRATION OF COMMERCIAL PAPERS Pursuant to Presidential Decree No. 678 and existing laws, the Commission hereby promulgates the following rules and regulations covering the issue of commercial papers in the interest of full disclosure and protection of investors and lenders. SECTION 1. Scope . Any person, firm or entity which issues commercial papers shall be subject to the provisions of these rules. Initially, only corporations shall be covered by these regulations. Separate regulations covering non-corporate issuers of commercial paper shall be issued at such time as the Commission deems necessary and appropriate in the public interest. SECTION 2. Definitions . For the purpose of these rules, unless the context otherwise indicates, the following definition of terms is hereby adopted; (a) Commercial Paper is an instrument evidencing indebtedness of any person or entity, especially banks and non-banks per-forming quasi-banking functions, irrespective of maturity, which is issued, endorsed, sold, transferred or in any manner conveyed to another person or entity, either with or without recourse. Examples of commercial papers are promissory notes, repurchase agreements, certificates of assignments, certificates of participation, trust certificates and/or similar instruments. (b) Interbank Call Loan is a loan extended by a bank to another bank, demandable within 24 hours, and evidenced by an interbank call loan advice form, in accordance with Subsec. 135.5. (c) Issue means creation of real or contingent liability relative to commercial papers. It includes the roll-overs and/or extension of maturing commercial papers. (d) Negotiation is the transfer of an instrument or of any underlying rights/interests thereof with the necessary formality as to constitute the transferee a holder or payee thereof (e) Affiliate a concern linked directly or indirectly to another by means of: (1) Ownership, control and power to vote, of 10% or more of the outstanding voting securities. (2) Interlocking directorship/officership. (3) Common major stockholders; i.e. owning 10% or more of the outstanding voting securities. (4) Management contract or any arrangement granting power to direct or cause the direction of management and policies. (5) Voting trustee holding 10% or more of the outstanding voting securities. (6) Permanent proxy constituting 10% or more of the outstanding voting securities. (f) Subsidiary means a company 50% or more of the outstanding voting securities of which are directly or indirectly owned, controlled, or held with power to vote, by another. SECTION 3. Registration . (a) The following corporate issuers of commercial paper are required to file a registration statement with the Securities and Exchange Commission, on or before January 1, 1976. (1) Every financial intermediary, bank or non-bank which performs quasi-banking functions; (2) Every corporate issuer of commercial paper aggregating P1 million or more outstanding (i) which would be negotiated; or (ii) which would be issued to twenty (20) or more lenders/investors. It is understood that any corporation performing quasi-banking functions shall, in addition to the registration requirement of these rules, be subject to the provisions of Subsec. 519.3, Book V, on securing a certificate of authority to perform quasi-banking functions. aisadc (b) The applicant for registration under this Section shall submit the following documents: (1) Application and Registration Statement, in the prescribed form and with the prescribed Annexes thereto; (2) Audited financial statement as of at least three (3) months prior to 1 January 1976 or audited financial statement as of more than three (3) months but not beyond twelve (12) months prior to 1 January 1976 accompanied by an audited financial statement as of at least 3 months prior to 1 January 1976, the latter financial statement, however, shall be substituted with an audited financial statement three (3) months following the end of applicant's fiscal year; and (3) A copy of any prospectus, brochure, advertisement or letter of communication which the registrant intends to issue in connection with the registration. (c) The Commission may waive the need for the disclosure of any portion of a material instrument and/or contract if the registrant requests and the Commission agrees that disclosure of such portion would impair the value of the instrument or contract and would not be necessary for the protection of investors. (d) The registration of commercial papers with maturity of more than one year shall be governed by the procedure for close-end registration of securities under the Securities Act, as prescribed by the Commission. [See 6. Appendix E] (e) The acceptance of the registration application is not a guarantee that the Commission has evaluated the registration papers. SECTION 4. Negotiation . No commercial paper shall be negotiated without first having been registered in accordance with these rules, unless it is exempt from registration, as provided under Section 5. SECTION 5. Exemption from Registration . The following need not be registered under these rules: (a) Interbank call loans as herein defined; (b) Loans and advances of the Central Bank under its open market and/or rediscounting operations; (c) Commercial papers issued by the National and local Governments, Central Bank of the Philippines, Philippine National Bank, Development Bank of the Philippines, Land Bank of the Philippines, Government Service Insurance System, Social Security System and such other financial entities as may be determined by the Commission, upon the recommendation of the Central Bank; and (d) Commercial papers issued by corporations, the total outstanding amount of which is less than P1 million at any one time, or P1 million or more but neither negotiated nor issued to twenty (20) or more lenders/investors: Provided , however , that any corporation performing quasi-banking functions shall still be subject to the requirements of Subsecs. 519.2 and 519.3, Book V, Provided , further , that for purposes of determining exemption under this sub-paragraph, papers of subsidiaries, affiliates, holding companies or any other related companies shall be aggregated and considered as one issue. SECTION 6. Reports of Exempted Corporate Issuer . Other than those indicated in Sec. 5 (a) to (c), every corporate issuer of commercial paper exempted under these rules shall file an information sheet, in such form and content prescribed by the Commission, under oath, upon effectivity of these regulations and thereafter not later than January 31 of every year. SECTION 7. Open-end Registration . Registration of commercial paper as required under Section 3 hereof shall authorize the registered issuer to issue commercial papers: Provided , however , that the aggregate outstanding issues at any one time shall not exceed the debt ceiling of commercial papers with maturities of one year or less, determined and authorized by its Board of Directors and disclosed in the registration statement. SECTION 8. Notice and Hearing . (a) For registrants who have commercial paper outstanding prior to the effectivity of these regulations (1) Upon receipt of the registration statement duly accomplished and with the required annexes, the Commission shall publish an omnibus notice thereof in a newspaper of general circulation throughout the Philippines. The cost of publication shall be borne proportionally by applicants concerned. (2) Seven (7) days after such publication, the Commission shall issue a provisional permit authorizing the sale of commercial papers in the Philippines. This permit shall be valid for a period of 90 days. (3) During this period, the Commission shall review the registrant's application. If necessary, the Commission may call the officers of the registrant to a closed door conference-hearing. (4) Within said period of ninety (90) days, the Commission shall issue a regular authority to sell unless it needs additional information or materials; in which case the Commission shall issue its decision not later than ten (10) days after submission of the additional information or materials beyond the said 90-day period. (5) The registrant shall publish the fact that a regular authority has been issued by the Commission in a newspaper of general circulation throughout the Philippines in a form and content as approved by the Commission. (6) This regular authority shall be subject to the annual renewal requirements. (b) For registrants which do not have any commercial paper outstanding prior to the effectivity of these regulations (1) The Commission shall issue its decision to register not later than ninety (90) days after submission of the completed application for registration. In the event the Commission should require additional information, the Commission's decision shall in no case be issued later than ten (10) working days after submission of the additional information beyond the aforestated 90-day period. (2) During this period, the Commission shall review the registrant's application. If necessary, the Commission may call the officers of the registrant for a closed door conference-hearing. (3) After the Commission issues the registration authority, the registrant shall publish notice thereof in a newspaper of general circulation throughout the Philippines in such form and content as prescribed by the Commission. (4) Seven (7) days after publication, the regular authority issued shall be automatically in force. SECTION 9. Return of Registration Applications . (a) The Commission shall return any application for registration, unless it is satisfied that: (1) all the requirements of applicable laws and regulations governing the issuance of commercial papers have been complied with; (2) the issuance of the commercial papers will not be in conflict with public interest and national policies; and (3) all information necessary for a proper evaluation of the worthiness of the commercial paper have been disclosed in the registration statement. (b) The Commission shall return applications upon finding that the information disclosed by the registrant in its application for registration is erroneous or may result in a misleading conclusion. SECTION 10. Basic Features of Commercial Papers . (a) All registered commercial papers of registered issuers shall be pre-numbered. It shall state, among others, the debt ceiling of the registrant and a notice that all information about one registrant is available at the Commission. (b) The Commission may, at some future require the standardization of commercial paper format. SECTION 11. Filing Fees . Every registrant shall pay the following fees: (a) Upon registration, an initial fee of 1/50th of 1% or P1,000, whichever is higher, but not to exceed P10,000 based on the total commercial paper registered. (b) On the anniversary month of registration, a renewal fee of fifty (50) per centum of the original filing fee, plus 1/50th of 1% of any increase from the last previous registered amount, with a maximum of P10,000 and a minimum of P500.00. SECTION 12. Submission of Inventories . The following inventories as of October 31, November 30 and December 31, 1975 shall be submitted to the Commission not later than fifteen (15) days from end of the reference month: (a) A list of the outstanding commercial papers held by each financial intermediary engaged in quasi-banking functions, showing the name of the issuer, date of maturity and amount thereof. (b) A list of outstanding commercial papers issued by corporations covered under Section 3 by type, date of maturity and amount thereof. SECTION 13 Periodic Reports . Every registered issuer of commercial papers shall file with the SEC a quarterly statement, signed under oath by its President, specifying any changes in their original registration statement. These documents shall be filed within thirty (30) days following the end of each quarter. SECTION 14. Central Bank Supervisory Powers . The Monetary Board shall also have the power of supervision in the enforcement of these rules, concurrent with the Commission and, without prejudice to the provisions of the succeeding paragraph, impose administrative sanctions as circumstances warrant. SECTION 15. Administrative Sanctions . If after due notice and hearing, the Commission finds that there was a willful intent to submit inadequate disclosures or to deceive through the filing of inaccurate information in the registration statements and/or the periodic reports, or there is a violation of any of the above regulations, the Commission may subject the violator to any of the following penalties: (a) Suspension or revocation of selling authority; (b) A fine of not less than P200 for every day the violation persists; (c) Other penalties within the power of the Commission under existing laws; and (d) The filing of criminal charges against the corporation and its principal officers. SECTION 16. Effectivity . These rules shall take effect immediately. Manila, Philippines, December 10, 1975. (SGD.) ANGEL L. LIMJOCO, JR. Chairman Securities and Exchange Commission APPROVED: (SGD.) TROADIO T. QUIAZON, JR. Secretary Department of Trade (SGD.) G.S. LICAROS Chairman Monetary Board of the Central Bank of the Philippines APPENDIX E (Book I, Part 6) SEC RULES ON REGISTRATION OF LONG TERM COMMERCIAL PAPERS AND BONDS Pursuant to Presidential Decree No. 678 and existing laws, the Securities and Exchange Commission hereby promulgates the following rules on close-end registration of commercial papers with face maturities of 366 days or more and bonds, referred to in Section 3(d) of the Rules on Registration of Commercial Papers dated December 10, 1975, in the interest of full disclosure and protection of investors and lenders. SECTION 1. Scope . These rules shall cover the following corporations issuing commercial papers with face maturities of 366 days or more and bonds: (1) Financial intermediaries, banks and non-banks performing quasi-banking functions; (2) Other corporate issuers of long term commercial papers and bonds the aggregate amount to be issued or the outstanding issue of which is P1 million or more: (i) Which will be negotiated to any number of persons; or (ii) Which will be primarily issued to twenty (20) or more lenders/investors. No commercial papers with face maturities of 366 days or more and bonds shall be issued or negotiated unless the same have been registered or are exempt pursuant to these rules. It is understood that any corporation performing quasi-banking functions shall, in addition to the registration requirement of these rules, be subject to the provisions of Subsec. 519.3, Book V on securing a certificate of authority to perform quasi-banking functions. Regulations prescribing the registration of commercial papers by issuers not otherwise covered by these rules shall be promulgated at such time as the Commission deems necessary and appropriate in the public interest. SECTION 2. Definitions . For the purpose of these rules, unless the context otherwise indicates, the following definition of terms is hereby adopted: (a) Commercial Paper is an instrument evidencing indebtedness of any person or entity, specifically banks and non-banks performing quasi-banking functions, which is issued, endorsed, sold, transferred or in any manner conveyed to another person or entity, either with or without recourse. Examples of commercial papers are promissory notes, repurchase agreements, and/or similar instruments. (b) Issue means creation of real or contingent liability relative to commercial papers. It includes the roll-overs and/or extension of maturing commercial papers. (c) Negotiation is the transfer including the assignment of an instrument whether negotiable or non-negotiable or of any underlying rights/interests thereof with the necessary formality so as to constitute the transferee a holder or payee thereof. (d) Affiliate is a concern linked directly or indirectly to another by means of: (1) Ownership, control and power to vote, of 10% or more of the outstanding voting securities; (2) Interlocking directorship/officership. (3) Common major stockholders; i.e., owning 10% or more of the outstanding voting securities; (4) Management contract or any arrangement granting power to direct or cause the direction of management and policies; (5) Voting trustee holding 10% or more of the outstanding voting securities; cdtech (6) Permanent proxy constituting 10% or more of the outstanding voting securities; (e) Subsidiary means a company 50% or more of the outstanding voting securities of which are directly or indirectly owned, controlled, or held with power to vote, by another. SECTION 3. Registration . (a) Requirements The applicant for the registration of commercial papers with face maturities of 366 days or more and bonds shall submit the following documents in quintuplicate: 1. Registration Statement, in the prescribed form and with the prescribed annexes thereto. (a) LT 10 Commercial and Industrial Corporations (b) LT 20 (A) Banks authorized to engage in quasi-banking functions (c) LT 20 (B) Banks not authorized to engage in quasi-banking functions (d) LT 30 (A) Non-bank financial intermediaries authorized to engage in quasi-banking functions (e) LT 30 (B) Non-bank financial corporations not authorized to engage in quasi-banking functions (f) LT 40 Exempt issuers 2. Resolution approved by the stockholders owning at least a majority of the subscribed capital stock certified under oath by the corporate secretary, authorizing the issuance and creation of said commercial papers and bonds, respectively; 3. Immediately preceding three (3) years financial statements certified by an independent Certified Public Accountant; 4. A cash flow and projected balance sheet/income statement certified under oath by the Treasurer or any Senior Financial Officer covering the period during which said commercial papers and bonds shall be outstanding; 5. Sample form of the debt instruments in accordance with SEC Memorandum Circular No. 5, Commercial Paper Series, dated June 10, 1976; 6. A copy of any prospectus, brochure, advertisement, letter or communication which the applicant intends to circulate in connection with the issue; 7. Certificate of Creation of bonded indebtedness as approved by the Commission pursuant to Section 17 of the Corporation Law; 8. Trust Indenture, the terms and conditions of which shall be on an arm's length basis executed by and between the applicant and a qualified trust corporation which is neither an affiliate nor a subsidiary of the applicant; 9. A schedule of the assets to be used as collateral certified under oath by the Treasurer or any Senior Financial Officer of the applicant, in case of mortgage or collateral bonds; 10. In case of financial intermediaries not authorized to engage in quasi-banking functions, a board resolution to the effect that the applicant will not engage in such activity as defined under Subsec. 519.1, Book V. Compliance with Nos. 7, 8, 9 shall only be required of issuers of Bonded Indebtedness: Provided , That issuers of long term commercial papers which are secured either by mortgage or pledge of real and personal properties shall likewise comply with requirement No. 9. (b) The Commission may waive the need for the disclosure of any portion of a material instrument and/or contract if the applicant requests and the Commission agrees that disclosure of such portion would impair the value of the instrument or contract and would not be necessary for the protection of lenders/investors. (c) The acceptance of the registration application is not a guarantee that the Commission has evaluated the registration papers. SECTION 4. Close-End Registration . Registration of commercial papers with face maturities of 366 days or more and bonds as herein required shall be a close-end process. This means that the principal amount of any outstanding issue in any manner re-acquired, pursuant to the terms and conditions of the issue cannot be resold or reissued but has to be retired and deducted from the aggregate amount which the issuer is authorized to borrow under the registration statement filed by such issuer. Nothing herein shall authorize financial intermediaries engaged in quasi-banking functions to pre-terminate their commercial paper issue in violation of applicable Central Bank regulations. SECTION 5. Notice and Hearing . (a) For applicants which have commercial papers with maturities of 366 days or more and bonds outstanding prior to the effectivity of these rules: 1. Upon submission and receipt of the registration statement duly accomplished together with all the required annexes and supporting documents, the Commission shall publish once at the expense of the applicant, such fact of filing in a newspaper of general circulation in the Philippines reciting that a registration statement for the sale of such commercial papers and bonds has been filed with it, and that the said Registration Statement, as well as all the other requisite papers attached thereto, are open to inspection during business hours by interested parties. 2. Seven days after such publication, the Commission shall issue a provisional permit authorizing the sale of such commercial papers and bonds in the Philippines, which shall be valid for a period of 90 days. 3. During this period, the Commission shall review and evaluate the applicant's application. The Commission may, if it finds necessary, call the officers of the applicant to a closed-door conference-hearing. 4. On or before the expiration of the period of 90 days, the Commission shall issue an Order authorizing the sale of said commercial papers and bonds unless it needs additional information or materials in which event, the Commission shall issue its decision not later than 10 days after the submission thereof, beyond the said 90-day period. 5. The applicant shall publish ONCE, the fact that a regular authority has been issued by the Commission in a newspaper of general circulation throughout the Philippines in such size, form and content as prescribed by the Commission. (b) For applicants which do not have any commercial paper with face maturities of 366 days or more and bonds outstanding prior to the effectivity of these rules: 1. The Commission shall issue its decision not later than 90 days after submission of the completed application for registration. In the event the Commission shall require additional information, the Commission's decision shall in no case be issued later than ten (10) days after submission of the additional information beyond the aforesaid 90-day period. 2. During this period, the Commission shall review and evaluate the application. If necessary, the Commission may call the officers of the applicant for a closed-door conference-hearing. 3. After the Commission issues the registration authority, the applicant shall publish notice thereof ONCE in a newspaper of general circulation throughout the Philippines, in such size, form and content as prescribed by the Commission. (c) The Commission shall return any application for registration, if: 1. The requirements of applicable laws and regulations governing the issuance of long term commercial papers and bonds have not been complied with; 2. The issuance of the long term commercial papers and bonds will be in conflict with public interest and national policies; 3. Not all information necessary for a proper evaluation of the worthiness of the long term commercial papers and bonds have been disclosed in the registration statement; and 4. The information disclosed by the applicant in its application for registration is erroneous or may result in a misleading conclusion. SECTION 6. Exemption from Registration . The following need not be registered under these rules: (a) Loans and advances of the Central Bank under its open market and/or rediscounting operations; (b) Long-term commercial papers and bonds issued by the National and Local Governments, Central Bank of the Philippines, Philippine National Bank, Development Bank of the Philippines, Land Bank of the Philippines, Government Service Insurance System, Social Security System; (c) Long-term commercial papers and bonds issued by such other government financial entities as may be determined by the Commission upon the recommendation of the Central Bank; and (d) Commercial papers with face maturities of 366 days or more and bonds issued by corporate issuers other than financial intermediaries, banks or non-banks performing quasi-banking functions, the total amount to be issued or the outstanding amount of which is less than a million or P1 million or more but is neither negotiated to any number of persons, nor primarily issued to twenty (20) or more lenders: Provided , however , that said corporate issuers shall, prior to issuance of its long-term commercial papers and bonds, file an information statement (LT-40) with the Commission: Provided , further, that for purposes of determining exemption under this sub-paragraph, papers of subsidiaries, affiliates, holding companies or any other related companies shall be aggregated and considered as one issue. SECTION 7. Submission of Inventories . The following inventories as at July 31, August 31 and September 30, 1976 shall be submitted to the Commission not later than the thirtieth day of October 1976: (a) A list of outstanding commercial papers with face maturities of 366 days or more and bonds issued or held by each financial intermediary authorized to engage in quasi-banking functions covered by LT 20(A) and LT 30(A) in the prescribed form and content (CP Form QB 2-3-01). (b) A list of the outstanding commercial papers with face maturities of 366 days or more and bonds issued by corporations covered by LT 10, LT 20(B) and LT 30(B) by accomplishing CP Form 101; CP Form 102. SECTION 8. Periodic Reports . Monthly and quarterly reports in quintuplicate, shall be submitted on or before the 15th day following the end of each month and within thirty (30) days following the end of each quarter, respectively, in the prescribed forms herein indicated, as follows: I Monthly Reports of long term commercial papers and bonds outstanding, declared overdue and/or restructured, money serviced where paying agent function is retained and other off-balance sheet items serviced: A. CP Form M-2-3-01 for financial intermediaries engaged in quasi-banking-functions covered by LT 20 (A) and LT 30 (A); B. CP Form M-101 or CP Form M-102 for other issuers covered by LT 10, LT 20 (B) and LT 30 (B). II. Quarterly Report signed under oath by the President or any other officer duly authorized to do so by the Board of Directors, specifying any changes in the original registration statement or information statement of the corporations: A. CP Form Q-2-3-01 for financial intermediaries covered by LT 20 (A) and LT 30 (A); B. CP Form Q-1 for all registered issuers covered by LT 10, LT 20 (B) and LT 30 (B); C. CP Form Q-40-1 for all exempt issuers covered by LT 40. The Commission may require the submission of such other pertinent reports or statements as it may deem necessary in the interest of the public. SECTION 9. Filing Fees . Every applicant shall pay a minimum fee of P1,000.00 or 1/50th of 1%, whichever is higher, based on the total commercial papers and bonds registered but not to exceed P10,000.00. SECTION 10. Central Bank Supervisory Powers . The Monetary Board shall also have the power of supervision in the enforcement of these rules, concurrent with the Commission and, without prejudice to the provisions of the succeeding paragraph, impose administrative sanctions as circumstances warrant. SECTION 11. Administrative Sanctions . If after due notice and hearing, the Commission finds that there was a wilful intent to submit inadequate disclosures or to deceive through the filing of inaccurate information in the registration statements and/or the periodic reports, or there is a violation of any of the above regulations, the Commission may subject the violator to any of the following penalties: a) Suspension or revocation of selling authority; b) A fine of not less than P200 for every day the violation persists; c) Other penalties within the power of the Commission under existing laws; and d) The filing of criminal charges against the corporation and its principal officers. SECTION 12. Effectivity . These rules shall take effect on October 15, 1976. Ortigas Avenue, Pasig, Metro-Manila, Philippines. October 15, 1976. APPROVED: (SGD.) ANGEL L. LIMJOCO, JR. Chairman Securities & Exchange Commission (SGD.) G. S. LICAROS Chairman Monetary Board of the Central Bank of the Philippines APPENDIX F (Book I, Part 6) REDISCOUNTING PRIVILEGES UNDER THE SUPERVISED CREDIT PROGRAM Commercial banks may rediscount eligible Masagana 99 and Masaganang Maisan papers at 100% loan value of the outstanding balance or unpaid portion thereof and at the preferential rate of 1% per annum, subject to the following conditions: a. That the loans granted to farmer-borrowers shall be strictly under a supervised credit scheme as described under 3. Appendix I. The borrowers/projects financed by these loans shall be reviewed from time to time by Agricultural Credit Supervisors of the Central Bank to determine their compliance with these guidelines. b. All unsecured loans shall be covered by guarantee under the Land Bank "Agricultural Guarantee Fund." c. An interest reduction of two (2) per cent per annum shall be granted to farmer-borrowers who fully liquidate their loans on or before maturity in which case the interest collected shall not exceed ten per cent (10%) per annum. For this purpose, a stipulation to this effect shall be embodied in the covering promissory note of the farmer-borrowers, otherwise, the promissory note is not eligible and acceptable for rediscounting. Maximum amount per loan application and frequency of rediscounting . There shall be no limit on the amount of loan application and the number of times a bank may avail itself of rediscounting facilities of the Central Bank: Provided, That such availments shall not exceed its rediscount ceiling as provided for under Subsec. 162.11 Access to the Central Bank credit facilities . The qualifications for availment by commercial banks of the credit facilities of the Central Bank are provided for under Sections 164, 111 and 155. Additionally, in the case of a commercial bank, it must have no overdrawings in its clearing account with the Central Bank and shall have no deficiency in the required liquidity floor of Central Bank-supported securities against government deposits. Maturity period . The maturity of Central Bank loans or advances secured by eligible Masagana 99 and Masaganang Maisan papers covering production credits shall not exceed 210 days and 150 days, respectively. Loan documentation required . All banks applying for a loan with the Central Bank shall submit to the Department of Loans and Credit the following papers: a. Loan application in duplicate, duly accomplished and signed by two (2) duly authorized officers of the bank; b. Original and two (2) copies of the bank's promissory note in favor of the Central Bank, also duly signed by the authorized officers of the bank; c. Certifications by the bank technicians(s) that the loans listed in the rediscount schedules were granted under the supervised credit scheme, and by the bank president/manager that the unsecured loans pertaining to "Masagana 99 and Masaganang Maisan" are covered by the Agricultural Guarantee Fund; d. Rediscount schedule supported by: 1. Farmer-borrowers' promissory notes duly endorsed by two (2) authorized officers of the bank; 2. Farmer-borrowers' applications and farm plans and budgets consolidated in one sheet (back to back); 3. Certification by barangay captain as to identity of Masagana 99 or Masaganang Maisan farmer-borrower that such borrower is a bona-fide member of a selda of his barangay and cultivating a certain hectarage of riceland or cornland; 4. Real estate mortgage or chattel mortgage duly registered, if the loans are covered by a mortgage on real estate or personal properties; and 5. Co-maker's statement in the absence of real estate mortgage or chattel mortgage. [Source: Circular Letter dated 3-28-77.] APPENDIX G (Book I, Part 6) GUIDELINES FOR AVAILING OF SPECIAL FUND UNDER THE REHABILITATION PROGRAM FOR RICE-PRODUCING AREAS IN CENTRAL LUZON The following guidelines for availing of special funds under the rehabilitation program for rice-producing areas in Central Luzon are hereby issued: 1. Application for Special Fund in the prescribed form shall be submitted by a rural bank or PNB branch qualified to participate as an agent of the Central Bank not later than December 31, 1978. A rural bank or PNB Branch to be qualified to participate shall submit a sworn written undertaking that it will restructure Phase XI loans of farmers affected by typhoons "Yading", "Weling" and "Kading" over a period of two and one-half (2-) years for irrigated areas and three (3) years for rainfed areas. 2. The application shall be supported by a list of farmers in the attached form, approved by the rural bank or PNB branch. The farmer shall meet the following requirements: a. He must be included in the master list of farmers affected by typhoons "Yaning, Weling and Kading" to be submitted by the Ministry of Agriculture to the Central Bank irrespective of whether or not he participated in Phase XI of the Masagana 99 Program. b. He must be included in the master list of farmers to be submitted by the National Irrigation Administration (NIA), Farm Systems Development Corporation (FSDC) and/or the Ministry of Agriculture indicating that farmlands being cultivated by them are serviced by NIA or are otherwise adequately irrigated and ready for immediate replanting. 3. The maximum amount of loan that may be granted under this program shall not exceed P1,200 per hectare. The proceeds of the loan shall be used exclusively to finance the replanting of early maturing seed varieties in irrigated rice lands. 4. Loans granted under the program shall be for a period not exceeding 120 days at an interest rate of 10% per annum plus a service charge of 2% per annum. Farmer-borrowers under the program shall execute a promissory note in triplicate copies in favor of the Central Bank of the Philippines as an Administrator of the Special Fund, the original of which shall be submitted to the Department of Rural Banks and Savings and Loan Associations. 5. The rural bank or PNB as agent of the Central Bank shall receive a commission of 3% on the amount collected for the fund in addition to the service charge of 2% per annum. The attached Agency Agreement shall be entered into between the Central Bank and the participating rural bank or PNB. 6. The rural bank or PNB branch shall assume/absorb for its own account 15% of losses arising from nonpayment of loans granted under this program. 7. The rural bank or PNB branch shall consolidate the past due loans of its farmer-borrowers under Phase XI of M-99 program including accrued interest thereon. Such consolidated loans which were rediscounted with the Central Bank shall be restructured within sixty (60) days from the date of effectivity of the Agency Agreement. The Central Bank as well as the rural bank or the PNB branch shall not charge interest on the restructured loans within the term of the restructured loans. However, should these loans remain unpaid after the maturity of the restructured loans, the same shall be charged interest at the original rate until they are paid. 8. In implementing the program, the following procedures shall be observed: a. The qualified farmer-borrowers shall submit their loan application with the participating rural banks or PNB branch. b. The rural bank or PNB branch shall submit to the DRBSLA, Central Bank, its application for availment of Special Funds covering the list of recommended applications of farmer-borrowers. Only applications of farmers whose names are included in the list furnished by the Ministry of Agriculture shall be considered for a loan. c. The DRBSLA, Central Bank, shall process the application and shall release to the rural bank or PNB branch through credit advice to the nearest PNB branch concerned the necessary amount from the Special Fund. d. The rural bank shall withdraw funds from the PNB branch and shall release loans to farmer-borrowers in accordance with this and existing M-99 guidelines. Such loan releases shall be made immediately from the date of receipt of the credit advice. e. Repayments received by the rural bank or the PNB branch from borrowers on loans granted under this program, including interest thereon less 3% commission on the amount collected, shall be remitted to the DRBSLA, Central Bank, within five (5) banking days from receipt thereof. 9. Any amount received by the rural bank or PNB branch from the Central Bank as Administrator of the Special Fund not loaned out or otherwise committed to qualified farmers shall be remitted to the DRBSLA, Central Bank, within thirty (30) days from receipt of the credit advice but in no case shall the remittance be made later than January 31, 1979. 10. Any misappropriation of funds received by the rural bank or the PNB branch or failure of the rural bank or PNB branch to remit to the Central Bank loan repayments of farmer-borrowers of the amount from the Special Fund not loaned out as provided in paragraph 9 above within the requisite period under this program shall subject the officers and employees responsible therefor to prosecution under Article 315 of the Revised Penal Code. 11. A rural bank which fails to restructure its M-99 loans (Phase XI) within the prescribed period of sixty (60) days from date of effectivity of the Agency Agreement notwithstanding its sworn undertaking to do so shall, after due hearing, subject the officers of the rural bank who signed the sworn undertaking to the sanctions provided for under Section 34-a of Republic Act No. 265, as amended. 12. Separate books of accounts and records affecting transactions under this Special Fund shall be kept by the rural bank or PNB branch participating under this program. Cash pertaining to this Fund shall, likewise, be physically segregated from other funds. Separate financial statements in the existing prescribed form shall be submitted monthly to the Central Bank by the participating rural bank concerned. Uniform accounting entries shall be made in accordance with the prescribed rules. [Source: Memorandum Circular to All Rural Banks and PNB Branches in Central Luzon dated 11-22-78, as amended by Memorandum Circular to All Rural Banks and PNB Branches in Central Luzon dated 1-8-79.] APPENDIX H (Book I, Part 6) SAMPLE CERTIFICATION ON EXPORTER-BORROWERS PACKING CREDITS CERTIFICATION This is to certify that: (1) the packing credit rediscounted with the Central Bank covering the export bills listed below which are being submitted for rediscounting had been liquidated by the exporters concerned and that the corresponding loan values had been fully settled with the Central Bank; and (2) the amounts corresponding to partial negotiations of export L/Cs, had been applied in partial payment of the exporters' packing credit advances and the proportionate loan values thereof had been remitted to the Central Bank. Amount Packing Credit DLC of Loan with CB LC/SO/PO Appl. Remittance Exporter/Borrower Draft Date Amount No. No. Date Amount ________________________ (Name of Bank) By: __________________________ (Signature) (Title) __________________________ (Signature) (Title) PART 7 Trust Operations SECTION 171. Pre-requisite for the Exercise of Trust Functions The Governor or the Senior Deputy Governor of the Central Bank shall have the authority to approve securities being deposited for trust duties "provided that these securities are government bonds or bonds the servicing and repayment of which are fully guaranteed by the Republic of the Philippines . . ." Accordingly, the deposit of securities by a bank with the Central Bank for the faithful performance of its trust duties, as required in Section 65 of Republic Act No. 337, as amended, shall be made in accordance the procedures outlined in Appendix A. [MACB 9-14-59] The amount of securities required to be deposited with the Central Bank by any bank/trust company as security for the faithful performance of its trust duties shall be graduated according to the volume of its trust assets (based on the average amount of trust assets held by the bank/trust company during the preceding semester), as follows: Volume of trust assets Required trust deposit (In million pesos) with the Central Bank * P35,500 below P250,000 35,501 to P71,000 500,000 71,001 to P106,500 750,000 106,501 to P142,000 1,000,000 etc. etc. The required trust deposit with the Central Bank as prescribed above shall be complied with by the bank/trust companies concerned within sixty days from receipt of notice thereof. [MACB-DSE 2-17-70] SECTION 172. Trust Accounts SUBSECTION 172.1 Funds considered trust accounts Funds of the Rice and Corn Administration, (now National Grains Authority) and the Agricultural Credit Administration (ACA) which are placed with commercial banks as well as rural banks exclusively for the purpose of financing the rice program of the Government are trust accounts and are of a fiduciary nature, considering that such funds are to be employed immediately and under direct instructions from the RCA and the ACA. [MAB-DSE 6-15-66] SUBSECTION 172.2 Trust Accounts Treated as Ordinary Deposits Certain trust accounts maintained by certain government agencies with commercial banks with privileges of time deposits (among others, a fixed rate of return and the full return of principal without regard to losses, expenses or otherwise) shall not be considered as creating a trust relationship between the parties and the amounts involved shall be treated as ordinary deposits by government agencies; and, therefore, subject to existing statutory and regulatory provisions on: (a) deposit reserve requirements; and (b) ceiling on interest rates on deposits. [MAB-Gov. 7-19-65] SECTION 173. Trust Agreements Any agreement/instrument containing any or all of the following features shall not be construed as an agreement or instrument constituting a trust: (a) Where the risk and responsibility will be exclusively for the "trustee" in case of loss in the investment of the trust funds, where such loss is not due to the failure to exercise the skill, care, prudence and diligence required by law of the "trustee"; (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"; and (c) Where there is a preponderance of purpose or of intent that the agreement/instrument creates a debtor-creditor relationship, as determined by the Governor/Monetary Board upon the findings and recommendations of the head of the appropriate supervising and examining department. [Circular 354 12-29-72] SECTION 174. Trust Transactions SUBSECTION 174.1 Prohibited trust transactions ; exceptions a. The restriction against transactions defined in the third paragraph of Section 56 of Republic Act No. 337, as amended, shall apply if a trust company or bank engaged in the business of a trust company shall, for the account of the trustor or the beneficiary of the trust, knowingly purchase or acquire property 1) from any of the departments, directors, officers, employees of the trust company or bank; 2) from the wife, husband or relative within the third degree of consanguinity or affinity of such director, officer, employee; 3) from a partnership (or from a partner for the account of the partnership) of which such director, officer, employee (or his wife/her husband, or relative within the third degree of consanguinity or affinity) is a general partner; 4) from a co-owner with such director, officer, employee (or with his wife/her husband, or relative within the third degree of consanguinity or affinity) of the property; except when the acquisition or purchase covers only said co-owner's undivided interest; 5) from a corporation, association or firm of which any or a group of such directors, officers, employees and/or their wives, husbands or relatives within the third degree of consanguinity or affinity hold/own more than fifteen per cent (15%) of the subscribed capital of said corporation, or of the equity of such association or firm; and 6) from a corporation, association or firm of which any director or officer of a trust company or bank is also an officer of said corporation, association or firm. b. The exception to the prohibition of the third paragraph of Section 56 of Republic Act No. 337, as amended, shall be allowed only if the following conditions concur: 1) the transaction is specifically authorized in writing by the trustor; 2) the relationship of the trustee and the party from whom the property is acquired or purchased is fully disclosed to the trustor prior to the transaction; and 3) the said disclosure and date thereof must be in writing and incorporated in the instrument creating the trust or in another instrument signed by both trustor and trustee. [Circular 354 12-29-72] SUBSECTION 174.2 Additional regulations on trust operations . The following are the additional regulations governing the operations of a trust company or a bank authorized to engage in the business of a trust company: a. Except as otherwise herein provided, funds received in trust or on deposit for the use, benefit or behoof of others by a trust company or a bank authorized to engage in the business of a trust company shall be administered in accordance with the instrument creating the trust. b. Unless otherwise authorized by the trustor in the trust agreement or in a separate document, the lending or investment of trust funds shall be limited to the loans and investments authorized by law for savings and mortgage banks. c. Where the trust funds are to be loaned out to directors/officers/stockholders/related interests of the trustee bank or trust company, specific written authority for that purpose shall be obtained from the trustor. Specific written authority from the trustor shall also be obtained where the trust funds are to be lent to the trust company or trustee banks itself, except when the funds are placed on deposit in the bank proper. d. All loans funded by trust funds shall be subject to: 1) The loan limit to a single borrower prescribed by Section 23 of R.A. No. 337, as amended. 2) The procedural requirements and quantitative ceilings provided for under Section 83 of R.A. No. 337, as amended, and Section 134 for loans granted to bank directors/officers/stockholders/related interests; and prcd 3) The requirements of Sections 76 and 77 of R.A. No. 337, as amended. e. When the property sought to be purchased or acquired for the account of the trustor or the beneficiary of the trust from any of the departments, directors, officers or employees, or related interests of the trust company or trustee bank is in the form of debt instruments or other forms of obligations, the specific written authority and full disclosure requirements under Section 56 of R.A. No. 337, as amended, as implemented by Item (b) (3) of Subsec. 174.1 shall be complied with. f. For purposes of computing the single borrower's limit under Section 23 of R.A. No. 337, as amended, and/or the quantitative ceilings established by Subsec. 134.4, the total loans granted by the trust department and by the bank proper to the same person, firm or corporation shall be reckoned with. g. A trust company or trustee bank shall comply with the provisions of law and other existing regulations and with the other requirements herein established notwithstanding an exemption from such compliance or any other authority to the contrary granted by the trustor. [Circular 734 5-9-80] APPENDIX A PROCEDURAL REQUIREMENTS REGARDING DEPOSIT OF SECURITIES FOR THE FAITHFUL PERFORMANCE OF TRUST DUTIES The deposit of securities by a bank with the Central Bank for the faithful performance of its trust duties, as required in Section 65 of Republic Act No. 337, as amended, shall be made in accordance with the following procedures: 1. Every bank which shall make a deposit of securities with the Central Bank, either initially or in exchange for those already on deposit, shall first submit to the Director of the Department of Commercial and Savings Banks (DCSB) an application for the approval of said securities, giving the particulars of the securities to be deposited, and, in case the securities are to be deposited in exchange for those already on deposit, the particulars of the securities to be replaced should also be given. 2. The Director, DCSB, shall then forward the application to the Governor or Senior Deputy Governor together with his recommendation. 3. When the securities described in the application are duly approved for deposit by the Monetary Board, the Governor or Senior Deputy Governor, the bank shall then deposit the securities with the Cashier of the Central Bank. 4. The Cashier of the Central Bank shall not accept from any bank securities for the faithful performance of its trust duties unless the securities are approved by the Monetary Board, or in case of government or government-guaranteed bonds, by the Governor or Senior Deputy Governor. 5. The Cashier of the Central Bank shall not permit the securities deposited in accordance with Section 65 of Republic Act No. 337, as amended, to be reduced below the minimum amount of P250,000 or below the amount required by the Monetary Board to be on deposit with the Central Bank unless such reduction is approved by the Monetary Board. 6. In case the securities to be deposited are government or government-guaranteed bonds, the application for such deposit to be submitted to the Director, DCSB, should be accomplished in the prescribed form. 7. In case the securities to be deposited are other than government or government-guaranteed bonds, there is no prescribed form therefor; but the applicant bank will simply write the Central Bank requesting approval of the securities to be deposited as security for the faithful performance of its trust duties, and specifying the particulars of the securities. Sources: MACB 6-24-59 MACB 9-14-59 SECTION 179. Sundry Provisions SUBSECTION 179.1 Fund borrowings from trust departments . It is clarified that funds borrowed by banks or non-bank financial intermediaries performing quasi-banking functions from trust departments of banks or investment houses in the latter's capacity as fund managers are not considered as Interbank Borrowings and, therefore, are subject to: a. 20% reserve requirement on deposit substitutes under Subsec. 567.11; b. Minimum 15-day maturity period under Subsec. 567.21 of Book V; c. Minimum trading lot rule under Subsec. 567.22 of Book V; and d. 35% transaction tax. [These provisions also appear under Subsec. 163.3] [Memorandum to All Banks and NBFIs with QBF 5-28-79] Footnotes * P250,000 increase in trust deposit for every increase of P35.5 million in trust assets. PART 8 (Reserved) PART 9 Miscellaneous Provisions SECTION 191. Other Operations . SUBSECTION 191.1 Clearing Operations . The deposit reserves maintained by banks in the Central Bank in accordance with the provisions of Section 100 of Republic Act No. 265, as amended, shall serve as a basis for the clearing of checks and the settlement of interbank balances, subject to such rules and regulations as the Monetary Board may issue with respect to such operations. [Sec. 107, R.A. 265] Accordingly, banks shall observe the clearing procedures outlined in detail in 9.Appendix A. Said deposit reserves are not regular current accounts. The use, therefore, of Central Bank checks for drawings against reserve deposits shall be limited to (a) settlement of obligations with the Central Bank; and (b) withdrawals to meet cash requirements. [MAAB 24 3-22-77] SUBSECTION 191.11 Overdrawings in deposit (clearing) account with the Central Bank . In case a commercial bank fails to cover any overdrawings in its deposit account with the Central Bank not later than the next clearing day, it shall also be denied the credit facilities of the Central Bank. Such exclusion from clearing shall continue for as long as it has not maintained credit balances with the Central Bank for at least five consecutive banking days; if its clearing account is overdrawn for five consecutive banking days, it shall be prohibited from (a) making new loans or investments, except investments in government securities with Central Bank support, and (b) declaring cash dividends until it has maintained credit balances in its Central Bank clearing account for at least fifteen consecutive banking days. The denial from availment of credit facilities of the Central Bank shall continue for as long as the bank has not maintained credit balances with the Central Bank for at least fifteen (15) consecutive banking days. [Circular 552 1-17-77] [This provision also appears in Subsec. 162.33] SUBSECTION 191.12 Clearing of treasury warrants . The clearing of Type "A" and Type "B" treasury warrants in Manila and in areas served by the Central Bank regional clearing offices shall be governed by regulations embodied in 9.Attachment A.2. [CL 10-28-77] SUBSECTION 191.2 Collection of internal revenue taxes, customs duties and other levies a. Procedures for collection . The President of the Philippines, under Executive Orders No. 2 dated January 5, 1966 and 206 dated January 9, 1970, as amended by Executive Order No. 339 dated September 9, 1971; Presidential Decree No. 230 dated June 28, 1973 and Executive Order No. 425 dated February 16, 1974, directed the Central Bank to receive payment of internal revenue taxes, customs duties, taxes and other levies, export and premium duties, through its authorized agent banks, payment of which shall be in accordance with the procedures outlined in 9.Appendix B. b. Interest on revenue collections in excess of ceilings . A 3% interest per annum shall be imposed on total collections of internal revenue taxes, customs duties and export/premium duties by each authorized agent bank in excess of P40 million a month, said interest to be computed monthly by the Revenue Collection Office of the Central Bank. Authorized agent banks shall remit to the Revenue Collection Office the payment of interest due on revenue collections within thirty (30) days from receipt of the statement of interest. Any interest due not so remitted shall be debited against the demand deposit account with the Central Bank of the authorized agent bank concerned. [Circular 731 4-30-80] SUBSECTION 191.3 Handling of tax and loan accounts arising from sale of Treasury Bills (Tax Anticipation Series) . Guidelines in the consideration of banks to be designated as government depository banks which may be allowed to handle the tax and loan accounts to be established by the National Government in connection with the issuance and sale of Treasury Bills (Tax Anticipation Series) follow: a. Only commercial banks meeting the following criteria may be authorized to handle tax and loan accounts [to be established by the National Government in connection with the issuance and sale of Treasury Bills (Tax Anticipation Series)] : 1) That such banks are incorporated under the laws of the Philippines; 2) That such banks have realized net profits during the preceding three years; and 3) That such banks are not under supervisory action of the Monetary Board, such as suspension of loan operation, etc. b. Except as otherwise provided, tax and loan accounts which shall be established in designated commercial banks shall be treated as demand deposits, subject to: 1) Legal reserve of twenty per cent (20%); [MB Res. 1831 1-13-70] 2) Liquidity floor of thirty per cent (30%) in the form of Treasury Bills, Central Bank-supported securities and/or credits eligible for rediscount with or advances from the Central Bank under Section 87 of Republic Act No. 265, as amended. 3) Ceiling the amount of which shall not exceed fifty per cent (50%) of net worth; and 4) Reporting requirements on government deposits in CBP-7-16-08. c. Proceeds derived from the sale of Treasury Bills (Tax Anticipation Series) deposited under the said tax and loan accounts with the commercial banks shall be subject to withdrawal upon call made by the Central Bank as fiscal agent of the Government, which call shall be made in writing. [CL 2-16-67] SUBSECTION 191.5 Sale of government securities a. Clarification of terms . The phrase "to be held in trust" as embodied in the last sentence of paragraph 4 of the Service Agency Agreement in the sale of Central Bank Certificates entered into by and between the Bank and duly accredited service agencies which reads: "4. . . . The agency in this connection, is allowed to retain twenty per cent (20%) of the proceeds of its sale of CBCI to be held in trust for servicing interest and other requirements of the CBCI." should be construed to mean that the fund so retained pursuant to the aforementioned Service Agency Agreement shall be held for the Central Bank under a special account. Such special account shall not be considered a deposit and therefore, not subject to reserve requirement. [MAB-DSE 12-28-70] SUBSECTION 191.6 Domestic stand-by letters of credit (L/Cs) . Domestic stand-by letters of credit may be issued or used in transactions other than those involving movement of goods under the following guidelines: a. The bank's obligation to pay shall be either unconditional (as against presentation of a clean draft) or conditional only upon the presentation of documents and not upon actual existence or non-existence of facts; i.e., the bank must not be called upon to determine disputed questions of fact or law; b. The bank's obligation shall be limited to a fixed maximum amount; c. The bank's obligation shall have an expressed expiration date; d. The stand-by letter of credit accommodation shall not violate, nor shall drawings against it result in violation of, any law or existing Central Bank directives, rules and regulations: Provided , however , That the total amount of the L/C to be opened shall not exceed an amount equivalent to fifteen per cent (15%) of net worth, and: Provided , further , That: 1) If the party who opened the L/C is a director, officer or stockholders of the issuing bank, the stand-by L/C accommodation shall not exceed an amount equivalent to the ceiling on such loans as provided under Section 83 of Republic Act No. 337, as amended, and implemented by Subsec. 134.4 whichever is lower; and 2) Any amount in excess of the foregoing ceilings shall require the prior approval of the Central Bank. e. The party who opened the stand-by L/C or the ultimate borrower shall not have any past due obligation with the issuing bank for the 90-day period preceding the date of issuance of the L/C; f. The stand-by L/C shall be fully secured and such security shall be limited to real estate mortgages and/or bonds/securities either guaranteed or issued by the Central Bank or the National Government, except those in favor of the Philippine Government against advances made by the government to guarantee the performance/completion of vital government projects; g. Drawings shall be honored only upon failure of the party who opened the L/C (borrower) to pay the amortization(s) due and upon presentation of a written certificate to this effect; and h. The party who opened the L/C (borrower) must have an unqualified obligation to reimburse the bank on the same condition as the bank has paid. [MACB 3-25-76, as amended by MACB 3-30-76] SUBSECTION 191.7 Allowable drawings against reserves on deposit with the Central Bank . In connection with the bank reserves on deposit with the Central Bank to comply with legal requirements, all banks are reminded that said deposits are not regular current accounts. The use, therefore, of Central Bank checks for drawings against reserve deposits shall be limited to (a) settlement of obligations with the Central Bank; and (b) withdrawals to meet cash requirements. (See also Subsec. 191.1.) [MAAB 24 3-22-77] SUBSECTION 191.8 Interest income on reserve deposit with Central Bank . Deposits maintained by banks with the Central Bank as part of their reserve requirement shall be paid interest at three per cent (3%) per annum, effective January 1, 1978, based on average daily balance of said deposits to be credited quarterly. [Circular 588 12-24-77] SUBSECTION 191.9 Depositary relationship arrangement . SUBSECTION 191.91 As depositary of rediscounting proceeds . Rediscounting proceeds for rural banks situated outside the 50-kilometer radius from Manila shall be credited, for the account of the rural bank concerned, to the clearing account with the Central Bank of the depositary commercial bank to be designated by the borrowing rural bank. The contemplated depositary relationship arrangement must be manifested to the Central Bank thru the submission by the rural bank of an authenticated copy of the letter of understanding between the rural bank and the commercial bank showing such depositary relationship which must indicate the requirements enumerated under Subsec. 363.85 of Book III. [MC to All Commercial and Rural Banks 3-1-71, as amended by Circular 710 12-26-79] SUBSECTION 191.92 As depositary of funds of various special financing programs . In connection with the various Special Financing Programs for food production administered by the Department of Rural Banks and Savings and Loan Associations (DRBSLA), Central Bank, credit advices issued relative thereto by the DRBSLA Loan Teams to branches of commercial banks for the account of rural banks and stock savings and loan associations require the prior confirmation and funding of the DRBSLA. For this reason, no withdrawals from such accounts shall be allowed by the depositary commercial bank until its receipt of the corresponding DRBSLA confirmation and funding. Any withdrawal permitted by the depositary bank before receipt of such confirmation and funding shall be for its account, and no liability whatsoever shall attach to the Central Bank. [CL 8-31-79] SECTION 192. Bank Advertisements . The following rules and regulations shall govern bank advertisements: (a) No bank shall publish, issue or distribute in any form, any advertisement that shall degrade, deprecate or otherwise prejudice other banking and financial institutions; (b) No bank shall publish, issue or distribute in any form of advertisement (in newspapers, magazines, television, radio, billboards, brochures, prospectuses, or any other medium) or allow itself to be used/mentioned in any form of advertisement related to services, such as the acquisition, sale, resale or lease of real estate; insurance privileges and other non-banking activities/services, which are not directly related to the business of banking or in pursuance of regular banking business; (c) No bank shall place or cause to be placed any advertisement tending to mislead a depositor into believing that he will get more in benefits than what the bank is legally authorized to give. No bank advertisement shall contain any false claim or exaggerated representation as to its liquidity, solvency, resources, deposits and banking services; (d) No bank advertisement shall give the impression that the bank is engaged in a business other than banking; (e) Banks shall inform their depositors and other clients by advertisements or publication of the termination of benefits previously advertised or publicized; (f) Banks shall discontinue any advertisements whenever the same is deemed unethical/unwarranted or violative of the provisions of this Section and are directed to do so by the appropriate supervising and examining department of the Central Bank in the exercise of its administrative authority. Towards this end, the client banks and/or their advertising agencies should incorporate in their contract/agreement for time and space with media the condition that such contract/agreement for time and space can be cancelled/terminated immediately whenever the client bank is directed by the Central Bank to desist or discontinue the particular advertisement in question; cdpr (g) Responsibility for compliance with the above rules and regulations rests with the bank officers or directors who caused the approval or placement of such advertisement. [Circular 457 3-20-75] SECTION 193. Assessment Fees on Banks . The par value of CBCIs held by banks on consignment basis and which are lodged under contingent accounts shall be excluded in determining total assets for purposes of computing the assessment fees chargeable against banks under Section 28 of Republic Act No. 265, as amended. [MB Res. 1603 10-6-70] SECTION 194. Bank Premises and Other Fixed Assets . SUBSECTION 194.1 Expansion of bank premises . Any bank contemplating to expand the premises of its existing banking offices (head office, branch, agency or extension office) shall inform the Department of Commercial and Savings Banks, in writing, of such intention, and submit a. a sketch showing other banking offices operating in the immediate vicinity; and b. an estimated outlay involved in the expansion of premises. The bank concerned shall not start actual construction/expansion until it shall have determined that the head office/branch/extension office as expanded complies with the 10-meter distance between banking offices and the legal limitation on investments in bank premises. [MAB 3-17-71] SUBSECTION 194.2 Appreciation or increase in book value . As a general rule, appreciation of increase in book value of bank premises and other fixed assets is not allowed. However, in cases where the market value of the property has greatly increased since the original purchase, appreciation may be allowed Provided , That the Director of the Department of Commercial and Savings Banks be notified in advance of the proposed increase in value and: Provided , further , That the corresponding appreciation credit shall not form part of the combined capital accounts of banks but lodged under a Revaluation Reserve account. [Circular 302 6-20-70] SUBSECTION 194.3 Ceiling on total investments . The following guidelines shall be observed for purposes of determining compliance by all banks with the fifty percent (50%) ceiling, based on net worth, on the total investment of banks in real estate and improvements thereof, including bank equipment, as provided in Section 25 of R.A. No. 337, as amended: a. The investment of any bank in real estate and improvements thereof and in bank equipment shall include all real estate and equipment necessary for the bank's immediate use in the transaction of its business, such as: 1) "Bank Premises-Land and Buildings", "Buildings under Construction", "Leasehold Rights and Improvements", and "Furniture, Fixture and Equipment" (as defined in the Manual of Accounts for All Banks), owned and used by the bank in the conduct of its business, including staff houses, recreational facilities and landscaping costs, net of accumulated depreciation: Provided , however , That appraisal increment on bank premises shall not be included in the total investment in real estate and improvements for purposes of these guidelines; and 2) Real property, equipment or other chattel purchased by the bank in its name for the benefit of its officers and employees, net of depreciation and in the case of land or other non-depreciable property, net of payments already made to the bank by the officers and employees for whose benefit the property was bought, where such property has not yet been fully paid and ownership has not yet been transferred to them. b. The following shall be included in the computation of a bank's total investment in bank premises: 1) (a) The cost of real estate leased in whole or in part by the bank from a corporation in which the bank has equity, equivalent to the amount obtained by applying the percentage of the equity of the bank in the lessor to the cost of that portion of the property being leased, or (b) the amount of equity in the lessor, whichever is lower; plus the amount obtained by applying the percentage of the equity of the bank in the lessor to any outstanding loans of the lessor with the bank, the proceeds of which were used to purchase, construct or develop the real estate used for the bank's purposes. 2) The lower of (a) the cost of real estate leased in whole or in part by the bank from a corporation in which any or a group of stockholders owning 10% or more of the voting stock of the bank, directors and/or officers of the bank, hold or own more than 15% of the subscribed capital stock of the lessor, equivalent to the amount obtained by applying the percentage of the equity of said stockholders/directors/officers in the lessor to the cost of that portion of the property being leased by the bank, or (b) the amount obtained by applying the percentage of the equity of the stockholders/directors/officers in the lessor to any outstanding loans of the corporation with the bank, the proceeds of which were used to purchase, construct or develop the real estate used for the bank's purposes. [Circular 621 7-26-78] SECTION 198. Other Miscellaneous Provisions . SUBSECTION 198.1 Cash dispensers . Banks may install and operate cash dispensing machines without prior approval from the Central Bank, subject to the following conditions: a. The bank shall install the machines in its own premises and shall provide/put up adequate security measures for the bank and its deposits; b. The bank shall assure the Central Bank that this banking service shall not allow the grant of any gift, promotional offer/give-away or any additional compensation for deposits to be maintained except that which normally accrue to savings deposits; and c. The banks shall submit to the Department of Commercial and Savings Banks, for its information/records, a copy each of all brochures/pamphlets/literature dealing with this banking service. [MB Res. 1701 8-9-74] SUBSECTION 198.2 Armored cars . Banks may freely use armored cars to afford security in collecting and/or delivering cash or securities and other valuables from or to their clients, branch or extension offices or the Central Bank, provided, such armored cars are not operated as mobile banks. [MAB-G 8-8-66] SUBSECTION 198.3 Reproduction and use of facsimiles of government securities . 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 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. 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, news-worthy, or other purposes which do not tend in any way to defeat the objectives underlying the promulgation of these regulations: Provided , however , That any such illustration shall be in black and white, and of a size less than three-fifths (3/5) or more than one and one-half (1-) times in size of the government securities being illustrated. Any violation hereof shall subject the offender to the penal provisions of Section 34 of Republic Act No. 265. [Circular 482 10-13-75, as amended by Circular 565 4-21-77] SUBSECTION 198.4 Premyo Savings Bond Agency SUBSECTION 198.41 Procedure for payment of cash prize claims to service agency holders or winning bonds . In implementation of Ministry Order No. 4-79, series of 1979, copy attached, providing for the payment of prizes of winning Premyo Savings Bonds "Biglang-Bahay" series, in the form of cash at the option of the Human Settlements Development Corporation if the holder thereof is a service agency, the following procedure shall be observed: a. The service agency shall prepare the usual prize claim for Premyo Savings Bond. b. The prize claim shall be forwarded to the HSDC with the request that payment be made in the form of cash. c. On the basis of the above prize claim, the service agency bank shall debit the account "Due to CB-PSBs" (20% retention). d. The Securities Servicing Department shall respond to the above debit only upon receipt of the prize claim, payment of which, in the form of cash, has been approved by the HSDC. [CL 2-14-79] SECTION 199. Sanctions in General . Any violation of these regulations governing commercial banks, or non-compliance therewith, shall subject the violator/responsible party or parties to the penalties/administrative sanctions provided in Sections 34 and 34-A of Republic Act No. 265, as amended. As a general rule, any bank that violates directives/prohibition or restriction orders issued by the Monetary Board shall be penalized by a continuance of the suspension or penalties imposed under such orders until the bank concerned shall have shown strict compliance therewith for four consecutive weeks. [MAB-DSE 7-13-65] APPENDIX A (Book I, Part 9) CLEARING REGULATIONS SECTION 1. Time and Place of Exchanges . The clearing of checks, bills and other demand items contemplated in this Appendix shall be conducted in the premises of the Central Bank on the ground floor of the Central Bank Building and at such other places in regional clearing centers which the Central Bank may designate. The hour for making such exchanges shall be at 4:00 P.M. on each business day as well as on all local holidays in the clearing centers and/or at such other times which may be fixed by the Central Bank. SECTION 2. Settling Clerks . The head office of each bank, institution or entity together with all its branches within designated clearing areas (Attachment 1) shall be considered as one (1) unit and shall be presented by one or more (but not exceeding six) competent clerks/representatives to deliver and receive the items to be exchanged. The facsimile signatures and NBI clearances of representatives shall be submitted to the Accounting Department. All representatives shall be issued their respective ID cards which shall be presented for admission in the clearing office or regional clearing units. SECTION 3. Items for Clearing . All checks and documents payable on demand and drawn against a bank/branch, institution or entity allowed to clear may be exchanged through the Clearing Office in Manila and the Regional Clearing Units in regional clearing centers designated by the Central Bank. As evidence of the channel through which they were negotiated, all items to be exchanged shall be properly endorsed and guaranteed before being sent to the Clearing Office/Unit and shall bear the name of the bank/branch, institution or entity to which they belong. Likewise they shall be impressed by sending bank/branch, institution or entity with a special stamp to the effect that they have been cleared through the clearing facilities of the Central Bank. The Clearing Office/Unit of the Central Bank shall in no way be responsible for any flaws or defects in the items or for any irregularity whatsoever in any of their features. Matured Philippine Treasury Bills which may be presented for clearing shall be impressed with a special stamp with the word "PAID" and the name of the bank/branch, institution or entity and the date of payment. The Treasury Bills shall be sealed in separate envelopes properly stamped in bold letters "TREASURY BILLS" with a machine tape listing the serial numbers and corresponding amounts, the total of which shall be included as a debit against the Central Bank. Treasury Bills for return may be sent through clearing following the procedure stated under Section 4(c) hereunder. Treasury Warrants shall be cleared under the special clearing arrangement issued by the Department of Finance, as embodied in Attachment 2. SECTION 4. Clearing Procedures . (a) Procedure for Regular Clearing Each bank/branch, institution or entity, through its representative/s, shall deliver their respective demands in sealed envelopes made out separately against the other banks/branches, institutions or entities allowed to clear. The total of each demand shall be listed in a certified adding machine tape attached to the sealed envelope. In acknowledgment of receipt of the demands against the bank/branch, institution or entity he represents, the settling clerk concerned shall prepare and sign a Clearing Office Statement (Clearing Form No. 4) in duplicate for local clearing. The original and duplicate of the statement shall be submitted to the Chief, Clearing Office, in Manila or the Regional Clearing Officer in the regional clearing centers. The original shall be retained and shall be the basis for settlement of clearing balances in the respective deposit accounts with the Central Bank. The duplicate, duly authenticated by the Chief, Clearing Office or the Regional Clearing Officer concerned, shall be returned to the bank/branch, institution or entity concerned through their clearing representatives. The duplicate shall be the basis of each bank/branch, institution or entity for taking up corresponding entries in their respective books of accounts on the date of clearing. For out-of-town clearing, the Clearing Office Statement (Clearing Form No. 4-A) shall be prepared in quadruplicate for authentication by the Clearing Officer who retains one copy. The third copy shall be returned to the sending bank/branch, institution or entity through the respective clearing representatives. The original and duplicate shall be shipped to or retained in the Manila Clearing office, as the case may be. Out-of-town demands presented in a clearing center against a bank without any branch in that particular clearing area shall be delivered to the Clearing Officer who shall prepare a debit service (Clearing Form No. 4-B) for the head office of the drawee bank/branch concerned in the Manila clearing area. In acknowledgment of receipt of out-of-town demands, the duplicate of the Clearing Office Statement and/or the original of the debit advice/s, settling clerks of respective drawee bank/branches in each clearing center shall sign the shipping manifest. These clearing office statements and/or the debit advice/s shall serve as bases for the head offices in the Manila clearing area to record the results of out-of-town exchanges in their books on the date of receipt. Clearing operations between regional clearing centers and the Manila clearing center is shown in Attachment 4 (Tarlac, Tarlac used as example). (b) Procedure for Special Clearing Demands may be presented directly to the drawee banks/branches, institutions or entities concerned at times other than that specified in Section 1. For this purpose, the Special Clearing Receipt (Cash Form No. 10) shall be used. The original and duplicate copies of the receipt shall be retained by the sending bank/branch, institution or entity and the triplicate shall be delivered to the drawee bank/branch. At the following clearing session, the original of the Special Clearing Receipt shall be presented as a demand against the bank/branch, institution or entity concerned. Nothing in this section shall prevent direct settlement between the parties concerned. (c) Procedure for Returned Items Items which should be returned for any reason whatsoever shall be presented not later than the next regular clearing for local exchanges. Out-of-town exchanges shall be returned within the period specified in the Memorandum to Authorized Agent Banks announcing the opening of clearing facilities in each of the authorized regional clearing centers. Items for return shall be sealed in special red envelopes and shall be considered and accounted for as debits to the demanding banks/branches, institutions or entities and credits to the returning banks/branches, institutions or entities. Nothing in this section shall prevent direct settlement of returned items between the parties concerned. Items which have been the subject of a material alteration or items bearing a forged endorsement when such endorsement is necessary for negotiation shall be returned within twenty-four (24) hours after discovery of the alteration or the forgery but in no event beyond the period fixed or provided by law for filing of a legal action by the returning bank/branch, institution or entity against the bank/branch, institution or entity sending the same. Missorts or items misdirected through clearing shall be returned at the next clearing session in special yellow envelopes and shall be accounted for as debits to the bank/branch, institution or entity which had misdirected the items. (d) Procedure for Excluded Member(s) In case any bank/branch, institution or entity is excluded from clearing on any day on account of tardiness or absence, value shall be given to deliveries of the others present for credit to their accounts in accordance with normal settling procedures. The total of said deliveries shall be debited to the account of the excluded bank/branch, institution or entity. The bank/branch, institution or entity excluded from clearing shall, as heretofore, send its representative to the Clearing Office/Unit to prepare the clearing statement and accept deliveries on it. In case of failure to send its representative, the Clearing Office/Unit shall, in the meantime, receive such deliveries which should be picked up by the excluded bank/branch institutions or entity not later than 5:30 P.M. on the same day. prLL In the event of strike or force majeure which prevents a bank/branch, institution or entity allowed to clear from having access to its records or otherwise ascertaining whether checks delivered to it shall be honored or returned, notice of such circumstances shall immediately be given to the Central Bank Clearing Office/Unit. In such cases, items drawn against the bank/branch, institution or entity concerned shall not be presented for clearing. SECTION 5. Loss of Clearing Items . Any loss or damage arising from theft, pilferage, or other causes affecting items in transit shall be for the account of the sending bank/branch, institution or entity concerned. Inter-regional clearing operations shall be governed by other rules and regulations which are embodied in Attachment 3. Sources: Circular 580 dated 9-19-77 Circular Letter dated 9-20-78 ATTACHMENT 1 (Book 1, Part 9) DESIGNATED CLEARING AREAS Suburban Towns & Cities Clearing Centers Within the Clearing Areas 1. Manila Quezon City, Pasay City, Caloocan City, San Juan, Mandaluyong, Makati, Paraaque, Navotas, Malabon, Marikina, Pasig Metro Manila 2. Angeles City Guagua, San Fernando Pampanga 3. Bacolod City 4. Baguio City Baguio City 5. Cabanatuan City Cabanatuan City 6. Cagayan de Oro City 7. Cebu City Mandaue Cebu 8. Dagupan City Urdaneta Pangasinan 9. Davao City 10. Iloilo City 11. Laoag City Laoag, Batac, Vigan 12. Legazpi City Daraga, Tabaco Albay 13. Lucena City Lucena City 14. Naga City Iriga Camarines Sur 15. San Fernando, La Union Baguio City 16. Tacloban Tacloban City 17. Zamboanga City Sources: Circular 580 9-19-77 Maab 78 10-17-77 Maab 79 10-17-77 Maab 80 10-17-77 Maab 29 4-11-78 ATTACHMENT 1 (Book I, Part 9) LIST OF CLEARING CENTERS Suburban Towns and Cities Clearing Centers Address within the Clearing Areas Applicable CB Issuances Manila Ground floor of the Quezon City, Pasay City, Circular 580 9-19-77 Central Bank Building Caloocan City, San Juan, Mandaluyong, Makati, Paraaque, Navotas, Malabon, Marikina, Pasig Metro Manila Angeles City Ground Floor, Rizal Dau (Mabalacat), Guagua, MAAB No. 55 5-14-74, Theater Bldg. Rizal San Fernando Pampanga as amended by St., Angeles City CL 7-30-79 Bacolod City Pacific Bank Bldg., Araneta Ave. MAAB Unnumbered Bacolod City 5-11-67 Baguio City 2nd Floor, RCBC Bldg., MAAB No. 78 10-17-77 85 Harrison Road, Baguio City Batangas City 3rd Floor, Phil. Banking Circular Letter 2-2-79 Corporation Building, P. Burgos St. cor. D. Silang St., Batangas City Cabanatuan City 3rd Floor, Liwag Bldg., MAAB No. 79 10-17-77 P. Burgos Ave, Cabanatuan City Cagayan de Oro 2nd Floor, Travellers MAAB No. 93 8-27-74 City Life Bldg. Cagayan de Oro Cebu City Ground Floor, SSS Bldg., Mandaue Cebu MAAB Unnumbered Jones Ave., Cebu City 1-4-66 Dagupan City 2nd Floor, R. Villamil Bldg. Urdaneta Pangasinan MAAB No. 53 5-14-74, Perez Blvd. cor. Burgos as amended by St. Dagupan City CL 2-5-80 Davao City C.B. Regional Office Panabo MAAB Unnumbered 2-22-67 as amended by CL 11-12-79 Dumaguete City 3rd Floor, Uymatiao Dumaguete City Circular Letter 4-20-79 Building San Jose Street, Dumaguete City Iligan City 2nd Floor, Dy Pico Bldg., Iligan City Circular Letter Quezon Ave., Corner 11-28-78 Echiverri St. Iligan City Iloilo City Pacific Bank, Iznart St. MAAB No. 63 6-19-74 Iloilo City Laoag City 3rd Floor, Philippine Batac Ilocos Norte MAAB No. 29 4-11-78 Veteran's Bank Bldg., Vigan Ilocos Sur General Segundo Ave. Laoag City Legaspi City 3rd Floor, del Rosario Daraga, Tabaco Albay MAAB No. 22 3-21-77 Bldg. II J. P. Rizal St., and Legaspi City Circular 580 9-19-77, as amended by CL 6-2-80 Lucena City Ground Floor, Bartolome Lucena City MAAB No. 80 10-17-77 Sy Bldg. Corner Evangelista and Recto Sts., Lucena City Naga City 6th Floor, PNB Bldg., Gen. Iriga Camarines Sur MAAB No. 54 5-14-74 Luna St., Naga City and Circular 580-9-19-77 San Fernando, 3rd Floor, CB Regional MAAB No. 23 3-21-77 La Union Office Bldg., Quezon and Circular Ave., San Fernando, 580 9-19-77, as La Union amended by MAAB No. 78 10-17-77 Tacloban City Uytingkoc Bldg., Gen. MAAB No. 42 7-6-76 Enage St., Tacloban City and Circular 580 9-19-77 Tarlac 2nd Floor, T. N. Asiaten CL 3-7-80 Bldg. E. Taedo cor. Panganiban Sts., Tarlac, Tarlac Tuguegarao Social Hall, LBP Bldg. Memorandum 4-7-80 San Gabriel St., Tuguegarao Cagayan Zamboanga City Ground Floor, Hotel MAAB No. 62 6-19-74 Sultana Bldg., Pilar St., and Zamboanga City Circular 580 9-19-77 ATTACHMENT 2 (Book 1, Part 9) CLEARING OF TREASURY WARRANTS The National Treasury issued the following regulations on the Type "A" and Type "B" Treasury Warrants in Manila and in areas served by the Central Bank Regional Clearing Offices: EFFECTIVITY: Starting on October 16, 1969, type "A" and "B" treasury warrants shall be accepted as clearing items for regional clearing in areas served by the Central Bank regional clearing offices. The branches or agencies of the commercial banks may avail of this facility of the Central Bank by following the procedures prescribed hereunder. These treasury warrants shall be carried in the Central Bank pouches from their regional offices to Manila. TREATMENT OF TYPES "A" AND "B" TREASURY WARRANTS: Types "A" and "B" treasury warrants with circular holes already punched at the designated field by the bank branches or agencies in accordance with Treasury Circular dated July 7, 1969, shall be placed in separate sealed envelopes or packages, together with their respective run-up tapes. The outside of the envelopes must clearly indicate the type of treasury warrants contained therein, the number of pieces, and the total amount per tape. When the pouch is received in Manila, these envelopes or packages shall be turned over by the Central Bank unopened to the representative of the sending bank's Manila office. The Manila office of a bank shall gather all treasury warrants it receives from its various branches and agencies in a single day, and submit them to the National Treasury for special clearing on the next day. The treasury warrants must be endorsed by the Manila office, stating, among others, the date of clearing and that they are being presented for special clearing. See suggested rubber stamp mark: These treasury warrants, as well as those paid at the main offices and suburban branches or agencies of the commercial banks shall be presented to the National Treasury by the banks concerned between the hours of 8:00 A.M. and 10:00 A.M. during banking days, supported by run-up tapes and the usual clearing receipt. The special clearing receipt may be cleared on the same day through the Central Bank Clearing House and shall be accounted as debit against the demand of the National Treasurer. PERIOD WITHIN WHICH TREASURY WARRANTS MAY BE DISHONORED: The National Treasury may dishonor a type "B" treasury warrant found defective within two (2) working days, while type "A" treasury warrants may be dishonored within sixty (60) working days. In both cases, the period shall be reckoned from the date the special clearing receipt is coursed through the Central Bank Clearing House. The foregoing time limit will not apply to treasury warrants found to have been paid to the wrong party, tampered, and otherwise tainted with fraud. DISHONORED, MISCLEARED, AND OTHER RETURNABLE ITEMS: These items will be returned directly to the presenting bank. The accepting bank shall issue the corresponding credit ticket in favor of the National Treasury, which ticket shall be cleared by the National Treasury through the Central Bank Clearing House. If the bank to whom a treasury warrant is dishonored refuses to accept or recognize the action taken by the Treasury for a valid reason, the bank may return the controversial items, or evidences thereof, directly to the National Treasury, together with required run-up tapes and a concise but comprehensive statement of such reason. The return must be made not later than 10:00 A.M. on the next banking day, otherwise the member bank shall be deemed to have accepted and recognized the validity of the returned item, and it is therefore, left without further recourse. The National Treasury shall issue the corresponding credit ticket for those returned items accepted, and same shall be taken up in the manner set forth above. COMPLIANCE: Banks participating in the Treasury special clearing operations bind themselves to conform, without reservation, to the regulations promulgated herein, or which may henceforth be promulgated relative to special clearing operations. Any bank has the option to present their paid treasury warrants to the National Treasury for collection. CENTRAL BANK RESPONSIBILITY: Any treasury warrant lost pilfered from the Central Bank pouch shall still be the responsibility of the sending bank, and such responsibility ends only after the National Treasury has taken physical possession of the treasury warrants. Lost or pilfered treasury warrants must be reported to the National Treasury in accordance with Treasury Memorandum Circular No. 13-69, dated October 1, 1969. Source: Circular Letter 10-28-77 ATTACHMENT 3 (Book I, Part 3) GUIDELINES FOR INTER-REGIONAL CLEARING OPERATIONS IN VISAYAS AND MINDANAO Inter-regional clearing operations shall be conducted in Visayas and Mindanao through the facilities of seven (7) Central Bank Regional Clearing Units located in Bacolod, Cagayan de Oro, Cebu, Davao, Iloilo, Tacloban and Zamboanga Cities. Checks received by banks/branches in one clearing area against banks/branches located in the other clearing areas may be presented for clearing subject to the rules and regulations embodied in 9.Appendix A. In accordance with the schedule of delivery, pick-up and returns, implementation shall be made in three (3) phases as follows: Phase 1 : Initially on November 2, 1978, Cebu and Davao Regional Clearing Units will accept demands against banks located in the other designated clearing areas in Visayas and Mindanao. On the other hand, Iloilo, Bacolod, Tacloban, Cagayan de Oro and Zamboanga Regional Clearing Units will accept demands against Cebu and Davao Regional Clearing Units only. Phase 2 : On December 1, 1978, Iloilo and Bacolod Regional Clearing Units will start accepting demands against banks in all other clearing areas. At the same time, Tacloban, Cagayan de Oro and Zamboanga Regional Clearing Units will start accepting demands against banks in Iloilo and Bacolod. Phase 3 : On January 2, 1979, all the designated seven (7) Regional Clearing Units shall accept demands against banks in the other six (6) Regional Clearing Units. 1. Items for Clearing Items for clearing shall consist of demand items consisting of checks and/or other documents drawn against banks/branches located in each of the following clearing areas: City Within the Clearing Centers Clearing Areas Bacolod City None Cagayan de Oro City None Cebu City Mandaue Davao City None Iloilo City None Tacloban City None Zamboanga City None 2. Settlement of Clearing Balances Clearing balances of participating banks/branches shall be debited or credited, as the case may be, to the clearing accounts of their respective head offices in Manila in the afternoon of the same day the demands are presented for clearing. 3. Miscellaneous Provisions Checks for inter-regional clearing shall be sealed in special brown envelopes measuring 7" x 11" with the destination "To Cebu" or "To Zamboanga", etc. as the case may be, properly stamped in bold letters of not less than one (1) inch. The left side of the envelope shall bear one inch stripe according to the following color scheme: Regional Clearing Unit Color Bacolod Green Cagayan de Oro White Cebu Blue Davao Red Iloilo Violet Tacloban Royal Blue Zamboanga Gray All participating banks shall keep photo copies/microfilms of checks presented for clearing. Any loss or damage arising from theft, pilferage, or other causes affecting items in transit shall be for the account of the sending bank/branch, institution or entity concerned. 4. Guidelines for Inter-regional Clearing a. For an orderly process of exchanges, each bank/branch representative shall deposit the demand envelopes against drawee banks/branches located in other Regional Clearing areas in the respective compartments assigned to each of the participating banks/branches. b. The bank/branch representatives shall sort the demand envelopes received according to destination. Amount of demands shall be posted as Debits (Items Received) in their respective Clearing Statements (Clearing Form 4-A) to be prepared in four (4) copies for distribution as follows: 1) Original Sending Clearing Unit 2) Duplicate Sending Bank/Branch 3) Triplicate Head Office of Drawee Bank/Branch 4) Quadruplicate Drawee Bank/Branch c. The Regional Clearing Officer shall sort according to bank/branch and destination the demand envelopes delivered for account of banks without branches in his clearing area. Corresponding Debit Statement (Clearing Form 4-B) shall be prepared in three (3) copies for distribution as follows: 1) Original Head Office of Drawee Bank/Branch 2) Duplicate Drawee Bank/Branch 3) Triplicate Sending CB Clearing Unit d. The quadruplicate of the Clearing Statements and duplicate of the Debit Statements shall be attached to the demand envelopes for shipment to the Regional Clearing Units concerned. In acknowledgment of receipt of inter-regional demands, clearing representatives of respective banks/branches at destination shall sign the covering manifest (in duplicate). Original shall be returned to the sending clearing unit. e. In the Regional Clearing Unit where the demands are presented, a Clearing Advice (Form 4-B(a)) shall be prepared for inter-regional as well as local and out-of-town (Manila) clearing results reflected in clearing statements and debit statements. After the 9:00 A.M. clearing session, the results of the inter-regional clearing transactions shall be posted in the Clearing Advice, striking a sub-total to determine that it is in balance. In the same Clearing Advice, the results of local and on Manila clearing shall be posted after the 4:00 P.M. session to complete the transactions for the day. The original of the clearing advice shall be sent to the Head Office of the Drawee Bank/Branch thru the Clearing Operations Division, Manila, bound together with: 1) The duplicate of the local and out-of-town (Manila) clearing statements; 2) Triplicate of inter-regional clearing statements; 3) The originals of the debit statements; and 4) The demand envelopes containing "On Manila" checks/returns. The Clearing Advice shall be the basis for entries in the books of accounts of the bank Head Offices concerned. The duplicate of the Clearing Advice shall be forwarded to the Drawee Bank/Branch while the third copy shall be retained as office file of the Regional Clearing Unit. f. The daily results of both local, out-of-town (Manila) and inter-regional clearing shall be summarized in the consolidated clearing proof sheet. For purposes of transmission to the Head Office through the DEX machine, the results of clearing as reflected in the consolidated proof sheet shall be condensed in Clearing Form 4-C(a). Any exception or observation which requires immediate attention shall be explained in the memorandum portion. g. All Regional Clearing Officers shall acknowledge receipt of all incoming pouches and/or shall give notice of delay/non-arrival of pouch/es or other exception/s to the sending clearing unit concerned on the Confirmation Slip (form attached) not later than the following business day. If for any reason, clearing is suspended or there is no demand against any of the other clearing units and as no pouch will be sent to all or any of the clearing units, the Confirmation Slip, which shall be placed in an envelope properly addressed to the clearing unit concerned and duly marked in bold letters "CONFIRMATION SLIP FOR IMMEDIATE TRANSMITTAL TO ADDRESSEE," shall be sent through the pouch to Manila. A duplicate of the Confirmation Slip for file of the Clearing Operations Division, Manila Office shall be stapled to the envelope. h. All shipments of pouches shall be accompanied by a checklist and manifest which shall be properly acknowledged by the receiving clearing unit. A separate transmittal letter shall be prepared in duplicate for all communications addressed to other departments which are sent through the general purpose pouch under the responsibility of the Administrative Department, Manila. The original shall be properly marked "For the Communications Center," while the duplicate shall be returned to the sending Regional Clearing Unit with the acknowledgment of the personnel in-charge of opening the pouch in the Communications Center. i. All clearing pouches arriving late in the afternoon and in the evening may be picked up from the Airport in the morning of the following day for delivery to the drawee bank at the 9:00 A.M. clearing session. For security reasons, those arriving on Friday night shall be picked up on Saturday morning. ATTACHMENT 4 CLEARING OPERATIONS BETWEEN REGIONAL CLEARING CENTERS AND THE MANILA CLEARING CENTER (TARLAC, TARLAC USED AS SAMPLE) (Book I, Part 9) Exchanges of clearing items among branches of commercial and savings banks in Tarlac, Tarlac, will be conducted at 4:00 P.M. on each business day as well as on all local holidays in the premises of the Tarlac Regional Clearing Unit in accordance with the rules and regulations embodied in Subsec. 191.1. cdi Simultaneously, "On Tarlac" checks and "On Manila" checks may be presented for clearing respectively through the Manila Clearing Office and the Tarlac Regional Clearing Unit. In Manila 4:00 P.M. Manila banks deliver "On Tarlac" checks and dishonored "On Manila" checks picked up at 4:00 P.M. of the previous day. Manila Banks pick up "On Manila" checks and returned "On Tarlac" checks delivered at 4:00 P.M. at Tarlac the previous day. In Tarlac 4:00 P.M. Tarlac banks deliver "On Manila" checks and dishonored "On Tarlac" checks picked up at 4:00 P.M. of the previous day. Tarlac banks pick up "On Tarlac" checks and the returned "On Manila" checks delivered at 4:00 P.M. at Manila the previous day. If not returned on schedule, it is understood that "On Tarlac" and "On Manila" checks delivered to the Manila Clearing Office and Tarlac Regional Clearing Unit, respectively, will be considered "good" after 4:00 P.M. on the third business day following the date of delivery. ITEMS FOR CLEARING Items for clearing shall consist of checks and documents payable on demand and drawn against banks in Manila and its suburbs (Quezon City, Pasay City, Caloocan City, San Juan, Mandaluyong, Makati, Paraaque, Navotas, Malabon, Marikina and Pasig-Metro Manila) on one hand and banks in Tarlac, Tarlac on the other. SETTLEMENT OF BALANCES Clearing balances of participating banks in Tarlac, Tarlac, shall be debited or credited, as the case may be to the clearing accounts of their respective head offices with the Central Bank in the afternoon on the date of clearing. MISCELLANEOUS Out-of-town checks shall be sealed in special brown envelope measuring 7" x 11" with the destination "To Tarlac" or "To Manila", as the case may be, properly stamped in bold letters of not less than one (1) inch and three (3) orange stripes, 1/1" wide on the right edge. Banks shall microfilm all out-of-town checks. Source: CL dated 3-7-80 APPENDIX B (Book I, Part 9) TAX COLLECTION PROCEDURES The taxes/duties enumerated under Subsec. 191.2 shall be collected under the following arrangements: I. CUSTOMS DUTIES, TAXES AND OTHER LEVIES A. General Rule In implementation of Executive Order No. 2 of the President of the Philippines dated January 5, 1966, directing that customs duties, taxes and other levies on imported goods be collected by the Central Bank through its authorized agent banks, and in line with Customs Administrative Order No. 2-66 dated February 5, 1966, the following rules and regulations are hereby promulgated: 1. Central Bank release certificates covering imports shall be issued by authorized agent banks upon payment by the importer of the amount of customs duties, taxes and other levies found due on the merchandise to be covered thereby. For this purpose, the Bureau of Customs shall issue an "order of payment" indicating the merchandise sought to be released and other particulars of the importation, and the corresponding amount of duties, taxes and other levies found due and collectible. Upon payment of such amount, the authorized agent bank shall issue an official receipt, and may then issue the release certificate covering the merchandise. Payments may be made in the form of cash, certified checks, or advice by the importer to its bank to debit its account. However, payments made through a debit to the account of the importer shall involve amounts of P20,000.00 and above only, and accordingly, in the preparation of the Order of Payment (OP), the Commissioner of Customs or his authorized deputy, shall, upon inquiry from the importer, indicate thereon the name of the authorized agent bank to whom the importer shall pay. In turn, the authorized agent bank shall indicate in the bottom portion of the official receipt the remarks "Account debited". 2. Authorized agent banks shall submit daily to the Central Bank of the Philippines a report of all collections of customs duties, taxes and other levies received during the day. Unless sooner demanded, such collections shall be remitted to the Central Bank within thirty (30) days. 3. The form for the official receipt mentioned above and the manner of its accomplishment shall be prescribed by the Central Bank. [Circular 217 2-8-66, as Amended by Circular 707 12-5-79] B. Collections in Ports of Cebu and Davao Cities 1. Branch Offices and Head Office of the authorized agent banks in the Ports of Cebu and Davao shall furnish the Revenue Collection Regional Units of the Central Bank and the Collector of Customs with the names and specimen signatures of the officers authorized to sign the Central Bank release certificates and official receipts, and of their authorized representatives who shall be provided with proper identification cards. 2. Central Bank release certificates covering imports shall be issued only upon payment of the corresponding customs duties, taxes and other levies; except, however, when a discrepancy exists in the quantity, value and description of the commodity indicated in the Order of Payment as compared to that covered by the relative Letter of Credit, in which case, the release certificate shall not be issued and the matter referred to the Revenue Collection Regional Unit of the Central Bank. 3. Branch Offices and Head Office of the authorized agent banks situated in Cebu City and Davao City shall accept payment for customs duties, taxes and other levies, covered by an Order of Payment issued by the Bureau of Customs except payment for customs duties, taxes and other levies by government-owned or controlled corporations, the collection of which shall be made only through banking offices of the Philippine National Bank and other government banks including the Development Bank of the Philippines. Authorized agent banks shall issue corresponding Official Receipts on forms prescribed for the purpose. Payments may be made in the form of cash, certified checks or advice by the importer to its bank to debit its account. However, payments made through a debit to the account of the importer shall involve amounts of P20,000.00 and above only, and accordingly, in the preparation of the Order of Payment (OP), the Commissioner of Customs or his authorized deputy, shall, upon inquiry from the importer, indicate thereon the name of the authorized agent bank to whom the importer shall pay. In turn, the authorized agent bank shall indicate in the bottom portion of the official receipt the remarks "Account debited". Such forms shall be supplied to the Branch Offices and Head Office of the authorized agent banks by the Central Bank of the Philippines through its Regional Offices and shall be treated as accountable forms by the said offices of the authorized agent banks. 4. The Branch Offices and Head Office of the authorized agent banks covered by these arrangements shall submit to the Revenue Collection Regional Unit in their particular area, a daily summary of collections of customs duties, taxes and other levies not later than 5:00 p.m. on the same day such collections are made. This summary shall be signed by a responsible official of the particular office and shall be accompanied by the pink and orange copies of the official receipts and copy each of the corresponding release certificates. All copies of Official Receipts cancelled shall be surrendered and included in the Abstract of Collections. The Branch Offices and Head Office of the authorized agent banks in the area shall deliver to the Collector of Customs in the particular port of entry the yellow and white copies of the Official Receipt covering payments of customs duties, taxes and other levies together with a copy of the daily summary of collections not later than 5:00 p.m. on the same day the collections are made. 5. The Branch Offices and Head Office of the authorized agent banks situated in the area covered shall remit by Cashier's Checks to the Revenue Collection Regional Unit the amount of customs duties, taxes and other levies collected by them not later than the Monday following the week during which collections were made. Any collections not so remitted shall be debited against the demand deposit account of the Head Office the following day (Tuesday) after the remittance is due. [Circular 313 11-26-70, as amended by Circular 613 6-27-78 and Circular 707 12-5-79] C. Collections in Ports of Cagayan de Oro and Iloilo Cities 1. Branch Offices of authorized agent banks situated in Cagayan de Oro and Iloilo City shall accept payments for customs duties, taxes and other levies except payments for customs duties, taxes and other levies by government-owned or controlled corporations, the collection of which shall be made only through banking offices of the Philippine National Bank and other government banks including the Development Bank of the Philippines, upon presentation of the Orders of Payment issued by the Bureau of Customs. Authorized agent banks shall issue the corresponding Official Receipts on forms prescribed for the purpose. Payments may be made in the form of cash, certified checks or advice by the importer to its bank to debit its account. However, payment made through a debit to the account of the importer shall involve amounts of P20,000.00 and above only, and accordingly, in the preparation of Order of Payment (OP), the Commissioner of Customs or his authorized deputy, shall, upon inquiry from the importer, indicate thereon the name of the authorized agent bank to whom the importer shall pay. In turn, the authorized agent bank shall indicate in the bottom portion of the official receipt the remarks "Account debited". Such forms shall be supplied to the Branch Offices of the authorized agent banks by the Central Bank of the Philippines through its Regional Units and shall be treated as accountable forms by the said offices of the authorized agent banks. 2. All such collections made by said Branch Offices are to be booked and credited to a Special Account "Due to Central Bank Customs Duties Account". 3. The Branch Offices of the authorized agent banks covered by these arrangements shall submit to the Revenue Collection Regional Unit in their particular area, a daily summary of collections of customs duties, taxes and other levies not later than 5:00 p.m. on the same day such collections are made. This summary shall be signed by a responsible official of the particular office and shall be accompanied by the pink copies of the official receipt, order of payment and the corresponding release certificate. All copies of Official Receipts cancelled shall be surrendered and included in the Abstract of Collections. The Branch Offices of the authorized agent banks in the area shall deliver to the Collector of Customs in the particular port of entry the yellow and white copies of the Official Receipts covering payments of customs duties, taxes and other levies together with a copy of the daily summary of collections not later than 5:00 p.m. on the same day the collections are made. 4. The Branch Offices of the authorized agent banks situated in the area covered shall remit by Cashier's checks to the Revenue Collection Regional Unit the amount of customs duties, taxes and other levies collected by them not later than the Monday following the week during which collections were made. Any collections not so remitted shall be debited against the demand deposit account of the Head Office the following day (Tuesday) after the remittance is due. 5. The issuance of CB Release Certificates by authorized agent banks covering imports shall be guided by MAAB No. 19 dated February 20, 1974. 6. Branch Offices of the authorized agent banks in the Ports of Cagayan de Oro and Iloilo shall furnish the Revenue Collection Regional Units of the Central Bank and the Collector of Customs with the names and specimen signatures of the officers authorized to sign the Central Bank release certificates and official receipts, and of their authorized representatives who shall be provided with proper identification cards. cd [Circular 426 8-21-74, as amended by Circular 613 6-27-78 and Circular 707 12-5-79] D. Collections in Port of San Fernando , La Union 1. Branches of authorized agent banks in San Fernando, La Union, shall: a. accept payments for customs duties, taxes and other levies upon presentation of Order of Payment issued by the Bureau of Customs; b. issue the corresponding receipts in forms to be requisitioned from the Revenue Collection Office, Revenue Collection Regional Unit (RCRU); c. book all such collection and credit same to the account "Due to Central Bank-Customs Duties Account"; d. submit to the RCRU a summary of collections of said duties and taxes not later than 5:00 PM on the same day such collections are made, sample form shown in Attachment 4 duly supported by the pink copies of the Official Receipt (OR), Order of Payment (OP) and release certificate; e. deliver to the Collector of Customs the yellow copies of the OR, together with a copy of the summary report not later than 5:00 PM on the same day the collections are made; f. remit to the RCRU by cashier's check the amount of customs duties, taxes and other levies collected by them from Monday to Friday on the following Monday. Any collection not so remitted shall be debited against the demand deposit account of the Head Office on the following day (Tuesday); g. submit an inventory report for the accountability of official receipts to the RCRU within five (5) days after the end of each month, sample form shown in Attachment 5; h. furnish the RCRU and the Collector of Customs with specimen signatures of their signing officials at the onset and each time there is a change in signing authorities; and i. provide their authorized representatives with proper identification cards. 2. The issuance of CB release certificates by authorized agent banks covering imports shall be guided by existing regulations. 3. Branch offices which willfully delay the submission of their reports of collection and the remittance thereof shall be subject to the penalties imposed under Item 4 of Section V of this Appendix. [Circular 736 5-16-80] E. Miscellaneous provisions 1. Authorized agent banks and branch offices concerned shall remit in full to the Central Bank all their collections of customs duties, taxes and other levies not later than the Monday following the week during which collections were made. Any collections not so remitted shall be debited against their demand deposit account with the Central Bank. [MAAB 4-26-67] 2. Authorized agent banks in Greater Manila may issue release certificates covering goods intended for discharge and clearance in any port other than Manila even before the payment of the corresponding customs duties, taxes and other levies due thereon, Provided: a. no discrepancies are noted in the relative shipping documents; and b. the release certificate to be issued therefor are stamped "Customs Duties, Taxes and Other Levies to be Paid to the Collector of Customs, Port of ( Entry )". Conversely, authorized agent banks other than those based in the Greater Manila Area may issue release certificates for goods destined for discharge and entry in the Port of Manila provided the aforecited conditions are complied with. [MAAB 2-19-71, as amended by MAAB 19 2-20-74] 3. All authorized agent banks in Greater Manila Area shall transmit to the Cash Division, Bureau of Customs, copies of Central Bank Official Receipts and corresponding Release Certificates intended for the said Bureau covering payment of customs duties, taxes and other levies, at least once in the morning and once in the afternoon to further accelerate the release of imported articles pursuant to Customs Administrative Order No. 5-72 approved by the Secretary of Finance on October 25, 1972. [MAAB 46 11-7-72] II. NATIONAL INTERNAL REVENUE TAXES A. Assessment and Collection 1. The collection of national internal revenue taxes shown in Attachment 1 shall be made in all cities and municipalities with head offices, branches, agencies and extension offices of commercial banks, the Development Bank of the Philippines and the Land Bank of the Philippines: Provided , That the collection of national internal revenue taxes from government-owned or controlled corporations in all cities and municipalities shall be made only through banking offices of the Philippine National Bank and other government banks including the Development Bank of the Philippines. For this purpose, Greater Manila Area shall comprise the cities of Manila, Caloocan, Quezon and Pasay and the municipalities of Las Pias, Navotas, Malabon, Mandaluyong, Marikina, Muntinlupa, Makati, Paraaque, Pasig, Pateros, San Juan and Taguig. The areas under Revenue Collection Regional Units shall comprise Greater Cebu Area which includes the cities of Cebu, Lapu-Lapu, Mandaue and Toledo; Greater Bacolod Area which includes the cities of Bacolod, Cadiz, Silay, San Carlos and the towns of Binalbagan and Victorias; and the cities of Davao, Iloilo and Cagayan de Oro. Other Cities and Municipalities shall comprise all other cities and municipalities not included above. 2. Authorized agent banks which include head offices, branches and agencies of commercial banks, savings and mortgage banks, stock savings and loan associations, development banks, the Development Bank of the Philippines and the Land Bank of the Philippines shall accept payment from the taxpayer the full amount of internal revenue taxes stated in space number 9 of the Revenue Tax Receipt (RTR) issued by the Commissioner of Internal Revenue or his authorized deputy, in the form of cash, cashier's, treasurer's, manager's or certified checks, and checks drawn by the taxpayers or advice by the taxpayer to its bank to debit its account and shall issue and validate the corresponding Confirmation Receipt (CR) on forms prescribed for this purpose. However, payments made through a debit to the account of the taxpayer shall involve amounts of P20,000.00 and above only and accordingly, in the preparation of the Revenue Tax Receipt (RTR), the Commissioner of Internal Revenue or his authorized deputy, shall, upon inquiry from the taxpayer, indicate thereon the name of the authorized agent bank to whom the taxpayer shall pay. In turn, the authorized agent bank shall indicate in space number 12 of the Confirmation Receipt the remarks "Account debited". Such Confirmation Receipt forms shall be supplied to the authorized agent banks by the Revenue Collection Office, Central Bank, and shall be treated as accountable forms by the authorized agent banks. In the cities of Cebu, Davao, Bacolod, Iloilo, Cagayan de Oro and San Fernando, La Union, Confirmation Receipt forms (CR) shall be supplied to the branch offices of the authorized agent banks by the Central Bank's Revenue Collection Regional Units in the said cities and shall be treated as accountable forms by said branches of authorized agent banks. Authorized agent banks shall be required to submit a monthly Inventory Report of Confirmation Receipt (CR) to the Revenue Collection Office, Central Bank or its Revenue Collection Regional Units, not later than the 15th day of the succeeding month. Inventory reports of confirmation receipts under the branch accountability of authorized agent banks in San Fernando, La Union shall be submitted within five (5) working days after the end of each month to the Revenue Collection Regional Unit, sample form shown in Attachment 6. However, in case of documentary, science and strip stamps, payment hereof shall be in the form of cash or cashier's, manager's, treasurer's or certified checks. A check accepted for payment of taxes shall apply to only one Confirmation Receipt (CR). The Bureau of Internal Revenue shall be the sole agency to issue Revenue Tax Receipts (RTRs) to taxpayers and shall be fully accountable to the Central Bank for all Revenue Tax Receipt forms issued by them. Confirmation Receipts with five copies to a set will be used if and when authorized agent banks have already utilized all their stock of Confirmation Receipts with four copies per set. The additional copy is for the BIR Reconciliation Officers. The serial numbers for the new sets of Confirmation Receipts with five copies per set start from 3,000,001. The color and distribution of the Confirmation Receipts with five copies per set are as follows: Distribution Color 1) Original Taxpayer's Copy Security Cheque Paper 2) Duplicate Central Bank Copy Green 3) Triplicate BIR Copy Pink 4) Quadruplicate BIR Reconciliation Officer's Copy Blue 5) Quintuplicate Authorized Agent Bank's Copy Orange The BIR Reconciliation Officer's copy of the Confirmation Receipt shall be attached to the duplicate copy of the Summary Report of Collection (CB RCO Form No. 003) to be taken from collecting banks by authorized deputies of the Bureau of Internal Revenue. 3. All national internal revenue tax collections made are to be booked and credited to a special account "Due to the Central Bank of the Philippines Bureau of Internal Revenue". However, the account shall indicate whether the collection is for Greater Manila Area (GMA), Other Cities and Municipalities (OCM), Greater Cebu Area, Greater Bacolod Area, Davao City, Iloilo City, Cagayan de Oro City and San Fernando, La Union. Any check payment subsequently returned and/or dishonored by a drawee bank shall be debited automatically to this special account and delivery of such returned/dishonored checks shall be as follows: a) For Greater Manila Area (GMA) and Other Cities and Municipalities (OCM) To the Revenue Collection Office, Central Bank of the Philippines, Manila. b) For the areas covered by Revenue Collection Regional Units To their respective regional units. [Circular 554 2-3-77, as amended by Circular 612 6-27-78, Circular 640 11-20-78, Circular 656 2-19-79 and Circular 707 12-5-79; CL 7-31-79; Circular 735 5-16-80] All collections credited to the Special Account (Due to Central Bank-Internal Revenue Account) shall: a) not be subject to the "liquidity floor" requirements; and b) be exempted from the deposit reserve requirements. Taxes collected by authorized agent banks shall not be subject to payment of interest or any other charges by the collecting authorized agent banks to the Government. B. Submission of Collection Reports 1. For Greater Manila Area . Authorized agent banks shall submit to the Revenue Collection Office, Central Bank, a daily summary report of collections of internal revenue taxes collected by them, including the collections of all their branches and agencies located in the cities and municipalities covered by these arrangements not later than seven (7) days following the date of collection. This Summary shall be signed by a responsible official of the authorized agent bank and shall be accompanied by the duplicate copies of the Confirmation Receipts (CR), together with the original copies of the Revenue Tax Receipts (RTR). The Confirmation Receipts (CR) shall be listed numerically in the Summary. The authorized agent banks shall deliver to the Bureau of Internal Revenue located in Quezon City the triplicate copies of the Confirmation Receipts (CR) together with the duplicate copies of the Revenue Tax Receipts (RTR), covering payment of internal revenue taxes collected and validated by them including collections by their branches and agencies, together with a copy of the daily summary report of collection not later than seven (7) days following the date of collection. 2. For Greater Cebu and Greater Bacolod Areas and in the Cities of Davao , Iloilo and Cagayan de Oro . The Branch Offices and Agencies and Head Offices of the authorized agent banks covered by these arrangements shall submit to the Revenue Collection Regional Unit in their particular area a daily summary report of collection of internal revenue taxes collected by them not later than seven (7) days following the date of collection. This summary shall be signed by a responsible official of the authorized agent bank and shall be accompanied by the duplicate copies of the Confirmation Receipts (CR) together with the original copies of the Revenue Tax Receipts (RTR). The Confirmation Receipts (CR) shall be listed numerically in the Summary. The branch offices and agencies and head offices of the authorized agent banks in the area shall deliver to the Regional Office of the Bureau of Internal Revenue in the locality the triplicate copies of the Confirmation Receipt (CR) together with the duplicate copies of the Revenue Tax Receipts (RTR) covering payments of internal revenue taxes issued by them, together with a copy of the daily summary report of collections not later than seven (7) days following the date of collection. 3. For San Fernando , La Union . Branches of authorized agent banks in San Fernando, La Union shall submit their summary report of collections of internal revenue taxes to the Revenue Collection Regional Unit not later than seven (7) days following the date of collection. 4. For Other Cities and Municipalities . All collections made by branch offices and agencies of authorized agent banks covered by this arrangement from Monday to Friday shall be submitted to their respective head offices from Monday thru Friday of the following week. The head offices of the authorized agent banks shall forward to the Revenue Collection Office, Central Bank, Manila, all abstracts of collections received from their branches, agencies and offices together with a summary of such abstracts not later than Friday of the third week following the date of collection. The weekly abstracts of collections shall be submitted in duplicate and must be signed by a responsible official of the branch office and accompanied by the duplicate copies of the Confirmation Receipts (CR), together with the original copies of the Revenue Tax Receipts (RTR). The Confirmation Receipts (CR) shall be listed numerically in the abstracts. The authorized agent banks shall also deliver to the Bureau of Internal Revenue National Office, located in Quezon City, the triplicate copies of the Confirmation Receipts (CR) together with the duplicate copies of the Revenue Tax Receipts (RTR) covering payments of internal revenue taxes collected by their branches, agencies and offices together with a copy of the weekly abstracts prepared by the head office, within the third week after date of collection. C. Remittances of Collections 1. For Greater Manila Area . The authorized agent banks shall remit by cashier's checks to the Revenue Collection Office, Central Bank, Manila the amounts of internal revenue taxes collected by them and by all their branches and agencies in the cities and municipalities covered by these arrangements within seven (7) days from the date of their receipt of such amounts as shown in the daily summary of collections. Any such collections not so remitted shall be debited against their demand deposit accounts with the Central Bank. cdti 2. For Greater Cebu and Bacolod Areas and in the Cities of Davao , Iloilo and Cagayan de Oro . The branches, agencies, offices and head offices of the authorized agent banks situated in the area covered shall remit by cashier's check to the Revenue Collection Regional Unit concerned the amounts of internal revenue taxes collected by them within seven (7) days from their receipt of such amounts as shown in the daily summary of collections. Any collections not so remitted shall be debited against the demand deposit account of the head office with the Central Bank. 3. For San Fernando , La Union . Branches of authorized agent banks in San Fernando, La Union shall remit all collections to the Revenue Collection Regional Unit (RCRU) within seven (7) days from their receipt of collections as shown in the daily summary of collections. Any collections not so remitted shall be debited against the demand deposit account of the Head Office of the authorized agent bank. Reporting and accounting for collections, remittances and inventories of Confirmation Receipts Official Receipts for Internal Revenue Taxes, and Export Premium duties shall be kept distinct and separate from each other. A copy of the daily summary of collection accompanied by copies of the CR and RTR shall be submitted to the Regional Office of the Bureau of Internal Revenue in the locality on the same day the reports for RCRU are due. Branch Offices of the authorized agent banks in San Fernando, La Union, shall furnish the Revenue Collection Regional Unit, the Regional Director and the Bureau of Internal Revenue with the names and specimen signatures of the officers authorized to sign the Central Bank confirmation receipts. They shall also provide their authorized representatives with proper identification cards. 4. For Other Cities and Municipalities . All collections made by branch offices, sub-branches, extension offices and agencies of authorized agent banks located in the cities and towns covered by this arrangement shall be remitted in the form of cashier's check by their respective head offices within the third (3rd) week but not later than Friday of the same week from the date of their receipt of such amounts, as shown in the weekly abstracts of collections. Any collection not so remitted shall be debited against the demand deposit account of the head office with the Central Bank. For internal revenue taxes received by agent banks up to 5:00 P.M. of the last day the corresponding tax is due, the relative confirmation receipts shall be dated as of "current date". However, payments received after 2:30 P.M. shall be validated and credited by the banks as of the following business day. Said payments shall be properly identified in the confirmation receipt. D. Others 1. For this purpose and in order to facilitate filing of tax returns and payments of the corresponding taxes due thereon during the rush periods, an authorized deputy of the Commissioner of Internal Revenue shall be stationed in the Offices of the authorized agent banks covered by this arrangement during the period March 1 to 15, April 1 to 15 and July 1 to 15 of each year. 2. The Central Bank shall penalize any authorized agent bank who willfully delays the submission of their report of collections and remittance of said collections to the Central Bank. In any case of deliberate failure to report the collection on time and to remit the collection on time, any authorized agent bank shall be subject to the penal provision mentioned in Item 4 of Section V of this Appendix. [Circular 554 2-3-77, as amended by Circular 612 6-27-78 and Circular 640 11-20-78; Circular 735 5-16-80] 3. Authorized agent banks are advised that the Commissioner of Internal Revenue has authorized them and their branches to endorse all checks paid for internal revenue taxes in the name of the Commissioner of Internal Revenue in view of which they may accept checks drawn in favor of the Commissioner of Internal Revenue in payment of internal revenue taxes. 4. Official receipts shall be accomplished accurately and legibly. Attention should be given the amount in words, in figures and as validated that there should be no inconsistency. All blanks in the Official Receipt should be properly filled in. 5. Carbon paper should be changed as often as necessary to make all copies of the official receipts legible. [MAAB 6-19-70] 6. All authorized agent banks are hereby advised that loss of confirmation receipts (previously being published by the Central Bank) shall henceforth be published by the authorized agent bank concerned in three (3) daily newspapers (Bulletin Today, Times Journal and Daily Express) at a minimum size of 3 x 4 column inches, signed by the president or senior official of the authorized agent bank, once a week, for three (3) consecutive weeks. Cost of such publication shall be shouldered by the authorized agent bank concerned which shall inform the Revenue Collection Office, Central Bank, of the dates of such publication in order to establish said bank's net actual accountability of confirmation receipts. Shown in Attachment 7 is the format of "Notice of Loss". [CL 9-28-79] III. EXPORT-PREMIUM DUTY A. Assessment and Collection 1. The export duty shall be levied, assessed and collected on the peso equivalent of the gross FOB value at the time of shipment, based on the prevailing rate of exchange, of the export products enumerated in Title III, Sec. 514 of the Customs and Tariff Code, as amended, at the rates prescribed therein. [Circular 373 7-2-73] 2. In addition to the export duty, a premium duty shall be levied, assessed and collected on certain export products listed in Executive Order No. 425 dated February 16, 1974, in accordance with the schedule and rates provided therein. [MAB 23 2-25-74] 3. Immediately upon completion of the loading of the export shipment, the Bureau of Customs, or the Collector of Customs concerned, or their duly designated representative, shall issue an Order of Payment to the authorized agent bank named therein authorizing such authorized agent bank to collect the export duty therein stated within 30 days from date of shipment: Provided , That the collection of export duty from government-owned or controlled corporation shall be made only through banking offices of the Philippine National Bank and other government banks including the Development Bank of the Philippines. This export duty shall constitute a lien on the peso proceeds of the shipment involved. If not fully paid within the said period of 30 days from the date of shipment, the deficiency shall be increased by an amount equivalent to 25% thereof, the total to be collected in the same manner as the duty. Where the deficiency is the result of false or fraudulent statements or representations attributable to the exporter, the surcharge shall be fifty per centum (50%). [Circular 373 7-2-23, as amended by Circular 614 6-27-78] 4. Authorized agent banks and their branches collecting the export duty and premium duty shall issue official receipts for the amounts collected on the official receipt forms prescribed by the Central Bank of the Philippines. For their requirements, authorized agent banks shall requisition the official receipt forms from the Cash Department, Central Bank of the Philippines. However, bank branches in the cities of Cebu, Davao, Cagayan de Oro, Iloilo and in San Fernando, La Union, shall requisition their receipt forms from the respective RCO-Revenue Collection Regional Units. Such forms shall be treated as accountable forms by the collecting banks concerned. [Circular 633 9-25-78, as amended by Circular 735 5-16-80] 5. All collections of export-premium duty made by authorized agent banks credited to the special account "Due to Central Bank Export Duty" shall: a) Not be subject to "liquidity floor" requirement; b) Be exempted from the deposit reserve requirement. Collections of export-premium duty made by authorized agent banks shall not be subject to payment of interest to the government. On the other hand, the authorized agent bank shall not collect any charges for the service they have rendered. B. Reporting of Collections 1. The authorized agent banks shall submit to the Revenue Collection Office, Central Bank of the Philippines, a daily summary of collection of export duty and premium duty collected by them and their branches within the Greater Manila Area not later than 5:00 P.M. on the business day next following the date of collection. 2. For collections made by branches of authorized agent banks located outside the Greater Manila Area, the daily summary of collections of export duty and premium duty shall be submitted through their respective Head Offices as soon as possible but not later than seven (7) days after receipt of collection. However, for collections made by bank branches operating in the cities of Cebu, Davao, Cagayan de Oro and Iloilo, the daily summary of collections of export duty and premium duty shall be submitted to the respective RCO-Revenue Collection Regional Units not later than seven (7) days after receipt of collection. 3. Notwithstanding that an authorized agent bank or branch thereof may not have made any collection of export duty and premium duty on a particular business day, the daily summary of collection shall nevertheless be submitted with indication that no such duties were collected on said day. 4. The summary, duly signed by a responsible officer of the authorized agent bank concerned, shall be accompanied by the Central Bank-RCO copies of the corresponding (a) official receipts and (b) orders of payment as listed on the summary. 5. All copies of official receipt forms cancelled and/or voided due to error or any other cause shall be surrendered and listed in the daily summary of collections. 6. Similarly, a copy of the daily summary of collections accompanied by copies of the official receipts and orders of payment (Bureau of Customs return copy) shall be submitted by authorized agent banks direct to the Bureau of Customs or Collector of Customs concerned. C. Remittance of Collections 1. All collections of export duty and premium duty made by authorized agent banks and their branches shall be remitted to the Central Bank of the Philippines by the authorized agent bank concerned either by Cashier's, Manager's or Treasurer's Checks within seven (7) days from the date of collection. However, remittances for collections of export duty and premium duty made by bank branches, operating in the cities of Cebu, Davao, Cagayan de Oro and Iloilo shall be submitted to the respective RCO-Revenue Collection Regional Units. 2. Any collections not remitted within the said period of seven (7) days shall be debited against the demand deposit account with the Central Bank of the authorized agent bank concerned. [Circular 373 7-2-73, as amended by Circular 633 9-25-78 and Circular 735 5-16-80] D. Miscellaneous Provisions 1. All authorized agent banks are requested not to release to the exporter the full proceeds of export unless and until the export and premium duties due on the particular export shipment involved have not been paid considering that the export-premium duty was constituted as a lien on the peso proceeds of the export shipment. 2. In view of certain difficulties encountered in the implementation of the above provisions, authorized agent banks are hereby instructed to: a. estimate export and/or premium duties due on a particular shipment in case the Order of Payment has not yet been received from the Bureau of Customs; and b. deduct the estimated export/premium duties from the proceeds of export before release thereof to the exporter. For this purpose, authorized agent banks should secure from the Export Coordination Division of the Bureau of Customs copies of current and base prices of dutiable export products and the applicable formula for export and premium duties. [CLs 6-20-79 and 2-11-80] 3. All authorized agent banks are advised that losses of official receipts used in the collection of customs duties and export/premium duties shall also be published by the agent bank concerned in three (3) daily newspapers (Bulletin Today, Times Journal and Daily Express) at a minimum size of 3 x 4 column inches, signed by the president or senior official of the authorized agent bank, once a week, for three (3) consecutive weeks. Cost of such publication shall be shouldered by the authorized agent bank concerned which shall inform the Revenue Collection Office, Central Bank of the Philippines, of the date of such publication, in order to establish said bank's net actual accountability of official receipts, within 30 days (30) from first publication thereof. Shown in Attachment 8 is the format of the "Notice of Loss". [CL 3-19-80] IV. OTHER FEES AND CHARGES ASSESSED ON EXPORTS Pursuant to Letter of Instructions No. 808 dated February 9, 1979, which provides that all fees and charges assessed on exports shall be consolidated and collected after shipment through authorized agent banks (for purposes of this section, authorized agent banks refer to commercial banks only) as deductions from export proceeds and in accordance with the rules and regulations set forth by the National Economic and Development Authority on August 27, 1979, the following procedures were approved for the guidance and implementation of authorized agent banks and all others concerned. 1. All fees and charges assessed on exports (covered by irrevocable letters of credit whose payment shall take place within ninety (90) days from the date of shipment) by the different government collecting agencies before shipment shall be consolidated in one form called "Authority to Collect" (AC). The AC Forms, serially numbered, shall be requisitioned from the Revenue Collection Office of the Central Bank of the Philippines and shall be treated as accountable forms by the authorized agent banks. 2. The authorized agent banks shall supply the exporter with the AC Form together with the Export Declaration. This Form shall be coursed by the exporter to all government offices/agencies imposing and collecting fees and charges on the particular product for export. All government collecting offices/agencies shall indicate the export fees and charges being imposed and the authorized official making the assessment for collection shall affix his signature thereto. Any erasure or alteration should bear the initials of the authorized signatories. 3. The authorized agent banks upon submission by the exporter of the accomplished AC Form shall determine the total assessments of the different offices/agencies and deduct these assessments from the export proceeds. Payment shall be recorded by machine validation, in words and in figures, at the space provided for at the bottom portion of the AC Form and shall bear the signature of the authorized bank officials. These fees and charges on exports shall constitute a lien on the peso proceeds of the shipment involved. 4. The authorized agent banks shall submit to the Export Duty Division, Revenue Collection Office, Central Bank of the Philippines, a daily summary report of collection of export fees and charges collected by them and their branches. This summary shall be signed by a responsible official of the authorized agent bank and shall be accompanied by the original copies of the AC Forms. Authorized agent banks and their branches within Greater Manila Area shall submit their daily reports of collections within seven (7) days following the date of collection. For collections made by branches of authorized agent banks outside the Greater Manila Area, and for collections of authorized agent banks whose head offices are outside the Greater Manila Area, the daily summary of collections shall be submitted, through their respective Head Office as soon as possible but not later than twenty one (21) days after receipt of collection. Notwithstanding that an authorized agent bank or branch thereof may not have made any collection of fees and charges on exports in a particular business day, the daily summary of collection of fees and charges on exports shall nevertheless be submitted with indication that no fee or charge on exports was collected on said day. The summary shall contain the following: (a) AC No.; (b) Name of Exporter; and (c) Amount. All copies of ACs cancelled or voided due to error or any other cause shall be listed in the summary report and submitted to the Revenue Collection Office, Central Bank of the Philippines. A copy of the summary of collection accompanied by copies of the ACs (NEDA copy) shall be submitted by the authorized agent banks to the Policy Coordination Staff, NEDA, 9th Floor CB Multi-Storey Bldg., Ermita, Manila. 5. All fees and charges on exports collected by authorized agent banks shall be credited to 'Due to the Central Bank of the Philippines Others Export Fees/Charges" a subsidiary ledger account which shall be maintained for "Due to the Central Bank of the Philippines Others," a general ledger account which shall form part of the Manual of Accounts for Commercial Banks prescribed under Subsec. 124.2. The said fees and charges shall: a. not be subject to the 'liquidity floor' requirement; b. be exempted from the deposit reserve requirement; and c. not be subject to payment of interest to the Government. Authorized agent banks shall not collect any charges for the services rendered. 6. All collections of fees and charges on exports made by the authorized agent banks and their branches in the Greater Manila Area shall be remitted to the Central Bank of the Philippines by the authorized agent banks concerned by Cashier's, Manager's Or Treasurer's checks within seven (7) days from the date of collection. However, remittances of collections made by branches of authorized agent banks outside the Greater Manila Area and collection of authorized agent banks whose head Offices are outside the Greater Manila Area, shall be made to the Central Bank of the Philippines within twenty one (21) days from date of collection. Any collection not remitted within the said period of seven (7) or twenty one (21) days, as the case may be, shall be debited against the demand deposit accounts with the Central Bank of the Philippines of the authorized agent banks concerned. 7. For purposes of identifying signatories of the different government offices/agencies involved in the collection of fees and charges on exports, these offices/agencies shall furnish the Central Bank Revenue Collection Office with the name and specimen signature of their signing officers. 8. The authorized agent banks shall submit to the Export Duty Division, Revenue Collection Office, Central Bank, within seven (7) days after the end of the month a report of AC requisitioned and disposed (by numbered set not pad). The report shall show the following: a. On hand, beginning of the month b. Requisitioned during the month c. Used during the month d. Cancelled during the month, and e. On hand, end of the month 9. The authorized agent banks who willfully delay the submission of their reports of collection and remittance of said collection to the Central Bank of the Philippines within the prescribed period shall be subject to the penalties imposed under Item 4 of Section V of this Appendix. [Circular 694 9-14-79, as amended by Circular 716 2-5-80] V. OTHERS 1. Collections of customs duties, taxes and other levies, internal revenue taxes and stabilization tax may be signed by either one or two authorized official/s of the bank depending upon the system of internal control followed by the bank concerned. [MAAB-OG 1-28-71] 2. All authorized agent banks are required to: a. Ascertain that their main offices, branches, agencies and extension offices have sufficient Central Bank official receipts at all times . For Central Bank offices where accountable official receipts forms may be secured, and for deadlines of tax payments, see Attachments 2 and 3 respectively; b. Instruct their personnel in charge of internal revenue tax collections to comply strictly with the guidelines on the preparation of official receipts and reports set forth under the procedures outlined in Section II of this Appendix. [MAAB 75 10-22-75] 3. The Bureau of Customs shall classify the customs duties, internal revenue taxes and other levies in its Order of Payment Form into four (4) broad tax categories, as follows: a. Import duties b. Excise taxes c. License and business taxes d. Others All authorized agent banks are therefore requested to ascertain that all Orders of Payment presented to the banks for payment shall show such classification in the breakdown of customs collection. In case of a taxpayer's payment by check, money order, or treasury warrant, the amount paid for each kind of tax/duty shall be noted at the back thereof so that in case the instrument is subsequently dishonored, the taxes affected could be adjusted accordingly. [MAAB 68 6-1-73] 4. Any banking institution authorized to collect internal revenue taxes, customs duties, taxes and other levies and export-premium duty, which shall willfully delay the submission of exports and remittance of its collection to the Central Bank within the period prescribed thereon, shall pay fines in accordance with the following schedule: For delay in For delay in submission of remittance of report collection a) Per banking day of P10 plus 1/30 of 1% on default for the first amount of delayed 5 banking days of remittance default b) Per banking day of P15 plus 1/15 of 1% default for the next on the amount 5 banking days of of delayed default remittance c) Per banking day P20 plus 1/10 of 1% of default for on the amount the succeeding of delayed banking days of remittance default Provided , That: a) Fines imposed above shall not be in excess of P500 a day; b) The default shall start to run on the day following the last day required for submission of the report or remittance, as the case may be. However, should the last day of filing fall on a non-banking day in the locality where the reporting bank is situated, the default shall start on the day following the next banking day; c) The manner of payment or collections of fines as enumerated under Item (b) (3) of Subsec. 124.21 shall apply; and d) Repeated violations of revenue report submission and collection remittance requirements shall subject the banking institutions, and the persons responsible for such violations, to the penal provisions of Sec. 34 of Republic Act No. 265, as amended. [Circular 550 12-13-76, as amended by Circular 728 4-10-80] ATTACHMENT 1 (Book 1, Part 9) LIST OF NATIONAL INTERNAL REVENUE TAXES PAYABLE THROUGH AUTHORIZED AGENT BANKS BTR/GFS BIR Classification BTR/GFS Classification Code 1. Individual Income Tax Individual Income Tax 1.2.0 2. Corporate Income Tax Corporate Income Tax 1.1.0 3. Estate Taxes Death & Gift Taxes 4.4.0 4. Donor's Taxes Death & Gift Taxes 4.4.0 5. Specific Taxes Selective Excises on Goods 5.2.0 6. Specific Taxes Imported Selective Excises on Goods 5.2.0 7. Privilege Taxes on Business Business & Professional Licenses 5.5.1 (Fixed Taxes) 8. Percentage Tax on Business General Sales Turn-Over or Value 5.1.0 (Gross Receipts) Added Taxes 9. Percentage on Stock Property Transfer Tax 4.5.0 Transactions 10. Compensating Tax General Sales Turn-Over or Value 5.1.0 Added Taxes 11. Percentage Tax on Gross Selective Taxes on Services 5.4.0 Receipts of Night Clubs, Cabarets, Jai-Alai 12. Annual Graduated Fixed Tax Business & Professional Licenses 5.5.1 13. Percentage on Insurance Selective Taxes on Services 5.4.0 Premiums 14. Mining Occupation Fee Other: Property Income 8.2.2 15. Rentals on Coal Bearing Land Other: Property Income 8.2.2 16. Royalties Other: Taxes on Goods & Services 5.6.0 17. Amusement Tax: Winnings in Individual Income Tax 1.2.0 Race Tracks & Jai-Alai 18. Forest Charges Administrative Fees & Charges 8.3.0 19. Rental of Forest Lands Other: Property Income 8.2.2 20. Fees of Weights & Measures Administrative Fees & Charges 8.3.0 21. Firearms Tax Business & Professional Licenses 5.5.1 22. Firearms Initial & Annual Administrative Fees & Charges 8.3.0 Fees 23. Annual Hunting Permit Administrative Fees & Charges 8.3.0 24. Radio Fees Administrative Fees & Charges 8.3.0 25. Tobacco Inspection Fees Administrative Fees & Charges 8.3.0 26. Water Rentals Administrative Fees & Charges 8.3.0 27. Large Power Development Administrative Fees & Charges 8.3.0 Tax 28. Tax on Timber: UP Administrative Fees & Charges 8.3.0 Information Fund 29. Wood Conservation Fee Administrative Fees & Charges 8.3.0 (FOR PRIDECOM Fund) 30. Special Franchise Tax ) Selective Taxes on Services 5.4.0 Manila Jockey & Phil. Racing ) Club ) 31. Greater Manila Flood Tax Selective Taxes on Services 5.4.0 32. Taxes under Sugar Adjustment General Sales Turn-over or Value 5.1.0 Act Added Tax 33. Documentary & Science Stamp Tax 7.2.0 Stamps (P10.00 and above) 34. Proceeds from Forfeitures of ) Other Non-Tax Revenue 8.6.0 Bonds, Litigation Fee, ) Proceeds from Smuggled or ) Confiscated Goods ) 35. Unclassified Taxes Other Taxes 7.3.0 ATTACHMENT 2 LIST OF CENTRAL BANK OFFICES WHERE CB ACCOUNTABLE OFFICIAL RECEIPT FORMS MAY BE SECURED FOR AUTHORIZED AGENT BANKS WHERE OFFICIAL RECEIPTS COVERED BY: MAY BE SECURED 1. Circular No. 296 (for HOs situated in Cash Department, Ground Floor Greater Manila Area) 17 Storey Building, Central Bank of the Philippines, A. Mabini St., Manila 2. Circular No. 314 (for branches Revenue Collection Regional Unit situated in Cebu City) and Circular SSS Building, Jones Avenue, No. 336 (for branches in the cities Central Bank Regional Office, of Lapu-Lapu, Mandawe and Toledo) Cebu City 3. Circular No. 314 (for branches Revenue Collection Regional Unit situated in Bacolod City) and 2nd Floor, Pacific Banking Circular No. 336 (for branches Corporation Building, Araneta St., in the cities of Cadiz, Silay and Bacolod City San Carlos and in the towns of Binalbagan and Victorias) 4. Circular No. 314 (for branches Revenue Collection Regional Unit situated in Davao City) 3rd Floor, Central Bank Regional Office San Pedro St., Davao City 5. Circular No. 425 (for branches Revenue Collection Regional Unit situated in Cagayan de Oro City) 2nd Floor, Mosanti Building, Corner Borja and Velez Streets, Cagayan de Oro City 6. Circular No. 425 (for branches Revenue Collection Regional Unit situated in Iloilo City) 2nd Floor, Pacific Banking Corporation Building, Corner de Leon and Iznart Sts. Iloilo City 7. Circular No. 336 (for branches Cash Department, Ground Floor situated in Other Cities and 17 Storey Building, Central Bank of Municipalities) the Philippines, A. Mabini St., Manila Source: MAAB No. 75 dated 10-22-75 ATTACHMENT 3 DEADLINES FOR TAX PAYMENTS 10th day of every month Last day of remittance for employers for taxes withheld from employees' wages during the preceding month if the total amount is P200.00 or more, and Last day of remittance of taxes withheld under Republic Act No. 1051 for the preceding month by government offices and agencies. 15th day of March Last day of payment of income tax of individuals with fixed income or those who fall under Paragraph 3 of sub-Section A of Section 45 as required by Presidential Decree No. 371. 15th day of April Last day for payment of income tax by individuals with business income for the preceding calendar year. 15th day of July Last day for payment of the 2nd installment of income tax by individuals who elected to pay the tax due in two installments where the amount exceeds P1,000.00 20th day of January, April, July and October Last day for the payment of the following taxes: 1. Percentage tax 2. Franchise tax (For franchise holders where no time limit is specified in the franchise) 3. Bank tax 4. Finance Company tax 5. Royalty or Ad Valorem tax 6. Premium tax 25th day of January, April, July and October Last day for remittance of taxes on BIR Form W-1 withheld from employees' wages during the preceding quarter, by employers, and Last day for remittance of income tax withheld at source from non-resident aliens and non-resident foreign corporations and from domestic and resident foreign corporations who are recipients of dividends from domestic corporations, during the preceding quarter, by withholding agents. If any of the above days falls on a holiday, Saturday, or Sunday, the last day of payment shall be on the succeeding business day. Payment of taxes beyond the corresponding due date shall nevertheless be accepted by authorized agent banks. Penalties and surcharges shall be imposed by the Bureau of Internal Revenue. Source: MAAB No. 75 dated 10-22-75 ATTACHMENT 4 (Book I, Part 9) Sample for Summary Report of Collections of Customs Duties, Taxes and Other Levies ATTACHMENT 5 (Book I, Part 9) SAMPLE FORMAT OF INVENTORY REPORT OF OFFICIAL RECEIPTS _________________________________ Bank MONTHLY REPORT OF CB OFFICIAL RECEIPTS (Form CB-RCO 01-02) For the Month of __________________ I. On Hand, Beginning NO . OF OFFICIALS RECEIPTS of Month IN PADS IN SETS SERIAL NO . __________________ _________________ _________________ __________________ _________________ _________________ __________________ _________________ _________________ Sub-Total _________________ II. Received from the NO . OF OFFICIAL RECEIPTS Central Bank IN PADS IN SETS DATE SERIAL NO . ________ ____________ _________________ _________________ ________ ____________ _________________ _________________ ________ ____________ _________________ _________________ Sub-Total _________________ III. TOTAL (I + II) =============== IV. Less: A. Issued to Importers/Brokers NO . OF OFFICIAL RECEIPTS SERIAL NO. IN PADS IN SETS __________________ _________________ _________________ __________________ _________________ _________________ __________________ _________________ _________________ Sub-Total _________________ B. Cancelled DATE SERIAL NO . NO . OF OFFICIAL RECEIPTS IN PADS IN SETS ________ ____________ _________________ _________________ ________ ____________ _________________ _________________ ________ ____________ _________________ _________________ Sub-Total _________________ V. TOTAL (A + B) =============== VI. Balance on Hand, End of the Month (III-V) =============== CERTIFIED CORRECT: ____________________ Authorized Signature Source: Circular 736 dated 5-16-80 ATTACHMENT 6 (Book I, Part 9) SAMPLE FORMAT FOR INVENTORY REPORT OF CONFIRMATION RECEIPTS _________________________________ Bank MONTHLY REPORT OF CB CONFIRMATION RECEIPTS (OR OFFICIAL RECEIPTS FOR EXPORT/PREMIUM DUTIES) For the Month of __________________ I. On Hand, Beginning NO . OF OFFICIALS RECEIPTS of Month IN PADS IN SETS SERIAL NO . __________________ _________________ _________________ __________________ _________________ _________________ __________________ _________________ _________________ Sub-Total _________________ II. Received from the Central Bank NO . OF OFFICIAL RECEIPTS DATE SERIAL NO . IN PADS IN SETS ________ ____________ _________________ _________________ ________ ____________ _________________ _________________ ________ ____________ _________________ _________________ Sub-Total _________________ III. TOTAL (I + II) =============== IV. Less: A. Issued to Taxpayer/Exporter NO . OF OFFICIAL RECEIPTS SERIAL NO . IN PADS IN SETS __________________ _________________ _________________ __________________ _________________ _________________ __________________ _________________ _________________ Sub-Total _________________ B. Cancelled DATE SERIAL NO . NO . OF OFFICIAL RECEIPTS IN PADS IN SETS ________ ____________ _________________ _________________ ________ ____________ _________________ _________________ ________ ____________ _________________ _________________ Sub-Total _________________ V. TOTAL (A + B) =============== VI. Balance on Hand, End of the Month (III-V) =============== CERTIFIED CORRECT: ____________________ Authorized Signature Source: Circular 735 dated 5-16-80 ATTACHMENT 7 (Book I, Part 9) SAMPLE FORMAT OF NOTICE OF LOSS OF CONFIRMATION RECEIPTS _________________________ (Name of Bank) _________________________ (Address) NOTICE OF LOSS Notice is hereby given of the loss of _______________________ Central Bank (quantity) Confirmation Receipts (CB-RCO Form No. 02-03), used by Commercial and Non-Commercial Banks in the collection of internal revenue taxes, bearing Serial Numbers __________________ The above missing CB Confirmation Receipts, issued to and in the custody of __________________________________________________________ at the time of loss, have been cancelled (Name of Bank and Address) and invalidated and payments purportedly covered by them shall be dishonored. ______________________________ (Name of Bank) By: (SGD.) Name of President or Senior Bank Official Designation Source: Circular Letter dated 9-28-79 ATTACHMENT 8 (Book I, Part 9) SAMPLE FORMAT OF NOTICE OF LOSS OF CONFIRMATION RECEIPTS _________________________ (Name of Bank) _________________________ (Address) NOTICE OF LOSS Notice is hereby given of the loss of _______________________ Central Bank (quantity) Official Receipts (CB-RCO Form No. 01-02 [for customs duties] or No. 03-01 [for export/premium duty]) used by Commercial Banks in the collection of customs duties (or export/premium duties) bearing Serial Numbers ____________________. The above missing CB Official Receipts, issued to and in the custody of __________________________________ at the time of loss, have been cancelled and invalidated and payments (Name of Bank and Address) purportedly covered by them shall be dishonored. ______________________________ (Name of Bank) By: (SGD.) Name of President or Senior Bank Official Designation Source: Circular Letter dated 3-19-80 APPENDIX C (Book I, Part 9) PROCEDURAL GUIDELINES FOR THE REPRODUCTION 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. LibLex 3. The Securities Marketing Department shall advise as soon as possible the applicant of the action taken thereon by the Governor. Source: Guidelines-Governor 10-22-75 BOOK I INDEX (Reference are to Sections/Subsections/Appendices) Accrual of interest earned on loans 113.12; 131.33 Advertisements regulations on, 192 Agrarian reform credit allocation required for, 135.12 alternative investments, 135.12 beneficiaries of, 135.11 (d) borrowers qualified under, 135.13 definition, 135.11(b) interest and other charges, 135.16 rediscounting of papers, 163.2; I.6.App.C reporting requirements, 135.17 sanctions, 135.18 securities acceptable for, 135.14(a) syndicated type of, 135.15 Agricultural credit , in general allocation required for, 135.12 alternative investments, 135.12 borrowers qualified under, 135.13 crop loan, 135.7 definition, 135.11(c) interest and other charges, 135.16 loanable funds for, 135.11(a); 135.19 reporting requirements, 135.17 sanctions, 135.18 securities acceptable for, 135.14(b) syndicated type of, 135.15 Allied undertakings approved undertakings, 141.1 banks disqualified from investing in, 141.2 ceilings on investments in, 141.3 ceilings on loans to, 131.1(b) interlocking directorship/officership with bank, 141.4 Armored cars use of, 198.2 Aromatic Tobacco Trading Loan Fund Program rules and regulations, 136.2; I.3.App.Q rediscounting under the, I.3.App.Q Articles of Incorporation provision on voting requirements on certain corporate transactions, 115.2; I.1.App.A, Part II F.2 stock option provision, 112.11 Assets acquired in settlement of loans, 139.2 appreciation/increase in book value, 194.2 eligible for payment of subscription to capital stock, I.1.App.A, Part I B.8 revaluation of fixed assets exchanged for bank shares for purposes of increased capitalization, I.1.App.A, Part I B.6 risk, 111.2 total, 111.21(a) Audit operations/management/financial audit (see Operations audit) submission of audit program, 124.5 Bad debts definition, 113.11 (a) Banking days and hours banking days, 123.1 banking hours, hours beyond minimum, 123.2; 123.3 existing authorizations and notifications on, 123.7 notice of changes in, when notice not required, 123.4; 123.5 posting of schedule of, 123.8 reporting requirements, 123.6 Banking offices establishment guidelines in general, 114.1 establishment guidelines for commercial banks except money shops, I.1.App.B establishment guideline for money shops, 114.3; I.1.App.C extension offices, reporting requirements, 114.4 transfer/relocation of, 114.2 Bank premises appreciation or increase in book value, 194.2 ceiling on total investments, 194.3 depreciated, definition, 111.21 (g) expansion of, 194.1 Bank protection rules and regulations on, 124.8; I.2.App.J designation of security officer, I.2.App.J form of security program, ib. installation of security devices, ib. reportorial requirements, ib.; I.2.Att.J.1 sanctions for non-compliance with regulations, I.2.App.J Bill of exchange drawn in good faith against actually existing values, 131.11 (e) Barangay Savings Movement rules on solicitation of deposits, 151.32; I.5.App.F Bio-data of directors, 121.5 of officers, 122.5 Board of Directors place of meetings, 115.1 Borrowings commercial papers, issue of (see Commercial papers) direct/indirect by directors, officers and stockholders, procedural requirements (see Loan/s) from the government, 161 from trust departments, 179.1 interbank, 135.5; 163.4 peso borrowings of foreign firms from domestic banks (see Loan/s) rediscounts (see Rediscounting) Branches/Branching general guidelines on, 114.1 guidelines for commercial banks, I.1.App.B guidelines for purposes of increased capitalization of commercial banks, I.1.App.A, Part I E By-laws provision on board meetings, 115.1 provision on voting requirements on certain corporate transactions, 115.2 Call loans (see Interbank loan transactions) Capital accounts , combined definition, 111.21(b) exemption from minimum requirement, 111.22 minimum requirement, computation of, 111.2 sanctions for deficiency in, 111.23 Capital gap computation, I.1.App.A, Part I A.4 definition, I.1.App.A, Part I A.1 Capitalization guidelines on increased capitalization program of capital build-up, I.1.App.A, Part I A paid-in capital, increase in, I.1.App.A, Part I B Greek formula concept, I.1.App.A, Part I F purchase of outstanding shares I.1.App.A, Part I C limitations on stock ownership, I.1.App.A, Part I D branching privileges, I.1.App.A., Part I E minimum paid-up capital requirement, 111.1 recording/reporting requirements, 111.24 Capital notes treatment of, for purposes of increased capitalization of commercial banks, I.1.App.A, Part I B.5 Capital Stock acquisition by financing companies, 112.14 family group, 112.13(a) foreigners, 112.15 ceilings on voting equity (see Ceilings) convertibility of preferred to common, 112.2 options to subscribe at par, 112.11 transfer of shares (see Transfer) Cars armored, 198.2 car loans (see Financing plans) Cash or hand definition/computation, 111.21 (c) Cash price definition, 131.52(c) Categories of reports authorized signatories to, formats of board resolution designating signatories to, 124. 22 (b); I.2.Apps. D, E, F categories of, 124.22(a) list of Category B reports, I.2.App.C sanctions for submission of reports under unauthorized signatures, 124.22(c) CBCI sale under Service Agency Agreement, 191.5 Ceilings cases when ceilings on loans of commercial banks may be exceeded, 131.13 exclusions from computation of ceilings on loans of commercial banks, 131.12; 131.14 on loans to allied undertakings, 131.1(b) on loans to directors, officers and stockholders aggregate ceiling, 134.4(b) individual ceiling, 134.4(a) on loans to a single borrower, 131.1(a); 131.12 on investments in allied undertakings, 141.3 in real estate and bank equipment, 194.3 on rediscounting, 162.11 on voting equity of individuals, family groups, corporations, 112.12 of foreign controlled corporations, I.1.App.A, Part I D on voting concurrence requirement, 115.2(b) Certificate/Certification on deposit for SEC registration purposes, required format, 159.7; I.5.App.D sample certification on exporter-borrowers' packing credits, I.6.App.H Charges finance, 131.52(h) miscellaneous (see Miscellaneous charges) non-finance, 131.52(f) Chartering (see Establishment) Chart of accounts definition/description of accounts for reporting purposes, I.2.App.B Clean loans (see Unsecured loans) Clearing operations for treasury warrants, 191.12; I.9.Att.A.2 inter-regional clearing operations, I.9. App.A.3 list of clearing centers, I.9.Att.A.1 overdrawings in CB account, 191.11 procedural guidelines, I.9.App.A use of CB checks in, 191.1 Collaterals insurance on, 133.2 Commercial papers "actually owned by the person negotiating the same", definition, 131.11(f) registration requirements long term, 169.1; I.6.App.E short term, 169.1; I.6.App.D sanctions for violation of regulations on issue of, 169.1 Compensating deposits prohibition on, 131.21 Consolidation (see Merger) Confirmation receipts loss of, sample format of notice of loss of, I.9.App.B, Part II; I.9.App.B.7 use of, I.9.App.B, Part II Conversion of preferred to common stock, 112.2 Cooperative Finance System rules and regulations on, 136.3; I.3.App.O Corporate farming program eligibility under agrarian reform credit, 135.11 Credit policies of government-owned corporations, 139.3 priority classification Priority I, I.6.App.A Priority II, ib. supervised (see Supervised credit) to directors, officers, stockholders (see Loan/s) Credit card operations as an approved allied undertaking, 141.4 of banks to directors, officers, stockholders, 134.2 Creditor definition, 131.52(a) Crimes/losses required report on, 124.24; I.2.Att.A.1 Crop loans requirement in grant of, 135.7 Current accounts (see Demand deposits) DBP Progress Bonds banks as agents of, 154.1(d) Debts bad, 113.11(a) in process of collection, 113.11(c) well-secured, 113.11(b) Delinquency in payment of obligation, 121.1(b); 122.1(b) Demand deposits interest on, 153.1 issuance of checks without sufficient funds or credit, 153.5 prohibition on officers and employees on maintenance of, 122.7; 153.5 reserves on, 153.2 temporary overdrawings, prohibition on, 135.4; 153.3 Deposits as security for loans, 111.21(e) booking of, 159.5 certification on deposits of proposed corporation, prescribed format, 159.4; I.5.App.D compensating/derivative deposits, 131.21 current/demand (see Demand deposits) deposits made by lessees under Rental Control Law, 151.6 government (see Government deposits) interest on (see Interest) minors as depositors; I.5.App.B of farmer-borrowers under supervised credit, 131.21; 151.42 opening/operation of accounts, basic provisions, 159.1 savings (see Savings deposits) schemes to attract (see Promotional schemes) solicitation of (see Solicitation) time (see Time deposits) unclaimed balances, 159.4 uncollected deposits, drawings against, 153.6 Depositary relationship arrangement of rediscounting proceeds, 191.91 of funds of various financing programs, 191.92 Directors bio-data, submission of, 121.5 ceilings on loans to (see Ceilings) definition, 121.1(a); 134.1(a) delinquency in payment of obligations, 121.1(b) direct/indirect borrowings of (see Loan/s) disqualifications effect of possession of, 121.4 persons disqualified to become directors, 121.3 procedures for, 121.31 foreigners as, I.1.App.A, Part II.F interlocking directorates, 121.5; 141.4 obligations of, defined, 121.1(c) qualifications of, 121.2 Directory of banks submission of certain information, 124.23; I.2.App.C Discounting recording/reporting of, 162.2 illustrative examples/formulas for computation of discount rates, I.3.App.P Disclosure format of statement on loan transactions, 131.51; I.3.App.D of effective rates of interest on deposits, 157.4 requirements of Truth in Lending Act, 131.5 Dispensers installation of cash dispensing machines, 198.1 Dividends amount available as dividends, 113.13 declaration, prohibition/limitation on, 113.2 recording of, 113.15 reporting and verification, 113.14 sanctions, 113.16 Dormant accounts definition of, I.2.App.I, Part XII maintenance fees on, 151.5 internal control measures for, I.2.App.I Part XII Down payment definition, 131.52(d) Drawings against uncollected deposits (DA UDs) prohibition on, 153.6 Due from CB definition/computation, 111.21(d) computation of account for reporting purposes, 124.25 Employees financing plans for (see Financing plans) prohibition on maintenance of demand deposits, 122.6 Establishment of banking offices other than money shop (see Banking offices) of money shops, 114.3; I.1.App.C Examination definition, 124.21(a) refusal to permit examination definition, 124.21(a) fines for, 124.21(c) Export export premium duty, I.9.App.B, Part III other fees and charges on, I.9.App.B, Part IV Export Priorities Plan exportable products of existing firms, I.6.App.B exportable products of preferred areas of investment, ib. rediscounting of papers under the, 163.1 Extension of loans (see Renewal of loans) Extension offices reporting by, 114.4 Family group determination of, 112.12(c) transfer/acquisition of shares within group, 112.13 Fees annual assessment fees, 193 on dormant accounts, 151.5 on loans, service and other fees, 131.32 Financial audit (see Operations audit) Financing plans forms of, 134.83 mechanics, 134.82 other requirements, 134.85 plans not covered by fringe benefit programs, 134.86 preconditions/limitations, 134.84 types of, 134.81 Fines for refusal to permit examination, 124.21 (c) for reserve deficiencies, 155.41 for willful delay in submission of reports, 124.21(a) manner of payment/collection of, 124.21(b) procedural guidelines on collection of, I.2.App.K Format of board resolution for signatories of A-1 reports, I.2.App.D of board resolution for signatories of A-2 reports, I.2.App.E of board resolution for signatories of B reports, I.2.App.F of certification on compliance with regulations on bank protection, I.2.Att.J.1 of disclosure statement on loan transaction, I.3.App.D SEC-prescribed for certification on deposit, I.5.App.D sample format of notice of loss of official receipts, I.9.App.B.8 sample format of notice of loss of confirmation receipts, I.9.App.B.7 Fringe benefit programs financial assistance to officers and employees (see Financing plans) Furniture , fixtures and equipment depreciated, definition, 111.21(h) Giveaways guidelines on distribution, 156.2 Government deposits acceptance of application for authority to accept, 154.5 banks authorized to accept, 154.2 general prohibition on, 154.1 liquidity floor requirements on, 154.3 sanctions for violation of rules on, 154.6 transactions exempt from regulations on, 154.4 Government securities as alternative investments to investment-deposit-ratio requirements, 139.13 as collateral for loans, 133.1 as investment outlets for agrarian reform credit, 135.13 reproduction and use of facsimiles, procedural guidelines, 198.3; I.9.App.C rules on buying and selling in the open market, 142.1; I.4.App.A sale under the Service Agency Agreement, 191.5 securities eligible as reserves, 155.22 Grains Quedan Financing Program guidelines on, 136.1; I.3.App.N guarantee coverage of, I.3.Att.N.1 Greater Manila Area definition, for purposes of increased capitalization of commercial banks, I.1.App.A, Part I E.5 Greek formula concept for capitalization of Philippine branches of foreign banks, I.1.App.A, Part 1 F IGLF Program accreditation system for, 135.2; I.3.App.F medium-scale industries, regulations for financing under the, I.3.App.M portion classified as non-risk assets, 111.1 small scale industries implementing regulations for financing under the, I.3.App.G list of potential industries for financing, I.3.Att.G.1 Insurance on real estate improvements used as collaterals, 133.2 Interbank loan transactions call loans, 135.51; 163.3 interest rates on, 135.5; 163.4 procedural requirements, I.3.App.B recording of, 135.5; 163.4 reserve requirements on, 135.5; 163.4 transactions excluded, 179.1 transactions included, 135.5 Interest on loans accrual of interest earned on loans, 113.12; 131.33 acceleration/decelaration clause, 131.31(a) applicability of Usury Law, 131.31(a) contra account for uncollected interest on loans, 131.33(d) disclosure requirements of Truth in Lending Act, 131.5 in absence of stipulation, 131.31(b) on agricultural credit, 135.16 rates, maximum, 131.31(a) rediscounting rates (see Rediscounting) Interest on deposits days in a year, 157.2 disclosure of effective rates, 157.4 maximum rates on demand deposits, 157.11 on savings deposits, 157.12 on time deposits, 157.13 payment in kind, 157.3 provident fund contributions, 159.2 sanctions for violation of rules on, 157.5 Interlocks interlocking directorates, 121.6; 141.4 interlocking officerships, 122.5; 141.4 Internal control minimum standards, 124.7; I.2.App.I for dormant/inactive accounts, I.2.App.I (XII) Investment from the DBP for purposes of increased capitalization, I.1.App.A, Part III in allied undertakings (see Allied undertakings) in domestic banks by foreigners by foreign investors in general, I.1.App.A, Part II A general guidelines, 112.15 of foreign banks and/or their affiliates, I.1.App.A, Part II B of pension funds or similar trust funds, I.1.App.A, Part II C counterpart foreign currency loan or other investment, I.1.App.A, Part II D repatriation of, I.1.App.A, Part II E foreigners as directors or officers of domestic banks, I.1.App.A, Part II F in real estate and bank equipment, 194.3 in subsidiaries/affiliates, reporting requirements, 142.21 in venture capital corporations, 142.3 Investment-deposit ratio clarifications to policy, 139.14 eligible alternative investments, 139.13 compliance grace period for, 139.17 methods of, 139.12 policy statement, 139.11 regional groupings, 139.11; I.3.App.C reporting requirements, 139.15 sanctions for non-compliance, 139.16; 164(f) Letter of credit (L/C) domestic stand-by L/Cs, 191.6 export L/C, failure to negotiate, 163.18 Liabilities definition, 131.11(a) Liquidity floor on government deposits amount required as, 154.3 exempt transactions from, 154.4 sanctions for deficiency in, 154.6; 162.44 Loan/s accruals of interest on, 131.33 call loans (see Call loans) ceilings on (see Ceilings) charges on (see Charges) counterpart foreign currency loan, I.1.App.A, Part II D crop loan, 135.7 definition, exclusions from definition, 134.1(d); 134.2 demand loans, when due, 131.43 discount rates, illustrative examples, 131.31(a); I.3.App.P for financing of agricultural and export industries, 139.12 interbank loans (see interbank loan transactions) interest rates on, 131.31(c) overdrafts/overdrawings in current accounts, 135.4 past due accounts (see Past due accounts) peso borrowings by foreign firms rules and regulations on, 135.9; I.3.App.K suggested debt-to-equity ratio, I.3.Att.K.I suggested annual build-up program, I.3.Att.K.2 proceeds of (see Loan proceeds) renewals/extensions of, 131.45 restructuring/refinancing, 131.47 retention of loan proceeds, 131.21 secured (see Secured loans) to directors/officers/stockholders transactions covered by regulations on, 134.1(d) transactions not covered by regulations on, 134.2 determination of direct/indirect borrowings, 134.3 individual/aggregate ceilings on, 134.4 transitory period for compliance with regulations on, 134.5 real estate transactions, 134.6 reporting requirements on, 134.6 sanctions for non-compliance with regulations on, 134.7 procedural requirements, I.3.App.A to rural banks, 135.3 types of, 131.42 under the fringe benefit program (see Financing plans) under IGLF Program (see IGLF program) under letters of credit covered by margin deposits, 113.21(f) unsecured/clean (see Unsecured loans) writing off (see Write off) Loans and advances definition, for write-off purposes, 131.43(a) Loanable funds computation of, for purposes of agricultural credit in general/agrarian reform credit, 135.11(a); 135.19 Loan limits (see Ceilings) Loan proceeds prohibited uses of, 131.21; 131.22 utilization of, 131.23 Lotteries guidelines on holding of, 156.1 Management audit (see Operation audit) Masaganang Maisan program guidelines on credit operations, 135.81; I.3.App.I rediscount rates/privileges under the, I.6.App.F Masagana 99 Program additional guidelines for PNB on Masagana 99 operations, 135.81 guidelines on credit operations, 135.81; I.3.App.I rediscount rates/privileges under the, I.6.App.F valuation reserves for "doubtful" and "loss" loan accounts, 135.81; I.3.App.J Meeting place of meetings of Board of Directors, 115.1 Merger between a commercial bank and a savings bank, I.1.App.A, Part IV C when majority vote of stockholders required, I.1.App.A, Part IV A when two-thirds vote of stockholders required, I.1.App.A, Part IV B Miscellaneous charges definition, 131.32 maximum amount allowed for loans, 131.32 Money borrowed definition, 131.11(b); 134.1(d) Moneyshop establishment of, guidelines on establishment, 114.3; I.1.App.C National Internal Revenue taxes collection of procedures for, 191.2(a); I.9.App.B collection of interest on government bonds and securities, 198.5 interest on, 191.2(b) list payable through banks, I.9.App.B.1 Obligations of directors/officers, defined, 121.1(c) Officers bio-data, submission of, 122.5 ceilings on loans to (see Ceilings) definition, 122.1; 134.1(b) direct/indirect borrowings of (see Loans) disqualifications effect of possession of, 122.4 persons disqualified to become officers, 122.3 procedures for, 122.31 financing plans for (see Financing plans) foreigners as, I.1.App.A, Part II F interlocking officerships, 122.6; 141.4 prohibition on maintenance of current accounts, 122.7 qualifications of, 122.2 Official receipts loss of official receipts used in tax collection, I.9.App.B, Part III (D) sample format of notice of loss of, I.9.App.B.8 Open market operations rules and regulations on, 142.1; I.4.App.A Operations audit exemption from, 124.55 contents, minimum, 124.53 coverage, minimum, 124.52 need for audit program, 124.5 procedural guidelines, 124.54 who may conduct, 124.51 Overdraft/overdrawings in deposit accounts with CB, 162.43; 191.11 prohibition on temporary overdrawings, 135.4; 153.3 temporary overdrafts, when past due, 131.42 Palay Marketing Credit Program considered as agricultural credit, 135.2 rules and regulations on, I.3.App.L Past due accounts accrual of interest income, 131.44 allowance for uncollected interest, 131.33 criteria for, 131.42 definition, 131.41 demand loans, 131.43 renewals/extensions, 131.45 restructuring/refinancing, 131.47 reporting requirements, 131.46 writing off, 131.48 Posting of abstract of Truth in Lending Act, 131.56 of banking hours and days, 123.2 Preferred stock conversion into common stock, 112.2 purchase out of loan proceeds, 131.22 with cumulative feature, 112.2(c) Premises , bank (see Bank premises) Premyo Savings Bond procedure for payment of prize claims to service agency holders, 198.41 Price cash or delivered price, 131.52(c) Promotional schemes gifts/giveaways, guidelines on distribution, 156.2 other schemes, 156.3 raffles/lotteries; guidelines on holding of, 156.1 sanctions for non-compliance with regulations on, 156.4 Protection , bank (see Bank protection) Provident fund exemption from interest rate regulations, 159.2 Raffles guidelines on holding of, 156.1 Rate of interest on deposits (see Interest) of interest on loans (see Interest) simple annual rate, 131.52(i) Ratio investment deposit, 139.1 networth to risk assets, 111.2 debt-to-equity ratio for borrowing foreign firms, I.3.Att.K.1 Recording of daily transactions, 124.1 of loans, advances, discounted and/or rediscounted eligible papers, 162.2 Rediscounting and CB advances applications, processing of, 162.5 availment, additional qualifications required for, 164 basic terms and conditions ceiling/limit, 162.11 eligibility of papers, 162.12; 163.11; 163.21 loan values, 162.13 interest rates and other charges, 162.14 maturities, 162.15 call loan transactions, 163.4 loans to long-term lending institutions, 163.5 of export letters of credit, 163.18 of export products under the Export Priorities Plan of the BOI, 163.1 of papers covering non-traditional exports/small-scale/cottage industries and the production/exports/trading of sugar, rice and tobacco, 163.16 of papers of exporters of services and construction contracts, 163.7 recording/reporting procedures, 162.2 remittance of collections, 162.3 suspension/denial of privilege, grounds for, 162.4 under the agrarian reform credit, 163.2, I.6.App.C under the Aromatic Tobacco Trading Loan Fund Program, I.3.App.Q under the supervised credit programs (Masagana 99 and Masaganang Maisan), I.6.App.F Refinancing of loans, when allowed, 131.47 Refusal to permit examination amount of fines, collection, computation, 124.21(c) definition, 124.21(a) Rehabilitation program for rice producing areas in Central Luzon, 136.4; I.3.App.R Relocation (see Transfer) Renewal of loans, when allowed, 131.45 Rental/s deposits of lessees under Rental Control Law, 151.6 Reports/s categories of (see Categories of reports) Chart of Accounts for reporting purposes, I.2.App.B computation of "Due from CB" account for reporting purposes, 124.25 deadline for submission of, I.2.Att.A.1 definition, 124.21(a) forms prescribed for, 124.2 of extension offices, 114.4 of agrarian/agricultural credit, 135.17 on bank protection, I.2.App.J on capital requirements, 111.24 on certain information bank directory, 124.23; I.2.App.G organizational structure, 124.23; I.2.App.H on changes in banking days and hours, 123.6 on credit transactions of creditors, 131.55 on crimes/losses, 124.24; I.2.Att.A.1 on investment-deposit ratio, 139.13 on loans to directors/officers/stockholders, 134.6 on past due accounts, 131.46 on required and available reserves, 155.45 on TIPID Movement, I.5.App.E place of submission of, I.2.Att.A.1 required of commercial bank, accomplishment procedures, I.2.App.A and A.1 sanctions for submission under unauthorized signatures, 124.22(c) signatories to, format of resolutions for signatories to, 124.22; I.2.Apps. D, E, F Uniform System of Accounts, 124.2 willful delay in submission of (see Willful delay) Reserves against deposit liabilities amount required as, 155.1 computation of reserve position, 155.3 chronic reserve deficiency, penalties, 155.5; 162.42 deficiencies in, 155.4 form of, 155.2 on interbank loan transactions, 135.5; 163.4 overdrawings with CB, 155.6 report on compliance, 155.8 sanctions for violation of rules on, 155.9 unpaid fines chargeable against reserves, 155.7 Restructuring of loans, when allowed, 131.47 Risk assets definition/computation, 111.2 Sabog-Tanim Program limit on loan under the, 135.81 Sanctions for capital deficiency, 111.23 for non-compliance with rules and regulations on bank protection, I.2.App.J for non-compliance with Truth in Lending Act and its implementing rules and regulations, 131.58 for failure/refusal to adopt Uniform System of Accounts, 124.2 for refusal to permit examination, 124.21(c) and (d) for submission of reports under unauthorized signatures, 124.22(c) for violation of maximum lending rates, 131.31(a) for violation of registration requirements of commercial papers, 169.1 for violation of regulations on government deposits, 154.6 for violation of regulations on loans to directors/officers/stockholders, 134.7 for violation of regulations on promotional schemes, 156.4 for willful delay in submission of reports, 124.21(b) and (d) in general, 199 Savings deposit booking deposits/withdrawals made after banking hours, 151.43 dormant account, maintenance fees on, 151.5 deposits of lessees made under Rental Control Law, 151.6 interest rates, 151.1; 157.12 of farmer-borrowers under supervised credit program, 131.21; 151.42 receiving/paying outside bank premises, 151.3 reserves on, 151.2 sanctions for violation of authorized rates on, 151.6 solicitation under TIPID Movement, 151.31 withdrawal authority slips, 151.41 Secured loans by CBCI, 111.21(i) by Certificates of Land Transfer, 135.15(a) by government securities, 133.1 by hold-out on or assignment of deposit, 111.21(e) by machinery and equipment, 133.3(b) by margin deposits, 111.21(f) by real estate, 133.3(a) by real estate improvements, 133.2 Service Agency Agreement on sale of CBCI, 191.5 Solicitation of deposit minimum safeguards for, I.5.App.A under Barangay Savings Movement, 151.32, I.5.App.F under TIPID Movement, 151.31 SSS premiums commercial banks as collection agents, 154.1(a) Staples readily marketable non-perishable, 131.11(b) Stock (see Capital stock) Stockholder ceilings on loans to (see Ceilings) definition, 134.1(c) direct/indirect borrowing of (see Loan/s) Supervised credit concept, 135.8 guidelines on credit operations, 135.81; I.3.App.I guidelines on setting on of valuation reserves, I.3.App.J Masagana 99/Masaganang Maisan (see Masagana 99 or Masaganang Maisan) rediscounting privileges under, I.6.App.F Surplus definition, 131.11 Taxes collection procedures of customs duties and levies 191.2; I.9.App.B, Part I National Internal Revenue taxes (see National Internal Revenue Taxes) export premium duty, 191.2; I.9.App.B, Part III other fees and charge on exports, I.9.App.B, Part IV deadlines for payment of, I.9.Att.B.3 other regulations on collection of, penalties for willful delay in submission of reports or remittance of collection, I.9.App.B, Part IV Third degree on consanguinity or affinity determination of relationship, 112.12(c) Time deposit from the Agrarian Fund Commission, 152.5 interest basis of computation, 157.2 rates, 152.1; 157.13(b) time of payment, 157.13(a) matured time deposits, 157.13(c) reserves on, 152.2 size of, 152.4 term of, 152.3 withdrawal before maturity date, 157.13(d) TIPID Movement manual of operations, I.5.App.B minors as depositors, ib. reporting requirements, ib. segregation of TIPID accounts, 151.31(a) solicitation of deposits under the, 151.31 Trade-in definition, 131.52 Transactions corporate, requiring more than simple majority vote, I.1.Att.A.1 recording of, 124.1 Transfer of bank offices/premises, 114.2 of bank shares to new investors, 112.13(b) within a family group, 112.13(a) Treasury Bills handling of tax and loan accounts arising from sale of, 191.3 Treasury Warrants clearing of, I.9.Att.A.2 Trust accounts treated as ordinary deposits, 172.2 additional regulations on, 174.2 funds considered as trust accounts, 172.1 deposit for faithful performance of duties, procedural requirements, 171; I.7.App.A fund borrowings from trust departments, 179.1; 163.4 investment of trust funds in bank equity, I.1.App.A, Part II C non-trust agreements, 173 prohibited transactions, exceptions, 174 Truth in Lending Act disclosure requirements, 131.5 format of disclosure statement on loan transactions, 131.51; I.3.App.D implementing rules and regulations, 131.51 to 131.58 offices authorized to enforce regulations on, 131.57 posting requirement of abstract, format, 131.56; I.3.App.E Unclaimed balances treatment of, 159.4 Uniform System of Accounts adoption/implementation, 124.2 sanctions for non-compliance, 124.2 Unimpaired capital and surplus definition, 131.11 Unsecured loans collateral requirements, when needed, 132.15 general guidelines on grant of, 132.11 maximum amount, 132.13 need for submission of proof of financial capacity of borrower 132.12 sanctions for violation of regulations on, 132.16 signatories to, 132.12 term of, 132.13 Valuation reserves/accounts for doubtful and loss loan accounts under Masagana 99 and similar programs, 135.81(b); I.3.App.J Venture capital corporations (VCC) investment of banks in, 142.3 Voting requirements on certain corporate transactions, 115.2 Well-secured debt definition, 113.12(b) Willful delay amount of fines, collection, computation, 124.21(b) in submission of reports, defined, 124.21 (a) Withdrawals against uncollected deposits, 153.6 booking of, 159.5 Write-off of loans as bad debts, frequency, procedural requirements, 131.48